In 1982, Seafirst Corp. seemed to be fulfilling its corporate destiny when it announced a deal to move its headquarters into a planned 76-story office building here.
After all, Seafirst towered over its competition as the biggest bank in the Pacific Northwest, boasting a 20-year string of rising profits. It had transcended its humble regional roots and was a strutting player on the world stage.
What could be more fitting than occupying the tallest building on the West Coast?
But even before the ink on the lease had dried, Seafirst stumbled. Straying from its familiar turf in a reckless quest for growth, the bank had actually outfitted its lending officers with cowboy hats and sent them off to woo wildcatters and other energy-related borrowers in the dusty oil fields of Texas and Oklahoma.
By mid-1982, Seafirst had booked more than $1.2 billion in energy loans, and many of them were souring as the energy boom went bust. A passel of bad foreign loans added to Seafirst's woes. And by the middle of 1983, a nearly insolvent Seafirst was forced to embrace an emergency rescue and takeover by BankAmerica.
Today, Seafirst--minus its grand ambitions--has been nursed back to health as a bank focusing almost exclusively on the Pacific Northwest. Under a new management team headed by former Wells Fargo Chairman Richard P. Cooley, Seafirst posted net income of $57.7 million, including tax credits of $18.3 million, last year.
However, while contractual obligations forced Seafirst to move into the tall new office tower--"We were committed," Cooley says simply--Seafirst will soon be outstripped as the region's largest banking concern.
U.S. Bancorp of Oregon has agreed to buy Washington's Old National Bancorp and will top Seafirst's $10.3 billion in assets when the deal is completed July 1. Rainier National, a $9.8-billion institution that recently agreed to be acquired by Los Angeles-based Security Pacific, is also nipping at Seafirst's heels.
"It might be upsetting to some on the staff," acknowledged Richard M. Rosenberg, Seafirst's president and chief operating officer. "But we have tried to inculcate the staff with the message that more important than size are return on assets and profitability."
Of course, Seafirst was dethroned as the leader in those areas in 1982. Currently, the most profitable big bank in Washington state is First Interstate Bank of Washington, a unit of Los Angeles-based First Interstate Bancorp that relies heavily on automated teller machines. The Washington unit netted a striking $1.20 on every $100 of assets last year.
Rescuer Has Problems
First Interstate of Washington's return on assets is double Seafirst's 60 cents on every $100 and almost 50% better than Rainier's respectable 84 cents. Cooley said in an interview that his goal is for Seafirst to have a return on each $100 in assets of between 85 and 90 cents but that that will not be attainable for another few years.
Meanwhile, Seafirst's rescuer, BankAmerica, is having problems of its own, and many local business people believe that the San Francisco-based giant has become a drag on Seafirst. "In retrospect, we couldn't have picked a better parent for Seafirst," chortles a top officer of one major competitor.
Seafirst's ailing parent is clearly a sore subject for Seafirst's leaders. "If BankAmerica weren't there, we'd have to invent it," asserted Rosenberg, who contends that Bank of America's international network has been "terribly helpful" to Seafirst customers doing business overseas.
BankAmerica's charitable foundation also lent Seafirst $1 million when Seafirst was in trouble so that the company could continue making donations to charity.
Still, Rosenberg acknowledged that "when B of A's name is in the headlines, our lending officers have to spend the first 10 minutes of every call talking about the situation there."
Seafirst Not for Sale
BankAmerica's woes have led to recurrent speculation that it might be forced to sell Seafirst, perhaps to a local group led by Cooley, even though B of A's chairman and chief executive, A. W. Clausen, has flatly ruled out its sale.
"Sure, it would be nice to own your own bank," Cooley said. "It is a nice idea, and I am sure that every employee--including me--would put up a big wad of money if we had the chance."
But Seafirst is not for sale, and any local group would have to go so deeply into debt to finance a purchase that "it would be hard to make any money," Cooley acknowledged. "It's not going to happen," he added.
Seafirst's value to BankAmerica is more than as a money maker. "We can be sympathetic to their problems because they are where we were in '83 and '84," said Cooley, who serves as a director of BankAmerica. "We can provide a model for their recovery."
The Seafirst experience illustrates that recoveries in the banking industry--where bad loans can stay on the books for years--can take a very long time.
To this day, Seafirst has $100 million in energy loans that are not earning interest on its books, and Cooley figures that a "clean" Seafirst could have netted $40 million more in additional profits last year.
But the basic strategy at Bank of America has been the same as at Seafirst: First, stop the bleeding; second, cut expenses; third, attempt to rebuild the business.
Step three, perhaps the hardest, is where Seafirst has excelled. "Seafirst today is a much more human institution," said Patrick F. Patrick, president of the $670-million Prudential Bancorp in Seattle. "A great deal of the arrogance that came with being dominant is gone."
The contrast between the personable Cooley and his aloof predecessor, William M. Jenkins, could not be greater. Where Jenkins once told an interviewer that he did not have time to "go out and grin at tellers," Cooley has made himself widely accessible to staffers and customers.
Together with Rosenberg, another veteran from Wells Fargo, he has instilled in the bank a sales culture built around Seafirst's advertising slogan, "Expect Excellence."
Loan officers, who once drummed up business by downing tumblers full of Wild Turkey with their "good ol' boy" partners from Oklahoma City's failed Penn Square Bank, now troll local boat shows looking for borrowers. Not quite as exciting, but a lot safer.
"We are turning this whole group of people into sellers," exulted Cooley, who speaks excitedly of branch managers reaching out into their local communities rather than waiting for business to just walk in the door.
Of course, competition is certain to heat up after July 1, when barriers against interstate banking come down in Washington and Security Pacific and U.S. Bancorp enter the fray.
"Security Pacific will enhance our ability to grow," said Jon M. Christoffersen, Rainier's president. "Instead of being a pretty good performer against our peers, we'll be an exemplary performer."
Rainier, while keeping its own name, will borrow Security Pacific's technology to automate its branch system. Rainier will also sell Security Pacific's merchant banking products and take advantage of Security Pacific's international network.
But overall, "Security Pacific bought a good bank," notes William S. Randall, president and chief executive of First Interstate of Washington. "There's not a lot of fixing up they can do."
U.S. Bancorp may have more work on its hands with Old National, Washington's sixth-largest bank. Old National's loan woes forced Rainier to call off a planned merger with the company in 1982.
Still, U.S. Bancorp is superbly managed and will likely capitalize on the fact that come July 1 it will be the largest locally owned bank in the Pacific Northwest.
"But if either of them expect to make their mergers work by taking market share, we're going to make it tough for them," First Interstate's Randall vowed.
Randall's bank, though one-third the size of Seafirst and Rainier, was much in the news lately during the abortive effort of First Interstate Bancorp, its parent, to acquire BankAmerica.
"It gave our bank more visibility than we had seen in a long time," he said. "For a while there, First Interstate was top of mind."
But First Interstate Bancorp Chairman Joseph J. Pinola's plan to lop off chunks of Seafirst and incorporate them into First Interstate alienated some in the community here.
"It made everybody see red that First Interstate was going to dismember an institution that was making a comeback," said Cooley, who displays an editorial from a local newspaper opposing First Interstate's plan.
With Seafirst out of play, First Interstate will have to look elsewhere for acquisitions to fill out its Washington branch network, which is clustered along the Interstate 5 corridor in the western, more prosperous, part of the state.
First Interstate will have plenty of company when seeking acquisitions. Other banks interested in gaining a foothold in this diversified state of 4.2 million residents include New York's Citicorp and First Bank System of Minneapolis.
Indeed, mergers and acquisitions of local banks have been coming at such a furious rate now that the barrier against interstate banking is coming down that the University of Washington's graduate school of business, which maintains an index of 65 Pacific Northwest stocks, is having trouble keeping pace.
Says research director Paul Sommers: "I have to keep making changes in the banking sector because we keep losing banks."