Basic instincts: that is the key to James Montgomery's success as chairman and CEO of Great Western Financial Corp.

One day in 1982, Great Western Financial Corp. Chairman and Chief Executive James Montgomery sat at his desk, looking at a package of loans to small- and medium-sized businesses -- the first such package of commercial loans the savings and loan was to make.

Great Western had spent about a year creating the business loan division, hired about 50 people and "spent a fair amount of money" gearing up to make commercial loans, he recalls.

Montgomery remembers reviewing the package of loans which were "well put together. I said, 'We don't want to make commercial loans.' I said, 'We should shut this whole thing down before we make the first loan.'"

It was a decision, in retrospect, that Montgomery doesn't regret. Savings and loans like Gilbraltar Savings -- which got away from savings and loans' main business of residential lending and into commercial business -- have fallen.

"The biggest mistakes that I can recall that I have made is every time I did something or allowed something to be done that went against my instincts," Montgomery says. "You better trust your instincts."

John Maher, president of Great Western, bristles when asked if Montgomery makes decisions based on instinct. Montgomery, he says, has a "clear, rational sense of what a financial institution should do. He does not get swept up in the idea of the month club."

Not only did Great Western decide not to develop a business loan division, Montgomery disbanded the commercial real estate division in 1987, years before many other savings and loans.

Montgomery also stayed away from acquiring failed savings and loans in the mid-1980s. Los Angeles County-based S&Ls Glendale Federal Bank, California Federal Bank and Coast Federal Bank have recently had trouble meeting capital requirements due to acquisitions of failed institutions, and so-called good will, a non-tangible asset which was part of the government deals in the mid-1980s, Maher notes.

Montgomery's smart, steady leadership is why Great Western "has tip-toed through what has been a veritable minefield (for savings and loans) for the last 15 years," Maher says.

Great Western has not only survived, but in the last few years has been on a hot acquisition binge. It has bought the deposits and branches of dozens of failed California and Florida thrifts at "just a fraction of what we would have paid in the 1980s," Montgomery said. Since June 1990, Great Western acquired 281 branches and $8.2 billion in deposits of failed Florida S&Ls and went from having virtually zero presence to being the fifth-largest financial institution in that state, all the while staying well above federal capital requirements.

Great Western, which recently moved its headquarters from Beverly Hills to Chatsworth, is the second-largest thrift in the nation with $39.6 billion in assets. If its bid to acquire financially troubled HomeFed Bank is successful, Great Western would become the nation's largest S&L, surpassing Irwindale-based Home Savings of America, which has $46 billion in assets. Great Western and Home Savings are two of several interested bidders in San Diego-based HomeFed, which has $13.9 billion in assets and is being marketed by the Resolution Trust Corp., the federal agency assigned to disposing of failed thrifts' assets.

Last year, Great Western posted record earnings of $298 million, making it the nation's most profitable S&L. And, according to the industry's trade paper, American Banker, Montgomery was the highest-paid savings and loan executive in the country in 1991, pulling down $1.7 million in cash compensation, a 26 percent increase over his 1990 salary.

"Mr. Montgomery's pay was lofty, even by commercial banking standards, approaching the rarefied realm of paychecks at J.P. Morgan & Co.," American Banker noted.

Montgomery was named president of Great Western in 1975, chief executive officer in 1979 and chairman in 1981. He is a big, robust man at 6-feet, 4-inches tall, who appears a lot younger than his 57 years. He is an all-around sportsman, according to those who know him.

During Montgomery's tenure as chairman, Great Western has grown from $10.6 billion in assets to $39.6 billion.

In college, Montgomery was on a UCLA volleyball team that won a national championship. According to one of his four sons, Montgomery carried around two briefcases for years -- one full of business papers and another for the sports pool he was in.

In recent years, he has gone on salmon fishing trips in Western Canada with Great Western President Maher, and attends basketball games with friend William Mortensen, who is chairman of FirstFed Financial Corp.

In some ways, Montgomery is exactly the sort of person you would expect to head a company called Great Western.

He raised his family in the pastoral community of Hidden Hills in the West San Fernando Valley. His home and his office are filled with paintings and sculptures of the Old West. Many people have remarked that, more than anyone else, Montgomery resembles John Wayne.

Montgomery's face lights up when he talks about Wayne, who in the late 1970s was spokesman for Great Western. Actor Dennis Weaver succeeded Wayne after his death, and all of the S&L's commercials still carry a Western themes.

Montgomery was born in Topeka, Kan., in 1934, at the height of the Great Depression. His father, an accountant, moved the family to live in the San Fernando Valley in 1946.

"My father had health problems. He never finished college. He never did the things he thought he should do," Montgomery says. But his father was perhaps the biggest influence on his life.

"He wanted us to develop our potential. He always said, 'You should get everything you want,'" Montgomery says. "From a very early age, I wanted to run a big company."

Montgomery followed in his father's footsteps, getting an accounting degree from UCLA.

But Montgomery was never a run-of-the-mill accountant, according to Jack Farrell, now retired partner of the Los Angeles office of accounting firm Price Waterhouse. Farrell remembers Montgomery from when he was still in college and worked part-time in the records vault at Price Waterhouse.

Montgomery was more "operationally motivated than most accountants, and looked more at the company as a whole rather than numbers on a page," Farrell says. He remembers that Montgomery, "just two or three years out of college," so impressed a client, real estate developer Harris Goldberg, that Goldberg offered the young man a job as chief financial officer.

Montgomery worked for Goldberg for a few years before joining Great Western as assistant to the president in 1960. In 1964, he left Great Western to serve as president of Los Angeles-based Citizens Savings & Loan Association, and then re-joined Great Western as president in 1975.

Asked what is most important to him, Montgomery doesn't hesitate. "My four sons," he says. Now grown, his sons are "all different" and there is "not a banker in the lot."

One son owns a pizza parlor in Valencia, another works for IBM in Los Angeles and his youngest is in college and is currently traveling the world. Jeff Montgomery, the second oldest son, is the chairman and CEO of his own company, Los Angeles-based Harvey Comics Entertainment Inc., which he purchased with a group of investors and without his father's help for $8 million. The 27-year-old's success story has been featured in Business Week magazine.

Today, the company is worth several times that and Jeff Montgomery is involved in developing movie projects for two of Harvey Comics characters, Ritchie Rich and Casper the Ghost.

Jeff, like his father, wanted to head up a big company at a young age and he attributes a lot of his success to the support he got from his father when he was growing up.

James Montgomery spent a lot of time with his sons, Jeff Montgomery says. His father routinely dropped him and his brothers off at school in the morning and was home at 7 p.m. most every night. The senior Montgomery played golf on Saturdays and spent Sundays with the family, Jeff said.

"Growing up, he grounded us in fundamentals, chief among them were dad's lectures on integrity," Jeff says. The worst thing Montgomery's kids could do was lie, Jeff says.

His father has taught him a lot about getting satisfaction out of watching a company grow, Jeff Montgomery says. "My father is a farmer, versus being a trader," Jeff says.

As for the future, Great Western isn't finished growing, but Montgomery would not really give an indication in which direction it will develop.

Great Western's brass is interested in acquiring HomeFed, but Montgomery says he isn't willing to get into a bidding war to do it. "HomeFed has a good deposit base in San Diego. . . . (But) if bidding gets fierce, we'll back away."

Great Western has also been mentioned as a possible suitor for troubled, Los Angeles County-based S&L CalFed Inc., Glendale Federal Bank and Coast Federal Bank.

"It's no secret there are some struggling, large companies. It's no secret we want to be involved in acquisitions," Montgomery says. But, he adds, although "we have talked from time to time with all of those companies" there was never anything that could be termed as a formal merger talk between Great Western and the three savings and loans.

But being the largest savings and loan in the country is not on the top of Montgomery's list, he says. "We are No. 1 in America today in profitability, and that is more important than assets."

SNAPSHOT

James Montgomery

Native of: Topeka, Kan. Current residence: Bel Air Age: 57 Education: Bachelor's degree in accounting from UCLA