Mountain Pacific Bank’s founder likes a challenge
Duffy received numerous nominations, all of which pointed to a remarkable role he has played over the past few years. Not only did he guide Mountain Pacific Bank through tough economic times, he also led the way for that institution to become one of the most highly capitalized banks in Washington.
What is even more remarkable is that Duffy never planned to be a banker at all.
"My degree was in accounting," the Everett native said. "My father was a CPA and I was going to become a CPA."
But an illness that delayed his college graduation by one quarter was ultimately responsible for a career step that would change the course of his life. When he graduated college a few months later than his peers, he found that he had missed the key hiring period for his chosen industry. Accounting firms would not be actively seeking graduates again until the following spring.
During that unsettled time, Duffy continued working his college job as a teller at Olympic Bank in Everett. But the bank heard he was job hunting and, to retain him, offered him a position preparing tax returns in the trust department. When Olympic Bank was bought by First Interstate Bank, he requested a transfer from the trust department to commercial lending.
By the time Wells Fargo purchased First Interstate Bank in 1996, Duffy's career as a banker was pretty well set. He was working in Seattle but his wife Kathy, also Everett born and raised, was eager to get him back to Snohomish County. To get closer to home, Duffy signed on as a senior lender with a new bank called the Commercial Bank of Everett. Here he continued to gain knowledge and experience that would later help him when he started up Mountain Pacific Bank.
From Commercial Bank of Everett, Duffy moved to Coastal Community Bank in 2000. Three years later he was promoted to president and chief operating officer, but then came a pivotal moment in his career.
"The CEO of Coastal and I had a falling out," Duffy recalled.
He still isn't completely sure what the disagreement was about but the two men did agree on one thing -- a parting of the ways.
Duffy was ready to move on, but what to do? That was when he formulated the idea to start up Mountain Pacific Bank in 2006.
"I figured there was opportunity out there for another local community bank," Duffy said. "So I put a founders group together and I started the bank."
To better ensure the bank's success, Duffy looked at what other people were doing and created a hybrid plan of what he knew from experience would really work. Although he knew the focus would be commercial and business lending, he also knew that business banks' weaknesses were deposits, so there had to be some retail emphasis for balance.
He was also aware that having just one location was distinct drawback when trying to compete with the big-name banks that have the convenience of multiple branches. Another bank he had worked in the past had offered courier pick-up of deposits for business customers. Duffy expanded on this service idea to create the mobile branch. His mobile bank customers don't have to physically go to the bank; the bank can come to them.
Also, knowing that people bank at big institutions to take advantage of huge ATM networks, Duffy decided to make every ATM free for his customers.
"We don't charge a fee if they use someone else's ATM. And if that ATM charges a fee, we reimburse it," Duffy said.
Mountain Pacific Bank's headquarters at 3732 Broadway in Everett opened its doors in July 2006. Within six months, a remarkably short period of time for a start-up bank, the institution was profitable. Duffy believes Mountain Pacific Bank was the fastest bank to achieve profitability in Washington state. In 2008, the Lynnwood branch opened to much fanfare.
But changes were coming to the banking world that year. Like many other financial institutions, part of Mountain Pacific Bank's initial success hinged on the same construction and development lending that was about to send the U.S. economy into a historic tailspin.
As the market began its downward plunge, Duffy's bank went through its standard annual safety and soundness exams from state and federal regulators. The results were not good.
"Early in 2008, we had stopped doing construction and development loans, but we had enough on the books that it still caused problems," Duffy said.
In spring 2009, Mountain Pacific Bank was put under a cease-and-desist order by the Federal Deposit Insurance Corp. and the Washington state Department of Financial Institutions. It was a scenario that was played out at many other banks across the region at about the same time.
Duffy knew that his bank's survival hinged on action. Instead of developing what he called a "bunker mentality" from what had happened, he made sure that Mountain Pacific Bank met the challenges directly.
"I'm very driven," Duffy said. "I like challenges. When I'm told I'm not going to succeed, it makes me even more driven."
Duffy and his board knew that they needed to raise capital and shrink the bank to get through the problems that they had. Fortunately, he said, one of the things that helped them was that they had stopped dealing in development loans sooner than many other banks. Also, they yet hadn't grown into their capital so their ratios were higher than most banks.
Directors and other shareholders got busy and raised a lot of capital for the bank. The directors helped the bank by financing a program of development for the vacant building lots that Mountain Pacific Bank came to possess through defaults. The lots were worth very little in their undeveloped state. The bank's directors put up the money to build the houses on them.
The houses were built to meet the lower end of the market but contained finishes and amenities that are appealing to buyers and make them easier to sell. In this way, the properties could be sold at a better price and the bank would take less of a hit. Since 2009, more than 50 houses have been built in this way.
Throughout the recession, Duffy was always aware that there would be plenty of banks that wouldn't make it. He had a lot of sleepless nights hoping that his bank wouldn't be one of them.
"I kept telling my board that if we survive this, we could be one of the few local banks left," Duffy said. "When I started this bank, there were 14 banks headquartered in here in Snohomish County and now there are only seven. North of Lynnwood, there were seven banks headquartered up here and now there are only two of us -- my former employer and myself."
And now, as the economy begins to turn, Mountain Pacific Bank is one of the most highly capitalized banks in the state and the FDIC lifted its 2009 cease-and-desist order. Yet this isn't completely satisfying for Duffy.
Although he admits to being very competitive, this wasn't the way he wanted to win. He sees a void left by the other banks that didn't make it, especially in terms of their community involvement. That is one of the reasons he feels compelled to give back to the community.
He tries to be on at least two boards at all times. He is on the board of directors for the Providence General Foundation and the board of trustees for Economic Alliance Snohomish County. He is a member of Everett Rotary Club, a past board member of the Boys & Girls Club of Snohomish County, the Everett Public Schools Foundation and North Everett Little League.
His wife of 29 years, Kathy, is a volunteer co-manager of the Providence Hospital Gift Shop. She is tremendously supportive of him despite his workaholic hours, Duffy said, and she doesn't mind when he spends his few free hours on the golf course.
He also praised the staff of Mountain Pacific Bank who have helped to keep the bank open through tough times and are ready to see it through to the future. He believes that they are the ones that deserve the credit. One thing he is sure of is that they are all in it for the long run.
Find more Snohomish County commerce news at The Herald Business Journal: www.theheraldbusinessjournal.com.
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