Posted by Joseph Phillips on Monday, May 16, 2016 at 10:22 PM PDT
Mark Mason, President and CEO of HomeStreet Bank, participated in the Albers Executive Speaker Series. Since joining HomeStreet in 2009, Mason has led the turnaround of the once troubled institution, recapitalizing the bank with an initial public offering and returning the bank to profitability and growth.
The title of Mason’s talk was, “Doing Well by Doing Good,” linking his presentation to Albers Ethics Week, which was taking place simultaneously in the school. Mason appealed to the roots of HomeStreet, and said that it had a long history as a good corporate citizen operating as a family owned and controlled business. He noted that there are three things an ethical institution needs to get right:
- Do the right thing for customers – for example, HomeStreet did not get involved with “liar loans” and other questionable home loan products that led to the Great Recession.
- Take care of employees – at one point, employees owned 20% of the bank, but that was jeopardized when the bank was on the brink of collapse, so employees had a lot at stake in saving the bank!
- Be a good corporate citizen – exceed Community Reinvestment Act requirements and give generously to charitable causes (HomeStreet gives two percent of pre-tax income)
Mason then told the story of how HomeStreet got caught in the Great Recession. Because the bank believed in doing the right thing by customers, it did not get involved in the exotic mortgages that lenders such as Countrywide and Washington Federal got caught up in. It took tremendous discipline to avoid the herd mentality, but to compensate for that, Homestreet made a large number of loans to homebuilders. When the residential and commercial real state markets started to head South, that is where they ran into problems and had large write-offs in their portfolio for land acquisition and improvements loans
Before taking the position, Mason went to the FDIC, the primary regulator of HomeStreet, to see if he would have enough time to turn the bank around before the agency closed the bank. The FDIC said the bank would be given sufficient time because of its record of good corporate citizenship -- another aspect of "Doing Well by Doing Good!"
Because the bank had few exotic loans, it benefitted from the large drop in mortgage rates that allowed it to take advantage of the resulting huge surge in mortgage re-financings. Once it got some traction, it was able to issue an IPO and use the resulting $100 million to re-capitalize the bank. Nevertheless, Mason later learned that for many weeks HomeStreet was Number One on the FDIC's list of banks that needed to be seized and shut down. For those of you who do not remember, throughout 2009 and 2010 every Friday afternoon the FDIC would announce a list of the banks from around the nation that it had taken over that Friday afternoon! Of course, today, the FDIC is surely glad it practiced "forbearance" in the case of Homestreet!
In the Question and Answer, Mason was asked what is the best way to be using consultants, a frequent practice of the banking industry. Mason replied that consultants were useful in accelerating the pace of change (and speed is important!) and for filling knowledge gaps in the organization, but they were less useful in bridging a staffing shortage and in decision-making roles.
Mason was also asked about how to build an ethical culture within an organization. He mentioned the need to communicate the theme, especially highlighting employees who had "done the right thing" when faced with an ethical dilemma. Secondly, he emphasized the need to have leaders who instinctively "did the right thing." Tone at the top is very important in setting the culture. If you find that you have a leader who does not measure up, that person needs to be managed out.
He was also asked how to establish a common culture in an organization spread out across nine states, he mentioned has to travel a lot to see employees and customers. The centralized systems used by Homestreet across many processes also help to keep the culture more consistent.
When asked how students can differentiate themselves in the job market, Mason replied that you need to demonstrate that you know something about the company and industry you are interviewing for. You also need to demonstrate enthusiasm, energy, and a willingness to work hard!
Mason noted that Homestreet is optimistic about its opportunities for growth. Initially, there was opportunity in the Seattle market as result of the vacuum created by the demise of Wamu. That has gradually disappeared to the point where the local market no longer presents the growth opportunities that HomeStreet is looking for. As a result, they have looked to acquisitions in other markets to fuel growth, such as the recent acquisition of Bank of Oswego in Oregon.
Asked about Seattle as headquarters for the bank, he said there were advantages over smaller cities in recruiting, but Seattle is not a national banking center, so the bigger the job, the harder it is recruit the right person. At the same time, the economy is strong, which attracts out of market competitors and increases competition for talent. The cost of living in Seattle has also been rising, which also makes recruiting more difficult.
In closing, Mason made a pitch to the largely student audience that there were many career opportunities in the banking industry. These opportunities were not just in accounting and finance, but also in marketing, sales, and management functions. He noted he has been working with the Washington Banking Association to raise awareness on college campuses of the many opportunities in the banking industry.
That was a great way to end the talk -- giving our students insight on career opportunities! Between that and reinforcing the themes of Albers Ethics Week, this was a great opportunity for our students to hear from a turnaround expect in the banking industry!