Patrick D. Bowlen, owner of the Denver Broncos football team, took a look at Woodland Hills-based Investment Savings & Loan Assn. two years ago and decided to try to buy it.
"We felt they had a very attractive portfolio," Bowlen said. "They weren't into a lot of high-risk investments."
But in mid-1984, just when Bowlen was supposed to complete the acquisition, he started having second thoughts and backed out of the deal. Bowlen said that, although he remained impressed with Investment Savings and its management, he became wary of the harm that rising interest rates could do to it and other S&Ls.
Bowlen may have been prescient. Investment Savings and its subsidiaries lost money for the first time in six years during the fiscal year ended March 31, chalking up a shortfall of $740,844.
At the same time, Bowlen's assessment of the S&L's management as conservative may be at odds with some of the ways its executives have tried to improve the institution's financial condition.
Many Play It Safe
After taking big losses, many banks and savings and loan associations play it safe. They typically pull out of risky new ventures and seek sanctuary in the stable and profitable lines they know best.
But Investment Savings, which is required to increase its relative net worth over the next four years to meet regulatory standards, is relying heavily on aggressive new strategies that some analysts consider chancy.
For example, it is using a network of agents and brokers in Central and Southern California to recruit loan customers and is operating a so-called money desk to bring in deposits of $100,000 or more.
Gerry Findley, a bank consultant and editor of Findley Reports, a banking publication, maintained, "They're just growing too damn fast."
Investment Savings officials cite the S&L's financial recovery over the last several months and its nearly unblemished performance since opening in 1978 as evidence of their ability to avoid trouble.
Overcome a 'Tough Year'
"We've had one tough year and we've overcome that quickly," said Ted C. Hill, the S&L's ruddy, white-haired president.
Not all of Investment Savings' moves have been unconventional. It has followed the path of many other S&Ls by forming subsidiaries in businesses related to real-estate lending. Investment Savings also is re-emphasizing home mortgage lending, the traditional province of the S&L industry.
Investment Savings--guided since its inception by a group of San Fernando Valley business executives including Herbert F. Boeckmann II, the owner of Galpin Ford--never has been one to take it slowly. It had only $31.6 million in assets 3 1/2 years ago. By the end of June, it was bigger than any of the banks based in the Valley and, with $289.8 million in assets, was the second-largest S&L in the area.
That growth stemmed chiefly from Investment Savings' aggressiveness in arranging commercial real-estate loans. It became the lead lender for an array of hotel and office-building projects inside and outside of California.
Fell Into the Red
But, after five straight years of profits, Investment Savings ran out of luck. It fell into the red during its last fiscal year because of some relatively modest loan losses, slackening loan demand, unprofitable new subsidiaries and past accounting mistakes.
Instead of slowing down and sorting out the problems, Investment Savings has been trying to maintain rapid growth by reshaping itself.
"We're trying to be ahead of the game," said Investment Savings Chairman Robert A. Nordskog, a Van Nuys businessman and record-holding power boat racer. "We're not the follower."
Investment Savings' revised strategy actually started more than a year ago, when it began bringing in a group of four, ostensibly more qualified, senior executives to assist Hill in daily operations.
Among the more conservative moves taken by the new management has been to steer the S&L away from the currently soft market for commercial real-estate lending. Instead, Investment Savings is concentrating on home mortgage lending, a more stable and traditional line of business for S&Ls.
Uses Own Appraisers
Hill said Investment Savings established a real-estate appraisal subsidiary partly out of self-defense. Stung in the past by what they believe were inflated appraisals, Investment Savings executives now use their own appraisers to assess real estate for which they are considering making loans.
"At first we didn't think we could afford to have an in-house appraiser. Then we found out we couldn't afford not to have one," Hill said.
Hill said about half the business from the real-estate appraisal unit, founded last year, now comes from other financial institutions. Investment Savings' 18-month-old loan-funding unit also splits its time about evenly between its parent company and outside customers.