Perspective

January 27, 2011

Passages

Last Friday I attended a memorial service for Pat Redmond, who was President and CEO of Viking Bank. The memorial service was an amazing celebration of Pat’s life – he was one of the “good guys” and the ceremony reflected that. The speakers were eloquent and poignant and made me think about what is important in life.

Reflections

As we as a country and an industry work our way back towards some semblance of normalcy and stability, Pat’s passing seemed to put everything in perspective. Despite the challenges most of us have faced professionally, the most important things are still life, health, family and friends. Often our priorities get confused, especially as we go through particularly stressful periods.

Lessons Learned

In meeting the challenges we are presented, we cannot lose sight of what’s really important. We need to look to our family and friends for support and strength. Often, we tend to internalize problems and isolate ourselves from the ones that matter most. The lesson learned from Pat is to rely on family and friends and not close down. They will be there after the storm.

An Industry In Transition

Last week I also attended another client’s Board meeting. The CEO made a great comment: “It is the unwritten agenda of the federal banking agencies to shrink the banking system.” Upon reflection, I realized how powerful a statement that is as it explains otherwise inconsistent and seemingly unreasonable actions. Raise capital, merge, sell or fail seems to be the regulatory mantra with the not so subtle goal of reducing the number of banks as soon as possible.

Surviving In Today’s Environment

It seems crystal clear that in order to survive today a bank must have lots of capital. Without it, you may fall prey to aggressive regulatory enforcement actions, loan and asset classifications and write downs and an overall unfriendly environment. Those banks that have been able to raise or at least maintain strong capital seem to be in the best position to minimize regulatory ire and to survive.

Size Does Matter

Unfortunately, we have seen a discrepancy in the way regulators treat banks depending on their size. Generally speaking, those banks with over $1 billion in assets seem to get more time and tolerance to address issues than the smaller community banks. Perhaps it’s merely the potential impact on the system of the failure of a larger bank, but size does seem to matter. More time, more tolerance, and quicker upgrades after recapitalization all are common characteristics for the larger banks.

Crystal Ball Gazing

2011 will be a year of continued consolidation, some capital formation and more whole bank deals. Clearly, before the end of the decade, there will be fewer than 5,000 banks.

People

When the smoke clears, life is just a journey and it’s about the people we meet and the experiences and memories we accumulate along the way that matter most. The premature passing of Pat Redmond should serve as a stark reminder of that.

If you should have any questions or wish to discuss issues specific to your financial institution please contact any of the following members of the Graham and Dunn Financial Services Team:

Stephen M. Klein (206.340.9648 or sklein@grahamdunn.com),
Kumi Yamamoto Baruffi (206.340.9676 or kbaruffi@grahamdunn.com),
or Casey M. Nault (206.903.4808 or cnault@grahamdunn.com).

If you do not wish to receive further Cyber-Grahams, click here.

If you are not already a member of this list and wish to join, email click here.

Please feel free to forward this newsletter to a colleague.

Cyber-Graham® is published by Graham & Dunn as a service to clients and other friends. The information contained in this publication should not be construed as legal advice. Should further analysis or explanation of the subject matter be required, please contact the attorneys listed above or the attorney whom you normally consult.