Spokane Journal of Business

Metropolitan Mortgage posts record net income

Figure nears $10 million after increasing dramatically over the last five years

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Metropolitan Mortgage & Securities Co., of Spokane, has reported net income of $9.7 million for its most recent fiscal year, which is up from about $8 million in the previous year and nearly two-and-a-half times higher than it was five years ago.

In its newly released annual report for the year ended Sept. 30, 1997, Metropolitan also noted a significant rise in its return on average assets, with that annual figure increasing to 0.81 percent from 0.40 during that same five-year period. Return on assets is a key performance indicator for financial-services companies.

C. Paul Sandifur Jr., the companys president and CEO, devoted his entire message in the annual report to the companys purchase of the former Farm Credit Bank Building, an 18-story building at 601 W. First, which now is Metropolitans headquarters.

This move not only represents the successes of our past, but it also signals the promise of continued growth, he said.

Metropolitans core business is buying real estate mortgages at a discount from mortgage holders who want to liquidate their positions. The company often holds the mortgages it buys and derives income from them over time as mortgagees make their payments.

A few years ago, the company began diversifying by buying other types of cash-flow instruments, including mortgages that were being liquidated by the federal government during the savings-and-loan crisis, lottery winnings, structured settlements, and farm-subsidy payments. It also began originating residential loans through correspondent relationships with other lenders and loan brokers throughout the Western U.S.

Now looking to expand beyond the wholesale market, it has begun offering retail mortgage banking services in the Spokane area and says its considering opening retail branches.

In addition to those activities, Metropolitan sells securities, manages a commercial real estate portfolio, and operates an insurance subsidiary. The company employs a total of about 550 people.

Since 1996, Metropolitan has generated considerable cash flow through several large sales of mortgage-backed securities. In such a transaction, the company sells the loans, but continues to collect the payments made on them, then transfers that money to the buyers of the securities.

Those securitizations, as they are called, have caused the companys total assets to stabilize at just over $1 billion. Metropolitan reported total assets of $1.11 billion for the most recent fiscal year, which was down slightly from the $1.28 million peak of the previous year but still higher than in any of the three previous years. The company first surpassed the $1 billion mark in total assets in 1993.

Metropolitans diversification into new areas of business is reflected in a year-to-year decline in its real-estate receivablesto $512.9 million in fiscal 1997, compared with $650.9 million in 1996. The company sold $390.4 million worth of receivables of all types in 1997. That was up sharply from the previous years $182.2 million, but almost identical to the value of new receivables that the company acquired in 1997.

Metropolitan continued to build up stockholders equity in 1997, as it paid no dividends to common shareholders, instead funneling the entire $5.6 million in net income after preferred dividends into retained earnings.

Stockholders equity increased to $54.1 million, up from $40.6 million two years ago.

Kim Crompton
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