(parent company) (BANR-NASDAQ)
March 9, 2012 Issue
The Most Powerful Name In Corporate News and Information
With New CEO Mark J. Grescovich, in place Since 2010, Banner Corporation has Managed to Successfully Complete a Turnaround While Instilling and Implementing a Super Community Bank Model for Their Multi-State Franchise
Mark J. Grescovich, President and CEO
is President and Chief Executive Officer, and a director, of Banner
Corporation and Banner Bank. Mr. Grescovich joined the Bank in April 2010
and became Chief Executive Officer in August 2010 following an extensive
banking career specializing in finance, credit administration and risk
management. Prior to joining the Bank, Mr. Grescovich was the Executive Vice
President and Chief Corporate Banking Officer for Akron, Ohio-based
FirstMerit Corporation and FirstMerit Bank N.A., a commercial bank with
$14.5 billion in assets and over 200 branch offices in three states. He
assumed the role and responsibility for FirstMeritís commercial and regional
line of business in 2007, having served since 1994 in various commercial and
corporate banking positions, including that of Chief Credit Officer. Prior
to joining FirstMerit, Mr. Grescovich was a Managing Partner in corporate
finance with Sequoia Financial Group, Inc. of Akron, Ohio and a commercial
and corporate lending officer and credit analyst with Society National Bank
of Cleveland, Ohio. He has a Bachelor of Business Administration degree in
finance from Miami University and a Master of Business Administration
degree, also in finance, from The University of Akron.
Banner Corporation is a $4.26 billion bank holding company operating two commercial banks in Washington, Oregon and Idaho. Banner serves the Pacific Northwest region with a full range of deposit services and business, commercial real estate, construction, residential, agricultural and consumer loans. Visit Banner Bank on the Web at www.bannerbank.com.
Interview conducted by: Bud Wayne, Editorial Executive, CEOCFO Magazine, Published Ė March 9, 2012
Mr. Grescovich: I have twenty-five years of banking background. I have held several positions inside of commercial banking including CCO of a large regional financial institution, and head of corporate banking for a large regional multi-state franchise banking organization that was and still is very profitable and was profitable through the economic cycle. I joined Banner as president of the company in April of 2010 and took over as CEO shortly thereafter. The reason I joined Banner Corporation was basically to turn the company around. I saw in Banner a large multi-state franchise in a very attractive market, specifically the Pacific Northwest, and Banner was at the time a $4.5 billion institution that covered three states including Washington, Oregon, and Idaho. Quite frankly, it was a company that needed to be in transition. We have 89 offices inside of that footprint, but like many banking organizations on the west coast it really struggled with construction and development in its loan portfolio. These loans actually comprised 34% of the overall loan portfolio, so when the economy, specifically the housing market, got into trouble, obviously Banner became stressed. So the board of directors basically recruited me to come in to turn the company around and recapitalize the organization and get it on solid footing. The reason it was attractive to me was it was something I had done before in terms of turning a company around and instilling and implementing what is a super community bank model for a multi-state community bank franchise, and implementing that and growing it.
Given your background and all that has taken place over the last year or so
with the government regulations and the economy in the housing crisis, what
is now the vision for the bank and where are you in the turnaround process?
Let me give you a couple of
quick examples of how we are doing on each of those. Clearly, in June of
2010 in terms of achieving a moderate risk profile and getting back to
improving the capitalization and liquidity of the company, we had a public
offering of stock which raised roughly $162 million in fresh capital for the
company and also improved liquidity. While that was the hallmark event, we
have also been very successful on other fronts in terms of achieving a
moderate risk profile. Specifically, at 12/31/2011 our total capital to
risk-weighted assets now is a significant 18%. That is up from 12.5% roughly
at 12/31/2009. Our tangible common ratio was 9.5% at 12/31/2011, up from
5.8% at 12/31/2009. Also, at the same time we have been able to bolster our
reserves and now our allowance for loan losses to non-performing loans is
110%, which is up from 45% at 12/31/2009. So the risk profile of the company
in terms of its balance sheet and capitalization is significantly improved.
Also, one of the objectives in achieving a moderate risk profile was to
improve our earning asset mix. Our residential construction and development
portfolio, which was the most difficult part of the portfolio and the
primary cause of the stress in the company, has declined substantially at
12/31/2011 to represent just 7% of the overall loan portfolio and 6% of the
earning asset mix. That is down from a peak of over $1 billion, or 32% of
the overall loan portfolio. That has also helped to improve the risk profile
of the company. Also, non-performing loans have been decreased from the peak
of $243 million, or 6.2% of the portfolio down to $75 million, or 2.3% of
the portfolio at 12/31/2011. That reduction represents a substantial
improvement in non-performing loan totals and in reducing the drag on net
With regard to our strategic priority of remaining core funded, our loan to deposit ratio, which is a measure of how much we are lending out versus our overall deposit base, stood at 95% at 12/31/2011. That is down from a peak of 108%. Again, the company has begun to remake itself. We repositioned the balance sheet, remixed the balance sheet, improved core earnings, and significantly reduced the risk profile of the company.
CEOCFO: As far as your geographic footprint, what will your strategy be going forward; are you looking at growing the bank, is it going to be organic, de novo or are you going to be involved with acquisitions?
Mr. Grescovich: I do not know how familiar you are with the Pacific Northwest, but we look at the Pacific Northwest as five core markets. A lot of people paint a picture of the Pacific Northwest as one big geographic market. In actuality, it has several submarkets. The five submarkets that we identify include the Columbia Basin, which is central Washington, southeast Washington, and northeast Oregon; Eastern Washington, which is primarily Spokane; Puget Sound, which is Seattle north to the border; Portland, Oregon and Boise, Idaho. Those are our five markets. Bannerís history is in the Columbia Basin, as an agriculturally based institution in eastern Washington. Those markets of the Columbia Basin and eastern Washington are stable markets and we have substantial market share thereóthe number-one market share in the Columbia Basin actually, representing 54% of our deposits and roughly 43% of our loans. We are also well positioned in the higher growth markets of Puget Sound and Portland, and 43% of our branch distribution system is in those two markets. We plan to focus our growth in the Puget Sound and Portland markets.
CEOCFO: Do you operate more as a traditional bank, taking locally and loaning locally is that correct?
Mr. Grescovich: The value proposition is a super community bank model, which means we have the broad product depth for middle market and small business as well as the consumer base, but we deliver in a responsive local fashion. Therefore, within each of our five submarkets we have regional executives that are empowered to make decisions in each of those markets.
CEOCFO: What about new banking products such as remote deposit capture and new technologies?
Mr. Grescovich: We have invested heavily in treasury management products including remote deposit capture, and also in our bank-at-work program, which addresses the needs of businesses where we are their primary financial institution. We have products not only for the business owners and their families, but their employees as well, so we have invested heavily there along with mobile banking on the consumer side. We have continued to reinvest in the franchise.
CEOCFO: Would you tell us about Bannerís involvement in the community?
Mr. Grescovich: The good news is that community involvement was a hallmark of Banner prior to my joining the organization, so not only do we have an appropriate allocation of budget to reinvesting in the community, but over 80% of our employee base contribute back into their communities in terms of time and dollars or serving on boards of local charities. That is a significant number and we promote that as a company as part of our value proposition, as a community based organization. In addition, our executives in each of those regions have lived in those communities for a significant period of time and understand the communities very well.
CEOCFO: Do you have a lot of turnover or are you able to hold on to your people in this environment?
Mr. Grescovich: We reorganized the company in 2010, when I first joined. We repositioned our talented executive officers to their highest and best use of capabilities to execute the business model. Therefore, we have been successful at retaining a significant number of our senior officers in the company, but also we have been able to augment our company with very good executive talent from outside the organization. An example of that would be Brad Williamson joining our company to manage our Islanders Bank affiliate as president and CEO. Brad was the previous Director of Financial Institutions for the State of Washington, the bankís primary regulator. He recognized the value of this organization and what we are trying to do, so he decided to join our company as president and CEO of our affiliate bank.
CEOCFO: Are you focused at attracting investors, do you do road shows, and is your website set up to provide information?
Mr. Grescovich: Yes to both! I do a significant number of road shows and investor presentations. We have six analysts that cover us, so I spend quite a bit of time this way. Clearly, the capital raise we had in 2010 was very unique in that it was a public offering in which we raised 4 times of market cap for the organization, without a change in control, and no individual owner having more than 10% of the company. That is a significant number of institutional holders and I do spend a lot of time with the investment community.
CEOCFO: In closing, why should potential investors consider Banner Bank?
Mr. Grescovich: First and foremost, Banner has a scalable franchise and a very long history in the stable markets that I identified in the Pacific Northwest. We are also very well positioned as a company for robust growth and organic market share growth in the more vibrant markets of the Puget Sound and Portland. We have been able clearly to improve our performance and build shareholder value by executing effectively on our strategic priorities. We have been very transparent about what we are trying to accomplish. We are executing very well on that which I think adds credibility to the investor community, which is to say what you are going to do and show what you have been able to do.
Finally, the super
community bank model is a differentiated value proposition. It is
responsiveness, it is delivery, but more importantly its execution is a
differentiated business model in our marketplace and we are seeing that with
market share growth and improved core earnings power of the company. So,
those are the primary reasons you would look to invest in Banner. The other
important aspect is our geographic footprint. We are in the right market,
the Pacific Northwest, which has a per capita income growth that is
projected to outpace the national average, along with population growth that
is projected to outpace the national average as well. Therefore, we are in
the right markets in the United States and we have been able to execute on
the business model. The final aspect I would say is we are trading at
roughly 80%-85% of book value, so we are an attractive investment as well.
The organization has been able to begin to heal itself from the credit perspective and improve the risk profile of the company and at the same time we are growing core earnings for the organization. As a matter of fact, our revenue in 2011 was a company record. With regard to our strategic priority of remaining core funded, our loan to deposit ratio, which is a measure of how much we are lending out versus our overall deposit base, stood at 95% at 12/31/2011. That is down from a peak of 108%. Again, the company has begun to remake itself. We repositioned the balance sheet, remixed the balance sheet, improved core earnings, and significantly reduced the risk profile of the company. - Mark J. Grescovich
ceocfointerviews.com does not purchase or
recommendation on stocks based on the interviews published.