Mary Lynn Lenz isn't one to shy away from a challenge.
Rather, she embraces them, which helps explain her success over a decade where she has run four banks, including some in need of a turnaround. She also recognizes opportunity, which has led to the sale of each of those banks, including Slade's Ferry Bancorp in Somerset, Mass., and TFB Bancorp in Yuma, Ariz.
TFB agreed late last year to be sold to Glacier Bancorp in Kalispell, Mont., for $62.4 million, or roughly 169% of tangible book value. That sale came about after TFB had completed a strategic planning process.
Lenz, who has made several appearances on American Banker's list of the most powerful women in banking, will stay on as CEO of Foothills Bank, a division of Glacier, after the deal's expected completion in the second quarter.
Several factors led TFB to sell, including a reluctance to increase exposure to commercial real estate and challenges bringing in deposits, Lenz said in a recent interview. While many bankers are reluctant to discuss selling, Lenz said she believes such conversations are necessary to do what's right for shareholders, customers and employees.
The following is an edited transcript of that discussion.
Why did you decide to sell Foothills?
MARY LYNN LENZ: We have a majority owner, Scott Spencer, who owns a third of the bank and is our vice chairman. He and I started having strategic discussions in January [2016] about where we wanted to go by 2020. We came up with some goals and my senior team went back and financially assessed the plan to get to those targets. We thought we could do it. We thought there was great opportunity for loans in Arizona and the associated deposits.
There were some hurdles. We have already hit that 300% [ratio of CRE to total risk-based capital that makes regulators wary]. It's not a hard stop. But it certainly is something you don't want to take up to 400% or 500%. That was one thing that we saw as a challenge.
The other challenge is that lending has come back [and] we had used a lot of liquidity. We asked if we can grow our deposits as fast as we can grow loans. We thought that could be a shortfall, too. Everyone is out there looking for deposits.
We then [decided to] test the waters to see if there was a good partner out there. [Glacier CEO Michael Blodnick] called and asked me if I wanted to have lunch. In June, we had a two-hour lunch. He said at the end that he loved our bank. He loved Arizona and he really wanted to get into the state.
We liked the way Glacier is structured. The banks they have operate as their own entities. They retain their names and their management teams. They retain their employees. They have the strength of Glacier's capital, which diminishes the impact of CRE concentrations. It also allows us to make larger loans and gives us the clout to compete with the big guys.
TFB seemed to have frank discussions about its future.
It's not easy, but you can't interject your personal ambitions. Your first responsibility has to be to the shareholders, your board and your employees. I could easily say, "I have an employment contract that says I can stay there until 2020 and then renegotiate." I think it is all in how you research and lay out a game plan. Here are the different opportunities. We could do this or we could do that. We started this discussion in January [2016] and announced a deal in November. It wasn't a matter of throwing out a price. It was a very pragmatic, very focused discussion with lots of analysis.
There are a lot of community banks that have a board that says it will never sell the bank, which does no justice to shareholders. Or you can have a CEO that then says, "What about me? Will I have a job? Maybe I'm too young to retire." You have to make the best effort to not interject those personal interests into the decision.
Are regulators too concerned about CRE?
I turned around two distressed banks during the downturn, and both were the result of overzealous CRE lending where bad credit decisions were made. It's not that the whole sector was bad but some bad decisions were made. Now that I've been through a downturn, I understand the concerns. There's got to be some control over the risk, though it's not like we would ever intentionally jeopardize our banks.
We had a safety and soundness exam in January [2016] and I found that the regulators were great. When they came in, we were at 311% [CRE to total risk-based capital]. We had started different processes for that [such as] the stress testing. Our board was informed and we had risk controls in place. I didn't feel that they came in heavy-handed, but they made it abundantly clear that they would be watching and making sure that we would exceed the limit prudently.
What is Glacier's opportunity in Arizona?
We have an unprecedented opportunity to bring in larger loans. We have a focus on being on the ground and out with customers. I spend 60% of my time in the field visiting prospects and customers, talking with them and staying connected with them. We will have the power of [Glacier's] behind us, but we will use our methodology of being close to customers. Our customers don't even come to our bank to close their loans. We go to them.
You helped turn around Slade's Ferry and Professional Business Bank. How do you decide what CEO roles to take on?
I can't tell you it is calculated. It is really a journey. I've done four bank transactions in 10 years. No one ever set me out in that direction. I didn't wake up one morning and say I want to buy and sell banks.
When I decided I wanted to be a CEO, it was the last step in my career. It was a difficult decision since most of my career had been in retail. When you talk to most CEOs or boards, they will generally tell you they're looking for someone with commercial lending experience to walk into that CEO role. I had a problem with that. On the retail side you're into sales, service, marketing and compliance, human resources. I went out into the market in 2002 and there were six opportunities. I had to prove myself. I found the bank that was broken the most. [Slade's Ferry] hired me and we turned it around in 18 months. Then we took it to market a few years later and sold it for a fabulous premium.
When I took on Professional, I didn't know it was in any sort of trouble. It wasn't under any sort of disciplinary order. When I got into it, it had some warts and eventually we fixed them all and sold it.
Is there a secret to your success with turnarounds?
You have to utilize a very organized strategy because there are so many moving parts. Then it's continually motivating your staff. It can be daunting and there can be turnaround fatigue or turnaround depression. They feel like they're failing and they won't get to the finish line. I had many nights [at Professional] where I felt like the FDIC would come in that night and close the doors. But you have to motivate those who are helping you and never give up. You just have to keep getting up, because your reputation is on the line. And you can't always turn around a bank. I've been lucky that we were able to do it in the situations that I have been in.
What advice would you share with other women bankers?
Don't be scared of what you don't know. I started as a teller and I was never trained to read a balance sheet or income statement. Throughout my career, I have taken on opportunities where I had to dig in and figure it out. At Slade's Ferry, there were so many things that were broken that I didn't have experience in, but what I didn't know I leveraged with external partners and learned.
Always surround yourself with the best and the brightest but also with people that your gut tells you will run up the hill as fast as you. You can figure out anything you want to as long as you are tenacious. As I have mentored people over the years, I have always said, "Don't let anyone tell you that you can't aspire to something." If you want to, you can.
