Like other mortgage lenders, most of the nation's thrifts felt the pinch of a shrinking market in the first quarter of 1995.
At the nation's top 100 thrift originators, mortgage volume fell by more than 21% from the year-earlier level, to $19.1 billion.
For the thrift industry as a whole, the drop was steeper - 42%, to $27.1 billion. This means that thrifts below the top 100 had drops averaging more than 70%.
By contrast, a handful of the very largest thrifts boosted loan volume in a shrinking market. They did this through an aggressive pursuit of adjustable-rate mortgages in the first quarter.
The nation's second-largest thrift, Great Western Bank, Chatsworth, Calif., saw a 50% jump in originations over the first quarter of 1994. Great Western originated $2.5 billion in mortgages in the first quarter of 1995.
Sam Lyons, senior vice president of mortgage banking at Great Western, said the thrift decided to originate as many ARMs as it could in the first quarter, knowing that consumers would soon shift to fixed-rate loans.
"We figured it was a short-lived window, and we'd get what we could," Mr. Lyons said.
In fact, as the spread between short-term and long-term interest rates has narrowed, ARM volume has fallen, Mr. Lyons noted.
This week, the spread between a fully adjusted ARM with a rate tied to the 11th district cost-of-funds index and a 30-year, fixed-rate mortgage is down to just 20 basis points, according to HSH Associates, Butler, N.J. In December, that spread was a hefty 240 basis points.
The big spreads propelled many consumers to forgo the certainty of a fixed-rate loan for a lower-rate ARM, and the effects can be seen in the high volume of the largest thrifts.
By the first quarter, the spread had narrowed to an average of about 150 basis points - still enough to generate substantial ARM volume.
The nation's third-largest thrift, Oakland, Calif.-based World Savings and Loan Association, also picked up significant volume in the first quarter.
World Savings, among the most aggressive ARM lenders, made $1.8 billion in loans during that period, up 43%.
American Savings Bank, Irvine, Calif., ranked fourth in assets, did 40% more in loan volume in the first quarter of 1995 than in the comparable period last year. The thrift made $1.2 billion in home loans in the first quarter of 1995.
Among the top thrifts, H.F. Ahmanson & Co.'s Home Savings of America saw a surprising drop from the first quarter last year. Mortgage volume fell 27% to $1.7 billion in the first quarter of 1995.
Spokeswoman Mary Trigg attributed the drop to the increasing popularity of fixed-rate loans in the first quarter. In addition, she said that Irwindale, Calif.-based Home Savings, unlike many of the other large thrifts, did not have an active program of buying loans from wholesale originators during that time.
Great Western's Mr. Lyons said Home Savings appeared to have backed away from the lucrative 11th district cost-of-funds index ARM during the first quarter, resulting in the lower volume.
Of all thrifts, Bank of America Federal Savings, Portland, Ore., showed the biggest percentage gain in loan originations in the first quarter. Volume rose 140%, to $350 million.
Spokesman Richard Beebe said the lion's share of the increase came from BankAmerica Corp.'s acquisition last year of United Mortgage Holding Co. of Bloomington, Minn., and Arbor National Holdings Inc. of Uniondale, N.Y.