Harbor Financial Acquiring Hamilton for $3.6M

Another independent mortgage company headed toward extinction last week when shareholders in Hamilton Financial Services Corp. approved a sale to Harbor Financial Group.

Houston-based Harbor agreed to buy Hamilton's mortgage servicing portfolio, its servicing center in Scottsbluff, Neb., and Hamilton Carter Smith & Co., a mortgage servicing broker, for 60 cents a share, or about $3.6 million.

Commercial banks have been buying out some of the bigger firms, like Prudential Home Mortgage. Smaller mortgage banks that choose to stay in the business, like Harbor, are bulking up to survive.

San Francisco-based Hamilton had been under pressure from shareholders to sell since 1994, when the refinance boom ended and the company started losing money. It pursued a sale that fall, but took itself off the block the following February, when rising interest rates made a lucrative offer unlikely.

The heat was turned up that summer when the company continued to lose money despite a a restructuring and cost-cutting plan instituted in January that eliminated 120 jobs and closed retail and wholesale offices around the country.

One large shareholder, Orin Kramer, principal of Kramer Spellman, a Fort Lee, N.J., investment partnership, wrote Hamilton's board of directors in August, pressuring it to put the company on the auction block to prevent further depreciation of the stock's value. At the time, Hamilton's stock was trading for about $5 a share.

The largest shareholders were Wellington Management and Heine Securities, which is controlled by activist investor Michael Price, a specialist in undervalued stock.

In October 1995, Hamilton put itself up for sale once again. It received offers from both Harbor and Sterling Financial Corp., Spokane, Wash. Deciding Harbor's deal was better, Hamilton's management called off talks with Sterling in February.

Harbor had bought three of Hamilton's retail origination offices in December 1995, during the San Francisco lender's cost-cutting phase. New America Financial, Dallas, bought Hamilton's Northern California offices that same month.

The agreement with Harbor provides Hamilton with a $3 million line of credit to cover operating expenses. Hamilton has borrowed $2 million of the money since March.

The agreement also provides William Kirschenbaum, Hamilton's chairman and chief executive, with a $235,000 cash severance payment. William Rast, president, also will receive $235,000, and Richard F. Ransom, executive vice president and chief financial officer, will receive $125,000.

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