In Distress

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Distressed banks can be a scary prospect, even for financial professionals with decades of experience. But they don’t spook Mary Lynn Lenz. The 56-year-old chief executive of Pasadena’s Professional Business Bank is gaining a reputation as something of a turnaround specialist after completing rehabilitations of two troubled institutions in the last decade. At Professional, she brought the bank back from the brink of failure through a recapitalization and a merger with California General Bank. The combined institution is now in the midst of its second merger, after which Lenz will head out the door. She said she might just go to another distressed bank to turn it around. Featured on several lists of top women in banking nationwide, Lenz didn’t come to the profession from business studies. A student of English and theater, she has been learning as she goes, fixing problems where she sees them. Lenz recently sat down with the Business Journal in her sparse Pasadena office to discuss how troubled banks can be fixed, what challenges women in the field face and how her son’s near-fatal surfing accident brought the East Coaster to Southern California.

Question: When you came to the bank, you had a reputation as a turnaround expert. How did you earn that?

Answer: In 2002, I decided that I wanted to be a CEO. So, it was probably less than 90 days and I found an opportunity with a small community bank in southern Massachusetts called Slade’s Ferry Bancorp. They were in trouble. They had terminated their CEO and they were in search of somebody who could come in and quote-unquote fix the bank. I was a little nervous about that because I had never fixed a bank.

What kinds of problems did they have?

Well, for example, this was 2002 and they had no computer technology. They were still opening accounts on typewriters.

How is that possible?

That’s what I said: How is that possible? They were opening new accounts on typewriters; they were still balancing manually, no automation whatsoever; no website. They didn’t have a strategic plan; there was no view of where the company needed to go. And we had to get it out of the regulatory order or it wasn’t going to be in existence.

Were you scared to come into that environment?

I was scared, of course, because you’re doing things you’ve never done before.

So what did you do?

We flipped management and brought in a really superior management team. Within 18 months, we got the bank out of regulatory distress and we began to implement a 120-point strategic plan. These were monumental, like rewrite the compliance program, implement the automation technology, create a website, revamp all the products. It worked so well that within year three, we had grown the bank 60 percent.

That must have been rewarding.

What a thrill to be able to turn a company around. It was so rewarding.

What did you do after leaving there?

I just wanted to breathe. I had worked so diligently for so many hours, and totally committed myself to this. So I took some time off and went over to Europe on a vacation, went to Florida a couple of times.

How did you end up in California?

Our son had moved to San Diego for quality of life. In probably October of 2008, I got a call one morning that he had been out surfing and he hit a sandbar and broke his neck in seven places.

Oh, my goodness.

By the love of God, he came out miraculously without any residual effects whatsoever. But he could have died. He fractured his thorax. He could have suffocated himself.

What did you do when you got the news?

He was on his way to a San Diego trauma unit, and here we were on the East Coast, so we jumped on the next flight. It was just a wake-up call for my husband and I. We said, “What are we doing back in Boston?” At that point, two of our daughters had moved out to San Diego, our son was out here and our daughter who was in Florida was contemplating coming here.

And you were next?

We said what the heck, we’ll go, too. So we packed it up, we sold our condo in Boston and came out here not knowing anybody. A little scared that I left all my centers of influence back on the East Coast, but exhilarated about the opportunity for new chapters, new beginnings.

Where did you grow up?

Buffalo, N.Y. I was the eldest of seven: six girls and one boy. My brother, Brian, was diagnosed with acute lymphoma at age 9 in January 1968 and passed away one year later. So most of my life, I grew up with five sisters.

That’s a full house. What was your role in the family?

You kind of become the leader of the pack. I think that just happens naturally. With two professional parents – at that time, most families didn’t have two working parents – and as the eldest, you just assume some leadership roles and try to keep everybody on target. Even at a young age you do that.

How would you do that?

During summertime, we were off from school, and I was probably all of 10 years old at the time, but I decided that I was going to keep all the kids busy for the day. I decided to start a day camp for kids in the neighborhood, so I employed each one of my sisters and they each had a role: somebody made the peanut butter sandwiches for lunch, somebody was in charge of story time. And we would just have all these kids come to our backyard for a couple of hours in the afternoon. I would be like a mother’s helper. That was fun.

A born leader. Did you know you wanted to lead a company some day?

No, not at all. Through high school I had no idea what I wanted to do. When I got into college, … I actually started out with English and theater, with no idea what I wanted to do with it.

Theater? So you sing and dance?

Yeah, I did. I don’t anymore. I sing to myself. (Laughs.)

What plays were you in?

“Fiddler on the Roof.” “My Fair Lady.” It was a traditional college theater.

How did you end up in banking?

In my sophomore year of school, I was living away at the time at Niagara University. I just decided it was too expensive for my parents, so I moved back home and I knew I needed to get a job. I walked to the corner and there was a bank. It was Erie County Savings Bank. Miraculously enough, the manager of the branch was a Niagara University graduate. I told him I was a student at Niagara University and I was looking for part-time work, and he hired me.

Were you nervous going into a field you knew nothing about?

I need to learn something new every single day. It was always that thrill of how do you do this, or how do you figure this out or how do you make this better. That worked monumentally well throughout my career because I don’t think there was one opportunity I ever had where somebody said, “Do you want this job?” I saw the opportunities and I’d ask for it. Nine times out of 10, I didn’t really have the skill set for that job.

Like when?

I was working for Empire of America Savings Bank, which was one of the largest savings banks in the country at that time; this would have been in like 1981. I got a call one day and was asked if I would design curriculum to teach branch managers how to originate home mortgages. But I knew nothing about a mortgage, other than we had one. That was it.

So what did you do?

I went out and got the Fannie Mae manual and I figured out what you needed in order to complete an application, and put together a slide show and went all over the country for the better part of a year teaching bank branch managers how to originate mortgages.

Did you ever face any hurdles as a woman in this field?

Growing up in the industry, it was tough. It was tough to gain credibility as a female. It was: Is she really going to work as hard? She’s got kids to take care of, and all of that stuff. But that doesn’t exist now. That glass ceiling at the higher levels of management definitely existed. I think that was shattered some time ago.

You’ve won numerous women in business awards, including one from the Business Journal, and you have been included several times in U.S. Banker magazine’s list of the “25 Most Powerful Women in Banking.” What do these distinctions mean to you?

The first time, I was absolutely shocked, absolutely shocked. Then I got to New York and met some of the other women, and that’s when I said, this is unbelievable. Marge Magner, who was then the head of Citigroup Global (Consumer Group) and ran, I don’t know, 200,000 employees around the world. I think she was No. 1 or 2 that year and I was like, are you kidding me? I’m in a person of this magnitude’s company?

Do you see yourself as a role model for women in the industry?

I would hope. I would hope that other women would believe that you can do whatever you want to do if you put your mind to it and if you explore new opportunities. But you’ve got to be able to get over that fear factor and just say, I’m ready to go.

You had two working parents, which was somewhat rare in the 1950s and ’60s. Was it inspirational to see your own mother build a career at that time?

Absolutely. When you’ve got a built-in role model in your home, of course.

When you joined Professional three years ago, did the board tell you that you would be turning around a struggling bank?

No, I don’t think they knew. And I mean that sincerely. I don’t think they knew that the company was in trouble. In fact, the goal that they gave me was $6 million net income, pretax, preprovision. We lost $54 million. They definitely didn’t know.

How long did it take you to realize that the bank would have severe problems?

I came in in March ’09, and within the first 30 to 60 days, it became abundantly clear that something wasn’t right. The commercial loan portfolio just didn’t look right. I went to the board and told them I was concerned about it, so we hired a third-party loan review. And that third-party loan review came back over a period of about six weeks and said there are lots of problems in this loan portfolio. (Regulators) were forced to put us in a cease-and-desist in July of 2009, much to my chagrin.

That must have been a rough way to start the job.

I was like, what have I done? (Laughs.) I was knee deep at that point.

How did you get things turned around?

The first thing we needed to do in the cease-and-desist, there was a capital plan requirement, so we wrote a capital plan. My CFO, Jim Westfall, and I went on the road and started doing dog-and-pony shows, sometimes two a day, to investors, to private-equity firms, to other banks, to individuals, to whomever we knew had capital. I called them our matinees and evening performances, except nobody ever stood up and clapped at the end.

Was anyone willing to invest in the bank?

After about 56 of these, we had pretty much given up. There seemed to be a lot of interest in the company, but nobody was coming off the sidelines.

The bank at the time was owned by Belvedere Capital, a private-equity firm. Couldn’t they just give you more money?

Eventually Belvedere actually liquidated their investments in their other banks that they had. They had three or four other banks. They ended up liquidating those positions and contributing that capital to PBB to save it from its ultimate demise. They didn’t want to consider it at all (but) there was no other alternative at that point. The independent directors and I knew that. If we didn’t get this money in, this bank was going down. We were going to be one of those Friday night horror stories.

So how did Belvedere react to the ultimatum?

Not very well. Not very well at all. It was the furthest strategy from their minds. The meeting was contentious, but it had to happen. This was going to be the only way we’d save the bank.

Sounds dramatic.

Oh, yeah, it was dramatic.

In retrospect, was it the right decision?

It was the only decision.

New capital doesn’t necessarily solve all your problems. What did you do next?

So we went back to one of the 56 people we had talked to, which was the Carpenter family of funds. John Fleming, who’s the president of Carpenter, had met with me on numerous occasions. Once he found out that the first-stage capital was coming in, they came back and said we’re very interested. So then we inked the deal to sell the bank to Carpenter.

You won’t be staying with the bank after closing the most recent merger, a deal with Bank of Manhattan. Your office is pretty bare. Have you started packing up already?

(Laughs.) No, I like scarce surroundings. I like everything to be really sparse.

What’s next for you?

I’m committed to California. We’re not going any place. We have a home in Dana Point that we bought just about a year ago, and then I’m up here during the week. I have a great balance of life. Once we’ve wrapped this all up, I’ll probably take a little bit of time and then start looking for a next chapter.

There are still distressed banks out there. Are you up for another turnaround?

I don’t know if I want to do another one, but I could consider it. I’ve done two turnarounds now. This is what I know and this is what I love. This is a challenging environment right now for banks and if I could help another bank, that would be great.

Mary Lynn Lenz

TITLE: Chief Executive

ORGANIZATION: Professional Business Bank

BORN: Buffalo, N.Y.; 1955.

EDUCATION: Studied English and theater, Niagara University and Buffalo State College.

CAREER TURNING POINT: Leaving Citizens Bank to become chief executive of a community bank.

MOST INFLUENTIAL PEOPLE: Her husband and children, who pushed her to seize new opportunities in her career.

PERSONAL: Lives in Dana Point with her husband, David, and has an apartment in Pasadena, where she lives during the week; has four adult children and four grandchildren.

ACTIVITIES: Stand-up paddle boarding, biking, doing Pilates.

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