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Back from the brink

by: OUTLOOK PHOTO: JIM CLARK - MBank CEO and President, Jef Baker, credits employees like teller Denise Matsuura (shown), as well as the banks board members and advisors, with the team effort that led to improvement in the banks financial stability. Gresham-based MBank has been recognized by the Western Independent Bankers (WIB) as the Innovative Community Bank of the Year. The award was presented to MBank’s CEO and President, Jef Baker, last month at WIB’s annual conference in Tucson, Ariz.

For Baker and MBank, the award symbolizes an unexpected “atta boy” for its giant steps forward toward financial stability.

“All of us at MBank are honored that our peers recognize our success in returning the bank to profitability,” Baker said. “With the commitment and leadership of an active board of directors, we overcame the odds thanks to the dedication of our employees, the support of our investors and the innovation of our team and strategic partners. It was an against-the-odds kind of story.”

Founded in 1995 by Rex Brittle and six others, MBank opened its doors in 1995 with $3 million in capital from 310 investors. The small, hometown bank atmosphere was warmly received by customers, and gave birth to branch expansion in Gladstone, Lake Grove and Portland. By the mid-2000s, MBank had $300 million in assets and employed nearly 120 people.

But in 2008, the bottom fell out of what had been a lucrative real estate market. MBank reported annual losses from 2008 to early 2011 and was ordered by the Federal Deposit Insurance Corp. in November 2010 to boost its capital funding or be acquired by another bank. Federal regulators gave the bank a 5 percent chance of survival.

Baker, who had been chief financial officer since 2005, became president and CEO of MBank in July 2012. His new duty was the monumental undertaking of turning the bank around.

“When I came on, I took ownership of those loans along with the financial operations and human resources,” he said. “My task was to keep the bank from failing. If I had known at the time we had a 5 percent chance of success, I probably would have been more stressed out.”

Baker had his hands full as he attempted to shore up the bank’s finances on a variety of fronts, from overhead to non-performing assets. He brought in consultants with Portland-based Guardian Investment Real Estate to help establish a protocol for resolving problem loans and examined the viability of maintaining multiple branches.

“We had to make some tough choices and took some financial hits,” Baker said. “We had to manage our overhead, which required some layoffs, and we closed the Hollywood branch.

“But what was really challenging was reducing staff and trying to get people to believe in you. It’s a tough situation to know you’re on the ropes and people are convinced the bank is going to fail.”

After MBank’s reduction in work force — from 125 to 43 company-wide — Baker knew he had to be creative to bolster employee morale.

He reinstated the bank’s holiday party and summer picnic and personally delivered Thanksgiving pies to MBank’s employees both at work and their home.

He also introduced a Survivor-themed intra-branch competition designed around team building and good old-fashioned fun.

“It was the little stuff like that that was so important to the company,” he said. “In the middle of this crisis, we were able to laugh and have some fun.”

The “little stuff” is what most likely caught the attention of the WIB, in determining its Innovative Community Bank of the Year Award, Baker said, in addition to the bank’s significant improvement in its financial footing.

MBank’s capital reserves are higher now than at the start of the recession, he said, and are approaching mandated standards set by federal regulators.

“We’re still healing, we’re profitable and we’re performing,” Baker added. “But we’re still not where we want to be in terms of our overall capital levels. I’m just very lucky to be surrounded by knowledgeable people in the banking industry and to work with a very supportive board.”

Another sign of MBank’s stability is a remodel of the Gresham branch, which should be completed by October. Plans are to combine the bank’s drive-thru area with branch services in the smaller building on the corner of Northeast Division Street and Burnside Road. Baker said the bank is negotiating with tenants interested in leasing the current branch location.

There are big trains and little trains along the track of survival in the banking industry. MBank, as the little bank that could, appears to be on course with Baker as the conductor.

“What was exciting to me was how warmly received MBank was by all these bankers,” Baker said. “We were all fighting the same challenges, some not as severe as ours, but everybody knows MBank now. I really believe innovation got us out of this mess and it will ultimately determine our success.”