From a distance, NationsBanc Mortgage Corp. appears to have everything one would expect from a company vying to be one of the vaunted top five in mortgage lending.
The mortgage unit of NationsBank Corp. has a huge, powerfully capitalized parent, has nationwide ambitions, and last year brought in a well-known mortgage banker, Andrew D. Woodward Jr., who has extensive experience in evaluating, buying, and integrating mortgage companies.
The one thing NationsBank has lacked is a major acquisition to catapult it to the top ranks. While other major lenders like Chase Manhattan, Chemical Bank, and Barnett Banks have invested hundreds of millions of dollars in mortgage assets, NationsBank has done little more than stick its toe in the water.
The bank has been sighted more times than Elvis, showing up as a bidder in the thick of nearly every mortgage bank sale in the past year. But so far it has made only two moderate-size purchases.
The signs from NationsBank are conflicting. "Mortgages have a major role in our corporate agenda as we build our consumer franchise," says Mr. Woodward. "We have a strong commitment to growth, internally and geographically."
But the ethos at the banking giant is not growth at any cost. "We are not in love with any of our businesses; we are in love with profitability," says G. Patrick Phillips, the NationsBank executive charged with overseeing the mortgage unit.
In fact, observers say, it is these two seemingly conflicting values - growth and a cautious eye on its costs - that govern the unit. They all agree the bank will eventually be a major player in the consolidation of the mortgage lending and servicing business. The question some are asking is whether the company's deliberate pace of expansion has made it fall behind its peers.
"It's kind of a schizophrenic time," said Mr. Woodward, noting that his own time is split between evaluating takeover candidates and working on paring down his organization in the face of an industrywide downturn in originations.
So far, the company's purchases have been more in the line of strategic add-ons rather than huge moves. In August, the company purchased about $6 billion in mortgage servicing rights from Phoenix-based Express America Holdings for about $85 million.
A key component of the Express America deal was that it gave NationsBanc Mortgage a servicing facility in the West, crucial if the lender is ever to become big in California or adjacent states.
In October, the lender followed up with a deal to buy three small, related mortgage lenders in California. While that acquisition carried with it only about $1.3 billion in servicing rights, it gave NationsBanc Mortgage a foothold in the Golden State. "We view it as a platform," says Mr. Woodward.
On the major properties, NationsBank has either passed or been out of the money. Mr. Phillips labels some of the prices paid this year as crazy, saying, "The very, very high premiums just didn't make sense to us."
That aside, for now the mortgage unit's strategy for expansion seems to be two-pronged: consider acquisitions as they come along and look toward new channels of loan production.
Shopping for a mortgage bank, however, takes a tremendous amount of time and effort. "There is a list of things we look at that is longer than this room," said Daniel F. Hellams, an executive vice president and head of the acquisition team.
Much of the emphasis is on evaluating the culture of the target company. "It goes all the way down to, do you give someone an automobile or do you reimburse them for mileage," said Mr. Hellums.
To build alternative channels, the company has focused on two areas in particular - assignment of trade and new issue, both forms of correspondent lending.
The hope is to build a system that can weather the type of downturn experienced in 1994. "At some times the economics of one channel are degrading while the others are improving," said Mr. Woodward.