Sometimes the best decision is to ignore bad advice.
Early in her career, Laura Lee “Laurie” Stewart asked her male branch manager at Everett Trust & Savings Bank how she could advance in the organization. The bank had only one female executive, Jo Balda, who was an operations chief.
“You need to wait until she dies,” he replied.
As it turns out, Balda, who died just recently, would continue working part time through her 80s.
“It was a really good thing I didn’t let him derail me,” said Stewart, who today is president and chief executive of Sound Community Bank and its parent company, Sound Financial, in Seattle.
Over the past three decades, Stewart, 69, has shattered the industry’s glass ceiling and led Sound through its transformation from a tiny credit union to a publicly traded bank that now has $685 million in assets.
She overcame some extraordinary challenges along the way, including going public just as the financial crisis was about to send the country reeling. Through it all, Sound has thrived under Stewart’s leadership, surviving the crisis even as other banks in Washington state were wiped out.
She also persevered through sometimes subtle, and sometimes blatant, gender discrimination early on, rising to become an industry leader at the state and national level. Younger bankers point to her as their inspiration, welcoming her frankness about the challenges women still face.
Her effective lobbying for regulatory relief and other industry priorities has won praise, too.
For all these reasons, Stewart is being recognized as one of our community bankers of the year for 2018.
Accidental banker
Growing up, Stewart had a passion for theater, performing in community plays, and believed that one day she would probably be a teacher.
She became a bank teller at Washington Federal Savings in 1968 as a student at the University of Washington because she needed work, she said. Then after she married Ken Stewart, who was in the Navy, they moved to Whidbey Island, Wash., where he was stationed.
Job opportunities, especially for women, were limited.
“When I got there, the choices were working as a cocktail waitress, or in the Navy commissary store, and interestingly, military towns have a fair number of branch banks,” Stewart said. “I said, ‘OK, this is an easy decision for me. I will try to get on with the bank.’ And I did.”
Stewart took classes on banking and after about six years decided she could make a career out of it. But she ran into roadblocks for women. For one, being a lender was out of the question. But she did not give up and received some crucial help at key moments.
After joining Everett Trust & Savings, she trained as a branch-operations supervisor and then as a loan processor. Stewart also was sent out to do an inventory check at a boat dealership across the street from her branch — a job normally reserved for men. At the time, women were required to wear skirts, so her colleagues stood at the branch window laughing as she climbed all over the boats looking for serial numbers. “But I learned how to do it,” Stewart said.
Perhaps the most important opportunity, she said, came from Wayne Young — the very same branch manager who had given her the dubious career advancement advice. Young arranged for Stewart to sit in on a monthslong training program on risk management for loan officers, under the guise she would take notes for her male colleagues.
“Now in today’s age, I would have said no to that,” Stewart said. “But back then that’s how he snuck me in that class. … By the time the class was done, I had learned a ton about commercial lending and even more about risk management. It was a great training opportunity.”
Making it to the top
To land her job as head of what would become Sound Community Bank, Stewart had to swallow her pride — not once, but twice — during the hiring process. She worked for Great Western Financial at the time, but that bank was pressuring her to relocate from Washington to Southern California, a move she didn’t want to make. Out of the blue, a recruiter called her about a job leading A.G.E. Federal Credit Union, which was founded to serve the employees of Associated Grocers and had just $38 million of assets.
“I talked to him at length,” Stewart said. After discovering that the recruiter wanted to send in at least one female candidate to be interviewed, she said, “I don’t want to be your token woman.” He said, “Would it hurt you?”
Stewart relented. “It might hurt me on principle, but it wouldn’t really hurt me to spend the day at the credit union, so I did the interview.”
She ended up being the institution’s second choice. The job was initially offered to a man who worked for a big bank. He accepted but backed out after realizing how different running a credit union would be. So an offer went out to Stewart, and she became its president in 1989.
It was a welcome opportunity, but the credit union was facing some challenges. The independent and wholesale grocery business was consolidating, making it harder for the institution to add members. That spurred Stewart to convert the credit union to a mutual savings bank in 2003. It sold about 45% of its shares in the first step of its conversion to a publicly traded bank in mid-January 2008.
The timing of that sale was not good. The U.S. economy had fallen into a recession in December 2007, and in late September 2008 the Dow recorded the biggest point drop in its history.
Sound’s stock would tumble along with the market, going from $10 per share at its initial public offering to around $3.85 a share. Those initial investors were mostly friends, relatives and others whom Stewart knew, along with the bank’s directors.
“Can you imagine how I felt when I got our depositors to invest in us?” Stewart said. “The bottom was falling out. It was killing me. I kept saying, ‘If we do what we know how to do and do it well and we execute on our plan, we will get through this cycle.’ ”
Banks in the Seattle market would struggle during the crisis after loading up on construction and land development loans. That drove a round of consolidation where some banks sold out of necessity and others were taken over by regulators. In all, 19 banks in Washington would fail from 2009 to 2015.
“You can count on one hand banks that were concentrated in construction loans that are still around today,” said Jeffrey Rulis, an analyst at D.A. Davidson. “They had a loan mix that wasn’t diversified.”
Stewart credits Sound’s survival to its choosing not to jump into construction and land development like so many other institutions did. It had roughly $13.6 million in those loans at Dec. 31, 2007, according to data from the Federal Deposit Insurance Corp. That was just 6% of its loan portfolio.
Management “didn’t put our heads in the sand” either, Stewart said. At the time, Sound had not made a foreclosure in 17 years. Most of its loan portfolio was in residential real estate.
Plummeting home prices put its mortgage and home equity lines of credit — sometimes made at 90% or 100% of the property value — on precarious footing. Sound analyzed every home equity line in its portfolio, charging off some but never releasing the lien. Today it is still recording recoveries from back then, Stewart said.
Sound posted only one annual loss during those tough years, and that was in 2009, for $461,000, according to data from the FDIC. It performed well enough through the crisis to continue to lend and manage its balance sheet so it wouldn’t require additional capital.
Colleagues credit Sound’s survival — it continues to be profitable and its stock was trading at around $35 per share in early November — to Stewart’s leadership.
“During the financial crisis, our bank fared very well, and Laurie was an important driver,” said Heidi Sexton, Sound’s chief operating officer.
Stewart skillfully managed the loan portfolio and committed “to work with struggling borrowers, in some cases, directly and with compassion,” Sexton said. “Additionally, she led fiercely yet calmly and emphasized taking our losses early and moving on.”
Loyalty goes both ways
Sound Community Bank is in one of the wealthiest areas of the country. Seattle’s median household income from 2012 to 2016 was roughly $74,500, compared with about $55,300 for the United States overall, according to data from the Census Bureau.
“Seattle is vibrant,” Rulis said. “For banks, that is a phenomenal backdrop for growth.”
Because of that, it would be easy for Sound to focus on wealthy individuals and businesses in the area to generate a profit. But Stewart has catered to consumers at the lower end of the income spectrum as well. For instance, the bank makes loans for manufactured homes. These tend to be smallish — just $30,000 to $40,000 — and higher risk, so other banks often avoid them. But Sound gladly takes the business that other banks refer to it.
“We believe in housing from beginning to end,” Stewart said. “We don’t want to just cherry-pick the high end. We believe if it is affordable for seniors or first-time homebuyers, then we want to be there. We want to be your trusted partner for your entire life.”
Plymouth Housing has been a beneficiary of this philosophy. The nonprofit’s mission is to eliminate homelessness. It houses more than 1,000 residents in its 14 buildings. The group has partnered with Sound on an e-pay program, which is currently in its second year. It allows the group to help residents budget their limited resources to ensure their bills are paid on time.
Sound was the perfect partner for this program because of its ability to handle the specialized requests that are sometimes required, said Lynn Beck, chief development officer at Plymouth Housing. Beck opened her first checking account with the bank back when it was still a credit union.
“What we love about Sound Community Bank is the accessibility,” Beck said. “We appreciate the fact that you can get Laurie on the phone.”
Though other banks theoretically could offer this type of program, “they don’t offer the level of service where you actually know the people at the bank,” she said.
North Olympic Land Trust, which promotes land conservation for farming in Clallam County, Wash., rents a former Sound branch from the bank at a subsidized price. The bank also gave one of the nonprofit’s predecessor organizations, Friends of the Field, a loan back in 2000 to buy a piece of farmland that it would go on to protect from development. Today those 30 acres are used to train plow horses.
Stewart has even encouraged one of Sound’s employees to join North Olympic’s board.
“Sound Community engaged with us right away, and it was not just a simple business transaction,” said Tom Sanford, executive director of North Olympic. “It was about a relationship between two entities working toward improving our community’s quality
of life.”
Fighting for community banks
It’s not surprising that Stewart would encourage others to get involved. She has been involved with advocacy for the industry since her institution was a credit union. The first time she testified at the state capitol in Olympia, it was about ATM fees, she said.
“When I was about 10, my mother announced I would argue just for the sake of arguing,” Stewart said. “She was probably right. But I just like the idea of the mental stimulation of talking about issues and how you can help make something better.”
Stewart has served as the chairman of the Washington Bankers Association and is the chairman-elect of the American Bankers Association.
“My takeaway from her is how much energy she has,” said Glen Simecek, president and CEO of the Washington Bankers Association. “She is just incredible in the sense she runs her own organization as well as being part of the community and takes time to come to events and speak. Every executive is busy, and the higher up you go the busier you get. She is able to hold it all together and make it look easy. That’s something I aspire to do but I am unsuccessful with so far.”
Rob Nichols, president and CEO of the ABA, said Stewart’s ability to generate bipartisan support helped get important legislation passed this year that rolled back portions of the Dodd-Frank Act. Stewart’s home state of Washington isn’t monolithic in its political leanings, so Stewart has needed to be able to appeal to Democrats and Republicans, Nichols said. Stewart was one of a handful of bankers to attend a meeting with President Trump and other administration officials last year to lobby for streamlining banking regulation.
“She has played a leadership role over the past two years or so,” Nichols said. “She was involved in all of the nitty-gritty, including the public policy piece. She has had a front-row seat.”
Continuing to foster this bipartisan spirit is something Stewart will focus on when she becomes chairman of the ABA in October 2019.
“Banking is not about one political party or the other. It is about good public policy,” Stewart said. “It is so sad that our country is so polarized right now. If there is one topic that we can come together on and we could have some influence on that, what a wonderful thing that would be.”
Speaking out in another way
Now that Stewart is an industry veteran, she said she has become more vocal about the times she was discriminated against in her career.
“I didn’t use to talk about it,” Stewart said. “I think I was almost ashamed of the circumstances of my career and being an accidental banker — being the first kid to graduate from high school, let alone college, in my family. Those stories are hard to tell.”
“People would ask, ‘Are you someone’s assistant?’ I was a novelty.”
Early on, Stewart worked for a small firm where she was an internal auditor for banks in Washington, Oregon and Idaho. Though the job gave her experience in accounting and loan audit work, it also opened her to subtle ridicule.
“People would ask, ‘Are you someone’s assistant?’ ” she said of her trips to clients’ offices. “I was a novelty.”
Stewart’s sharing of stories such as these makes her more approachable and relatable, said Daphne Kelley, Sound’s chief financial officer.
“If she told a story where she had it very easy to get where she is, then it would be difficult to relate to her,” Kelley said. “There is a genuineness and sincerity in being vulnerable, even in leadership roles.”
The industry has changed a lot since the days when Stewart was barred from being a loan officer. Four of the five members of Sound’s top management are women.
Sexton, Stewart’s colleague for almost 13 years, said having Stewart as CEO makes her feel like there is no glass ceiling. “Laurie inspires me,” said Sexton. “She is a true mentor, and she has given me every opportunity to succeed.”
But, Sexton noted, she attended a conference earlier this year where vendors introduced themselves to her husband, who had attended the event with her, and assumed he was the banker.
“When I shared the story with Laurie, she said, ‘We still have a lot of work to do,’ ” Sexton said. “At the end of the day Laurie never stops, whether it’s supporting employees, mentoring, sitting on boards or engaging continuously with the community. She never stops.”
Pushing for greater diversity, not only in terms of gender but in other areas like sexual orientation, will be another priority of Stewart’s term as chairman of the ABA, she said.
“We need to have more awareness around diversity and inclusion in our industry,” Stewart said. “Not just because it is the right thing to do, but because we will be a stronger industry if we have the voices of women and minorities.”
