Brent Beardall & Simone Lagomarsino: Bank CEOs on Leadership, M&A & the Deal That Made Them Family

Doing fantastic Brian. Thanks for having me on. Look forward to this conversation.

It feels good to be the reigning Super Bowl champions, doesn't it?

Yeah, that's an important life lesson perspective, right? Because it all depends what you're used to. We've had some good fortune with the Seahawks here. On the other hand, we also have the Mariners, who I believe, and I'm not 100% sure, but I believe they're the only major league baseball franchise that has never made it to the World Series. So, we have been longsuffering with the Mariners.

Yeah, be careful what you ask for, but I'm absolutely Yes, sir.

No, not quite since I was 19. Thank you. No, I just celebrated 25 years at the bank and we're a unique institution. I am the only the sixth CEO in 109 years now. And so it's kind of crazy to put that into perspective. So we're an institution that is just built on stability. And I've got probably two dozen employees that have been with the bank for over 40 years. And we reward over the longer term. We really try to deemphasize the short term. Of course, we all have to pay attention to it. But one of the things that's unique about us is every employee gets stock options. It was one of the things that made us great early on before you had to expense stock options. Then it went out of vogue and you had to expense them. But my philosophy is as a bank management team, if we are building the bank the way we should, we should be doubling the value every 10 years. And if you can give your employees an ownership stake, they're going to act like owners, which is what we all aspire to do, which is making decisions that may hurt in the short run, but are the right thing to do over the long haul. And so that's one of the philosophies that's always resonated with me. Back to your question in terms of coming up from the CFO ranks. A little bit of my story. I was with Deloitte, the accounting firm, before this. So, it's only my second job I've ever had since graduating college. I went to Deloitte, was there for almost seven years and was a manager about to go into the senior manager ranks. And I audited all over. I did some at Microsoft. I did some at Washington Mutual back in the day, which by the way has the honor of being the largest failure in US banking history. Several small manufacturing companies here in Washington. Several technology companies, if you remember InfoSpace back in the day in the dotcom boom, Go2Net, some of the movers and shakers back in the day. And also this company known at the time as Washington Federal Savings and Loan Association and I was absolutely intrigued at this what was a savings and loan at the time because it was such an anomaly. It was so bizarre. I looked at it and I'm like, 'This place has zero technology.' Literally, the most technology they had were phones. That's it. Phones and fax machines. Besides that, the ledger for the holding company was on a tall cheap tablet and everything was basically backwards in the way I thought it should be. Except you look at the total profitability and we were as judged by the efficiency ratio. We were one of the most profitable banks or thrifts in the country. Our efficiency ratio was 17%. I'm like, how in the world did they do that? 17%. And as a result, our total shareholder returns through the years have been unbelievable. As we sit here today, and this is from 1982, so in 44 years, our total shareholder return has been 36,000%. It's the Warren Buffett philosophy. It's do something consistently over time. If you can produce a 10 to 12% return over time, it just compounded and we had some really profitable years early on and it's just been quite a story. And so I looked at this, I said, 'Holy cow, that's so interesting and so unique.' And they were going through a transition of the CEO before me, the new CEO had come in, and he and I built a nice relationship.

So I wanted to be a leader. I didn't know exactly what I wanted to do. My father founded a bank in 1971, the year I was born. My father founded the bank. Unfortunately, my dad passed way too early. He passed away when I was 15 years old. And I started working at that bank the year before my dad died. So I literally started working at a bank at 14 years old in the file room. I was filing away pink slips for cars in the file room at 14 years old. And I went from the file room to collections of all things where I would call people up. I think you and I may have had this conversation a while back, telling people they better make payments on their autos otherwise the repo man was coming. And you find out, what you see on the surface is not what's really happening in a lot of cases. There's a lot of people that are living well beyond their means on consumer credit. So that's how I got exposed to banking.

I do remember that one. Yes.

Yeah. So at the time and this predated Sarbanes-Oxley, right? It predated the Enron debacle. So you could actually hire from your accounting firm from the manager level, your accounting firm into a manager level of the bank. And he said, 'Brent, I would love you to come on board and help us with the numbers here. You're great at it and you our relationship.' And I said, 'Thank you so much I appreciate it I love the numbers but I'm a people person. I love the numbers but the numbers are secondary to me. Relationships are what matters the most.' And I said probably most importantly I don't want to be over it. I want to drive revenue because that's where I believe I'll be able to add the most value. And we went back and forth several times and finally said, 'Okay, the controller is a position, but you know what? I'll put you in charge of the investment book. You have total latitude within our investment policy.' Then at the time I was 30 years old and he put me in charge of a what I don't know $2 billion investment book at the time. And I'm like, 'Okay, that's kind of cool.' And we had young kids and I'm like, 'I'm going to be a banker. I'm going to go from working 60 to 70 hours a week to working 40-42 hours a week as a banker. Now I'll be well and good.' And then he made perfectly clear that there was an opportunity for me to step into the seat or CFO role in five or so years then CFO would retire that'd be a natural opportunity. I said all well and good I'll be a good banker a soccer dad and go with that. I came to WAFED everything was going great and I was here for just a few months then the CFO had quadruple bypass surgery and said I'm done and literally retired. And at that point I said here is an opportunity to run and I just started working like crazy and my goal was to make it impossible for them to choose anyone else to be CFO. So they did the normal of course they hired head hunters and built the slate of candidates and put me up against that slate of candidates and they kind of dragged it out a little bit but after about a year they selected me to be the CFO of the bank and I think that was in 2003 they ultimately made that official but at the time I was the youngest CFO of a publicly traded bank in the country.

I had no idea they used you, Brian. You know the inside scoop.

Absolutely. Yeah. You say yes to everything you learn, right? And then really one of the things that differentiated me back in the time was FAS 133, right? How in the world do you implement FAS 133 and there were no experts. So I printed off all 1,200 pages of FAS 133, read it and became an expert. And literally I'm on AICPA panels and so forth with FAS 133. And one of the lessons I've had in life and in leadership is you run towards the fire when others are running away. Run towards the fire.

Yeah, I know you of course especially when I started off so young compared to many others and I'd go to industry groups and so forth, but you quickly learn what you know and what you don't know and then focus on learning more of what you don't know and try to find those people that are your mentors to learn and grow. And so much of life is trial by fire, right? I was in the role for five or so years when all of a sudden it was the boom times and everyone was doing the pay option ARM. Why in the world do you not if you're in mortgage lending business not do the pay option ARM? I think at one point it was like 85% of all mortgages were the pay option ARM. And I ran all the models I looked and I said this is nuts. You are taking interest rate risk which banks struggle to manage and you're putting that on the consumer and really what you're doing by putting it on the consumer is just exacerbating the credit risk. And you can't say over a short period of time, look, the consumer has it, it all works great. You have to test it through the cycles until you get it right. It's easy to be a rock star over a short period of time. It's really hard to be a rock star through the cycles.

Yeah so probably the biggest mentor within the bank was the CEO that was two CEOs before me. His name was Guy Pinkerton. He also came from the accounting ranks. We've long been an institution that total shareholder return is number one, right? Unless your shareholders happy, you can't make your employees happy and you can't make your customers happy. So, they're all constituents, but you're weighted towards figuring it out for a shareholder. So, he was a huge influence in my life. And the first day I started, I'll never forget it. He looked at me and he said, 'Okay, Brent, you're going to be dealing with numbers that you never imagined you'd be dealing with.' He said, 'Treat the bank's money like it was your own.' Right? The acronym OPM, other people's money. And that's one of the biggest problems with government we have today. It's one of the biggest problems with lending. You need to when you're evaluating a loan opportunity. Are they spending their own money or are they spending other people's money? It's not just how much equity is in the deal. How much of their equity in the deal? And he was hammering home that I needed to really take ownership of the expenses. And we had a long tradition of every single invoice that was paid was reviewed by the CFO all the way through I think it was 2015. From 2001 to 2015, I reviewed every single payment that was made at WAFED. Zero-based budget. You know what's happening. You question everything. And we can talk about that. You can go too far, right? Because you want to make sure you're spending enough to invest. And when you're running a 17% efficiency ratio, you're not building a franchise for the future. That's just reality. You don't have any bench strength at all. You don't have any redundancy. And so you have to find the balance. There's been lessons throughout there, but Guy Pinkerton was the one and he said to me after kind of explaining to me, keep your eye on the ball, but he also said, 'Never forget you could always pump gas.' Like, what in the hell does that mean? And he was raised by a single mother and his first job was pumping gas. And that was his way of saying stay humble. We all put our pants on one leg at a time every morning and never lose sight that this isn't everything. There's a lot more to life and you can always go pump gas and make a difference in people's lives. And to this day, I enjoy getting out there doing artwork. You know, doing some woodworking on the side, so just doing something tangible. So much of what we do is intangible and I think it is a human need, at least from my perspective, to do something that gives you tangible results.

Hey, 10 years later, you know, so yeah, it's been great. And he told me before he passed away, by the way, he told me he was proud of me and he told me that I made the right decision. So that meant the world to me. But I always thought I could go back to banking. Like if this doesn't work out, I can go back to banking. And I tell my wife, she's looking for a job. Like the secret is like you don't have to stay in a job. Like the psychology is you get a job, you have to keep it. But you can do whatever you want.

Yeah. When I look for people, even when we hire at Travillion, we're a small company. I look for people that are kind of obsessive about things. It doesn't have to be banking, but if I know that you can be obsessive, that's like I got obsessive about community banking. Like I literally read S&P and I look at banks all day and I just obsess over it. It's weird. Really weird. And movies. I obsess over movies the same way. That's kind of what I look like when I hire people at Travillion. What do you look for when you hire at WAFED? And I know I asked you another question we didn't even get to, but we're moving on.

Yeah. And that's so interesting thinking back to the young Brent Beardall advocating for themselves at a young age. You know, you're just a college kid. Like that's a good message to some of the younger leaders, like prove it. Show your interest. This younger generation is, and I have a 13-year-old and a college freshman. Sometimes they have trouble advocating for themselves. They're a little bit more introverted and reserved. Then they see me and I'm like bouncing off the walls meeting people everywhere we go. But I do think that that connection is something that needs to be like you need to experience things.

You do. And be proactive about it, right? That's my biggest when people say, 'Oh yeah, I just graduated from college. How should I go about finding a job?' I said, 'The last thing you want to do is wait for an opening.' That's the last thing. What you want to do is say, 'Okay, where do I want to be?' You name it. You want to be at Microsoft. Look at all the information about Microsoft out there. Study Microsoft. Know it inside and out. You want to be in the HR team? Go meet with the head of HR at Microsoft and talk to them about what they're doing. Say, 'Hey, I'm writing a white paper. Would you mind if I ask you a few questions?' One thing will lead to another. You have to take that initiative and show that you're willing to put in the investment up front and the world is your oyster. You can do whatever you want.

But before you go there and I know you're going to bring in a surprise guest. So, but before you go there, the power of networking, the power of connection, the power of relationship. It can't be superficial. You have to have substance to it. People think networking, okay, go to this social event superficial. That's getting your foot in the door. You have to have substance behind it. Back to my example. If you went to Microsoft to interview with the head of HR, you need to know your stuff. If you don't know your stuff, if you don't have substance, it's a waste of time.

Favorite movie, Shawshank Redemption. No, no, no coincidence. The banker and Shawshank Redemption. There you go. Oh, Andy Dufresne was the banker, right?