January 4, 2007 in Business

Bert Caldwell: CEO Jones reflects on a Banner year

Bert Caldwell The Spokesman-Review

D. Michael Jones has seen Spokane and Spokane banking coming and going.

Coming when he returned to Spokane 33 years ago to join Washington Bancshares Inc., the forerunner of Old National Bancorporation. He eventually became president of Old National, which was acquired by U.S. Bancorp in 1987.

Going when he moved on to Moore Financial Group in Boise. Jones became president of that holding company, which was renamed West One Bancorp. West One had barely dipped its toe in the Spokane market before U.S. Bancorp again bought a bank out from under him.

So Jones returned to Spokane in 1997 to take over Source Capital Corp., a commercial real estate lender that also did some lease financing. Source was merged into Sterling Financial in 2001.

Three months later, after some down time that included a trip to New Zealand, Jones was made chief executive officer of Walla Walla-based Banner Bank. In December, Banner announced a deal to purchase F&M Bank. Completion of the $99 million transaction, expected in late April, will bring Jones back into Spokane banking in a big way.

F&M, which marked its centennial last year, had been in Jones’ sights a long time.

He says he discussed a possible acquisition when he was at West One, but the owners of closely held Farmers & Merchants, as it was then known, were not interested.

“It’s no secret that I thought F&M was a great franchise,” Jones says. “They have the best branch distribution in Spokane for a small bank.”

Jones has led Banner through a remarkable growth spurt. When he took over in February 2002, Banner had 35 branches, and some pressing problem loans. Assets were about $2.1 billion. With closure of the F&M deal, and a $41 million purchase of San Juan Financial Holding Co. also announced last month, Banner’s system will number 80 branches. Assets will stand at $4.3 billion. Not surprisingly, shares of Banner stock have more than doubled in value, from about $20 to $44.20 at Wednesday’s close.

In the Boise area, where Banner once had no presence, Banner is completing its sixth branch. U.S. Bank and the city’s other big bank, Wells Fargo, have lost considerable share because they did not listen to their customers, Jones says. Banner and other smaller institutions have picked off loan officers and other employees and, with them, the customers they served.

Banner also has been successful in the Portland and Puget Sound areas, particularly around Bellingham. The San Juan Financial purchase will strengthen the bank’s position in that market, Jones says.

Jones says its Walla Walla location has worked to Banner’s advantage as it moved into the Northwest’s metropolitan areas. Portland interests resent Seattle, and vice versa, he says. Same with Boise and Spokane.

When you do business from Washington’s wine country, he says, “There’s a little bit of cache.”

And none of the city-versus-city baggage.

Banner has two branches and one loan office in Spokane. Jones says he wants to build on the physical and human assets that have made F&M successful for 100 years. The bank has 14 branches and 160 employees.

“They really do have some good people,” he says.

And Jones plans to put more of them in downtown Spokane. F&M has long been headquartered at the intersection of Argonne and Sprague in Spokane Valley. Jones says Banner could be an anchor tenant in a new headquarters building someone else would build.

He has not held any talks with developers, Jones says, adding “We’ve made it very clear that we’re looking.”

Jones, the son of former City Council member Del Jones, says he has returned regularly to Spokane, where he owns some apartments. He is enthusiastic about Spokane’s transformation since the hardscrabble days of the early 1980s.

“I have a sense Spokane has really turned around economically,” he says.

Meanwhile, Banner continues on the hunt for other potential acquisitions.

“There are a lot of small banks,” Jones says. “We’re talking.”

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