Standard Federal Bank
Standard Federal Bank
2600 West Big Beaver Road
Troy, Michigan 48084
Fax: (313) 637-2782
Incorporated: 1893 as Standard Savings & Loan Association
Assets: $9.8 billion
Stock Exchanges: New York
SICs: 6035 Federal Savings Banks
Standard Federal Bank stands as the largest thrift institution in the Midwest and the seventh largest in the United States. Founded in 1893, the bank survived the Great Depression of the 1930s and the savings and loan crises of the 1980s to enter 1993 with strong growth and assets of approximately $10 billion. The bank operates a retail franchise of over 150 banking centers, over 200 automated teller machines (ATMs), and over seven loan production offices throughout southern Michigan, northern Indiana, and northwestern Ohio. Although its primary lending activity is single-family mortgage lending—approximately $4.18 billion in home mortgage loans were closed in 1993— Standard Federal provides a full range of retail banking services, including checking and savings accounts, consumer loans, certificates of deposit, money market accounts, IRAs, and discount brokerage services.
On April 25, 1893, Standard Savings & Loan Association was established in downtown Detroit, taking over the charter of the Workman’s Savings and Loan Association and building off assets of $31,000 to fund thrift services and affordable home ownership. After steady growth, the business moved to larger headquarters in 1914. By 1927, with assets surpassing $10 million, Standard Savings constructed its own headquarters. The new location, at the corner of Griswold and Jefferson, held symbolic importance as the site of Detroit’s first building, Ste. Anne’s Church, built in 1701.
Contending with the hard times of the 1930s, Standard Savings reinforced the credibility of its old slogan, “Safety For Saving Since 1893.” The thrift managed to weather the Crash of ‘29 and the subsequent Great Depression. Having collected a large store of cash, Standard Savings was able to avoid a serious “run” on its offices and managed to keep its doors open even through the torrential bank closings of 1933.
After the Depression, Standard Savings was in a secure position to excel though World War II and the postwar boom years. In 1942 the company began sales of war bonds. By 1948, business had expanded enough to warrant multiple facilities, and the first branch office was opened in northwest Detroit. In 1950, Standard was issued a federal charter and changed its name to Standard Federal Savings & Loan Association. In 1957, with total assets at $100 million, the first branch offices outside Detroit city limits were opened. Steady success in the postwar years helped the company mold an identity and a set of standards that distinguished it from other savings and loan organizations and yielded sustained success into the 1990s.
A substantial part of the company’s distinct character derived from three executives who steered the company from the 1950s into the 1990s. Thomas R. Ricketts served as Standard’s president for 20 years starting in 1973 and also served as CEO from 1981 into the 1990s. His career with Standard Federal began in 1956 as a management trainee. His predecessor, Robert J. Hutton, started working at the company in October of 1929 and contributed to efforts at resisting the downward pull of the Crash. Hutton eventually served as president from 1962 to 1973 and as chairman from 1973 to 1981. Setting the precedent for both these company leaders, Walter J. L. Ray joined the company as a bookkeeper in 1908 and rose to serve as president from 1946 to 1962 and chairman from 1962 to 1973.
In the 1970s Standard Federal took a course of rapid expansion through mergers and acquisitions. In 1970, Birmingham (Michigan) Federal Savings merged with Standard Federal and main offices were moved to Birmingham. By 1973 the enlarged company had attained $1 billion in total assets and moved into larger headquarters in Troy, Michigan. Assets continued to climb with other mergers: Wayne (Michigan) Federal Savings merged with Standard Federal in 1975; First Federal Savings of Niles (Michigan) merged with the company in 1980; Landmark Savings and Loan (Saginaw/Bay City, Michigan) and First Savings Association of Dowagiac (Michigan) merged with Standard Federal in 1981; and Peoples Federal Savings of Detroit joined the bandwagon in 1982.
The year 1982 marked a temporary gap in Standard Federal’s pattern of upward growth. That year the thrift suffered a loss of $331.6 million. Most of that loss, however, was attributed to $1 billion of low-yielding loans that were sold in a restructuring effort. Standard Federal implemented a wholesale banking strategy to increase profitability and position itself strongly for stock conversion. Standard Federal’s pattern of healthy growth was quickly restored and continued through the 1980s. In 1984 the firm achieved assets in excess of $5 billion. In 1985 Standard Federal adopted a mutual savings bank charter, shifting from its status as an “association” to become Standard Federal Bank. In 1987 the bank converted from a mutual company to a publicly owned stock company listed on the New York Stock Exchange. The move represented one of the largest stock conversions by dollar amount in the history of the thrift industry, with the issuance of 30.4 million shares of common stock.
In addition to assuming a bank charter and going public in the 1980s, Standard Federal continued to grow through mergers and acquisitions. In 1983, the firm completed the largest merger in its history, joining forces with four Indiana thrifts simultaneously: American Federal Savings of Fort Wayne, First Federal Savings of Fort Wayne, Fort Wayne Federal Savings, and South Bend Federal Savings. The year 1988 saw the acquisition of Tower Federal Savings of South Bend (Indiana), adding eight branch offices to Standard Federal’s growing list. Finally, the stream of 1980s mergers was capped in 1989 by Standard Federal’s mergers with two prominent Michigan institutions: First Federal Savings and Loan of Kalamazoo and Peoples Savings of Monroe. The First Federal deal involved the acquisition of 1,812,910 shares of common stock for $29 per share, valued at approximately $54 million. Peoples had 2,200,000 shares of common stock acquired at $20 per share and amounting to an overall value of $44.7 million.
Another strategy to augment business growth in the 1980s involved renting space in K Mart retail stores to provide a full array of consumer banking and lending services at convenient shopping centers. In 1984 K Mart Corporation began a shot-gunning effort to identify new markets for consumer banking and lending services in its stores. In 1984 the retailer began a one-year test of limited-service banking in eight Florida and Texas K Marts, of which four in Florida were operated by Standard Federal. In a series of December 1984 court decisions, K Mart beat down legal challenges to its new financial services and thereby paved the way for banker’s services in 29 Florida stores. In 1985 the new strain of “retailer” banking moved north, with Standard Federal setting up financial service centers in four South Bend Indiana K Mart stores. The bank was thus able to bring checking accounts, passbook savings accounts, money market accounts, and consumer lending services directly to consumers.
Combining public relations with a vested interest in home ownership, in 1987 Standard Federal introduced a program titled, “Unique Realtor Services.” The program was designed to provide consultation to real estate salespersons and ultimately to better inform consumers about home financing and other real estate matters. The services included “Sixty Minute” realtor seminars for local realtor boards and half-day sales training seminars for top sales associates. Such seminars were attended by more than 6,500 real estate sales people in 1992 alone. Standard Federal also engaged the noted real estate authority Thomas Ervin by sponsoring his weekly newspaper column, “Let’s Talk About Real Estate,” and by helping distribute his booklet, “How to Use the Services of a Realtor When Buying or Selling a Home.”
Serving the needs of sellers and buyers of residential real estate through Unique Realtor Services was just one of the methods by which Standard Federal promoted home ownership and otherwise reinvested in the communities it served. In 1990, for example, the bank received $309,775 from the Federal Home Loan Bank (FHLB) of Indianapolis to finance two affordable housing projects in Michigan and Indiana. The funds were used to subsidize financing for the Historic Dunbar Corner Project in South Bend, Indiana, and the Gladstone Transitional Housing Project in Detroit. The entire concept was an indirect result of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, by which regional FHLB organizations were to allot specified portions of their annual net income to Affordable Housing Program participants investing in low- to moderate-income programs. Standard Federal was distinguished as the only financial institution to receive funds for more than one project from the FHLB of Indianapolis during the 1990 period. By 1992, Standard Federal had won approval on 13 Affordable Housing Program applications, totaling approximately $1 million in funds, more than any other thrift in its FHLB district.
In conjunction with the city of Detroit, the regional builder’s association, and local community groups, Standard Federal also co-sponsored HOMEARAMA Detroit, the city’s first new subdivision of single-family homes in over 40 years. The first phase of the project opened at Victoria Park and was completely sold out by the end of 1992, signaling new hopes for single-family homes in a beleaguered real estate market. In a May 1993 interview for Corporate Detroit magazine, Thomas Ricketts, Standard Federal’s chairman and president, expressed optimism for the project’s second phase and for the benefits of such projects in general: “What we thought is, rather than have a house here and a house there, really to help rejuvenate Detroit, you have to take a mass of an area. And then if that can be outwardly grown, I think it can make a difference.”
In 1992 Standard Federal also expanded its Community Home Buyers Program, which was co-sponsored by GE Capital and the Federal National Mortgage Association. The program enabled low- and moderate-income borrowers to purchase homes with as little as a three percent down payment. It also featured educational seminars and alternative credit sources to widen the pool of qualified applicants without substantially increasing risk.
In addition to new programs for mortgage lending and community reinvestment in the 1990s, Standard Federal continued its track of growth through acquisitions. In 1991 United Home Federal Savings of Toledo (Ohio) was acquired. The 1992 acquisition of First Federal Savings and Loan Association of Lenawee County added four new offices in southeastern Michigan, providing impetus for future growth in that market area. In 1993 Standard Federal acquired InterFirst Bankcorp, Inc., of Ann Arbor, Michigan, with five full-service offices serving the residents of Washtenaw County and a wholesale mortgage division serving 31 states in the United States. That same year Standard Federal established a presence in the Flint-Bay City-Saginaw area and northern Michigan with the acquisition of Taylor-based Heritage Bankcorp for $110.7 million in cash.
Standard Federal’s success from the late eighties onward stood out in visible relief against a backdrop of major failures affecting other banks and thrifts. The firm seemed to be thriving on the very conditions that were driving other institutions out of business in scores. In 1992 Standard Federal established new records for profitability, loan closings, and total deposits: net income for the year totaled $95.6 million, a 45 percent increase over 1991 net income; the bank made $3.61 billion in residential mortgage loans, a 117 percent increase over 1991; and assets reached $9.5 billion, with $6.5 billion in deposits. An analyst for Shearson Lehman Hutton Inc., New York, attributed Standard Federal’s success to its efficiency of operations, strict underwriting standards, and “a favorable match between earning assets and costing liabilities,” in a November 1988 article for American Banker. Painting a broader picture of his company’s successful character, Ricketts told stockholders in a 1992 annual report: “The Bank does not have significant loan concentrations to any one borrower, has no foreign loans, and does not make loans to borrowers engaged in highly leveraged transactions. The Bank has never purchased ‘junk bonds’ or other high-risk securities for its investment portfolio.” One consequence was an extremely low level of nonperforming assets—0.75 percent of total assets—compared to an industry average of over 4 percent.
Standard Federal also benefited from falling interest rates in the early 1990s, riding a boom in home-mortgage refinancing. In January of 1992, for example, the bank reported the largest volume of single-family mortgage loan activity in its history, with 7,699 mortgage loan applications received as compared to 1,470 applications in January of 1991. In an October 1991 Crain’s Detroit Business article, Standard Federal’s chief financial officer, Joseph Krul, stressed the need for prudent management of the bank’s loan portfolio to protect against the possibility of rising interest rates. “We’re managing our interest-rate profile such that we’re not going to end up with the same profile as the early eighties. Forty percent of our assets are either adjustable-rate or extremely short-term, like 90 day. In the early eighties, that figure was close to zero.”
In order to further reduce risks of changing interest rates for mortgage financing, and to increase operating efficiencies in general, Standard Federal developed highly automated operating systems. The efficiencies of such systems dramatically reduced operating costs and produced good customer service. Moreover, the productivity improvements of automated mortgage application systems alleviated the need to hedge with futures and options contracts, according to William Murray, senior vice president of corporate planning, in a February 1990 article for National Mortgage News. “The whole idea of options and forwards is that time is money. And the longer you sit there with something that is in process, the greater interest rate risk you bear,” explained Murray. The average time for Standard Federal to receive and close an application for a mortgage loan was 18 days in 1989, Murray pointed out. In addition, the company could sell the mortgages it originated to the secondary market—the Federal Home Loan Mortgage Corp. or the Federal National Mortgage Association—in 24 hours flat.
On April 25, 1993, Standard Federal observed its centennial anniversary with cause for celebration. Over its 100-year history, it had grown into the Midwest’s largest thrift and still showed little fatigue of old age. Low interest rates continued to lower interest payments on savings accounts and to spur record-breaking lending activity in 1993. In addition, implementation of a consultant’s recommendations had cut 1992 operating costs by $6 million. On May 6, 1993, the Office of Thrift Supervision (OTS) awarded Standard Federal its “Outstanding” rating, the highest rating granted to financial institutions for performance in the area of community lending and reinvestment. In all, the bank seemed poised for continued success well beyond the 1990s.
Nor did CEO and President Thomas Ricketts lack enthusiasm for the future. In a May 1993 article for Corporate Detroit, he explained: “I love my work, I really do. I really feel we are doing something important. I mean, we are putting Americans into housing, and I don’t know anything that’s nicer. We’ve got a product that everybody wants—money to get a home. We want to be the most successful financial institution in America.”
Standard Financial Corp.; Standard Service Corp.; Standard Insurance Agency, Inc.; Tower Service Corp.; Standard Brokerage Services, Inc.; Eureka Service Corp.
“K-Mart Widens Financial Services to Up Traffic, Profit,” Discount Store News, February 18, 1985, p. 3.
Matthews, Gordon, “Michigan Savings Bank Wins Praise for Efficiency,” American Banker, November 4, 1988, p. 2.
Ringer, Richard, “Very Slow Start for MBS Futures,” National Mortgage News, February 26, 1990, p. 11.
Roush, Matt, “Big Interest in Falling Rates,” Crains Detroit Business, October 7, Sec. 1, p. 3.
“Standard Federal Bank Experiences Greatest Lending Month in Its History,” PR Newswire, February 14, 1992.
“Standard Federal Bank and Interfirst Bankcorp, Inc., Execute Definitive Merger Agreement,” PR Newswire, July 16, 1993.
“Standard Federal Bank Receives Funds to Assist in Two Affordable Housing Projects,” PR Newswire, August 13, 1990.
“Standard Federal Bank Sponsors Unique Realtor Services,” PR News-wire, July 8, 1987.
Waldsmith, Lynn, “Capitalizing on the American Dream: Standard Federal Bank CEO Thomas Ricketts Does Things the Old Fashioned Way,” Corporate Detroit, May 1993, Sec. 1, p. 7.