Roslyn Bancorp has become the latest midsize player to quit mortgage banking.

The Roslyn, N.Y., thrift company said late Monday it had agreed to sell most of its retail mortgage production offices to American Home Mortgage Holdings, a publicly traded mortgage banking company based in Manhattan which will pay just $200,000 for the operation.

Roslyn will continue to offer home mortgages through its branches, relying on outsourcing agreements rather than keeping the business in-house. In an interview, Joseph L. Mancino, Roslyn's chief executive, said the company no longer wants to be in a thin-margin business that requires big capital expenditures and volume to compete.

"We decided the mortgage company was expendable," he said, and that Roslyn would liquidate it as well as it could.

Mr. Mancino said the company would like to hire another lender to handle back-office processing so that it will not have any overhead and "when the mortgage business slows down I don't have to worry about it."

Big mortgage companies like Cendant Mortgage and HomeSide Lending are known for making such outsourcing arrangements. Mr. Mancino said American Home Mortgage might end up doing the behind-the-scenes work for Roslyn.

Roslyn intends to focus more on multifamily lending, Mr. Mancino said. That is possible now because it has a presence in Brooklyn and Queens as a result of last year's deal for TR Financial Corp. and its Roosevelt Savings Bank subsidiary. Roslyn had found few opportunities to make apartment loans in its main territory, suburban Long Island, Mr. Mancino said.

The part of Roslyn National Mortgage Corp. not covered in the sale - including retail branches that American Home did not want - is to be shut down. As a result, the company said, it expects to take an after-tax charge of $7.6 million in the third quarter.

Despite a recent modest uptick in refinancing volume, the result of falling interest rates in the last six weeks, the mortgage industry remains in a slump. Rates have been rising for most of the last year, eroding homeowners' incentive to refinance. Companies like Roslyn that built up their origination capacities during the refinancing boom of 1998 have seen their mortgage banking profits squeezed.

In the first half of this year, Roslyn's noninterest income from mortgage banking dropped by 11.5%, to $5.96 million, according to a filing with the Securities and Exchange Commission.

"We decided it was time to sell it off before it impacted our earnings," Mr. Mancino said.

American Home Mortgage, which operates the Web site, agreed to buy Roslyn's mortgage production offices in Columbia, Md.; Vienna, Va.; Washington, D.C.; West Hartford, Conn.; and Melville and Patchogue, N.Y.

Cohane Rafferty Securities represented Roslyn. An official at the White Plains, N.Y., investment banking boutique declined to comment.

The $200,000 deal price would appear to be a steal, considering that it is just 0.4% of those branches' annualized production volume of $500 million. By comparison, Royal Bank of Canada bought Prism Financial of Chicago this year for about 1.5% of its volume.

But Mr. Mancino said American Home Mortgage also agreed to take over Roslyn's pipeline of mortgage applications in process, taking on interest rate risk. And the online lender is helping Roslyn save on severance costs because at least 75 of Roslyn National's 207 employees -- those at the branches to be sold - will keep their jobs.

As part of the deal, American Home Mortgage also agreed to assume the leases on the branches.

Kevin Timmons, an analyst at First Albany Corp., said he was not surprised to hear that Roslyn is quitting the mortgage business.

"They were never really good at the mortgage banking business, it seemed to me," said Mr. Timmons. Roslyn's mortgage unit never benefited as much as other companies did from refinancing booms like that of 1998, he said.

"You'd see their production levels moving up and down relative to where the industry was," he said, "but they never seemed to get the pop on the upside."

"These are tough times right now," Mr. Timmons said. "The guys who are marginal producers in terms of profitability and volume are making these decisions."

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