A year of change at InterWest
July 3, 2008 · Updated 12:51 PM
"Visit the InterWest Bank Web site, click on the link leadership profiles, and you'll get a brief message: Currently under revision.That, in a nutshell, describes the last eight months at InterWest.The company has gone through a series of momentous changes in the year 2000, including everything from a new chief executive to a new emphasis on commercial banking.This week the changes continued, as InterWest announced a new name - Pacific Northwest Bancorp - and a new Seattle address.Bank officials say the moves are needed to revitalize the company and turn a tide of declining financial performance. But the changes have also caused concern in Oak Harbor. InterWest was started in 1956 by Oak Harbor businessmen John Vanderzicht and John Vanderpol. Originally known as Island Savings and Loan, it has steadily grown into a company with $2.8 billion in assets and 55 offices in 16 Washington counties. It is Whidbey Island's largest private employer, providing about 200 local jobs.InterWest plays a central role in the community, as well, by making contributions to a wide variety of causes. That means anything from buying laptops for local nonprofits to helping fund Oak Harbor parades.Most island residents want InterWest to stay right where it is, in its corporate office building on Pioneer Way.InterWest CEO Patrick Fahey went out of his way this week to assure the company will do just that. There will be no loss of jobs and no empty buildings in Oak Harbor, despite the new Seattle address.We will not lessen our commitment to this community, Fahey said Wednesday.UpheavalPeople looking in at InterWest might be forgiven for thinking otherwise. When InterWest's board of directors bumped Barney Beeksma from his chairman role and Steve Walden from the CEO slot last April, it was a major change of direction for the company.Beeksma joined the Bank in 1960 as president and CEO, and is widely recognized in the banking industry for leading InterWest from its early days as a small Whidbey Island savings institution to a regional financial firm. InterWest became a publicly traded company in 1991.More than anyone, Beeksma symbolizes InterWest's ties to Oak Harbor.Walden stepped into the president and CEO roles in 1990, and presided over a major growth phase for InterWest, as it acquired seven commercial banks and expanded into new markets.But while InterWest's assets grew in recent years and the company delivered quarterly dividends to shareholders, in the last nine business quarters it consistently fell short of financial analysts' expectations. The stock price made a steady decline over the last two years, from a high of $31.50 to $13.50.Fahey is frank on this subject, and refers to the company's entrenched leadership and declining financial performance.He isn't alone in this view. InterWest's 15-member board voted to change course, and in April put Fahey in charge. Walden stepped into Beeksma's board chairman slot, while Beeksma remained on the board in a lesser role. Others in top management at InterWest, such as executive vice president Clark Donnell, left the company.New leaderFahey, 58, began his banking career at Seafirst (now Bank of America) in 1967. His first bank president job came at Old National Bank in 1983. He started a new Seattle-area commercial bank in 1988 - Pacific Northwest Bank. It quickly grew until InterWest bought it in 1998.Fahey is well known and respected in the Northwest banking community. He has served as president of the Washington State Bankers Association. After some time on the InterWest board of directors, Fahey says he saw the need for change at the company. As a thrift, InterWest was getting squeezed out of the once-lucrative home lending market. It needed more avenues into commercial banking, where small-business and consumer lending returns are much higher.Fahey says Beeksma and Walden deserve credit for pushing InterWest in this direction, which resulted in the company's acquisition of such commercial banking operations as Central Bancorp and Pacific Northwest Bancorp. But the blending of InterWest and these banks proved difficult. Thrifts and commercial banks do business in different ways, right down to the computer operating systems. Earnings did not take off as expected.Fahey believed InterWest needed to change its charter to become a commercial bank and focus on filling a niche as a mid-sized, regional bank. The board agreed. Fahey was appointed CEO. InterWest became a commercial bank on July 1.New directionAll of the changes this year at InterWest, Fahey says, are designed to boost earnings. We've got to get the company more profitable. That's what this is all about, he says.InterWest has hired several new executives with commercial banking experience, including Bette Floray, Carol Simpson, David H. Straus, Kim Brace and Michael Besselievre.The name change to Pacific Northwest Bancorp and the new Seattle address were announced this week. (The company's name and address change are not complete until it files with the government and receives final approval.)Some in Oak Harbor have worried that the center of power at InterWest is moving from Whidbey Island to Seattle, where Fahey keeps an office. He lives in Edmonds.But Fahey points out that he keeps an office in Oak Harbor, too. He says the name change and Seattle address are all about building a regional identity.The name 'InterWest' didn't define where we were, he says. This sharpens who we are, what we are and where we are.What's more, Fahey says, all of InterWest's administrative functions that have been handled in Oak Harbor, from marketing to the real estate group, will stay in Oak Harbor. He says the company put $4 million into the recent remodel of the Oak Harbor headquarters, and it is not possible, much less profitable, to move everything.He emphasizes that the Seattle address is a cosmetic change meant to improve business, and is not a departure from Oak Harbor.It's a positioning, reiterates InterWest marketing director Don Piercy.That's music to the ears of Oak Harbor business leaders.It's good news that they're keeping all those operations here, says Greater Oak Harbor Chamber of Commerce Executive Director Priscilla Heidecker. We hope in the future they'll keep the same level of commitment to Oak Harbor.Will it work?Banking analysts say InterWest is taking the needed steps to survive and grow.The name change definitely makes it more attractive as a regional play, says Charles Driggs, senior analyst at Safeco Asset Management in Seattle. And the emphasis on commercial banking was necessary.InterWest had an image as a good old savings and loan, Driggs says. Positioning itself as a regional commercial bank gives the company an opportunity to fill a need that used to be filled by Peoples, Rainier and Seafirst.Of course, changing a charter is one thing. Going out and getting the new clients is another. Driggs thinks Fahey is up to the challenge. He operates aggressively, Driggs says.Fahey himself says he plans to succeed.We've had difficulty being seen as the budding regional bank, he says. We plan to perform above our peers and be viable as a community bank. "