A turnaround artist finds a home
HomeStreet Bank CEO Mark Mason helps rebuild a local insti tuti on
By Jeff Bond
photo/Jeff Bond
¦ CEO Mark Mason stands outside the Queen Anne branch of HomeStreet Bank. A bank executive with an accounting background, Mason has made a career out of turning around troubled banks. He helped stabilize HomeStreet and lead the 90-year-old institution to an initial public offering of its stock earlier this year.

HomeStreet Bank CEO Mark Mason and his wife, Tracy, found a unique, but practical, way to choose Queen Anne as the location for their new home.

Mason, 52, was in the process of moving his family from the Los Angeles area to Seattle in August 2010, after commuting back and forth for about six months. He took out a map of Seattle and made the bank’s downtown headquarters the center of a circle. He then told his wife that she could pick anywhere within the circle for them to live as long as he wouldn’t need to cross water or use a bridge to get to work.

The result: The family settled on Queen Anne.

“It’s a refreshing change from Los Angeles,” said Mason, who took over the chief executive position at troubled HomeStreet Bank in January 2010.

The story is something of a metaphor for how this practical, yet creative, bank executive goes about his business: Study a subject closely. Clearly and calmly identify the

potential pitfalls and then avoid them.

Changing fortunes

Mason’s leadership has helped HomeStreet Bank not only survive a brush with insolvency following the economic implosion of 2008 and 2009, but actually to thrive and remain independent. He has successfully restructured and recapitalized the bank at a time when few thought it would be possible.

In fact, Mason said that HomeStreet Bank is one of the only banks in the nation during the economic downturn to recapitalize by selling shares to the public through an initial public offering. The move raised nearly $89 million in February of this year. Banks that were in HomeStreet’s situation in recent years most often either became recession road kill or improved their financial situation and then were bought out by larger banks.

But that wasn’t Mason’s plan. He and the bank’s leadership wanted HomeStreet to remain independent. So they turned to the public markets.

It took three tries before the market forces were right and stock-buyers recognized the bank’s improving fortunes. Mason acknowledged that a little luck played a role, as well.

Still, since the bank’s nadir in May 2009, when the FDIC and the Washington Department of Financial Institutions required HomeStreet to restructure and raise capital or risk being taken over and probably sold, the 90-year-old financial institution has bounced back in a major way. In the second half of 2011, the bank earned more than $22 million in profits.

In recognition of the improvements, federal and state regulators terminated their cease-and-desist order of the bank on March 26, ending their close oversight of the bank

and freeing Mason to pursue other lines of business.

Today, Mason maintains that HomeStreet is among the most profitable banks in the nation, when measuring profitability as a return on assets.

“We were in the second half of this last year, and we will be

again in the first half of this year,” Mason said. “That’s a pretty good start.”

No secret to turnaround

Mason is the first to say that there is no real secret to turning around a bank like HomeStreet. But he said there is some art to the process, and that is where experience is crucial.

“You have to be both a mechanic and an artist,” Mason said of turning failing banks around. “You have to do things to be successful that are often counterintuitive.”

He said it comes down to acting quickly and decisively to stabilize the bank’s loans, communicating clearly with bank regulators about what you are going to do and then executing. The job also involves objectively and analytically deciding which non-performing bank loans to hold onto, restructure or liquidate. It is this job that often requires a clear-eyed outsider to complete.

A bank’s total assets may shrink, but higher losses in the short-term often mean lower losses in the long-term.

Mason had his first major success in turning around a bank in 1998, when he became president and CEO of the $3.7 billion Fidelity Federal Bank in Los Angeles. According to a recent profile of Mason published in The Seattle Times, the CEO cut expenses and reduced the number of employees by almost half. He sold the bank’s credit-card business and got the bank’s nonperforming debts under control.

Mason later sold Fidelity Federal to a larger bank in 2002 and began a five-year stint as a consultant to banks and mortgage lenders.

In 2009, HomeStreet officials came calling. Soon after, the bank’s board of directors hired him to work his magic.

Mason said HomeStreet’s problems were similar to many banks at the time: heavy losses in home mortgages and construction lending. He said many of the bank’s troubled loans were to homebuilders trying to deal with the collapse in the real estate market.

However, he said HomeStreet also had a number of things going for it, including a strong and successful management team with the expertise of a much larger bank.

It also had the Puget Sound region. This is a place where the economic growth rate, the median income and the population growth rate are all higher than most other areas of the country. That meant HomeStreet would have a better chance to work itself out of its financial troubles.

Continuing to grow

As other banks pulled out of lending to

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