Banking On The Future Evelyn Meany Helped Guide Struggling Pend Oreille Bank Back To Prosperity

Numbers speak louder than Evelyn Meany.

The modest chairwoman and president of Pend Oreille Bank acknowledges times are very good at the Newport financial institution.

Assets up 52 percent in two years. Net income up 57 percent. Income per share swelling year to year.

Sheshunoff Information Services Inc., a Texas-based watchdog of the banking industry, says Pend Oreille’s 19.89 percent return on average equity in 1994 put it among the top 9 percent in its peer group.

“The facts speak for themselves,” says board member Frank Eichelberger. “That has got to do with management.”

The numbers told a different story when Meany left a troubled Pend Oreille Bank in 1986.

The four-year-old Newport institution had grown rapidly, she said, but some of the loans that fueled the expansion were going sour.

The pattern was not unusual. Meany said new banks often loan aggressively to attract customers, with the expectation there will be a certain amount of fallout after five or six years.

In Newport, she said, that pattern was exaggerated by the economic downturn that struck in the mid-1980s and a lending philosophy that sought to put credit within reach of those who could not get loans anywhere else.

Other banks were suffering from a mild recession, but in Pend Oreille County unemployment climbed above 18 percent.

Many borrowers pulled up stakes, never to return, Meany said. The trend was disturbing.

“We had some problems in the loan portfolio and they were not being addressed,” she said.

Meany said the bank was in no danger - new banks are typically overcapitalized - but earnings were flat and there were no internal systems for monitoring and collecting bad loans.

As vice president and cashier, she said she tried to focus attention on the problem.

“I was unable to convince anyone we needed to do something,” Meany said.

Frustrated but still on good terms with other bank officials, Meany resigned from Pend Oreille Bank to take a position with Farmers & Merchants Bank.

The Spokane institution has a good training program, she said, particularly in commercial lending.

Meany, an officer with a Havre, Mont., bank prior to her 1983 arrival in Newport, said most of her previous loan experience was in agriculture.

She spent two years with F&M, learning its conservative credit philosophies. In the meantime, Pend Oreille Bank’s woes festered.

Total income increased, but declined on a per-share basis. Return on equity and assets dropped to levels far below industry benchmarks.

In December 1988, Meany was brought back to Pend Oreille Bank as president. The rebuilding process began.

“We weren’t that well-situated when she took over,” recalled board member Glenn Bergau, who said Meany was rehired because she was familiar with the bank’s operations.

“She knew what she was doing,” he said.

Meany said controls common elsewhere in the industry were implemented at Pend Oreille Bank. Loans that had been renewed when there was no possibility of collecting were written off.

Provisions for loan losses dipped the bank into the red in 1990.

“I’m not sure I would have taken it on had I known how bad it had gotten,” Meany said semi-seriously.

But she added that the board and bank employees were supportive throughout the process. And Pend Oreille Bank has made an impressive turnaround since that low point.

Assets have doubled in the last four years to $26.8 million. In 1991, income rebounded to $167,000 - the bank’s best year to that point - and results last year were twice that.

Earnings per share have quadrupled.

Meany said Pend Oreille Bank has prospered without turning its back on the under-served clientele its founders wanted to reach.

“There’s nothing wrong with that type of borrower,” Meany said. “That’s what we’re here for.”

For example, she said, Pend Oreille Bank has no minimum on home loans even though loans for less than $25,000 cannot be sold on the secondary market.

Meany said the current portfolio is a good mix of commercial, residential and consumer loans. The bank has done particularly well with custom construction loans to contractors meeting the demand for second homes on Priest Lake or the Pend Oreille River, she said.

Although the Newport economy remains significantly dependent on the timber industry, the bank itself is not over-committed in that segment, Meany said.

She estimated Pend Oreille Bank’s assets have grown to more than 25 percent of those in Newport-area financial institutions, which include Seafirst Bank and Spokane Teachers Credit Union in Newport and West One and First Security banks in Priest River.

The presence of much bigger rivals does not deter Meany.

“We can move much quicker. We can react to change,” she said. “We know our customers.”

The bank has only one branch, but could add one on the Idaho side of the river if Clinton administration efforts to remove barriers to interstate banking are successful, Meany said.

Also, she added, Pend Oreille Bank formed a holding company that could offer services like insurance and securities in the future.

“Our real focus will be to enhance the growth of our area,” Meany said, crediting the bank’s rebound to the overall recovery that has been abetted by developments like construction of the Ponderay Newsprint Co. plant at Usk.

Meany married the plant’s general manager, William Meany, two years ago. He also sits on the bank’s board.

Meany said Newport has responded well to the fact that three of four executive officers at its homegrown bank are women.

Clients just want to be sure the person they are dealing with understands their business, she said.

Eichelberger said Pend Oreille Bank’s results are a credit to the whole management team.

“These people are very dedicated to providing the banking services that their community needs,” he said. “We came from being a marginal bank to being a very, very profitable bank.”

Eichelberger noted that Meany’s peers have recognized her abilities by electing her president of the Washington Independent Community Bankers Association for 1994, and to the education committee of the Independent Bankers Association of America.

“It’s been a real exciting five or six years,” said Meany, who anticipates another good year in 1995.

“We live here. We like it here. We’re going to seek out the ways that can work for the people who live here.”