Bucking a trend in which most thrifts have left the real estate development business, MAF Bancorp is laying the foundations for new neighborhoods in Naperville, Ill.

The $5.1 billion-asset parent of Mid-America Bank is completing its largest development ever - a 1,000-unit subdivision on the outskirts of the Chicago suburb - and said it expects to break ground on another 1,000-home project next spring. The company, which has developed nearly two-dozen residential projects in the last quarter century, said it has no plan to slow down.

"We are always on the lookout for new land," said Jerry Weberling, MAF's chief financial officer.

Development has been profitable for MAF; its five-person MAF Development subsidiary netted $7.8 million, or 8.4% of the thrift's pretax income, through the first nine months of 2000.

But the numbers understate its true importance. The subsidiary's steady revenue stream has allowed MAF to maintain a strong emphasis on mortgage lending, even as its net interest margin has shrunk to a slender 2.7%. Home loans comprise 89% of MAF's $4.3 billion portfolio.

Meanwhile, other thrifts faced with the same margin pressures have reconfigured their businesses to be more like commercial banks'.

"It's the only thrift I cover that is still actively involved in" development, said Jack Micenko, an analyst at Friedman Billings Ramsey & Co. in Arlington, Va.

Indeed, most thrifts shuttered their development offices in the late 1980s and early 1990s when the real estate market crashed. Some, especially those in New England, lost hundreds of millions of dollars on failed projects. Federal regulators, stuck with cleaning up much of the mess, were happy to see the pullback, said Charlotte Bahin, director of regulatory affairs and regulatory counsel at America's Community Bankers, the thrift trade group.

"Regulators look at banks that are involved in development as tools of the evil empire," she said. "That is unfortunate because, when it is done prudently, development is a fine investment."

Mr. Weberling said that MAF's nearly two-dozen projects since 1975 have totaled about 5,000 homes. MAF expects its development unit to earn up to $9 million next year, he said. As a developer, MAF builds the infrastructure and lays out the lots, which it then sells to home builders.

Forecasting earnings can be difficult, Mr. Micenko said, because real estate development "can lead to some wide swings in income." Still, he added, MAF has a good track record and therefore is unlikely to lose money in the business.

"These guys have been doing this for a long time," he said, "and it's one of their core competencies."

MAF's reliance on real estate development has rewarded investors - a $1,000 investment made 10 years ago would be worth more than $15,000 today.

The stock was trading at $24.13 a share at midday Wednesday, up 17% this year.

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