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updated 2:54 PM CDT, Jul 28, 2018

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Seattle's Irish-banker trio reflects on what happened to industry, and risks emerging

They're not a band of brothers because, while the Seattle area's three long-respected senior Irish bankers are friends, they are also competitors. But Dineen, Fahey and Patrick, all first named Patrick, are a breed of bankers who have always gauged success by how they did business, rather than how much business they did. As Scott Jarvis, director of the banking-oversight state Department of Financial Institutions, put it: "If we had more folks in the industry like them, we would have less to talk about when it comes to troubled institutions." Reflecting on what happened in their industry as real-estate lending activities began to unravel five years ago and climaxed with the crash that occurred four years ago next month, they collectively shake their heads. The three recall thinking, as they watched the sub-prime mortgage fiasco heating up from their respective vantage points, that "something was really wrong. All agree that, as the banking industry and the economy recover, they have concern that what Patrick Patrick points to as "the fatal inclination that you have to grow," coupled with greed, could lead to history repeating itself. Pat Fahey and Patrick, both now 70, were in retirement at that time after careers building successful banks and turning around troubled ones while Pat Dineen, 71, was a couple of years into the successful launch of Puget Sound Bank, where he was chairman, following his retirement as U.S. Bank's president for Washington. But those memories of retirement are now fading for both Fahey and Patrick as they are immersed in troubled-bank turnaround efforts, Patrick presiding as president and CEO over the comeback of Seattle Bank, where he has brought a $50 million local-investor capital infusion, and Fahey as CEO of First Sound Bank. Both Patrick and Fahey, called from retirement in 2008 as the crisis hit home, found frustration in their first comeback involvements. Patrick took the president/CEO role at deeply troubled Towne Bank in Mesa, AZ, and sank a lot of his own money into the project, only to find it was too far gone to save. And Fahey, then a board member of Frontier Bank in Everett, was pressed by its board as the bank's bad-loan portfolio swelled to oversee the effort to turn it around. But ineptitude (not his words) on the part of regulators scuttled what would have been a successful private-equity capital infusion. Fahey and Dineen were both key statewide executives of Spokane-based Old National Bank before it was acquired by U.S. Bank in the late 1980s. And after his retirement from U.S. Bank, Dineen was succeeded by still another Irishman, Ken Kirkpatrick, who had spent his entire career with the bank. Fahey and Dineen offered some surprisingly candid observations that the aggressive lending of Fannie Mae and Freddie Mac, and basically pressure from certain members of Congress on the two government-sponsored enterprises whose job it was to own or guarantee mortgage obligations, were key parts of the problem. "I think it's fair to say that political and Congressional pressure certainly 'encouraged' Fannie and Freddie to fuel the flood of unconscionable loans that were securitized and sold into the secondary markets, causing further fueling of the 'housing bubble,'" Fahey said. "I have seen video of President Bush and Senator McCain calling for a reigning-in of Fannie and Freddie, and then-Chairman Barney Frank of the House Committee on Financial Services rejecting that notion, asserting that they were doing a fine job," he added. Dineen's view from afar at the time was that "Fannie and Freddie spent an inordinate amount of time lobbying congress. They were in the big time themselves while common sense lenders like Wells Fargo and others trying to slow the growth of Fannie and Freddie, were thwarted by Congress and by the two financial entities who had no interest in slowing down." Patrick also suggested that the seizure of ill-fated Washington Mutual in September of 2008 and is fire sale to JPMorgan Chase were the result of the FDIC deciding to "make an example of someone." "Needless to say they (WAMU) had more than their share of problems and issues - but scapegoats were needed as the 'face' of the problems," Patrick added. " Unfortunately Lehman and WAMU had their photos taken for the necessary posters." Patrick has been doing turnarounds for almost 30 years, starting with Seattle-based Prudential Savings during the savings & Loan crisis of the early '80s, then Seattle's Metropolitan Savings in 1990. As far as concerns about "could it happen again," Patrick suggests that "not only could it happen again, but it's happening now in spades, with pricing again irrational in terms of institutions making term loans at rates that are inappropriate and too much is being lent against some projects, especially multi-family." "That market is almost out of control, from my perspective," Patrick adds. "One thing is for sure: de ja vu must be exciting for some." Fahey agrees, saying "the raging boom in apartment construction and lending may well be a looming problem." "Added to that is the burden of over-reactive legislation and regulation that will very likely stifle lending that could and should be done, as well as cause increased costs that will be passed on to borrowers and consumers of financial services," Fahey adds. "Aggressive banks are looking for growth opportunities and there is only so much real growth potential out there,"Dineen said. "Growing strictly by taking business from your competitors generally indicates that you are doing something a little more aggressive." "Bankers and lenders have short-term memories," Dineen chuckled.
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Dineen's vineyards is back to roots, not entrepreneur encore, after banker career

The 80-acre vineyard and winery in the Yakima Valley where Patrick J. (Pat) Dineen focuses an increasing amount of his attention isn't an entrepreneurial encore for the retired bank executive so much as it's a return to his roots on the farm.

 

Dineen, who hasn't totally stepped aside from his 40-year banking career since he chairs the board of Bellevue-based Puget Sound Bank and is one of its original investors, grew up on a dairy farm in the Midwest. "I knew that when I retired I wanted to get back into farming," he says, admitting that the dirt called to him from time to time over the years.

 
 

This is harvest time in Wine Country and thus Dineen is spending many of his days this month at Dineen Vineyards, which sits on a hillside north of  Zillah, amid a cluster of Washington State's well-known wineries, with an impressive view looking west toward the mountains.

 

It's there that Dineen Vineyard's grapes, primarily cabernet, cabernet franc and sirah, are being harvested and winemakers from many of the 23 wineries that are his customers arrive to load up their grapes.

 

Dineen only produces about 300 cases a year for his own use, either under the Dineen Vineyards label or the Kamiakin label, a second label featuring a red blend, that came into being about five years ago. Most of the 190 tons of grapes are bought  by the other wineries.

 

One of those wineries buying his grapes is Sheridan Vineyards, in which Dineen invested in 2000 after being introduced to Sheridan's founder, Scott Greer. He soon ran across a rundown apple orchard nearby that he bought in 2002 and turned into Dineen Vineyards. TheSheridan winery is built on part of Dineen's acreage and is leased back to Greer.

 

The vineyards primarily produce the three major varietals, but a total of eight different varietals are grown, though Dineen is quick to make it clear that "the viticulture is my interest in growing the grapes rather than making the wine."

 

His ongoing process of learning about the grapes includes traveling to Europe each year to visit different grape-growing regions and says with satisfaction that "I get into prestigious wineries that I wouldn't be able to if I didn't have the winery."

 

Like a number of those involved with vineyards or wineries in Washington State, Dineen first looked for land in the Napa Valley in California, but found "it was more pricey than I wanted to get into."

 

Dineen produced his first wine under the Dineen Vineyards label in 2003, primarily for personal consumption, but about four years ago he got his commercial bond to permit him to market and sell his wine.

 

"That was primarily to promote the vineyard," he said. "My plan is not to get any bigger since I'm retired. We could get bigger but chances are we won't."

 

Dineen, discussing his decision to be in the group who put up money to launch Puget Sound Bank in 2005, says "I had a good career in banking, made good money, and wasn't looking to get back into the business. But I figured I could do this with a minimal amount of time and effort. It hasn't turned out that way."

 

Dineen says Puget Sound Bank, a $200 million, single-office bank, "has a strong balance sheet. We didn't get into problems because we avoided real estate and focused on commercial and industrialized loans."

 

Dineen started his banking career with Seafirst Bank after moving West following graduation from Marquette University and five years in the Air Force. He then joined Spokane-based Old National Bank, which was acquired by U.S. Bank, where Dineen eventually served as president for Washington before he retired.

 

Looking ahead at the industry, Dineen said "we're going to see a lot of branch closures in an era when people can do their banking from anywhere. They could care less today if your bank has a branch on the busiest corner in town."

 

He notes "there aren't many healthy banks changing hands these days because banks looking to sell find that their book value is pretty much what they're being offered today."

 

"A few years ago, selling prices for banks would have been twice book value or even better for an attractive bank," he added. "Until we get back there somehow, you're not going to see much movement among healthy banks."

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