PITTSBURGH -- Who says you can't go home again? William Roemer and Leonard Carroll, the two top executives at Integra Financial Corp. are bringing their $13.9 billion-asset bank back to its community banking roots.

To do so, Mr. Roemer, chairman and chief executive officer, and Mr. Carroll, president and chief operating officer, are conducting a major restructuring of the bank's operations and its culture.

They are taking bureaucracy out of the holding company and giving autonomy to management.

Mr. Roemer and Mr. Carroll have divided their company into five lines of business: commercial banking, investment services, consumer finance, mortgage originations, and mortgage services.

Within the commercial banking unit, Integra has set up 10 community banks in 10 different regions of western Pennsylvania, each with its own president.

Each line of business has its own president, too. The idea is to let each president run "his" company as if it were his own business. The holding company acts as a shareholder.

If a president needs money for something, he goes to the holding company. But, if he has ideas about how to run his area, he doesn't need permission for most things from company potentates.

Integra may be the nation's 47th-largest bank and the fifth-largest in Pennsylvania, but it wasn't always a huge institution. It was born out of the 1989 merger of equals between Titusville-based Pennbancorp and Pittsburgh-based Union National Corp.

Now, as Mr. Roemer puts it, "We want to go back and instill in our organization that closeness between the people who will be running those community banks and those communities."

Mr. Roemer, Mr. Carroll, and Gayland Cook, president of the community bank in Pittsburgh, spoke to the American Banker soon after the restructuring plan was unveiled.

Q.: Can you explain the way the bank was originally structured, after the 1989 merger?

CARROLL: Our structure before was a pretty typical bank holding company structure -- lots of stuff in the holding company providing manufacturing services and selling those services at cost back down to the line companies that were buying those services.

The theory being you can manufacture cheaper at the holding company for three or four banks than you can have each bank manufacturing those services themselves.

When you have a typical holding company structure an awful lot of the things that people need to be entrepreneurial and grow their own lines of business and sort of muster their troops...is beyond their control. It's provided to them by the holding company.

And that's pretty typical in our business.

Q.: Briefly, describe the new structure.

CARROLL: We're going to give the executives control of all those pieces they used to buy from the holding company.

The result of that is the five industry groups with their own executive management team, and with a lot of their own back-office staff functions, and planning functions, and that kind of stuff.

Q.: Why restructure the bank now?

ROEMER: The Pittsburgh banking market is a highly concentrated market. Although we've prospered and more than doubled our size through in-market acquisitions, there just isn't a lot of opportunity to continue to grow in that fashion.

That was one of the reasons for our desire to look at our various industry groups. There were some nontraditional banking lines of business that we needed to explore and expand.

Q.: So, what is the purpose of the holding company now?

CARROLL: The holding company will be downsized because you'll have all these people moving back into the industries. The holding company will be much smaller.

People in the holding company will be policymakers and monitors as opposed to doers and manufacturers and servicers. And the industry groups will have a lot of autonomy.

Q.: How have your employees responded?

ROEMER: The attitude of our people has been very positive in this transition. I think we've generated a lot of enthusiasm. We're very bullish. We think it's right for this company.

Q.: Gayland, how does your job change from president of the subsidiary Integra Pittsburgh to being president of one of the ten community banks?

COOK: We believe that the new structure strengthens our capacity to be responsive to our customers at a high level. We find that sometimes our toughest competition is not a major competitor in size and presence, but a local competitor who can bring the president of the organization directly into a businessman's office.

The businessman believes he is dealing with the decision maker...The biggest way that my job will change is that I will have less responsibility for those things that are ancillary to the market.

Q.: What are those things that are ancillary?

COOK: Participation in the hierarchy and bureaucracy that occurs in a centralized management system. Participation in overall loan approval committees and structures, things of that nature, which will be significantly streamlined, by pushing the authority closer to the field.

Q.: Doesn't a structure like this cost more? After all, many bank consolidations these days involve centralizing their systems. The whole point is to decrease costs and become more efficient.

CARROLL: People worry that by breaking up into industries you're adding costs. We're not adding costs at all. Everybody assumes something that's centralized is more efficient. I don't subscribe to that.

Q.: In what way is centralizing operations more costly?

CARROLL: Bureaucracy. There's sometimes a lack of profit motive. People running the five industry groups have a profit motive. They will be assigned ROAs and ROEs, efficiency ratios.

They'll be given goals. They'll live and die by those goals. In a holding company you don't have that constant nagging of a bottom line.

Q.: So, why didn't you run the bank this way from the very beginning?

ROEMER: We felt that if you were going to create an Integra culture you sort of had to pull it all together at the holding company level. And we did that. We also were going through some tough times in the early 1990s with credit problems.

We had to centralize and control that function. At the same time we had five in-market acquisitions and we went through a standardization project that lasted 18 months where we took all of the various operating systems and pulled them together.

Q.: So, now that you have a new structure, what's the new five-year or 10-year plan?

ROEMER: What we want to concentrate on is to grow the investment services company and to grow the mortgage company and to grow Alltegra, which is our consumer discount company dealing primarily with second mortgages and nonconforming mortgage lending because we see real opportunity in those three lines of business.

We can't do a whole lot of inmarket growing relative to commercial banking through mergers and acquisitions.

Q.: Will you grow outside your market?

ROEMER: In the investment services, it would be primarily inmarket growth. But in the mortgage company and Alltegra, we envision growing outside the geographic area where we maintain branches. We just bought a small mortgage company (Mayflower Mortgage) in Dayton. Ohio.

Q.: How many layoffs does a restructuring like this mean?

CARROLL: I'm not sure. We're continuing to work on it, but both the mortgage and the finance industry groups have strategic plans, that have not been totally signed off on yet, but we'll grow those companies substantially outside western Pennsylvania. As those companies grow, they'll create a lot of jobs.

Q.: Are you downsizing anywhere?

CARROLL: As we "de-layer" the banking industry group, and we are de-layering it substantially, those people will be offered jobs in the other areas we're expanding.

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