Maverick Banker on the Move : First Nationwide’s Chief Drives to Build Top Consumer Bank
He drives a 1955 Volkswagen minibus and is a member of the financial advisory board of this city’s Zen Center.
But Anthony M. Frank also drives a nearly new Lincoln Mark VII and is an overseer of Dartmouth College’s Amos Tuck School of Business Administration.
As chairman of First Nationwide Bank, a Ford Motor unit, Frank’s style of management is grounded in the fundamentals: taking deposits from middle-class savers and making home loans. But it also features frequent flights of innovation.
Earlier this month, Frank, the biggest iconoclast in the thrift industry, lost--at least for the time being--a bid to become the industry’s biggest operator in a single stroke. The Federal Home Loan Bank Board announced that it had suspended talks aimed at selling ailing American Savings & Loan Assn. to Ford.
American, the nation’s biggest thrift, is a unit of Financial Corp. of America. Its acquisition by Ford and integration into First Nationwide would have tripled the size of Frank’s company and given it a 9% share of the lucrative California savings and loan market.
Frank is undeterred. With or without FCA, “our ambition is to be the national consumer bank” with a presence in every community with a population of 20,000 or more, the outspoken chairman declared in an interview. A longtime friend added: “He wants to build the best financial services organization in the world--both in terms of its usefulness to consumers and its profitability to its owners.”
String of Firsts
Nobody questions the 56-year-old’s appetite for growth or his deal-making prowess. Since 1981, the German-born, Dartmouth-educated MBA has engineered the acquisition of nine thrifts--including the first two federally assisted mergers across state lines, on terms so advantageous that they set competitors to grumbling. (One friend dismisses the complaints as “the carping of dwarfs.”)
Frank’s impressive string of firsts also includes an imaginative--but as yet unprofitable--franchising program that has given First Nationwide broad geographic reach without using up scarce capital. He has also installed nearly 200 mini-branches in K mart stores in his bid to reach middle-class savers.
“He has always been on the cutting edge,” said Maurice Mann, chairman of the Pacific Stock Exchange and former head of the Federal Home Loan Bank of San Francisco.
Indeed, Frank revels in overturning convention and vaulting barriers that daunt his competitors.
In 16 years, he has guided the transformation of a sleepy $400-million California thrift into a national player with assets of more than $16 billion; the First Nationwide Network of franchised thrifts controls an additional $30 billion in assets.
And while Frank’s profits have never been stellar, neither has First Nationwide ever posted an annual loss. That is no mean feat in the notoriously cyclical thrift industry, whose most colorful characters have often been wild risk takers.
“He runs a good, clean, conservative shop,” Kim Fletcher, chairman and chief executive of Home Federal Savings & Loan in San Diego, said. “I wish there were more people in the industry like him.”
Despite Frank’s accomplishments, some competitors and former associates question whether the deft deal maker would have been up to managing the $45-billion to $50-billion institution that would have resulted if his bid for Irvine-based FCA had succeeded.
‘Not Mr. Tough Guy’
“Tony would (have been) biting off a real big chunk of nonperforming assets,” said George P. Rutland, president and chief executive of CalFed, parent of California Federal Savings & Loan. “That’s a big pill to swallow.”
Added another thrift executive who has worked closely with Frank: “The problem with Tony is that he has never run a really cost-effective machine.” The executive continued: “He is brilliant, creative and farsighted, no doubt about it. But he is not Mr. Tough Guy, and he doesn’t like to have Mr. Tough Guy around him to get his costs in line.” Frank also delegates heavily and travels extensively.
In the first nine months of 1987, First Nationwide’s net income fell 38% to $51.5 million from $82.6 million a year ago. Frank blames the drop on the costs of expansion--assets had climbed to $16.1 billion by Sept. 30 from $13.4 billion a year earlier--and a narrowing of the spread between interest from loans and interest paid to depositors.
“We’ve got one more year of heavy expenses in 1988,” Frank said. “In 1989, 1990 and 1991, we’ve got to excel.”
Despite the profit drop, Frank retains the confidence of his company’s parent. “First Nationwide is a strong company with a strong management team, and Tony Frank is a very good leader of that team,” said James W. Ford, executive vice president of Ford Motor and president of its Financial Services Group.
James Ford, who oversaw the auto maker’s $500-million acquisition of First Nationwide in 1985, is not related to Ford Motor’s founding family. He would not discuss rumored tensions between Ford Motor’s hierarchy and Frank, whose intuitive, seat-of-the-pants style is said to have irked his more analytical bosses at Ford.
But the Ford executive did acknowledge that he has stationed “a couple of Ford people” in First Nationwide’s controller’s office, “and we expect that over time there will be other exchanges between Ford and First Nationwide.”
Far From the Board
Frank, too, discreetly declines to discuss his relationship with Ford’s top brass. “It has been a learning experience for both of us,” said Frank, who traded in a Jaguar for the Lincoln shortly after Ford took over his company.
Instead, Frank dwells on the positive. “We are fortunate to have a parent with capital that is willing to forgo dividends,” he said. Under Ford, he noted, First Nationwide has expanded from four states to 15, not including the franchise operations in 37 states.
Still, Frank’s distance from the top seems to rankle. “I’m so far from Ford’s board of directors that the people I report to aren’t even on it,” he said.
In contrast, Frank was--and remains--a director of National Intergroup, the diversified steel company that was First Nationwide’s previous corporate parent. “They sold the company but kept me,” he said with a laugh.
But Frank’s biggest source of frustration these days is the Federal Home Loan Bank Board, the regulatory agency that is overseeing the bidding for American Savings.
“It has been very difficult,” Frank said before the talks were suspended. “We’ve been negotiating for eight months. The whole cast of characters at the bank board changed July 1 (when a new chairman was appointed), and we almost had to start over again from scratch.”
Neither Ford nor Frank would discuss specifics. Still, sources close to the talks said the biggest hang-up involved the extent and the nature of Federal Savings and Loan Insurance Corp. guarantees to cover FCA’s bad assets. Ford was said to be seeking indemnification for future FCA loan losses--and government collateral to back up FSLIC’s guarantees.
The regulators, one intimate of Frank contended, were “afraid to make a deal. (They were) afraid to take the flak for turning FCA over to Ford.”
Some people in the industry interpreted the bank board’s announcement that the talks had been suspended as a negotiating ploy to win concessions from Ford. In any case, said CalFed’s Rutland: “Tony is not going to get a sweetheart deal this time like he did with his first few assisted mergers. The regulators well understand the value of FCA’s tax benefits to Ford.”
Those tax benefits, which are based upon FCA’s past losses, are estimated to be worth between $300 million and $1 billion.
Frank himself appears to be hoping that the regulators will have little choice but to eventually strike a deal with him.
Has Other Options
“If, as I suspect, FCA is going to report a big loss in the fourth quarter, Tony might have the bank board between a rock and a hard place,” one thrift official familiar with Frank’s strategy said.
This source noted that FCA lost $75.8 million during the third quarter and that further big losses would wipe out its capital, forcing the bank board to act.
Whether he wins or loses FCA, Frank notes that he has plenty of other avenues for expansion, including branching, mergers with healthy institutions, FSLIC-assisted mergers, opening K mart mini-branches and franchising.
Indeed, Frank cites planned future expansion in explaining First Nationwide’s recent decision to move its headquarters from San Francisco to a campus-like setting in Sacramento.
“If we keep on going this way, there is no reason why the network and ourselves shouldn’t be over $100 billion in assets by 1990 or 1991,” he said.
He speaks highly of his associates and employees. “You can do all the advertising in the world, but what really counts is the interaction between the customer and the teller,” he said.
“Tony is one of the rare people who knows how to bring out the best in others,” noted friend and First Nationwide director Robert Setrakian. “He can gather a group around him and create ideas.”
Another friend, Howard Nemerovski, a prominent San Francisco lawyer, added: “He has this unique ability to look over the horizon. He is always looking for a better way to do things.”
Frank left Germany and came to the United States at age 6 in 1937, a year after his parents--both of whom held Ph.D.s in economics--had fled to escape persecution by the Nazis. “I love everything about this country, except one thing: this American habit of examining oneself and introspection,” Frank said.
“I try not to analyze myself,” he added. “It has worked out well for me.” When questioned, however, he sketches the details of his past: growing up in Hollywood, attending Dartmouth, working as a U.S. military intelligence officer in Germany, attending graduate school at the University of Vienna.
It was in Vienna that Frank and his wife, Gay, lived in the 1955 VW minibus. They still own it--and drive it--today. “It’s the oldest one in America. I know because Volkswagen had a contest and I entered it.” But the winner was a 1959 model; Frank had missed the deadline for entering the contest.
No big deal, he said: “The prize was that they bought it from you and put it in the Henry Ford Museum.”
But enough talk of the past; what Frank wants to talk about is his bank. “What we try to do here is absurdly simple: We take the savings of 10 ordinary American families and bundle it up to lend it to another family for housing.”
“Our charter calls on us to ‘establish thrift and promote home ownership,’ ” he added. “What can be better than that?”
FIRST NATIONWIDE BANK
1987* 1986 1985 1984 1983 Assets (in billions) $16.1 $15.2 $11.6 $9.5 $8.5 Net income (in millions) 51.5 101.8 70.8 31.5 31.0 Employees 4,470 3,726 2,866 2,725 2,789 Branches 349 253 177 161 150 States 13 8 4 3 3
*At end of third quarter
Source: First Interstate Bank
