Oregon Pacific Bancorp (OPBP)
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Pacific Bancorps CEO, Tom Grove in 20 years has overseen the banks growth from
a small bank strictly in Florence Oregon, to a multi-branch organization now serving four
Mr. Grove: I have been in this position going on my 20th year. It has changed from a small bank strictly in Florence Oregon, to a multi-branch organization now serving four different communities.
CEOCFOinterviews: On your website I have seen financial services with a personal touch what does that mean, and how do you keep that as you grow?
Mr. Grove: We do two things; we consider ourselves high-tech and high-touch. I think this is one of the things that gives us an edge over some of the larger organizations that actually push people in the other direction. We also have set up the (inaudible) services of a trust department, investment department, along with our full scale vending from residential to commercial to consumer, and soon-to-be online banking. We have done this with the intent of the customer continuing to stay in-touch with us.
CEOCFOinterviews: How do you encourage people to come in and utilize more of your services?
Mr. Grove: We do it a lot with our advertising; anytime we advertise or send stock dividends, there is always some word of encouragement to stop in and see us. We hold several social open houses each year; one of them is an ice cream social here in Florence in July, and we have probably half of the town stop in during the day. We are starting to promote those in communities where we have just started.
CEOCFOinterviews: Will you tell us about the economics of the area you serve?
Mr. Grove: The regional base here in Florence, is primarily retirement and tourism, which is much of the time a very tough business environment to try to lend into, but we have been successful at it for the last 25 years. Part of the reason for our branching was to try to diversify our economy and by going into Coos Bay, we have gone into a much stronger business environment, although coastal, and we have gone into an economic situation in Coos Bay that is very depressed, but we feel it is just starting to rebound. We felt the opportunity to get in and get ourselves established and be part of that rebound, would be very beneficial. Roseburg has one of the stronger economies in the state of Oregon, and even under the current Oregon economic slowdown, Roseburg has not experienced it; it continues to be very strong. It is a strong retirement town but also has a huge VA hospital there, and some tech and manufacturing facilities which helps balance out the economic base and diversifies our portfolio considerably.
CEOCFOinterviews: You mentioned that it is tough lending into the tourism community. Please tell us more about that, and what have you learned over the years that enables you to do it successfully?
Mr. Grove: Firstly, the tourism on the coast where we are is very cyclical; we have a strong business environment starting in May, and it stays strong through September and then it drops back to the typical business volume of 20% until next spring. You have to have businesses that have the asset base, and the business ability to manage their cash reserves to be able to weather through the winter, and most of them are losing money. That is a particular challenge for a bank to go in and finance a business that you know is going to be in a non-profit situation for as much as half of the year.
CEOCFOinterviews: Do you see yourself going into additional communities?
Mr. Grove: We dont have anything specifically planned at this time, but I would not hesitate to move into additional communities as we see opportunities present themselves. We have had to this point, six different groups from six different communities that we are not servicing, contact us and asking us to come in, and trying to get us interested.
CEOCFOinterviews: Is that unusual for a bank?
Mr. Grove: Yes it is quite unusual. It started about three years ago. The first call surprised me and then they kept coming. It all started when we announced our branching in both Coos Bay and Roseburg.
CEOCFOinterviews: There must be a real need for what you do!
Mr. Grove: Apparently there is because there are other community banks that are starting in other areas around our area and to my knowledge, all of them are doing quite well.
CEOCFOinterviews: You formed a holding company at the beginning of 2003; what was the reason and where will that take you?
Mr. Grove: The only reason we formed it was to raise capital because our growth rate had been so rapid and we were starting to press our capital situation. Forming the holding company, allowed us to borrow and create capital up to $150,000,000.00 dollars. Since the formation of the holding company, we just exercised a trust preferred securities issue, for four million dollars, which we consummated last week for additional capital.
CEOCFOinterviews: What is the mix between commercial and consumer and would you like it to change?
Mr. Grove: Commercial to consumer is about 90% as far as in the regular loans. Consumer installment, and real estate is about 10% in that portfolio, although we are very involved in consumer residential real estate loans of which the majority are sold to Freddy Mac or other brokerages or some in-house. It is a good balance. We dont have a lot of demand for non-consumer residential real estate, and we dont foresee a lot of demand.
CEOCFOinterviews: What happens when the mortgage activity that we have seen so much of stops?
Mr. Grove: It has slowed down, although with the rates the last few weeks, it has rekindled. What we have done in both communities of Coos Bay and Roseburg is we have brought on lead producers in both of those communities. We think that purchase transaction loans are going to replace the refinance activity that we had before bringing on the producers of the communities.
CEOCFOinterviews: You mentioned you are starting Internet banking; why are you doing that now?
Mr. Grove: In Florence, we were not totally pressed to go into Internet banking and three years ago we had a consultant come in to advise us on it at one of the boards planning sessions. At the time the consultant came in, there had been a huge hack into online banking on the consumer side and several million accounts have been hacked. This consultant had been hired by the FBI to help investigate, and at that time, he advised us to steer clear. We were already allowing a bill-paying program and were online with our investment department and online with residential real estate. He said that that that is far enough, because you really are not jeopardizing the security of the bank. When we made the decision to go to Internet banking early this year, much to our surprise, the security issue seemed to be almost completely worked out, so we felt comfortable to now represent it to our customers as now being secure. The cost is one third of what it was three years ago, and we are also being pressured in Coos Bay and Roseburg much more for online banking than we were in Florence.
CEOCFOinterviews: How do you keep in touch with what the customer wants?
Mr. Grove: We do a customer survey annually, to track their likes and dislikes, in our stock letters, which we do quarterly; we ask for input .We are just in the process of initiating the mystery shopper program to go out and do phone surveys with our customers and to do mystery shopper with our branches to make sure that our service is up to snuff and that the customers are getting what they want.
CEOCFOinterviews: When someone comes into one of your branches, what will they find that they wont find elsewhere?
Mr. Grove: Firstly, our customers receive immediate attention; because every one of our branches has a reception desk right in front of the front door and that desk is always manned with somebody who has been with the bank for a number of years and has some experience. That person will then direct them where they need to go with service. We dont point them toward a telephone with an 800 number, which is what many of the larger banks do today. If we have somebody that needs service from our trust department, which is in the back of the Florence facility, we dont point a finger and show them where to go, we call the trust person and they come out and greet them and take them back to their office.
CEOCFOinterviews: Are there services that you are not offering now that you would like to offer?
Mr. Grove: Right now, I think we just about have gotten everything we wanted, which is right on the horizon for us. With the online banking and the automated bill-pay, we are doing both online and cash management for businesses.
CEOCFOinterviews: Do many of your commercial customers utilize your personal services?
Mr. Grove: Yes, the success in commercial banking today is relationship banking, which means a person gets to know them and they get very connected with them, so the business is very encouraged and willing to contact them if they have any needs or questions. I have many customers that I still deal with and they use me for a sounding board for a lot of non-bank issues.
CEOCFOinterviews: Will you tell us about your community involvement?
Mr. Grove: We encourage anyone from my position to somebody in bookkeeping, to get involved in the community in any way that they want to. We feel that employees all walk a different circle in their lives, whether it is involvement in their church, school or whatever, we encourage them to do it and we will off-set expenses for them to do that. On the senior level, it is in their job description, that they will get involved in some area of the community that is service involvement or business involvement. It is part of who we are.
CEOCFOinterviews: What do you look for in your people?
Mr. Grove: Firstly, when I am hiring, particularly at the senior level, I dont hire anybody looking for a job; I hire someone that already has a job, and many of them are shocked when I call them on the phone. There is enough up-set with some of the institutions that the people that are there, are not looking for work but they are not necessarily happy. For about the last seven years, that has been my mode of hiring senior people. I have not been one bit sorry for doing that. The main thing is people skills; if I can get someone that I know can take care of our customers to the point that it makes them happy, I can teach them the technical skills, but people skills are hard to teach.
CEOCFOinterviews: How do you weather the interest rate fluctuation?
Mr. Grove: We have a chief financial officer that does that on a full time basis, and you have to manage your risk. We are continually looking at the banks risk, and every time we make a large loan or a fixed rate, we will go out and do a shock test on that, and if it is beyond our comfort or policy level, we will do something like match funding, or sell part of it in a participation to lessen our risk. You have to keep a good balance between your assets and liability sensitivity; if you dont, an unforeseen move one way or another, can gnaw your best efforts.
CEOCFOinterviews: Why should potential investors be interested and what should they know that perhaps they dont realize when they first look at the bank?
Mr. Grove: Over
the last few years, many things have been happening with the bank and have been happening
in a positive manner. We are in a rapid growth mode. The growth is being done on a de novo
basis, in other words, starting up new operations rather than doing merger acquisitions,
which is a lot riskier because you are taking on a group of people that may not be happy
in the merger, and you are taking on a loan portfolio that may or may not have problems.
The fact is that this bank has a history of 25 years of being very conservative and never
being in trouble, and that is the direction we are going.
CEOCFOinterviews: What are the challenges for the banking industry and Oregon Pacific?
Mr. Grove: One of the biggest things is the on-going regulatory burden that we have to put up with. I think the last one happened with the Enron debacle. The banking industry has been under very tight scrutiny for a number of years, much tighter than the industry such as Enron, Worldcom, etc. We are being painted with the same brush with all the new regulations, even though we have been under the thumbnail of the federal regulators for years. That is causing an additional burden. In our own shop, we estimate that cost over the last few years, just with ongoing regulations, is somewhere between forty or fifty thousand dollars a year. That is meaningful dollars.
CEOCFOinterviews: What do you do about it?
Mr. Grove: You get out there and sell and work harder.
CEOCFOinterviews: Any final thoughts for our readers?
Mr. Grove: We just got through having a staff gathering and the actual tenure of the people that have been here, surprised me. Many of the key people have been here a long time, which means they know their job well and they get to know the customer. So we dont have the revolving door affect that every time the customer comes through the door, they are looking at a different face. I think that is something that is comforting to the public today, and it is proving benefits.
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