TierOne lays out 'aggressive' turnaround plan; some shareholders skeptical

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By MATT OLBERDING/Lincoln Journal Star

TierOne Corp. Chairman and CEO Gilbert Lundstrom on Thursday laid out what he called an “aggressive” plan to return the Lincoln bank to profitability and restore shareholder value.

Lundstrom told a large crowd of TierOne shareholders and employees attending the company’s annual meeting at The Cornhusker that the company has a three-point plan focusing on asset quality, financial quality and image quality.

Among the moves the company has made or will make, Lundstrom said, are tightening lending standards, cutting dividends and suspending its stock buyback plan and focusing lending efforts on its core markets of Nebraska, Iowa and Kansas.

While Lundstrom blamed much of the bank’s woes over the past 18 months on economic factors beyond its control, he acknowledged that the bank could and should do better.

“Our performance has been disappointing and has not lived up to expectations,” he said.

After never having an unprofitable quarter as a public company, TierOne has lost nearly $100 million in the past four quarters, while the stock price has tumbled more than 80 percent in the past 15 months.

That was not lost on stockholders, who peppered Lundstrom with questions about the stock price, the compensation of executives and the company’s disastrous foray into construction lending in places like Florida and Las Vegas.

Kevin Roschewski of Lincoln, whose father, Vern, preceded Lundstrom as CEO of the bank, said he didn’t buy the argument that TierOne’s problems were caused by factors beyond its control, and he laid blame squarely on the management and the board of directors.

“They made a lot of bad loans,” Roschewski said. “They should have stuck with single-family.”

 He also said the company, “shouldn’t have loaned in those places,” referring to Las Vegas, Florida and other areas where TierOne opened loan production offices.

Loans made in those areas, despite making up only 28 percent of TierOne’s loan portfolio, accounted for 78 percent of the company’s non-performing loans, which as of June 30 totaled nearly $133 million, or 4.7 percent of all loans.

Lundstrom defended those loans, saying they were “good loans” that were properly underwritten.

He said the loans have gone bad largely because of the housing slump and declining property values.   

TierOne has worked hard to clear up those bad loans, Lundstrom said, by selling off a large portfolio of the Florida loans and closing the loan production offices.

He said the bank is focused on the Las Vegas loans which now make up more than half of all the non-performing loans.

Unlike Florida, where many of the loans were for single-family homes, most of the Las Vegas loans are for large-scale condominium projects.

Lundstrom said working with a smaller number of borrowers will make it easier to work things out.

And despite the loan issues, Lundstrom said the bank is well capitalized and its core banking operations are sound.

“We are going to solve these problems for you,” he told shareholders.

Roschewski expressed skepticism.

“The bottom line is they’re losing millions of dollars,” he said.

“There are huge problems there, and it will be interested to see if it will turn around.”

Reach Matt Olberding at 473-2647 or molberding@journalstar.com.