Metropolitan Financial Corporation

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Metropolitan Financial Corporation

P.O. Box 522
Minneapolis, Minnesota 55480
U.S.A.
(612) 973-1111
Fax: (612) 344-1029

Wholly Owned Subsidiary of First Bank System, Inc.
Incorporated: 1926 as Metropolitan Federal Savings & Loan Association of Fargo, North Dakota
Employees: 2,600
Assets: $8 billion
SICs: 6712 Bank Holding Companies; 6036 Savings Institutions Except Federal

One of the largest savings and loan holding companies in the United States before its acquisition by First Bank System in 1995, Metropolitan Financial Corporation grew from a small building and loan concern incorporated in 1926 into a diversified regional banking giant during its 68 years of independent existence in the upper midwestern United States. Capitalizing on the savings and loan fiasco during the late 1980s, Metropolitan Financial recorded much of its enormous growth during this period and quickly became a stalwart in the savings and loan industry.

When Norman M. Jones joined the family business in 1952, it was a modestly sized building and loan association based in Fargo, North Dakota, where it had operated for the past 26 years. Then known as Metropolitan Federal Savings & Loan Association, the bank had spent its first quarter century accumulating $3.4 million in assets, enough to warrant the employment of seven people, three of whom were Jones, his father, and his grandfather. When the reins of leadership were passed to Norman Jones 15 years later in 1967, Metropolitan Federal’s new chief executive officer inherited five branch offices. Over the course of the next 15 years, Jones gradually increased Metropolitan Federal’s geographic presence, establishing branch offices primarily in rural settings; in the process, Jones made his family’s business a discernible banking force in North Dakota. In the 30 years before Jones assumed leadership of the savings and loan, his father and grandfather had built a respectably sized banking organization comprising five branch offices; in roughly half that time, Jones would open four times as many Metropolitan Federal branches, elevating the family business to the forefront of North Dakotan thrift institutions and creating a stable foundation for the prolific growth to come in the 1980s.

Several important changes in the corporate structure of Metropolitan Federal were effected during the first half of the 1980s which helped the banking organization assume a more aggressive stance toward growth. The first of these changes occurred in 1983 when the bank switched to stock ownership, converting from a federally chartered mutual bank to a federally chartered capital stock association. The following year, the bank’s shareholders voted to change from a stock savings and loan to a federal stock savings bank, a conversion that also resulted in a name change from Metropolitan Federal Savings & Loan Association to Metropolitan Federal Bank. Concurrent with this restructuring, shareholders elected to form a bank holding company for the new Metropolitan Federal to be named Metropolitan Financial Corporation. This reorganization allowed Metropolitan Federal to increase the types of services that it could legally offer and gave the financial institution better access to credit markets.

While Jones presided over these significant alterations in Metropolitan’s organization, indications of the rapid growth to come were just beginning to surface. In September 1984, two months after Metropolitan Federal Savings & Loan Association became Metropolitan Federal Bank, the institution acquired a failed savings and loan in Mitchell, South Dakota, with the assistance of the Federal Savings and Loan Insurance Corporation (FSLIC), giving Metropolitan its 35th branch office and its first in South Dakota. For Jones and his management team, the absorption of Mitchell Home Savings and Loan added $17 million to Metropolitan’s $1.4 billion in assets and extended the company’s geographic presence southward into South Dakota. Of greater significance was the nature of the merger itself, however, for it established a model from which Jones and other company officials would predicate Metropolitan’s growth later in the decade.

After the acquisition of Mitchell Home Savings, Metropolitan completed two more pivotal acquisitions, the first of which came in 1985. That year, Metropolitan bought out another troubled savings and loan institution, this time in Moorhead, Minnesota, near the North Dakota-Minnesota border, where the company already had an appreciable grip on the area’s banking business. Metropolitan had little need to bolster its presence in Moorhead, something Jones later admitted to American Banker when he confessed, “We were already serving Moorhead pretty well; we didn’t need an office there.” Like the acquisition of Mitchell Home Savings the year before, however, the significance of the Moorhead purchase was not the property gained but its implications for the future. For Jones, the move into Moorhead represented “a stepping stone to the Twin Cities.” Jones carried out this strategy two years later when Metropolitan purchased Rothschild Financial Corporation, located in the Minneapolis-St. Paul area, for $25 million. Rothschild Financial represented more than a harbinger of the future actions to be undertaken by Metropolitan; the mortgage concern by itself significantly contributed to Metropolitan’s operations, marking its entry into mortgage banking and establishing the company as a major regional mortgage banker.

On the heels of Metropolitan’s acquisition of Rothschild Financial, conditions began to develop in the U.S. banking industry that portended disaster for many members of the banking community, but signalled a period of exceptional growth for Metropolitan. Savings and loan institutions across the country were failing at an alarming rate, establishing a pattern that would soon build to a nationwide crisis costing the government and taxpayers more than $300 billion. Although an overwhelming majority of the savings and loan industry’s failures would occur in Texas, where 114 of the state’s 244 thrifts would be declared insolvent by the beginning of 1989, the crisis nevertheless afflicted nearly every state in the nation.

In the midst of this savings and loan disaster, Metropolitan weathered the storm and, at the same time, prepared to embark on a prodigious expansion program. The national banking crisis worsened in 1988, its debilitating effects punctuated by the failure of two California thrifts in June and another in September. The first two failures effectively stripped the FSLIC of its $1.3 billion cash reserves, while the rescue of a third California failure—the fourth billion-dollar failure in a three-week span— cost the government a staggering $2 billion. During this period of financially catastrophic failures, Metropolitan took advantage of its stalwart position in the industry and arranged for the acquisition of six insolvent thrifts, the absorption of which transformed the banking organization into a genuine interstate financial services provider.

On August 26, 1988, all six savings and loans were officially brought under the Metropolitan corporate umbrella. The addition of these thrifts greatly increased the scope of Metropolitan’s operations, making it one of the early winners in the race to restructure the country’s savings and loan industry. Perhaps the most rewarding aspect of the acquisitions, though, was the low price Metropolitan paid to become one of the early winners; similar to the company’s 1984 acquisition of Mitchell Home Savings, this deal was made with the help of the FSLIC, which provided sufficient financial assistance to enable Metropolitan’s multiple acquisition. In fact, for the six thrifts purchased in August, combined with another acquisition involving the merger of First Financial Savings Banks in Des Moines, Iowa, Metropolitan paid a mere $40 million, while the government paid $367 million in notes from the FSLIC and contributed $191 million worth of FSLIC-covered non-performing assets. Metropolitan continued to expand later that year, when it acquired the fourth-largest real estate company in the nation, Edina Realty Inc., its subsidiary, Edina Financial Services, Inc., and Equity Title Services Company.

The addition of Edina Realty, with 50 offices and annual sales of $3.5 billion, capped a remarkable year for Metropolitan. Literally overnight, the savings and loan concern transformed itself from a comparatively unknown thrift institution into a banking powerhouse buttressed by major mortgage banking interests and formidable real-estate brokerage concerns. Metropolitan’s assets jumped 76 percent from 1987 to 1988, reaching $4.1 billion, and its loan portfolio soared 78 percent to $1.8 billion, making Metropolitan’s 62nd year of existence by far its most active.

While Metropolitan’s frenetic acquisition pace of 1988 gave way to a period of relative inactivity, discord between Jones and another executive took on its own unique significance. In November 1990, Jones, then 60 years old, stepped down as Metropolitan’s chief executive, and Paul A. Lipetzky was promoted to the post of president and chief operating officer. While Jones remained the company’s chairman, Lipetzky took over day-today operations of Metropolitan, although he was never officially named chief executive officer. Under Lipetzky’s leadership, Metropolitan fared well, increasing its earnings from $28.3 million in 1990 to $57.5 million in 1991. Despite this success, Lipetzky was forced to step down in mid-1992, after Jones informed him that he would be returning as Metropolitan’s chief executive officer. Jones had vacated the chief executive post in 1990 primarily because Metropolitan was in the process of absorbing its numerous acquisitions into the company’s organization and had no immediate plans to expand. Two years later, with dozens of potential properties available for acquisition, Jones decided to return to Metropolitan to undertake the challenging task.

Metropolitan had already begun a push toward acquiring additional banking interests earlier in 1992, purchasing $71 million in deposits from Moneycor Savings Bank in March, the deposits of 12 branches of First Federal Savings Bank in April, and acquiring Security Financial Group, Inc. for $12.8 million in September. With Jones at the helm, Metropolitan continued to increase its assets, acquiring Home Owners Savings Bank and American Charter Federal Savings & Loan in December 1992, additions that raised the company’s total assets to $6.6 billion. Metropolitan acquired Western Financial Corporation and its subsidiary, Columbia Savings Association, in June 1993, Eureka Savings Bank in August 1993, then completed a giant acquisition in March 1994, when it obtained Rocky Mountain Financial Corporation and its subsidiary, Rocky Mountain Bank.

At the time, Rocky Mountain Financial ranked as the second largest banking institution in Wyoming, and its addition to the growing Metropolitan empire lifted the corporation’s assets to $7.8 billion. Through this acquisition, Metropolitan had become the llth-largest thrift holding company in the United States, with 211 branches covering nine states from Arizona to Ohio. Four months after Metropolitan acquired Rocky Mountain Financial, Metropolitan signed an agreement to be acquired by First Bank System, Inc., a Minneapolis-based commercial banking company with $26.5 billion in assets. In January 1995, the transaction was completed for $800 million in stock, effectively ending Metropolitan’s existence as a distinct corporate entity and giving First Bank System an impressive $8 billion in additional assets, $5 billion in additional deposits, and entry into four new states.

Principal Subsidiaries

Metropolitan Federal Bank; Metropolitan Services Corporation; Equity Title Services, Inc.; American Charter Credit Corporation; Security Consumer Services, Inc.; First Realty Property Management, Ltd.; Columbia Mortgage Corporation; Western Columbia Mortgage Holding, Inc.