Hitting the Books

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Hitting the Books
Wade Francis

The near collapse of the financial services industry put thousands of bankers and other Wall Street professionals out of work. For Wade Francis, it’s been a bonanza.

His Long Beach firm, Unicon Financial Services Inc., gets called in by troubled community banks to take a close look at their loan portfolios, tell management where everything went wrong and, if possible, how to fix it all.

With so many banks still reeling, the past year was the best ever for the 22-year-old outfit.

“In troubled times, banks need more services, they need more review, they need more consulting activity,” said Francis, a former bank examiner with the U.S. Office of the Comptroller of the Currency.

Francis won’t say how much money the privately held firm brought in last year, but he confirmed that annual revenue was up about 60 percent last year. In more than two decades, Unicon has never had an unprofitable year.

Indeed, the firm has ridden its reputation and the tidal wave of banking failures to remarkable success. Without spending any money on advertising, it has grown into a nationwide operation, with recent engagements in Oklahoma, Indiana and Oregon.

“Everything is word of mouth,” Francis said. “It all comes down to people we have been introduced to, people that have seen us. If we do a good job for you, you will tell somebody.”

Still, it remains to be seen whether the firm can sustain its profitable ways once the industry stabilizes and fewer banks are being forced by regulators to fix their loan portfolios, especially since Unicon is not a big firm, with just over 20 employees. Its main competitors – largely divisions of big accounting firms such as RSM McGladrey Inc. – have other business lines to fall back on.

But clients say Unicon’s small size gives it a nimbleness that some other firms don’t have. It can quickly execute contracts and a typical due-diligence job, for instance, does not take more than a week.

“A lot of the big accounting firms, they tend to be costly and more cumbersome,” said David Woo, an attorney in downtown Los Angeles who represents community banks. “It’s not that (Unicon is) inexpensive, but they do very good work for what they charge.”

Fast start

As a student at Berea College in Kentucky in the late 1970s, Francis had his sights set on law school. But a meeting with an OCC recruiter on campus led to a decadelong gig with the agency. By 1989, however, he began to grow frustrated with the limitations of his position. At the OCC, he was only allowed to tell banks when they had problems, not how to fix them.

As the savings and loan crisis accelerated, many institutions found themselves in desperate need of independent experts who could help sort through their books, so Francis set out on his own. By the end of its first week in business, Unicon had four clients; after one month, the number was up to eight.

“We have been profitable from Day One,” Francis said.

Almost immediately, two of his former OCC colleagues joined Francis at Unicon.

The firm specializes in more than loan portfolio reviews. Among the other services offered are management consulting, foreclosed property reviews and expert witness services.

Francis keeps close tabs on regulators when mapping out strategy. For instance, after the Y2K scare, regulators required banks to have better information technology support, so Unicon beefed up its IT practice.

After the financial crisis, business was buoyed by the fact that many banks were subject to regulatory enforcement actions, many of which required institutions to have their books audited by independent experts.

Some clients hire Unicon simply to make sure everything is in order, such as Don Griffith, who has recommended Unicon to a number of his colleagues.

The longtime banker, who recently launched Grandpoint Bank in downtown Los Angeles, began working with Unicon more than a decade ago. As founder and chairman of Peninsula National Bank, for instance, he hired Unicon to review the loans of Bay Cities National Bank prior to Peninsula’s acquisition of the bank in 1995.

He maintained a relationship with the firm, most recently hiring Unicon to consult on several Grandpoint acquisitions.

“You’re dealing in perhaps the most important part of banking, which is what is the true quality of a portfolio and what kind of risk is the bank taking,” Griffith said. “What they’ve told me is what it turned out to be. They’re excellent.”

Light competition

But not every service offered by Unicon is a consistent moneymaker. M&A consulting work plummeted after the financial crisis since virtually no banks were being sold unless they had failed. What’s more, the number of troubled banks under regulatory enforcement orders will eventually decrease, which could drag down Unicon’s loan consulting earnings.

Francis maintains he isn’t worried, since even healthy banks need to keep tabs on their loan performance.

“Our motto is in good times banks can afford us and in bad times they need us,” he said.

M&A work is starting to come back. Unicon was recently hired by private investors to review the books of Cascade Bancorp, a Bend, Ore., bank holding company that was struggling with considerable losses. Two months ago, a team of private equity investors, including West L.A.’s Leonard Green & Partners LP, bought a majority stake in the company for $177 million. It was one of the largest bank transactions in the Western United States in years.

On a recent Friday, the firm’s office was nearly empty. Though technological advancements have made it possible to transmit loan data securely from bank clients, Francis said he encourages his employees to go out and meet with clients.

“If there’s too many people sitting in the office, then we probably aren’t making money,” he said.

Unicon Financial Services Inc.

YEAR FOUNDED: 1989

HEADQUARTERS: Long Beach

CORE BUSINESS: Bank consulting and auditing.

EMPLOYEES: 22

GOAL: To hire several more associates this year.

THE NUMBERS: Revenue up 60 percent last year.

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