After four straight quarterly losses, Integra Bank Corp. of Evansville, Ind., has demoted its top executive.
The $3.6 billion-asset Integra said it had stripped Michael T. Vea of his chairman and chief executive titles and his board seat. He will remain Integra's president and have "modified responsibilities," the company said.
Analysts said they were not surprised by the shake-up, given Integra's lackluster performance.
Michael J. Alley, who joined the board last month, will be the interim chairman and CEO while Integra looks for a successor.
"The board felt that we needed to strengthen the management team in a way that would provide a greater sense of urgency in some of the changes we are implementing related to returning to profitability," Alley said in an interview Tuesday. "So we decided to make some changes but have Mike Vea continuing on with the management team, because we see him as adding value to the organization."
Vea acknowledged in another interview that it was "an unusual transition," but he said it was his idea — he approached the board about it this year, given the company's performance.
"I am good at sales and service and organic revenue, the customer contact, the public relationships. The CEO job has changed a lot. … Risk management hasn't worked as well as it should," Vea said. "I voluntarily resigned as chairman and CEO and kept the president title. … I am disappointed with the bank's results, but I am excited to continue to work on those customer-oriented areas where we have succeeded. … That is a better fit for me."
Alley said that in addition to continuing to foster Integra's sales culture, Vea will be involved in dealing with regulators, working with problem credits and dealing with asset disposition. Both Vea and Alley said Vea is expected to remain the president for the long term, not just until a new CEO is found. The search is expected to take 90 to 150 days, Alley said.
The 2007 acquisition of Prairie Financial Corp. in Bridgeview, Ill., has left Integra saddled with problem construction and development loans in the Chicago suburbs. In addition, a $17.5 million loan to Peoples Community Bancorp Inc. of West Chester, Ohio, a company that Integra attempted to buy last year, is nonperforming.
All told, Integra's nonperforming loans jumped 533% from a year earlier, to $189.2 million at the end of the first quarter, or 7.8% of its total loans.
Though it received $83.6 million through the Treasury's Troubled Asset Relief Program in February, analysts are also worried about the company's capital position. Its Integra Bank remained well capitalized by regulatory standards, but the company's tangible common equity ratio fell more than 100 basis points from a quarter earlier, to 4.8% on March 31.
Chris McGratty, an analyst at Keefe, Bruyette & Woods Inc., said Integra likely needs to raise $125 million to boost that ratio. He said the company could accomplish that by converting the government into a common shareholder or shrinking the balance sheet. A private common equity raising is unlikely, though, McGratty said.
Jeff Davis, an analyst with Howe Barnes Hoefer & Arnett Inc., said Integra's board "is holding Mike accountable for the losses that have been incurred" by demoting him. "That is what boards are supposed to do. The Prairie deal was supposed to get them into some growth markets, and it has been nothing but heartburn."
But R. Scott Siefers, an analyst at Sandler O'Neill & Partners LP, said that setting aside credit issues, Integra's operating metrics improved under Vea's leadership.
"The bank has improved over his tenure; unfortunately, we are at a point when the market is looking at credit and capital only," Siefers said.
