The collapse of Enron has no equal, although it does remind some economic experts of the corruption and bad business practices of the 1980s’ collapse of the savings and loans.
To refresh your memory: Wild interest rate fluctuations in the 1970s panicked the savings and loans. Hit hard by a lack of deposits, the thrifts sought new revenue-generating methods to stay solvent. In the early ’80s, Congress approved massive deregulation. Lending rules were loosened. Interest rate ceilings were eliminated. Sound familiar?
But the measures didn’t work. The savings and loans continued to lose money. Many made bad loans on overvalued property. In March 1985, Ohio’s deposit insurance fund neared depletion. Ohio Gov. Richard Celeste declared a bank holiday and shut down the thrifts. He allowed those that could be federally insured to reopen.
Regulators swept into Ohio to suture the wounds. Panic ensued.
Regulators shut down Northeast Ohio thrifts like Broadview Savings, Transohio Federal Savings and Cardinal Federal Savings. Others were purchased by larger commercial banks. Park View Federal Savings Bank remained open.
Park View President Keith Swaney euphemistically refers to those days as the “tough times.” Swaney has seen many tough times. He joined the thrift 40 years ago balancing account statements and worked his way up to teller, then to the data processing department.
Today, the tall, strapping Swaney is wiser and grayer than the young man who joined Park View out of high school. A lot of those gray hairs appeared during the fallout from the S&L crisis.
To be fair, his thrift was more a victim of the times than of greed and mismanagement. Because of its tighter control, Park View emerged from those tough times stronger than before.
“The regulators had bigger problems than Park View,” Swaney says. “We were lucky we had the time to work our way out of the problems.”
Like any business rapidly losing money, Park View had to lay off workers, trim its branch offices (from 16 to seven) and scale back business divisions. But Northeast Ohio as a region continued to expand. New homes and businesses sprouted up in the outer suburbs.
Park View was there to loan money for those projects and regional growth helped nurse the thrift back to health.
“It was a lot of hard work, cutting expenses and taking advantage of the real estate market when we could,” Swaney recalls. “We eventually started growing again.”
Thanks to its success in honing its niche of local home and business construction lending, Park View continues to grow in another tough time for smaller banks. The burgeoning thrift has $736 million in assets and 15 branch offices. It is too large to ignore, but still too small, Swaney says, for large commercial banks to come snooping around.
“You really have to have about $1 billion to draw any interest,” he says. “But we’re not looking to be bought. We have a young management team that has been with us for 10 to 20 years. We all enjoy what we do, and our company continues to perform.”
A breed apart
Former Park View President Jim Male decided in 1992 to take the company public on the NASDAQ stock exchange. The move gave Park View the necessary cash infusion of $8.5 million to leave the mess of the ’80s behind.
In 1994, the thrift reorganized under a parent company called PVF Capital Corp.
“We really had no choice,” Swaney says. “We literally had zero capital. You either had to raise capital or get taken over by the (Resolution Trust Corp.). If you didn’t come up with the capital, the RTC was either going to liquidate you or sell you off to somebody else.”
Like most thrifts, Park View’s stock doesn’t excite investors.
It broke into the NASDAQ at $10 a share. Since then, it has dipped as low as $8 and climbed as high as $14 to $15. While not exciting, that doesn’t mean investors aren’t interested in the stability thrifts like Park View offer.
Diamond Hill Capital Management Inc., an investment firm based in Columbus, offers a mutual fund made up of financial services stocks that include both large commercial banks and small-cap thrifts.
“The thrifts have performed very well relative to many other parts of the market in the last year,” says Christopher Bingaman, an investment analyst at Diamond Hill. “It’s generally a lower growth, lower return business than commercial banking, but it’s also lower risk. When the economy gets difficult, thrifts tend to perform better because of that lower risk, and they’re usually more (interest) rate sensitive than banks are.”
Commercial banks are more reliant on fees from the myriad other business offerings like cash management services, credit card processing and investment management, Bingaman says. Those fees often drop in a slower economy, and the bank’s stock price plummets.
“I would always prefer to own a well-run thrift vs. a poorly-run bank,” Bingaman says. “I wouldn’t say there’s anything too unique about (Park View), but there have been above average returns in growth over the last couple years. That’s probably just indicative of a well-run company.”
Stick to your guns
Swaney says Park View will remain a Greater Cleveland thrift and will not follow the lead of others in the area, like Charter One Bank, which dropped its thrift charter in January for a national bank charter. During the S&L crisis, some thrifts got into trouble by approving out-of-state loans.
But there’s a fine line between conservative and stubborn, and Swaney says Park View’s breadth of services will respond to the market.
“I’m not going to sit here and say we’re not going to offer all the new things that everybody else is offering,” Swaney says. “To some extent, we will. It will be a matter of what our customer base is, but we will continue as a real estate lender.”
Those looking for evidence can consider Park View’s new 55,000-square-foot corporate headquarters in Solon. The building has two entrances due to its unique customer traffic — the large glass-enclosed main entrance is for employees and visitors and the other, smaller, entrance around the corner is for building contractors only.
“With our accelerated growth over the past two years, we needed to take more control over the internal operations and put them all in one place,” Swaney says of the new headquarters. “It’s enhanced our efficiency as a company.”
Recent buyouts have worked in Park View’s favor, too. Security Federal Savings & Loan was acquired by FirstMerit Bank. Strongsville Savings Bank was acquired by Fifth Third Bank.
Since 1999, Park View has grown more than 60 percent and increased its employee base by 15 percent.
“(FirstMerit and Fifth Third) can’t cost justify a deal that’s $4 million and under,” Swaney says. “That’s where we do a big business. That’s our niche and we plan to continue to grow in that arena.”
How to reach: Park View Federal Savings Bank/PVF Capital Corp., (440) 248-7171