Connie Blumenthal

The Most Seasoned Real Estate Connoisseur in Greater Seattle and Mercer Island Luxury Real Estate Markets

Flynn's Harp: Fourth-generation Stanton, stewardship trumps profits at Washington Trust Bank

"When something has been in your family for four generations, stewardship becomes more important than a focus on profits," says Peter F. Stanton, chairman and CEO of Spokane-based Washington Trust Bank, in explaining how his company escaped most of the banking turmoil of the past four years.  

Peter F. Stanton
Peter F. Stanton

"That doesn't mean we spend our time looking in the rearview mirror," added Stanton, who was named president in 1990 to become the fourth-generation head of the bank that is now the oldest and largest privately owned commercial bank in the Northwest.

 

"We're focused on the future, but securing that future has always led us to have concentration limits on our lending," adds Stanton, whose great grandfather bought the bank, founded in 1902, in 1919.

 

Pete Stanton was 34 when he assumed the role of president, second youngest bank president ever in Spokane, second only to his father, Philip Stanton, who had become president of the bank in 1962 at age 31. As Phil Stanton turned the reins over to his son, he remained as chairman for most of the decade of the '90s.

 

It was that limit on "concentration" that allowed Washington Trust to avoid the disastrous rush into real estate and construction lending that felled a large number of banks, including three of its locally based competitors, although Stanton's bank found itself eating some bad loans.

 

At their worst, Washington Trust's non-performing assets "were in the high 4's," concedes Stanton, almost four times the current level of 1.24 percent. "But at its worst, we were about half of what most of our competitors were."

 

It was the soaring number of non-performing loans from zealous construction and real estate lending that brought competitors to their knees.

 

Sterling Savings Bank, publicly traded and about twice the size of Washington Trust, was faced with staggering totals of soured loans and was forced by the FDIC and state regulators to oust its top two executives, bring in new leadership and raise $300 million. It accomplished that and more and emerged from under the thumb of regulators to begin anew under aggressive and acquisition-minded fresh leadership.

 

American West, about half WTB's size, actually sought bankruptcy protection to avoid a takeover by regulators and re-emerged under the new ownership of SKBHC Holdings, LLC, a bank holding company backed by private equity groups.

 

And Bank of Whitman, although headquartered in Colfax and with assets of only about $580 million, but with a major presence in Spokane, became one of the state's failed banks when it was closed by state regulators in August of 2011. Its deposits and liabilities were assumed by Tacoma-based Columbia Bank.

 

Washington Trust actually took advantage of the turmoil other banks found themselves in when, in February of 2009, it acquired tiny Pinnacle Bank of Beaverton, which had been closed by Oregon bank regulators, to expand the Spokane bank's role in the Portland area.

 

Despite the re-emergence of its pre-crisis competitors under new leadership and financing, Washington Trust has held its own, seeing its net income, loan volume and lending in targeted sectors advance dramatically in the past two years.

 

And Stanton enthuses that "2012 is going to be a great year for us," noting that net income after two quarters was $11.9 million, compared with $16 million for all of 2011, which was up dramatically from the $9.1 million in all of 2010.

 

Yet caution remains the watchword for the bank, which boasts $4 billion in assets and a $3 billion loan portfolio generated from 40 offices and financial centers spread across parts of three states.

 

Stanton points out that "our loan loss reserve, compared to nonperforming loans, is 200 percent, while most banks have a reserve level under 100 percent."

 

"That's another of those things that comes about when you're private." He adds. "You have more interest in a fortress balance sheet than trying to bring everything possible to the bottom line."

 

"My dad was fond of saying that telling a bank it has too much capital is a little like telling a pilot he has too much runway," Joked Stanton.

 

I asked Stanton if Washington Trust was likely to be an acquirer as consolidation occurs, or become an acquisition.

 

"There for certain will be consolidation because of overcapacity," he replied. "And I think we're likely to be on the acquiring side of that for several reasons. One is because we've decided we wouldn't make very good hired help."

 

In fact, an acquisition binge wouldn't be the first time that has happened for Washington Trust, since in the '80s and '90s, its expansion came about largely through acquisition of successful banks in Central Washington and Northern Idaho. Plus Stanton created a private banking and commercial loan presence in Western Washington, where about a third of the bank's business is now done.

 

I asked him if there's a fifth generation waiting in the wings and he replied: "We have a couple of fifth generation kids working at the bank, but in a large complicated business there are no promises."

 

"We have never said that as a family we need to have a family member at the top, he said, adding, "There has been several times when we have had a non-family member running things," including current president and COO Jack Heath. But a Stanton has always been the chairman.

 

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