While the large California thrifts struggled to maintain their portfolios, Michigan-based Standard Federal built its servicing by 11% in the first half over yearend 1994.

The secret to its success has been its 1993 acquisition of Interfirst Bankcorp, Ann Arbor, Mich., according to Michael Maher, senior vice president and controller.

The $32.5 million acquisition gained steam this year, Mr. Maher said. Standard Federal now makes loans in 44 states through Interfirst. When it acquired the thrift-chartered mortgage bank, Interfirst operated in only 20 states, Mr. Maher said.

As a result of the expansion, Standard Federal has had a rich supply of adjustable-rate mortgages, as well as fixed rate loans this year, Mr. Maher said.

Production in the first nine months was $5.1 billion, up from a record $4.4 billion for 1994. The thrift expects to make another $1.5 billion in loans by yearend.

ARMs actually have made up a greater share of all loans so far this year than last at Standard Federal, even though the market as a whole shifted decisively to fixed-rate loans.

ARMs made up 28% of all loans through the end of September, up from 16% in the period last year.

The acquisition, Mr. Maher said, has given Standard Federal access into strong ARM markets on the East Coast, such as Virginia, North and South Carolina, and Florida.

In the past, Standard Federal's midwestern strongholds of Michigan, Indiana, and Ohio had been sparse producers of adjustables. Even when consumers take out ARMs in these markets, they refinance into fixed-rate loans as soon as the ARMs price upward, Mr. Maher said.

Another measure of the good times at Standard Federal: the thrift was originating so many ARMs this year that at the end of the second quarter it began to sell them into the secondary market.

"The intent was to use Interfirst as a means of obtaining more product than we could through our retail operation for our portfolio. For the first year after the deal, all of 1994, indeed we did. We took all the ARM product they could possibly give us," Mr. Maher said.

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