Growing in Unity: How Washington Federal Dodged Silos, Increased Numbers

by Marielle Mondon Monitor 100 2016

Washington Federal Regional President Michael Brown assumed his title at a time of great transition: the bank had just acquired 75 new locations throughout its eight-state bank footprint, 13 of which were in the state of Arizona, which he oversees. After working to unify more employees and getting everyone working together on a regular basis, Washington Federal’s personal approach to equipment financing helped the bank land in the Monitor 100.

Two years ago when Michael Brown assumed the regional president position at Washington Federal’s Arizona branch, the new title marked not only a new chapter in Brown’s career, but massive growth and transition for the bank. Brown was appointed in May 2014 and by the end of the month Washington Federal would acquire 13 new branches in Arizona alone, bringing state locations to a total of 36.

An Arizona Learning Curve

“It’s been an interesting transition, and it’s clearly had some challenges, but all in all it was an incredibly successful acquisition,” Brown says. The 13 branches were just one portion of 75 total new locations across Oregon, Idaho, New Mexico, Nevada and Arizona.

“What’s been interesting about the whole acquisition is how our models are quite a bit different on the retail side. This acquisition was retail only and did not include any commercial loans or deposits. There were really no loans of significance on this. It was basically brick and mortar branches and retail deposits.”

The sales-focused nature of Washington Federal is, in part, what attracted Brown to join a mortgage lender after a 30-year career in a more traditional commercial bank or finance company setting.

Prior to his tenure in Arizona, Brown lived and worked in Denver — Arizona was typically a part of his sales territory. As a senior vice president with Wells Fargo, where he served for 13 years, he became familiar with Phoenix, and when an opportunity for a group head position presented itself at CIT, Brown wasn’t hesitant to relocate to the city.

“I always liked Phoenix. I thought I’d give it a try, and this was pre-recession, and a lot of things happened during the recession. From CIT, I found my way to a regional bank located in Phoenix.”

After four years as president of Western Alliance Equipment Finance, a subsidiary of Western Alliance Bancorporation, Brown joined Washington Federal as the president of Washington Federal Equipment Finance, where he has spent just over four years.

“It was an interesting move because I’ve been an equipment finance guy, and at heart, I’ve been doing that for my whole career. Then two and half years ago, I truly jumped into the banking side to take on the role of the Arizona regional president. There are many of us within the equipment finance industry who have done something similar. We’ve all shared stories regarding the differences between the two roles. From a career standpoint, I’ve really enjoyed it. I’m learning so much about the core aspects of the banking business that I’ve really never known before,” Brown says. “The learning curve was big, but I’m enjoying it immensely. I now have a good working knowledge of retail, business banking and commercial real estate.”

This year marks Washington Federal’s first appearance in the Monitor 100. The numbers reflect this change, with Washington Federal’s net investment in equipment-related loans up to $176.1 million from 2014’s $140.1 million. New business volume, too, saw a great jump between 2014 and 2015, from $78 million to $96.7 million, respectively. In the eight-state footprint, Brown says the work primarily revolves around the classic middle market.

“Phoenix, I would say, and Arizona, is a very middle market type of place. In revenue size, the typical prospect ranges probably from $5 million to $100 million. There’s a lot here, I mean a lot,” Brown says. “Phoenix has a very big geography and a large population. We tend to focus also on that classic middle market, both on the equipment finance side and on the banking side.”

Building a Cohesive Sales Model

Brown contributes some of his region’s retail success to its uniquely personal sales model.

“Our retail branches are truly sales focused,” Brown says. “We are a portfolio lender. We book, fund and board all our own mortgages. We don’t sell them to Fannie or Freddie, which makes us unique. During the recession it was very helpful for us, because we were a portfolio lender and we could deal directly with customers who were going through some stress. They decide to upgrade to a new home, for example, and then go back to that same branch manager, and it’s the same person consistently working with them.”

Another significant aspect of Brown’s transition to Washington Federal has been building a more united business community for the Arizona offices.

“We’ve got eight regional presidents within our footprint, and we all report to the chief banking officer. So we work a lot together to ensure that we are very consistent across the footprint. We changed to our recent model because we were operating as a classic bank, whereby we were a little siloed.”

The focus now, Brown says, is to mitigate isolation via business lines and “play in the same sandbox together,” which is an ongoing goal for the company.

“Before the change to our current operating model, the business banking group reported to a group head in Seattle and commercial real estate reported to a different group head. So when you have silos like that, there’s a tendency for people to do their own thing without thinking about their brethren down the hall. This new structure allowed everybody to report to the geographical regional president,” Brown says. “Consequently, cross sales are up dramatically, everybody is working cohesively and it’s working really, really well.”

This policy is transferrable to the micro level for Brown’s Arizona team.

“I want them to know we have a model of ‘One Arizona,’” Brown says. “My short-term goal is to make sure that business banking is talking to commercial real estate. Our retail side is talking to business banking and commercial real estate. Our small business banking folks are talking to the commercial business bankers and the retail side. So, everybody’s talking all the time amongst each other, trying to figure out the best products and solutions for prospects and clients.”

Part of that is getting everyone under one roof — permanently. “We’re in active discussion right now to have a regional headquarters where everybody is in one place. Some of my divisions are down the road, and I want them to be down the hall.”

Projecting the Future of Branch Locations

Though Brown’s current title came at a time when Washington Federal was opening several new branches in his region, there’s a growing concern about the role branches play as technology changes the industry.

“It wasn’t that long ago that you couldn’t make a deposit with your phone. But now you can,” Brown says. “So what should a branch look like? Not tomorrow or the day after tomorrow, but five years from now?”

Brown says that planning to create a new branch today is much more complicated than the old formula of, “This is a great intersection, let’s put a brick and mortar branch here.” Today the use of technology, as well as the specific needs and demographics the branches are targeting, call for a more scientific approach.

“I’m working on a project in conjunction with our CEO and chief banking officer, specific to Arizona along those lines. I’m eyeball-deep in this particular long-term project,” Brown says.

100 Years Strong

Looking at the remainder of 2016, Brown predicts steadiness in the months ahead, though more uncertainty in the industry at a macro level.

“There’s just a little bit of uncertainty that continues to reverberate throughout the economy right now,” Brown says. “I think sometimes it has a direct impact on capital expenditures. So we’re trying to just sort our way through that, and we’ll continue to hit our targets, and everything will be fine at the end of the day.”

Brown also notes the impact the current market has on rates.

“I think in our industry, it seems like too many players are going after too few opportunities. When that happens, the rates customers get are continuing to be surprisingly low. Spreads typically associated with the top tier credits continue to migrate down to the middle market. It’s just frustrating,” he says. “We have been in this paradigm for quite some time and I am convinced we may be here for a while.”

Another frustration Brown is working to minimize is the all too familiar graying of the industry.

“I know the ELFA is keenly aware of it, but our industry has a lot of ‘gray.’ You go to a conference, and you see the classic blue blazers and a lot of gray hair,” Brown says. “I think the ELFA is keenly trying to focus on the next generation, getting some new, younger blood in there. I think we need to continue to do that because I don’t think we have enough today.”

Recruiting younger people also helps prepare the bank for future vacancies as new workers are trained to take over when the time comes, especially in the case of a surprise departure. “We recently experienced a situation like that in my Arizona retail division. A couple people left, which initially causes a void, and you think, ‘Oh boy, that’s going to hurt.’ But when you look at who’s next on the bench and ask them if they are ready to tackle a new challenge, it provides a great opportunity for them to help minimize the pain associated with the recent departure.”

Washington Federal is also celebrating a very large milestone in the next year — its 100th anniversary in April 2017.

“That’s a pretty incredible feat nowadays for a bank or any business,” Brown says. “I think it’s a great testament, frankly, to Washington Federal.”

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