Yet another mortgage bank is seeking to sell out.
First California Mortgage Co., a large privately held mortgage bank in San Rafael, Calif., has retained an investment bank and is seeking a buyer, according to market sources.
First California is entering a market flooded with assets, particularly California-based mortgage banks. Both Arcs Mortgage Co., the Calabasas-based Bank of New York unit, and Riverside-based Directors Mortgage Co. have been put on the block.
Twin forces are driving the properties onto the market, according to industry experts.
First, some of the handsome prices paid for mortgage banks earlier in the takeover boom -- notably the premium fetched by American Residential Mortgage in its sale to Chase Manhattan Bank -- whetted the appetite of owners and boards of directors.
Second, mortgage banks not affiliated with portfolio lenders are feeling the heat as dropping volumes and the popularity of adjustable-rate loans eat away at profit margins.
"Everybody wants to be the West Coast outpost of some eastern bank," said an investment banker.
First California Mortgage officials declined to comment.
Salomon Brothers Inc. is representing First California in its effort, sources said. A Salomon official declined to comment.
First California is controlled by Dennis M. Hart, who also serves as its president.
Mr. Hart also has a 50% interest in Headlands Mortgage, another California mortgage bank. Headlands is not expected to be included in the sale, according to one source.
First California has a servicing portfolio of about $3.5 billion. In the first six months of this year, it produced about $3.2 billion of home loans. The company appears to be following the "get big or get out" strategy currently in vogue in mortgage banking.
"I think they have been trying to get up to critical mass and have been frustrated," said a competing mortgage banker.
Earlier this year, the company was said to be exploring a sale of debt that would have allowed it capital for expansion. When the market soured, that plan was shelved, according to a source.