A Chicago-area savings bank, one of a growing number of midsize thrifts seeking banklike earnings streams, is jettisoning a large portion of its fixed-rate assets.
First Federal Bank for Savings, Des Plaines, Ill., last week securitized a large chunk of 15-year and 30-year mortgage loans to sell in the coming months.
The move is part of an effort to improve liquidity, by decreasing long- term, fixed-rate loans, and diversify lending.
"It's always been my intent over time to make us more of a commercial bank," said president and chief executive Larry G. Gillie, who was a commercial banker for more than 20 years before joining $564 million-asset First Federal in 1987. "To be viable long term, we needed to be more diversified in the balance sheet."
The federally chartered stock savings bank, owned by FirstFed Bancshares, will sell $116 million in securities backed by 15-yeqr and 30-year fixed-rate mortgages. First Federal will retain servicing on the loans.
The sale is expected to bring in more than $2.1 million in gains and fees, based on recent price estimates, the company said.
Management said it then can redeploy funds in variable-rate investments and diversify its loan products into areas such as commercial and construction lending.
Daniel E. Cardenas of Chicago's Howe Barnes Investments Inc. said he wasn't surprised by the plan, given management's background in commercial banking.
"They may not think as traditional thrift people would," he said. "I think if it's done correctly, it's positive."
The move is part of the company's goal to lower fixed-rate assets to 50% or less of total earnings assets by yearend 1997, with no more than 15% of the balance sheet repricing in five years or more.
Currently, about 73% of the company's balance sheet is in fixed-rate loans and investment securities. Of that, 22% will not reprice for five to 10 years and more than 27% for 10 or more years.
The sale of the securitized loans would reduce First Federal's fixed- rate assets to less than 60% by June 30, management said.
Mr. Gillie said the company will move slowly and not try to redeploy all $116 million this year. The bank intends "to be patient and not get in a hurry," he said.