Christopher Gill can barely conceal his contempt for the managers of those venerable big-city savings and loan institutions that are facing record losses and possible insolvency. His Gill Savings is making money at an eye-opening rate and doubled its assets in 1981.
Gill Savings, a state-chartered, family-owned institution, claims to be the most profitable S&L in the country and the fastest-growing in Texas--a position it achieved by aggressive, innovative business tactics far removed from the S&L tradition.
When other S&Ls were "doing business by habit," Gill said, extending conventional home-mortgage loans and attracting small depositors, Gill Savings was financing commercial real estate ventures--and taking equity positions in them--and bidding for the funds of depositors with over $100,000 to invest.
"Over $100,000, we can pay any interest rate we want," Gill said in an interview, "and we do. If you have that much, we will beat the money market with our interest rates."
Many S&Ls that once were economic powerhouses in their communities have fallen on hard times because they hold large portfolios of long-term, low-yield home mortgages, which were the cornerstone of their business.
The nationwide sustained high interest rates and the decline of the conventional mortgage market have undercut their profits, but Gill says it is the S&Ls' own fault for failing to respond to a changing real estate market.
"The real estate business is healthy," he said, "except for homebuilding. It's a very dynamic industry, especially in the Southwest. The S&Ls have what amounts to a monopoly right to gather money from the public and channel it into real estate investment, so we ought to succeed. The government insures our business and limits access to it -- that's a good deal."
The main reason Gill Savings is not saddled with low-yield mortgages is that it has existed only since 1975. Before that, it was the Richard Gill Co., an obscure mortgage banking business, starved for capital because it had no access either to federal mortgage seed money or to consumer deposits.
Denied a charter for its own S&L, Gill bought one, taking over the tiny Medina Savings Association, a $10-million blip on the finance charts based in Hondo, Tex. That small institution became the foundation of Gill Savings, which according to Christopher Gill ended 1981 with assets of $380 million.
According to Texas Business magazine, Gill Savings, "as a mortgage bank that acquired a savings and loan has become a unique entity in the industry: It is a savings and loan; San Antonio's largest mortgage servicer; a commercial lender for apartments, offices and shopping centers; a full-service home improvement and installment lender; a real estate appraisal firm; a commercial real estate broker, manager and developer; and a life insurance company."
That structure comes close to achieving Gill's objective of being "a vertically integrated real estate organization, not just a renter of funds." As a result, Christopher Gill said, Gill Savings will report about $5 million in earnings for 1981--well over 100 per cent of the $3.8 million in equity with which it began the year.
According to Gill, whose title is chief executive officer, and Edward Mattson, president, Gill Savings makes money from an activity that many other S&Ls try to avoid--servicing of mortgages, the processing of paper and the collection of mortgage payments.
"We originate loans and sell them and retain the servicing, and we buy loans from others, sell them and retain the servicing," Mattson said. "Servicing is a very substantial component of our business," with a total portfolio that grew from $634 million to $1.2 billion over the past year.
The head of Gill's real estate division is John H. Dalton, former chairman of the Federal Home Loan Bank Board. His division is critical to the profitability of the business, because the great majority of Gill's loans are made for commercial real estate ventures such as apartments and shopping centers.
The S&L insulates itself against interest fluctuations and inflation either by taking an equity percentage of the project or by indexing the loan interest rate.
As a result, Gill said, "we earn more so we can pay more. We concentrate on the nonregulated segments of the deposit markets, and we grow so we have dollars to invest. The earnings create capital and reserves, and the ability to grow rapidly."
Gill, a son of founder Richard Gill, loves to talk about his business and is hardly diffident about its money-making potential. He said that in the next five years he hopes Gill Savings will grow to a $1 billion institution and move up from about 30th in size among Texas S&Ls to the top five.
The prospect is "very exciting," he said, and "the S&L industry that is going to emerge from this shakeout is going to be strong and tough."