What does a commercial bank do after it sheds a mortgage-banking subsidiary?
At U.S. Bancorp, the answer is go back to basics.
In July, Mellon Mortgage Co., Houston, announced that it would buy much of the Portland, Ore., bank's troubled, home-loan unit and servicing for $75 million. The deal closed earlier this summer.
What's left at U.S. Bancorp is a shadow of the 40th-largest, home-lending operation that originated $4.3 billion worth of loans last year.
But don't tell U.S. Bancorp they are out of the home-mortgage business for good. They are just putting together a new operation - albeit one of a different nature.
The new lending outfit will arise from a bank subsidiary, U.S. Savings Bank, based in Bellingham, Wash. Its attention will be locked on loan originations from U.S. Bancorp's branch network.
"It may be different than in the past, but it is just a new focus," said Cliff A. Frydenberg, president of U.S. Savings Bank and U.S. Bancorp Mortgage.
On Oct. 1, U.S. Savings Bank will become U.S. Home Loans and take on an expanded role as U.S. Bancorp's lending guns.
It will employ more than 200 in many of U.S. Bancorp's branches. It will also service about $2.8 billion of loans between what the thrift originated on its own and what remains from U.S. Bancorp Mortgage.
About 75 people lost their jobs as a result of the sale.
Mr. Frydenberg expects U.S. Home Loans to originate $500 million to $700 million next year. He said the new component had the potential to originate $1 billion to $2 billion worth of loans a year.
"We are simply going to refocus our mortgage lending activities on the bank branch," he said.
He said U.S. Home Loans would probably sell 80% of its loans to the secondary market. The rest will be portfolioed.
Although still owned by U.S. Bancorp, the affinity lending division - which makes loans to professional or trade groups - is "on the back burner right now," said Thomas Sidley, U.S. Bancorp's chief operating officer. Our priority is building our branch network."
Thomas J. Carley, a Jensen Securities analyst, said U.S. Bancorp has more than offset the reduced income from lower mortgage production with a reduction in expenses.
"It was a blessing they got it sold and off the books," he said.
James R. Bradshaw, a research analyst at Pacific Crest Securities, said the greatest challenge for U.S. Home Loans was getting U.S. Bancorp's "commercial bankers" to be more sales driven.
A competing Washington banker said U.S. Bancorp's lending operation will not be a major factor in the Pacific Northwest marketplace. He said it lacked the structure and would not attract the personnel needed to dominate the region.
We perceive we will strengthen," said U.S. Bancorp's Mr. Frydenberg.
