CitFed Bancorp, Inc. History

Company Perspectives:

The mission of the directors, officers and employees of CitFed Bancorp, Inc. is to provide the Corporation's shareholders with a return on their investment that is competitive with that of the banking industry and to increase shareholder value. We will attempt to accomplish our mission by profitably providing financial products and services to our customers, utilizing safe and sound banking practices and selecting and retaining the highest quality employees who are committed to providing superior levels of service to our customers.

Company History:

CitFed Bancorp, Inc., is the holding company for Citizens Federal Bank, F.S.B., one of the oldest savings and loan associations in the state of Ohio. Citizens Federal has had few presidents since its founding in 1934, yet those individuals have managed the bank remarkably well. In 1981, for example, Citizens Federal was the 14th largest savings association in Ohio, with 13 offices and approximately $500 million in assets. By the end of fiscal 1983, Citizens Bank had developed into one of the largest savings associations in the state, with over 50 branch offices and $1.5 billion in assets. Astute and talented management continues to guide Citizens Federal Bank, and its operations are not only highly efficient and customer friendly, but still expanding within the state of Ohio.

Bold Beginnings in the Great Depression

Citizens Federal Savings and Loan Association opened its doors for business on August 6, 1934. This was a remarkable feat, considering the fact that the Great Depression had taken hold of the entire United States five years earlier. By 1933 40 percent of all home mortgage loans in the United States, amounting to a total of $20 billion, had defaulted. The result was a disastrous rate of foreclosures running at an astounding 26,000 per month. Nearly 2,000 savings and loan associations had gone bankrupt, with depositors losing over $200,000.

Part of Franklin Delano Roosevelt's New Deal involved the passage of the Home Owners Loan Act. This legislation established a system of federal charters for the troubled savings and loan associations, and created the Home Owners Loan Corporation. Under the auspices of the new law, already existing savings and loan associations were allowed to exchange mortgages that had defaulted for bonds issued by the Home Owners Loan Corporation. The West Side Building and Loan, located in Dayton, Ohio, was the first such organization in Ohio to take advantage of the new federal legislation. Changing its name to Citizens Federal Savings & Loan Association of Dayton, the company opened with approximately $800,000 in assets for lending to customers.

Citizens Federal Savings & Loan Association was successful from the start of its operations, primarily because the company maintained a conservative financial loan policy that was extremely effective, especially during the latter part of the Great Depression. Management decided to avoid any speculative investments, establishing a strict lending policy whereby loans were provided to customers only when they were guaranteed by homes or business holdings. In addition, there were very stringent limitations placed on loans that were provided by the firm to its own corporate officers. Most importantly, however, all customer deposits were insured, and, in a striking innovation for the 1930s, depositors also received a fixed rate of interest on their money. Finally, loans were amortized, so that all the firm's customers would know the exact amount of each monthly payment and precisely when the amount of the loan would be paid in full.

By 1937 Citizens Federal Savings & Loan Association had increased deposits to six times the amount the firm had started with--and funding for mortgages had been provided to more than 2,000 customers. Having always considered its mission to emphasize the importance of individual home ownership, Citizens Federal established a unique customer service information center called the "Homeowners Library." This center included an impressive up-to-date collection of information on building and modeling homes, so that individuals could study various materials such as architectural drawings and interior design books to help them create their own dwellings. At no cost or charge, the Homeowners Library was a phenomenal success, with numerous customers drawing on the wealth of information at the center. By 1940 Citizens Federal was growing at a rapid pace, and reported over $10 million in assets.

When the United States entered World War II in December 1941, Citizens Federal's primary function, loaning money for mortgages, came to an abrupt halt. All civilian construction was brought to an immediate stop, and was not resumed until after the war ended. In spite of this obstacle, Citizens Federal enthusiastically supported and sold war bonds for the United States government and the war effort. In one memorable occurrence, Citizens Federal built a "Victory War Bond Wagon" that toured the streets of downtown Dayton selling war bonds six days a week. From August 1942 through December of the same year, the firm jumped from 21st to first of all savings and loan associations selling war bonds. By the end of the war, the company reported an astounding 292,000 separate transactions for the sale of war bonds, and had accumulated nearly $20 million in total war bond sales.

Postwar Prosperity

When World War II ended, millions of soldiers who had fought overseas returned home and married, and one of their foremost goals was building a home. Citizens Federal picked up where it had left off before the war, and made the first GI Bill mortgage loan in the state of Ohio. With more and more soldiers taking advantage of the bill, the value of first home mortgages made by Citizens Federal shot up from $8.5 million in 1946 to over $29 million in 1956. Along with the increased construction activity throughout the state of Ohio, many people were moving from cities to suburbs, especially in the Dayton area. In order to continue providing its customers with highly efficient service, Citizens Federal opened offices in major suburban shopping centers, including Town & Country, Northtown, and Eastown. By extending hours of service to 8:00 in the evening at its suburban locations, the company brought in many new customers.

During the 1950s, Citizens Federal continued to expand its office locations and improve upon its customer service. Although growth was important to the company's management, of greater significance was the firm's earnings. As Citizens Federal's net worth continued to increase during the decade, management decided that it was not worth pursuing growth for its own sake. Consequently, even though a number of offices were opened in suburban locations for the convenience of its customers, Citizens Federal did not pursue an aggressive growth strategy until well into the 1980s.

Technological and Regulatory Changes,1960s and 1970s

The 1960s ushered in major changes for the company. One of the biggest influences on the financial community was the development of the computer. During this decade, Citizens Federal was the second savings and loan company in the nation to install its own online computer system within existing company facilities. Installing such a system meant a dramatic change for both financial institutions and their customers: Citizens Federal could now produce highly accurate daily statements of all financial transactions and operations, while customers could begin earning interest almost immediately with their deposits. In 1964 Citizens Federal merged with Lincoln Federal Savings, another large savings and loan association in the Dayton area. The merger resulted in an institution with over $100 million in assets. One year later, the total assets of Citizens Federal had increased to $113 million.

The decade of the 1970s was a watershed for the company. The financial community was changing rapidly, as were long-time federal regulations, and Citizens Federal took advantage of the changes. Since their inception, savings and loan associations were the primary lenders to individual homeowners for their very first mortgage, while commercial banks were involved in underwriting land developments. With new federal legislation passed by Congress during the early 1970s, savings and loan associations were allowed to create subsidiary companies to engage in land development. In 1971 Citizens Federal established its own land development company, Dayton Financial Services, and the new subsidiary immediately undertook three major projects south of the city of Dayton, including Quail Run, Woodland Greens, and Pebble Creek. By the end of fiscal 1972, the assets of Citizens Federal had grown to over $200 million. Management devoted the remainder of the decade to expanding its services, taking advantage of the enormous technological changes within the financial services industry, and improving upon the company's ever-growing assets.

Regional Expansion, 1980s and 1990s

In 1980 Citizens Federal posted $471 million in assets. Yet management was determined to surpass the $1 billion mark and to expand the company from a local savings and loan association in Dayton, Ohio, into a regional financial network. Management decided the only way to accomplish this goal in a relatively short period was to pursue an extremely aggressive acquisition strategy. In 1981 Citizens Federal purchased the Columbus Savings & Loan, a $32 million savings and loan association with three offices. During the same year, the company acquired Home Savings of Dayton, another savings and loan association with approximately $125 million in assets. In 1982 Citizens Federal bought the 12 offices of Cardinal Federal Savings and Loan Association. The offices, located in Columbus, Ohio, contributed an additional $200 million to the company's asset base. Not long afterward, Citizens Federal acquired the Ohio State Federal Savings & Loan, adding another $276 million to its assets, and a total of 16 offices located in Columbus and Chillicothe, Ohio. The Liberal Savings and Loan Association was also acquired during the same year, and brought with it offices located in Lebanon, Wilmington, and Cincinnati. At the end of its two-year whirlwind buying spree, Citizens Federal had achieved both of the goals it had set for itself: the company had grown by acquisition into a major regional financial services network, and had rapidly increased its total asset base to $1.5 billion.

During the mid and late 1980s, Citizens Federal maintained its commitment to providing mortgage loans to first-time homeowners. In the interests of its customers, the company dropped its loan interest rate two full percentage points during this period, resulting in many new mortgage loans throughout the savings and loan's territory. Concurrently, Citizens Federal continued to expand by either acquiring or building new offices in the Columbus, Cincinnati, and Dayton metropolitan areas.

In January 1991, management decided to create a bank holding company to further strengthen and coordinate the growing financial services that Citizens Federal was providing. CitFed Bancorp, Inc., was the name chosen to incorporate all the financial activities of Citizens Federal, CitFed Mortgage Corporation of America, and Dayton Financial Services Corporation. As CitFed grew during the early 1990s, the firm continued to acquire new offices and offer more financial services to its customers throughout the region within which it was operating. In 1994 CitFed benefitted from the withdrawal of Union Federal Savings Bank from the southwestern Ohio region. Union Federal, a privately operated savings and loan based in Indianapolis, Indiana, decided to sell its six southwestern Ohio offices to CitFed, primarily because of the rising costs associated with operating in diverse markets, and because of its inability to compete with CitFed's aggressive pricing structure for customer services.

During 1995 CitFed continued its growth through acquisition strategy. In March of that year management reached an agreement with PSB Holding Company, located in Xenia, Ohio, and formed as the holding company for Peoples Savings Bank, to merge its operations with CitFed. The merger resulted in the acquisition of six additional offices, including locations in Greene County, Warren County, and Montgomery County. The purchase of the offices in Greene County was especially important, since the area was projected to be one of the fastest growing counties in the state, with major employers such as Wright-Patterson Air Force Base, the Air Force Institute of Technology, and Wright State University. Management at CitFed was anticipating significant income producing value from Greene County alone within five years.

In 1995 CitFed reported an overall gain in new accounts of 32,000. Largely due to this surge in new customers, the company's branch offices generated a hefty $6.9 million in service fees, a jump of 27.3 percent over the previous year. During the same year, savings deposits at the bank grew by $209 million, while certificates of deposit grew by $115 million. From fiscal 1994 to the end of fiscal 1995, CitFed's total assets grew from $1.8 billion to $2.1 billion, an impressive increase by any standard.

CitFed operates 28 Citizens Federal Bank, F.S.B., branch offices throughout the six counties in the greater Dayton metropolitan area, and a total of 11 CitFed Mortgage loan offices in Ohio, Kentucky, North Carolina, and Virginia. Management at CitFed is committed to providing more extensive and efficient services for its customers, while it pursues an aggressive strategy of growth through acquisition.

Principal Subsidiaries: Citizens Mortgage Corporation of America; Dayton Financial Services, Inc.; CitFed Properties, Inc.

Further Reading:

• Bronstien, Barbara, "Union Federal to Focus Its Energy Back Home in Indiana," American Banker, December 2, 1994, p. 7.
• "CitFed Bancorp Acquisition," Wall Street Journal, February 1, 1995, p. A14(E).
• "CitFed to Call Euronotes," American Banker, July 30, 1993, p. 22.
• "Citizens Federal Bank," American Banker, May 19, 1994, p. 7.
• Cline, Kenneth, "Costlier Deposits May Put Squeeze on Margins," American Banker, January 6, 1995, p. 6.
• Kirby, Jerry, The Story of Citizens Federal Savings and Loan Association of Dayton, Newcomen Society: New York, 1984.
• Morris, Edward L., "Congress Must End the Terror Stalking Innocent S&L Officers," American Banker, July 30, 1993, p. 4.

Source: International Directory of Company Histories, Vol. 16. St. James Press, 1997.

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