Oceanmark Bank is the latest lender to flee the subprime market.

The Miami-based bank announced Tuesday that it was selling Oceanmark Financial Corp., its subprime mortgage unit, to Southern Pacific Funding Corp., a finance company based in Lake Oswego, Ore.

Terms of the deal were not disclosed, but analysts say that Southern Pacific probably agreed to pay about $5 million.

Oceanmark, with $58 million of assets, follows in the footsteps of several bigger banks that have recently tried to distance themselves from the volatile subprime industry.

High profit margins have attracted banks to subprime lending in recent years, but many conservative lenders have begun to question the sector's soundness. Several highly publicized disasters this year in the auto finance arena compounded their concerns.

In fact, many big banks are pulling away from the business, and others who were on the prowl to buy subprime auto lenders have dropped out of the market.

BankAmerica Corp. announced in March that it plans to sell its subprime unit, Security Pacific Financial Services. And last month Fleet Financial sold Option One, its finance division.

"Banks that are pursuing subprime area are the exceptions," said Mike McMahon, an associate with UBS Securities, San Francisco.

The business of lending to customers with poor credit just doesn't mix well with traditional banking, said Mr. McMahon, who served 16 years as a vice president at First Interstate Bancorp. before joining UBS.

Despite its profitability, bankers still have a hard time overcoming their "gut reaction to a less than perfect quality loan," Mr. McMahon said.

Nevertheless, some financiers and investors insist that subprime lending is the place to put their cash, and are paying premium prices for the companies. (See stories on page 11.)

Subprime companies' reliance on gain-on-sale accounting and their generally more entrepreneurial culture make them a difficult fit for banks, analysts say.

The cultural issue came into play recently when Barnett Bank abruptly lost Jeffrey Larsen, the head of its two-year-old subprime subsidiary. Although neither the bank nor Mr. Larsen would discuss the terms of his departure, industry sources said he bristled at the confines of bank culture.

In addition, getting into the subprime arena rarely provides any material increase in earnings per share, Mr. Mahon said, making it even less attractive for a large commercial bank.

But some banks are still bullish on the sector. KeyCorp is aggressively pursuing acquisitions in the subprime business, according to Jay Meyerson, head of KeyBank USA, its consumer finance unit.

Oceanmark Bank's chairman, Lynn Fenster, would not discuss specific reasons for the sale but said the bank would be unlikely to do any more subprime lending.

Oceanmark Financial will retain its management and its name, said a Southern Pacific representative. The unit is expected to originate $250 million of loans this year through its network of over 2,500 brokers.

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