H. F. Ahmanson & Company History

Company History:

H. F. Ahmanson & Company is the holding company for the largest savings and loan institution in the United States, Home Savings of America. Ahmanson has accrued more than $48 billion in assets, almost all of which is derived from Home Savings with its emphasis on financing residential real estate loans. The company weathered the difficulties that many savings and loan institutions fell victim to during the 1980s, but recovered to continue its expansion into heavily populated urban areas throughout the United States.

Howard Fieldstead Ahmanson, the company's founder, was born in 1906. Considered by his father to be a genius by the age of five, H.F. Ahmanson founded the company that bears his name in 1927, even before graduating from the University of Southern California that year at the age of 22. Ahmanson's company specialized in casualty insurance and quickly became the largest underwriter in California. During the Depression, the company prospered by dealing with foreclosures. Ahmanson once remarked that he felt like an undertaker: "the worse it got, the better it was for me." In 1943 Ahmanson bought control of the North American Insurance Company, the company his father had owned but which the family had been ousted from after his father's death in 1925.

After World War II, the housing market took off. Nowhere was this more evident than in California. In 1947, Ahmanson purchased Home Savings of America, a savings and loan association with assets of less than $1 million, for $162,000. Founded in 1889, Home Savings is today the cornerstone of its parent company, H.F. Ahmanson. In the decade that followed, Ahmanson acquired 18 additional institutions, merged them under the name Home Savings, and turned the group into a financial giant. So meteoric was its growth, in fact, that the Department of Justice's antitrust division launched an investigation of the conglomerate in the mid-1950s that was soon dropped.

While involved in this burgeoning savings and loan association, H.F. Ahmanson also formed the Ahmanson Bank and Trust Company in 1957, the National American Title Insurance Company in 1958, and the National American Life Insurance Company of California in 1961.

The company continued to grow at a furious pace until the 1960s, when the housing market began to falter and the federal government began to pass legislation designed to regulate the savings and loan industry. In 1965, the Ahmanson Company wisely shifted its mortgage emphasis from tract housing to apartment buildings and was able to avoid most of the problems that other savings institutions faced. Howard Ahmanson viewed the collapse as good for the industry because homes were being built too quickly. In his plain-spoken way, he likened this industry-wide correction to "a good laxative that cleaned out the system when it could afford to be cleaned."

In 1968, while traveling in Belgium with his wife and son, Howard Ahmanson suffered a heart attack and died. Fortune estimated Ahmanson's financial worth at the time at between $200 and $300 million, most of it controlled by trust funds and foundations. The Ahmanson company has been known for keeping a tight lid on the status of its operations, so it is not clear who succeeded Ahmanson as head of the then-private corporation. However, the executives that Ahmanson left in charge of his empire were carefully chosen, and even after his death, the company's reputation for aggressive and shrewd management continued, as did its ability to weather downswings in the economy.

The late 1960s and early 1970s were lean years for the savings and loan industry. A frantic building spree had led to many foreclosures in California and money was tight. Out-of-state money had poured into California because interest rates there were much higher than in the rest of the nation, but as other states began to match California's rates, the money was withdrawn.

By the latter part of the 1970s, investors were beginning to put their money in California institutions again, but in general at this time people were spending more and saving less than past generations. Savings and loans began to look for alternative ways to make money, through consumer lending (such as appliance financing) and loans on properties other than single-family homes. Ahmanson had foreseen these difficulties and had been making loans on apartment buildings since 1965 as a cushion against the failing mortgage market. But Ahmanson did not diversify to the point that would cause the failure of many thrift institutions in the years to come--even into the 1990s the company still did not make auto or consumer loans, leases, or unsecured commercial loans, which tend to be riskier.

Several federal regulations passed during this period proved advantageous to H.F. Ahmanson & Company. A 1968 law ended a nine-year freeze on takeovers by holding companies, and a 1971 rule allowed financial institutions to make loans within 200 miles of each branch office--whereas the old rule had restricted lending to within 200 miles of an institution's headquarters only. Spurred by the easing of restrictions, the Home Savings network soon covered the whole state of California, as four offices were acquired in northern California.

In the 1960s, there was intense competition among savings and loan associations centered around sky-high interest rates and offers of expensive premium items for customers who opened new accounts. In 1966, legislation ended the so-called "rates wars," leaving institutions to rely on their advertising budgets to attract new customers. Not surprisingly, the larger institutions with more advertising dollars to spend prospered and the giants, including Home Savings, gained the power to set loan rates.

The Tax Reform Act of 1969, which called for a reduction of concentrated holdings by foundations, resulted in several stock offerings by H.F. Ahmanson, but the company's financial base was so solid that the sales had minimal effect. A $100 million stock offering in 1972 was a record for the time, yet it only represented 6.4% of the firm's $4.4 billion in assets. After the Bank Holding Company Act of 1970, it was necessary for Ahmanson to sell the Ahmanson Bank, which it did in 1976 to private Philippine investors. However, Ahmanson was able to retain its trust operations as a subsidiary, Ahmanson Trust Company.

Ahmanson's insurance operations, the original business of the company, continued to grow, as Stuyvesant Insurance Group was acquired from GAC Corporation in 1974 and Bankers National Life Insurance Company was purchased in 1981.

Having saturated the California savings and loan market, Ahmanson began to merge out-of-state institutions into the Home Savings network under the name Savings of America. In December of 1981, three mergers were completed in Florida and Missouri; six more in Texas and Illinois followed in 1982. A New York merger was completed in 1984. Subsequent mergers included institutions in Ohio (1985), Arizona (1987), and Washington (1987). At the end of 1987, Home Savings reported $27 billion in assets.

These forays outside California often included expensive, and very successful, direct-mail campaigns. One promotion in Texas reportedly brought in $60 million in one month. But Ahmanson's interstate mergers have also generated some opposition. When Savings of America announced plans to open an office in Berywn, Illinois, a community known for its proliferation of financial institutions, critics in the industry questioned Ahmanson's motives. An earlier protest to the Federal Home Loan Bank by Illinois officials had been dropped after the company convinced the protesters that Illinois money would not be used for California investments. In any event, as one official said, protests rarely affect regulatory approvals, and the Savings of America branches continue to attract savers by offering interest rates as much as 2% higher than local competitors.

Further penetration outside California continued when, in January of 1988, Ahmanson acquired the Bowery Savings Bank, an institution that was established in 1934 in New York. The 25 Bowery offices continue to operate under their original name.

Ahmanson also strengthened its loan operations in the 1980s by opening lending offices under the name of Ahmanson Mortgage Company in Colorado, Connecticut, Georgia, Maryland, Washington, D.C., Massachusetts, Minnesota, North Carolina, Oregon, Tennessee, and Virginia. Two regional loan-service centers, in California and North Carolina, provided support for the offices.

Richard H. Deihl became chairman and CEO of H.F. Ahmanson in 1983. A company veteran, he joined Home Savings as a loan agent in 1960 and was elected CEO of the subsidiary in 1967. Under Deihl's leadership, Ahmanson avoided the temptation to jump on the bandwagon for the high returns from junk bonds during the mid-1980s, preferring to rely on the safer 1 to 1.5 percent earnings garnered from a home loan. It was a prescient decision. From 1988 to 1990, when hundreds of savings and loans throughout the United States were failing because of their involvement with junk bonds, Ahmanson's deposits grew by 75% and its assets increased by more than 65%. The company's net earnings during the same period averaged more than $200 million per year.

Part of Deihl's success was due to his strategy of streamlining Ahmanson's operating costs. First, the company moved its headquarters to Irwindale, California to take advantage of more space for less money. Secondly, more than 700 employees were eliminated at staff and administrative levels and, as a result, the company lowered its ratio of general expenses to 1.5% of its average assets, nearly one-half point below the industry ratio for the larger savings and loan institutions. Deihl also insisted on adhering to strict criteria for home loans. The average borrower at Home Savings carried a personal debt of 33% of his total income, almost 3% below the standard set by the Government National Mortgage Association. In 1991, approximately 95% of the company's entire loan portfolio was secured by residential real estate properties.

In light of such favorable numbers, Ahmanson continued to expand. In 1990 and the following year, the company purchased Home Savings Bank of New York and also acquired numerous branch offices from Coast Savings' San Diego operation. In 1992, Ahmanson acquired County Bank of Santa Barbara and also changed the names of its savings and loan operations in New York and Connecticut to Home Savings of America. In 1993, the company purchased 24 branch offices from HomeFed Bank.

Yet even with this expansion Ahmanson felt the effects of California's recession during the early 1990s. In 1992, earnings fell to $156 million, partially due to falling property values in the state which led to a substantial increase in nonperforming assets. During the same year, 61% of its mortgage business resulted from refinancings.

Despite these setbacks, Ahmanson remains a successful giant in the savings and loan industry. With a long and distinguished history, and an effective but low-keyed advertising strategy, Ahmanson has garnered a reputation for dependability and safety. Astute and conservative management policies helped the company avoid the catastrophes that hit many savings and loans in the 1980s. Indeed, the company actually prospered in those years by concentrating on what thrift institutions were chartered to do: take in savings and provide loans to people buying homes. If it continued to provide this service, H.F. Ahmanson & Company's role as a leader in the industry seemed assured heading into the late 1990s.

Principal Subsidiaries: Home Savings of America; Savings of America; Ahmanson Mortgage Company; Ahmanson Marketing, Inc.; Griffin Financial Services.

Further Reading:

• Barrett, Amy, "Can A Superthrift Survive On Safety?" Business Week, August 23, 1993.
• Murray, Tom, "It's A Wonderful Life," Financial World, April 30, 1991.

Source: International Directory of Company Histories, Vol. 10. St. James Press, 1995.

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