page_title: Philadelphia Savings Fund Society
section_title: Expansion and crisis
hierarchical_section_title: Philadelphia Savings Fund Society / History / Expansion and crisis
caption_attribution_description: English: The banking hall of the PSFS Building, looking from the north. Cropped from original.
context_page_description: The Philadelphia Savings Fund Society, originally called the Philadelphia Saving Fund Society, was a savings bank headquartered in Philadelphia, Pennsylvania, United States. PSFS was founded in December 1816, the first savings bank to organize and do business in the United States. The bank would develop as one of the largest savings banks in the United States and became a Philadelphia institution. Generations of Philadelphians first opened accounts as children and became lifelong depositors.
  The bank was organized by a group of men led by Condy Raguet, who had read about the concept of savings banks becoming popular in Great Britain. The bank quickly began to expand by adding services and branches, and moving into larger headquarters buildings. By the late 1910s, PSFS had the most depositors of any savings bank in the United States; it was second to the Emigrant Savings Bank in the amount of money deposited. PSFS began programs in the 1920s that encouraged children to put money into savings accounts instead of spending it on treats and school programs, allowing children to open accounts with PSFS.
context_section_description: The United States in the 1970s saw numerous changes to personal finance such as the advent of credit cards, money-market funds and automated teller machines. These changes resulted in a crisis for traditional community banks. The crisis prompted the government to step in with a solution to force mergers between troubled banks and healthy banks such as PSFS. In April 1982 PSFS merged with the Western Savings Fund Society, receiving US$294 million in assistance from the Federal Deposit Insurance Corporation (FDIC). The merger gained PSFS US$2 billion in assets. FDIC also credited PSFS with US$800 million in "supervisory goodwill".
  The deals also allowed the merged banks to expand into new business ventures. PSFS soon began expanding into new services such as equipment leasing, corporate finance and real estate development. In September 1983 PSFS converted from a mutual organization to a stock organization selling 35 million shares at US$11.25 each. In January 1984 PSFS began expanding into financial service by buying a loan portfolio and mortgage business from General Electric Credit Corp. for US$568 million. In April 1985 the company acquired four savings and loans in Florida and began paying five cents per share quarterly dividend to stockholders. In September of that year, PSFS began doing business under the name Meritor Financial Group to emphasize its expansion into financial services. In 1986 Meritor began operating mutual funds through a subsidiary, completing the transition to a full-service financial institution.
  In 1986, the bank went to the U.S. Supreme Court to defend itself against a claim sexual harassment. In Meritor Savings Bank v. Vinson, the court found the bank liable under the 1964 Civil Rights Act.
  Things soon took a turn for the worse as the company began losing millions through its new business ventures as its competitors began encroaching on Meritor's home market. Meritor's stock prices continuously dropped from almost the moment they were first issued. In August 1985 Meritor revealed it invested $215 million in a Virginia mortgage company that went bankrupt and in October 1987 Meritor halts its dividend after announcing a third-quarter loss of $379.6 million. That same month the company also announced plans to sell some of its operations.
  In January 1988 venture capitalist Frank Slattery bought 5.5 percent of Meritor's stock, becoming the controlling shareholder. Slattery began pushing for changes and in June, with help from others, was able to demote chairman and CEO Frederick S. Hammer to president and replace him with Roger S. Hillas. To try to stanch the losses Hillas sold Meritor's credit-card portfolio and some of its subsidiaries. Continuing to lose money, Meritor sold 54 suburban branches of PSFS, more than half of its branches, to Pittsburgh-based Mellon Bank for US$335 million in 1989. The deal, which included selling Mellon Bank the right to use the name PSFS, shed US$4.9 billion in assets from Meritor. Earlier that year an extra "s" was added to the word "Saving" in the bank branches' name, becoming the Philadelphia Savings Fund Society. When the deal went into effect in 1990 Meritor turned off the PSFS on the PSFS Building saying it was inappropriate to use the sign. Turning off the sign provoked protest from the public, historians and architecture buffs and Meritor and Mellon Bank agreed to relight the sign.
  Despite the effort, conditions continued to deteriorate for Meritor and other banks around the United States. Not helping matters was a poor commercial real-estate market that left Meritor with empty Philadelphia office buildings and half-finished suburban strip shopping malls valued at fractions of their original cost. In February 1991 regulators demanded higher capital standards which Meritor failed to meet. A few months later in August, Meritor ending a troublesome dispute with bondholders by giving up 37 percent of its common stock plus cash to redeem US$115 million in debt.
  By October 1992 bank analysts had listed Meritor among institutions most likely to be seized by the end
caption: PSFS Building's banking hall
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