He wears a Seiko watch from Costco. He cleans his own house. And he applies for jobs at banks on the brink of failure.
He wears a Seiko watch from Costco.
He cleans his own house.
And he applies for jobs at banks on the brink of failure.
In many ways, Patrick Patrick — aka “P2” — is a breed apart among bank executives. The 69-year-old parachutes into struggling banks, nurtures them back to health and moves on.
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The banks he’s saved, most recently Seattle Bank, were considered goners. But Patrick has built credibility over the years with regulators and investment bankers, buying him extra time to sell toxic assets, raise capital and resolve knotty problems.
“When your entire career is doing bad-bank turnarounds, you’re either good at it or you’re not going to get the next job,” said Joe Gulash, a Los Angeles principal at investment bank D.A. Davidson & Co. “He always kept getting the next job.”
At a recent Seattle business breakfast for financial-services leaders, Patrick was a lone gray sweater in a room of suits and ties. He’d already been up since 4:30 a.m., in time to get in a five-mile fast walk — a routine he’s kept for more than two decades.
“For me, if you get your heart rate moving, it’s amazing how your thinking can improve,” Patrick said.
The business of banking, he said, is simple: You invest money to get a higher return than you pay on deposits, while making sure depositors’ money is absolutely safe.
“The most common reason for a bank’s failure is five letters — greed,” Patrick said. The end of the last economic cycle set off a tidal wave of bank failures partly because executives had pushed for greater earnings than what was naturally possible. “An adult would say, ‘I don’t think we need to go that far.’ “
Distressed banks resist radical change, Patrick said, and he won’t sign on as CEO unless their boards give him full support. He typically cuts costs through layoffs and soothes regulators by resolving troubled loans through any means necessary.
The longest he’s ever led a bank was seven years.
“It’s like having your relatives come stay with you,” Patrick said. “After three weeks, they start to smell.”
The journey to the CEO’s office started for Patrick at Metropolitan Escrow in Seattle in 1963. He had just gotten out of the Army after three years and didn’t have a college degree. The unemployment office pointed him to the escrow company, which needed a clerk.
Patrick viewed it as just a first step in his business career. His father was a longshoreman and his mother was a homemaker. He was the second oldest of five, whose greatest achievement up to that time was becoming a bat boy at age 13 for the Seattle Rainiers.
He looked up to the Rainiers’ manager, Fred Hutchinson. After Vern Stephens from the Boston Red Sox joined the team, the losing Rainiers started winning.
“You may be good, but unless you work together, you won’t succeed,” Patrick recalled Hutchinson saying to him. “That’s a lesson you never forget.”
Once in the banking industry, Patrick moved into other jobs — loan officer, underwriter, escrow officer — before being promoted into management.
In 1983, he became CEO of Prudential Bank in Seattle, and three years later, regulators let Prudential buy failing Mariner Federal in an assisted transaction. (Prudential later would be bought by another bank and eventually absorbed into Washington Mutual.)
Patrick became CEO of troubled Metropolitan Federal in 1990, and over time, straightened it out; in 1996, Washington Federal bought the thrift. Patrick spent the next decade consulting for banks and volunteering with nonprofit groups. In 2008 he went to Mesa, Ariz., to become CEO of another ailing institution, Towne Bank. He bought a significant stake in it to show potential investors he was committed.
Without that, “you can’t look someone in the eye and tell them it’s a great investment,” he said.
But Towne failed two years later, in May 2010. “It had too many legacy bad loans,” Patrick said, and not enough investors ready to take the risk it could be saved.
After regulators arrived to seize the bank, Patrick said, he called his kids to tell them they’d lost some of their inheritance. “That’s the only one we lost, and it still sticks in my craw.”
Last summer a group of investors led by J.D. Delafield, CEO of Seattle merchant banking firm Delafield Hambrecht, was on the verge of buying Seattle Bank and needed a crackerjack CEO who could win regulators’ confidence and pull the institution back from the precipice.
The five-branch bank, owned for decades by the Story family, appeared to be a good takeover target. Its existing capital was sufficient to cover most of its expected losses on past loans, so the new investors’ money could be used to stabilize and grow the company.
After nine months of scrutinizing every loan in the portfolio, and months more of putting together a package that was attractive to regulators and investors, Delafield said, the deal was to close on June 9.
But on June 2, as he sat poring over investor disclosure documents in his office on the 38th floor of the Columbia Tower, Delafield saw a new entry on page 36 — a lawsuit filed in California by an elderly woman. The class-action suit alleged the bank’s mortgage company charged excessive origination fees on reverse mortgages and didn’t disclose them properly.
Delafield cursed. Even though the bank considered it baseless, the lawsuit threatened to derail the deal because of the potential of a huge jury verdict.
“Other than Osama bin Laden, there was no one more despised in 2010 than the mortgage industry,” Delafield said.
Nonetheless, on June 30 the investors bought 98 percent of the bank for a mere $5,700 with the understanding they’d infuse it with another $57 million in the coming months.
Seattle Bank’s board brought in Patrick, a former founding director at the bank, as its new CEO.
“You could not have scripted a better role,” Delafield said. “This story was written for him to star in.”
Eager for challenge
Fresh from the failure of Towne Bank, Patrick was eager to get to business.
Seattle Bank closed all its stand-alone mortgage offices in Oregon, California and Washington. The bank went from 224 employees on Sept. 30, to 139 by the end of 2010, to 78 now.
“That’s never easy,” Patrick said. “What you hope is, as a result, you’ve saved a lot of jobs because if you don’t succeed, the jobs are gone.”
Patrick’s team aggressively found ways to restructure or sell loans that are not producing income — shrinking them to $19.7 million at the end of 2010, from $104.8 million a year earlier.
One Friday in early January, Delafield’s worries about the class-action lawsuit threatened to prove correct. There was a hitch in settling the suit — which meant the investors wouldn’t recapitalize the bank, and Seattle Bank likely would fail.
“Pat emailed on Friday to say he had a couple of ideas, that he was not going to give up,” said board member Mark Shuur. Within two weeks, the lawsuit was settled.
The recapitalization — ultimately $63 million — went through.
“There’s no question that he saved the bank,” Schuur said. The investors put up the money, “but he gave us the opportunity.”
Now Patrick walks the floor of the bank’s headquarters in Seattle’s Queen Anne neighborhood twice a day, saying hello to employees and customers. He said he learns a lot about how well the bank is doing its job from those interactions.
Soon, he said he plans to move out of his top floor, corner office to the first floor, so he can have more direct contact with front-line staff and customers.
Will Seattle Bank be Patrick’s last act?
“As long as the energy is there, it’s going to be hard for me not to do something,” he said. “Some people need a score card, and I’m one of them.”
Sanjay Bhatt: 206-464-3103 or firstname.lastname@example.org