H. F. Ahmanson & Co.
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H.F. Ahmanson & Co. was a California holding company named after millionaire Howard F. Ahmanson, Sr. It was best known as the parent of Home Savings of America, once one of the largest savings and loan associations in the United States.
Considered by his father to be a genius by the age of five, Ahmanson founded the H.F. Ahmanson company in 1927, before graduating from the University of Southern California. Ahmanson's company specialized in casualty insurance and quickly became the largest underwriter in California. During the Great 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 Omaha-based National American Insurance Company. His father had previously owned National American, but the Ahmanson family had lost control of it after his father's death in 1925.
Post World War II era & 1950s
After World War II, the American housing market expanded tremendously, especially in California. In 1947, Ahmanson purchased the Home Building and Loan Association, a savings and loan association with assets of less than $1 million, for $162,000. Home Savings now became the cornerstone of H.F. Ahmanson & Company. In the decade that followed, Ahmanson acquired 18 additional institutions, merged them under the name Home Savings and Loan, and turned the group into a financial giant.
Prior to the 1950s, mortgage lenders often earned extra income by tying fire insurance policies to mortgages. New laws passed by states in the late 1940s began to limit this tying relationship. The U.S. Department of Justice's antitrust division launched an investigation of H.F. Ahmanson in the mid-1950s, but the investigation was dropped.
H.F Ahmanson 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 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. Ahmanson likened this industry-wide correction to "a good laxative that cleaned out the system when it could afford to be cleaned."
On June 17, 1968, while traveling in Belgium with his second wife Caroline Leonetti Ahmanson and his son, Howard Ahmanson suffered a heart attack and died. Fortune Magazine 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 was known for being quiet regarding its operations.
Ahmanson's nephew, William H. Ahmanson, succeeded him as head of the then-private corporation, while Richard Deihl continued as CEO of Home Savings and Loan. After Howard Ahmanson's death, the company's reputation for conservative and shrewd management continued, as did its ability to weather downswings in the economy.
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 $101 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, H.F. Ahmanson was forced 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.
In the 1960s, there was intense competition among savings and loan associations centered around very 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 advertising 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 interest rates.
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.
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 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 Berwyn, 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 1988, Ahmanson acquired the Bowery Savings Bank, an institution established in 1934 in New York City. 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 company avoided 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 by purchasing other savings and loans that were failing. 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. In July, 1994, Home Savings of America purchased Fidelity Federal Bank, Long Beach Bank and Hawthorne Savings and Loan Association, with a total of 21 branches in Southern California with deposits totaling $1.1 billion. In addition, Home Saving of America purchased five branches of Guardian Federal Savings Association of Huntington Beach and four branches of Northeast Savings in San Diego from the Resolution Trust Corp (RTC) in the same month. Two months later in September 1994, Home Savings of America purchased 23 branches of Western Federal Savings Bank from the RTC.
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 non-performing assets. During the same year, 61% of its mortgage business resulted from refinancings.
Prior to 1998 the principal Subsidiaries were Home Savings of America; Savings of America; Ahmanson Mortgage Company; Ahmanson Marketing, Inc.; Griffin Financial Services.
In 1998, Seattle-based thrift Washington Mutual (WaMu) purchased HF Ahmanson and its Home Savings unit for $10 billion. As a result of this takeover and those of American Savings and Great Western Financial, Washington Mutual became California’s second largest bank. At the time, HF Ahmanson had $55 billion in assets.
The acquisition also gave Washington Mutual control over a part of the Ahmanson Ranch, a hotly disputed undeveloped area northwest of Los Angeles. After initial considerations of developing a new city on the large space, WaMu eventually sold off their share, now known as the Upper Las Virgenes Canyon Open Space Preserve.
Expansion in California
In February 1995, Home Savings announced the pending acquisition of 52 Southern California branches of Household Bank from Household International for $53 million in cash. Home Savings planned to close 20 branches that were in close proximity to existing Home Savings offices. The acquisition by was completed in June 1995.
In March 1996, Home Savings announced the pending acquisition of 61 First Interstate Bancorp branch offices for about $200 million that Wells Fargo was required to sell before Wells Fargo could acquire First Interstate. As a result of close proximity to an existing Home Savings branch office, the first 14 out of a possible 27 First Interstate Bank branches were announced in June to be closed.
In October 1997, H. F. Ahmanson announced the pending acquisition of the Los Angeles-based Coast Savings Financial, Inc., with its Coast Federal Bank subsidiary for $900 million in stock. At the time of the announcement, Coast had 90 branch offices in California while Home had 370 branch offices in California, Texas, and Florida. The acquisition by was completed in February 1998. After closing 52 redundant branch offices in California and selling off the remaining branch offices in Florida in an unrelated sale, Home Savings had approximately 375 branch offices remaining in California and Texas by mid-1998.
The merger of Coast with Home Savings (and not to mention the subsequent acquisition of Home by Washington Mutual that occurred just a few months later) did not occur without problems for customers. One customer discovered that records for her two adjustable-rate mortgages could not be locate for an entire month. A Home Savings customer discovered that the bank lost his safety deposit box, which contained irreplaceable family heirlooms, during the branch offices consolidations. Other customers complained about long lines and erosion of the quality of customer service as a result of branch consolations.
Expansion in Florida
In February 1997, H. F. Ahmanson announced the pending sale of 12 branch offices in Florida to Birmingham, Alabama-based SouthTrust for an undisclosed amount. At time of the announcement, Home Savings had 39 branch offices in Florida. In December 1997, H. F. Ahmanson announced the pending sale of the remaining 27 branch offices in Florida to SouthTrust for $300 million in cash.
Expansion in Arizona
In August 1996, H. F. Ahmanson decided to leave the state of Arizona by announcing the pending sale of all 4 branch offices in Arizona to the First National Bank of Arizona, then a unit of Bancorp Hawaii Inc., for an undisclosed amount.
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- Mulligan, Thomas S. (February 8, 1995). "Home Savings to Acquire Bank Network : Thrifts: Purchase of Household Bank's 52 Southern California branches would add $1.35 billion in deposits.". Los Angeles Times.
- Iwata, Edward (February 8, 1995). "Home Savings to acquire branches - BANKING: The S&L will take over Household Bank offices, including 10 in Orange County.". Orange County Register. p. c02. (subscription required (. ))
Home Savings of America on Tuesday agreed to acquire the 52 Southern California branches of Household Bank, including 10 in Orange County, for $53 million... The acquisition gives Home Savings $53 billion in assets and 355 savings branches, including 25 in Orange County. Home Savings plans to consolidate 20 of the newly acquired branches into existing Home Savings offices.
- "Briefly: Home buying". Los Angeles Daily News. June 21, 1995. p. B2. (subscription required (. ))
Home Savings of America, an Irwindale-based thrift, Monday said it purchased 51 branches of Household Bank's Southern California operations. Home Savings acquired $1.25 billion in deposits.
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- "Business Brief -- H.F. AHMANSON & CO.: Unit to Pay $206 Million For Wells Fargo Properties". Wall Street Journal (Eastern ed.). March 29, 1996. (subscription required (. ))
Home Savings of America, Irwindale, Calif., a unit of H.F. Ahmanson & Co., said it agreed to pay Wells Fargo & Co. about $206 million for 61 bank branches in California. Through the transaction, Ahmanson gains a stronger presence in California, where it is already the third-largest financial institution. The branches it is buying have about $2.5 billion in deposits and $1.3 billion in loans. Wells Fargo is selling the branches in connection with its acquisition of First Interstate Bancorp. Ahmanson said it expects to consolidate as many as 27 of the branches.Alternate Link via ProQuest.
- "Home Savings to Close Branch". Sacramento Bee. June 27, 1996. p. F2. (subscription required (. ))
Home Savings of America will close one of the 15 First Interstate Bank branches it is acquiring in the Sacramento region, the company said Wednesday... In all, Home Savings said it will close 14 overlapping branches throughout the state as it completes its $200 million deal to buy 61 First Interstate branches from Wells Fargo & Co. More closings will be announced in the coming weeks... In March, the thrift said up to 27 of the branches, including one in Sacramento, could close.
- Vrana, Debora (October 6, 1997). "Ahmanson Deal to Buy Coast Federal Is Reported: Business: The parent of Home Savings of America is expected to acquire L.A.-based company. Deal would create state's third-largest financial institution.". Los Angeles Times.
The combination of Ahmanson, parent of Home Savings of America, and Coast, the Los Angeles-based parent of Coast Federal Bank, will create a thrift with $39.2 billion in deposits in California, Texas and Florida. Some branch closings and layoffs are expected, but the sources said the numbers will probably be small. Coast has 90 California branches and Ahmanson more than 370.
- "Ahmanson In Deal for Coast Federal". New York Times. October 7, 1997.
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- Lipin, Steven (October 6, 1997). "Ahmanson Agrees to Buy Coast Savings". Wall Street Journal (Eastern ed.). p. A3. (subscription required (. ))
H.F. Ahmanson & Co. has agreed to acquire smaller rival Coast Savings Financial Inc. for about $900 million, or $46.17 a share, plus certificates representing any cash awards from lawsuits against the U.S. government, say people familiar with the situation.Alternate Link via ProQuest.
- "Also. . .". Los Angeles Times. February 13, 1998.
Irwindale-based H.F. Ahmanson & Co. said shareholders of Coast Savings Financial Inc. approved its acquisition of the thrift and that it expects to complete the $900-million transaction today.
- Adamson, Deborah (February 13, 1998). "Closing Deal = Closing Banks - Ahmanson: Coast Has Cleared". Los Angeles Daily News. p. B1. (subscription required (. ))
H.F. Ahmanson & Co., the parent of Home Savings of America, said Thursday that federal regulators and shareholders have approved its purchase of Coast Savings Financial, the parent of Coast Federal Bank. The $900 million deal, structured as a tax-free exchange of stock, is expected to close today. As part of the acquisition, Ahmanson is closing 52 Coast and Home Savings branches. After the closures, 407 branches will remain... In October, Irwindale-based Ahmanson announced its purchase of Coast, which had 91 branches.
- "Southtrust Buys More Banks". Orlando Sentinel. December 6, 1997.
- Adamson, Deborah (December 9, 1997). "Home, Coast Closures - Thrifts Shutting 50 Branches". Los Angeles Daily News. p. B1. (subscription required (. ))
In the deal, Home Savings took over 91 Coast branches. Last week, Home Savings said it is selling 27 Florida branches to SouthTrust Corp., an Alabama-based operator of regional banks. When the targeted branches are closed, the combined company will have about 375 branches in California and Texas.
- Sanders, Edmund (March 18, 1998). "Washington Mutual finds Home - MERGER: The new conglomerate looks to be the force in California banking.". Orange County Register. p. c01. (subscription required (. ))
At first blush, the real winners of the merger-mania sweeping Southern California financial institutions appear to be the sign makers. The paint's barely dry on the new Home Savings logos at former Coast Savings branches, and now they're slated to be covered up by Home's would-be owner, Washington Mutual. Next month, nameplates at American Savings and Great Western Bank are coming down, and Washington Mutual signs will go up... A former Coast customer, Lima said she recently received a letter from Home explaining that her two adjustable-rate mortgages had been transferred to a new office. But when the mortgage payments came due, the new office failed to send the usual payment slip showing the amount owed. She called customer service, but they could find no record of her loans. After a month of phone calls, the problem was cleared up, but the experience left Lima skeptical.
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