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December 10, 2010
Firm: Umpqua Bank
Position: Senior Vice President
Umpqua Bank was formed in 1953 in Canyonville, Ore., with six employees. It was started to serve the needs of the community, mostly those working in the timber industry who needed a place to cash their payroll checks. Umpqua now has 183 locations in four states.
Commercial real-estate lending is a healthy piece of Umpqua’s lending activities and a significant portion of its loan portfolio. These loans provide funding for income-producing real estate, though a substantial share of its commercial real estate loans are for owner-occupied projects.
John Swanson is senior vice president and manager for Umpqua’s Commercial Real Estate Division in Washington state. A native Washingtonian, Swanson has more than 30 years of commercial real estate experience, predominantly focused on income property project financing.
Before joining Umpqua, Swanson was a senior vice president and Seattle market manager for U.S. Bank Commercial Real Estate, managing the bank’s Seattle commercial real estate portfolio.
The John Swanson 411
1. If you could own any property in the universe, what would it be?
Since this is a wide-open question limited only by imagination, I would like to own a winery located on a lake near a ski area. I don’t have a name of such a place, nor have I ever been to one that fits these criteria, but I’m sure one exists.
2. What’s your top 2011 New Year’s resolution?
Spend more time with family and friends.
3. What are you reading?
“The Hawk and the Dove.” A very interesting book about The Cold War and two key individuals that shaped our policies and strategies during that period.
4. What do you do to decompress?
We share a little getaway in Glacier, Washington, and spend as much time there as possible, especially during ski season.
5. What one thing about you would surprise people?
My new job with Umpqua is my second job since college, and that was a long time ago.
Tell us about Umpqua Bank and what sets it apart from other community banks.
A: When Ray Davis took over as CEO of South Umpqua State Bank (and its five branches) in 1994, he was inspired by the customer experience at lead retailers and fine hotels, and wanted to expand that customer-focused attitude to banking. He set the standard and tone that has been embraced and practiced at Umpqua ever since.
We have a culture that makes teamwork the norm. For example, we have daily “motivational moments” brief group activities that often teach key lessons or provoke fresh ways of looking at our business. We offer our associates (not bankers) 40 hours of paid time off per year for community service. Last year over 30,000 hours of associates’ time was donated. We empower all associates to go above and beyond for customers and make a difference in their communities, thus building brand loyalty.
Q: The Small Business Jobs Act was signed into law this past September. The new law extends the SBA-enhanced loan provisions while offering billions more in lending support, tax cuts, and other opportunities for entrepreneurs and small business owners. What do you think the impact of this significant law will be?
A: As it relates to the Small Business Jobs Act, specifically in increased loan amounts and government guarantees, Umpqua Bank is positioned to take advantage of these program changes. We are currently seeing increased loan inquiries due to no fees and loan guarantees to 90 percent. However, both of these temporary changes will not be available after the end of this year. Looking forward, increased loan sizes up to $5 million and debt refinancing allowed through the 504 loan program should help create opportunities for small businesses to get the funding they need, which wasn’t available just a short time ago.
Q: Umpqua Bank can be found in four states now (WA, OR, NV, CA). Do you have any geographical limitations on commercial lending and what property types do you prefer?
A: I believe our “stores,” not branches, now number 183, with more coming soon. Our geographical limitation for lending on commercial real estate is determined only by where our locally based clients chose to develop. We are lending on cash-flowing projects (term loans) or conservatively lending on construction projects. Our only appetite for speculative construction projects is currently apartments, which as an industry sector is benefiting from increasing demand with minimal new supply scheduled to be delivered over the next 12 to 18 months.
Q: Umpqua’s branding is unique. TV spots are loaded with phrases like “full hope ahead,” “bank on the bright side” even “Umpquatize.” How’s the reaction been on the commercial lending side?
A: The reaction of our clients and prospects for commercial real estate loans has been very positive. We are a conservative lender, but to have a local lender that is doing construction and term loans on commercial real estate is generating considerable opportunities in this market.
Q: Tell us about the management structure at Umpqua Bank.
A: Umpqua has a very flat organizational structure. I report to Danielle Burd, who is the executive vice president of commercial lending in Washington. Danielle reports to Cort O’Haver, who is the executive vice president of commercial lending for the holding company; and Cort reports to Ray Davis, our CEO and president. It even becomes flatter as Ray encourages direct contact from associates and customers.
Q: Umpqua’s third-quarter earnings this year were $8.2 million, compared to a $10.4 million loss in the third quarter of the previous year. You have great confidence in Washington with six stores in the works. What are your indicators that this region is fertile ground?
A: We like the economic drivers this area continues to offer, which includes the benefit of being port cities (Seattle and Tacoma) with significant exports to Asia. And of course there’s Boeing, Microsoft, Amazon, the Gates Foundation, biotech and the attraction of the area to young workers. The desirability as a recognized market to invest in for commercial and multifamily real estate and the region’s livability are big factors.
Q: What’s your take on balancing future lending practices? Do you worry about getting too deep into commercial lending like some others that have gone under?
A: As a real estate lender, or lender in general, there is always something to worry about. Our goal is to identify risks and mitigate them as much as possible on all of our commercial loans. With the Great Recession firmly in our minds (and the sting of charging off in excess of $400 million in loans since Q2 2007) we have a healthy approach to make sure we are making the right loans and focusing on key factors.
First, there’s people. We make sure we use experience as the primary driver of good deals. It’s best to get to know the customer and build the relationship. Tigers don’t change their stripes; we look to track records to help develop a full picture of potential customer performance. We are thorough in due diligence and financial spreading to account for contingent liabilities (what you don’t know CAN hurt you!). Another key factor skin in the game. There is no substitute for equity.
Interview conducted by Barbara Travers