Sunrise Federal Savings Bank of Farmingdale, N.Y., is alive and more than well.
Its robust health stems from a strategy that has resulted in a surge in its mortgage originations and serviving in the bank's primary market, Nassau and Suffolk counties on Long Island, just east of New York City.
TRhe $530 million-asset institution, a unit of Sunrise Bancorp, was pulled from the edge of financial collapse by its 60-year-old chief executive officer and president, Joseph Melillo.
Under the pressure in 1988 of a one-year government deadline to come up with a survival plan, Mr. Melillo tookl the offensive.
His program included an emphasis on biweekly mortgages and what the company calls the Sinsational loan, a fixed-payment, variable-rate mortgage. It is now putting the finishing touches on a 100% loan.
Sunrise's innovation appears to be paying dividends. In the third quarter of this year it rang up record earnings to $1.9 million, or 52 cents a share, up 46% from $1.3 million in the third quarter of 1992.
"We weathered more than a storm. We weathered a typhoon," Mr. Melino said.
"Back in June of 1980 in Nassau and Suffolk counties, we had about 25 federal savings and loans with a total net worth of somewhere in the neighborhood of $680 million combined. As of 1990, there were only four left out of the 25.
"So the other banks did not weather the storm. We were dying the same as everyone else, we were just dying a little bit slower."
Building Up a Portfolio
He suggested to the board that the bank create a mortgage banking operation "whereby it would take in the mortgages and then sell them to the secondary market." Within six months, the bank had its mortgage banking business operational.
"We decided to grow out of our problems," the 16-year Sunrise veteran said, pointing out that the bank began building up a mortgage servicing portfolio that gave it income, a float on the escrow accounts, and additional income through late charges. "It also eliminated any credit risk because we didn't own the loan."
One key to the rapid growth in nes loans came in the mid-1980s, when Sunrise came out with the biweekly mortgage, a product that now accounts for about one-third of its single-family portfolio.
Payments are made every two weeks, resulting in the equivalent of 13 months of payments each year. This extra payment increases the thrift's cash flows and accelerates the equity build-up for the borrower.
"It's good for the mortgagee and it's good for the mortgager," Mr. Melillo said.
"WeHre going to be putting out a product soon, in conjunction with a private mortgage insurance company, that is 100% financing," said Philip DeLuca, vice president and chief loan officer at Sunrise.
He said that if a young couple, for instance, wanted a $100,000 mortgage on a $100,000 home, "their parents could put up $10,000, which we would hold and pay interest on, and after a specific number of years that $10,000 would be returned to the parents."
At the end of the third quarter, Sunrise was servicing $363.6 million in loans that the bank had originated or purchased and sold to Federal National Mortgage Association or Federal Home Loan Mortgage Corp. This compared with about $400 million at the same point in 1992.
The bank is projecting originations at about $150 million for the entire year, compared with $125 million for all of 1992.