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Barney Frank, Maxine Waters and nine other Democrats urged financial regulators in 2010 to consider Certus' charter as a way to create a large minority-run bank headed by managers of "unquestioned character." That bank's big problems since suggest that, at minimum, the vote of confidence was misguided.
April 7
CertusBank is the latest in a list of high-pressure turnaround jobs for John Poelker.
Poelker, 71, has
The moves come less than two weeks after American Banker
Returning to profitability could be a trickier task than repairing Certus' reputation. Reducing executive expenses is simple, but many other crisis-era failed-bank rollups have struggled to move beyond their original strategy after the pace of failures fell and lucrative loss-sharing deals vanished.
Poelker's selection as interim president and CEO suggests that the $1.7 billion-asset company's board wants to restore credibility first and that directors are less concerned with finding someone to craft a new long-term strategy.
The choice suggests that the board wants a quick cleanup of Certus' image and finances. It also raises the possibility that the company will look to sell itself after a cleanup.
"All of the third parties, including investors and regulators, can rely on him," says Chip MacDonald, a lawyer at Jones Day in Atlanta who has known Poelker for years. "He has a tremendous amount of credibility and Certus needs someone the board and a potential buyer can trust."
In Poelker, the board found an industry veteran who has been a responsible steward for troubled institutions. He also has experience successfully rolling up failed banks into a profitable franchise.
Poelker is "the go-to-person in Georgia to deal with banks that had significant issues," says Walt Moeling, a senior counsel at Bryan Cave who recommended Poelker for the Certus job. "He knows the markets, he understands loss-share and he is an authority on corporate governance."
The move was a surprise to many Certus investors, who had recently begun attempts to nominate a new slate of directors for the company's June annual meeting. Certus is majority owned by about 25 hedge funds, including billionaire John Paulson's Paulson Management II and King Street Capital Management, a $20 billion distressed-debt specialist.
It is unclear if the move will satisfy investors enough to end their efforts to oust the board. Some investors had lost faith in the board after the troubles of the previous management team came to light.
Robert Wright, one of Certus' founding organizers and a director, was named chairman on Wednesday. The other four independent directors remain in place, following the departure of Jones, Davis and Charles Williams. (Williams
Poelker grew up in St. Louis, where his father spent one term as mayor. After retiring as chief financial officer at Old National in 2005, he opened a consulting firm and became known for coming in at the eleventh hour to try and rescue flailing banks.
Two of those banks -
Poelker became president and CEO at Georgian in July 2009; it failed two months later and was sold to First Citizens Bancorp in Columbia, S.C. In February 2010, he took the helm at Beach First, though regulators seized the bank two months later and sold it BNC Bancorp (BNCN).
Poelker "did all he could to get loan workouts moving" before a run on deposits sank Georgian, says Peter Bristow, president and chief operating officer at First Citizens. "He did a good job getting the board engaged but they just ran out of time."
Like Certus, Georgian was dealing with allegations of financial mismanagement when Poelker was brought in, Bristow adds.
"He was on a sinking ship at Beach First and he kept it afloat as long as he could," says Rick Callicutt, BNC's chief executive. Poelker "will bring a lot of discipline to the table" at Certus.
"He also brings with him a reputation with the FDIC and OCC that is important in times like these," adds Callicutt, who was BNC's chief operating officer when it bought Beach First and worked with Poelker on due diligence.
Poelker also has credibility with the Treasury Department, which appointed him in July 2011 to return to St. Louis by
Poelker made it clear at that time that he was brought in to serve as a resource to First Banks' board and management not to act as a government mole.
"My expectation is that I will be a director who has the same responsibility to shareholders and regulators just like any other director," Poelker said in an interview. "I won't have a reporting relationship with the Treasury. I don't need to talk to them."
Poelker's most recent executive experience at a bank was as CFO of State Bank Financial (STBZ) in Atlanta, which successfully executed the rollup strategy Certus has so far failed at. State Bank, founded in 2005 by a group led by CEO Joe Evans, has bought seven failed banks as it stitched together a franchise across Georgia.
The $2.6 billion-asset State Bank earned $13.7 million last year. It also has around $200 million in excess capital, which could help fund more banks in Georgia, says Jefferson Harralson, an analyst at Keefe Bruyette & Woods.
"Poelker comes from a bank that was successful with the rollup strategy that Certus was trying to use," Harralson says.
Certus has five FDIC-assisted deals under its belt, leaving it with 38 branches. Any reformation of Certus' expenses is likely to involve significant closures. An analysis by one Certus investor showed that more than a dozen branches had lost deposits since they were transferred to Certus.
Certus' recent losses, coupled with drama in its executive suite, has obscured the fact that the company still has plenty of capital. Losses recently pushed the bank's tangible common equity below the 10% level required by its federal charter, but it remains well-capitalized, with an 8.67% Tier 1 capital ratio.
Furthermore, Certus has drawn on only $218 million of the $500 million its investors committed when it was founded in 2010. This capital stash makes it possible if, for now, unlikely that Certus could return to its old rollup strategy if it resolves its expense problems and gets the regulators' blessing.
Poelker should benefit from having capital at Certus, which was largely absent in his other turnaround jobs. "Certus seems like a better opportunity in that regard," Bristow says.
Certus' regulatory risk is a greater unknown. The previous management team entered into several transactions that have drawn scrutiny from investors, including the payment of nearly $10 million to a consulting firm owned by Certus' top officers and at least one instance of the bank selling property to an executive at a price that appears to be below market value.
The FDIC, OCC and Federal Reserve Board have consistently declined to comment on Certus, citing restrictions on discussing open and operating institutions. But an investigation into the company could be a serious distraction from efforts at reform and strategic repositioning.
Poelker also needs to win over Certus' nervous investors. Rod Taylor, an executive recruiter in Atlanta who worked with Poelker when they were at consulting firm Edgar Dunn, believes he can prove his worth to shareholders.
Poelker "knows everything about how a bank works and can tell what is going wrong," Taylor says. "He isn't going to misrepresent anything. He does not put lipstick on pigs."
Poelker has already made his first change, moving his executive office from an adjacent, connected suite at Certus' Greenville headquarters to the main office, where the other employees work. It was a first, if largely symbolic, effort to change the company's culture.
Robert Barba contributed to this report.
