By Dan Shaw, Evansville Courier & Press
Integra Bank Corp. is eliminating about 65 positions and temporarily lowering the pay of executives in order to improve its profits.
Mike Alley, Integra chairman and chief executive officer, said the workforce will be reduced by about 8 percent, bringing the total number of employees down to 890. The cuts are affecting workers throughout Integra's 75 branch offices in Indiana, Illinois, Kentucky and Ohio, he said.
About 22 workers will lose their jobs in the Evansville metropolitan area. Integra began making the reductions about three weeks ago, but the bulk of them occurred today.
The decision was made after the bank conducted a review of its departments. Alley called it a "comprehensive and inclusive process."
"It's painful whenever you impact people's lives and positions," he said. "But we have strong buy-in and support from our various departments."
Integra has been harmed in recent times by defaults and late payments on loans. Its loss for the first quarter of 2009 was $28.5 million, which came on top of a loss of $110.9 million for all of 2008. The bank's stock has traded as high as $10.33 a share in the past year. It closed at 98 cents today, down 30 cents from the previous close.
Alley declined to say how much his compensation was being reduced. The changes announced today were meant to lower the bank's cost by about 20 percent in all, and his cut was "in line with that," he said.
"It was a substantial number, not just a few thousands dollars," he said.
Besides the layoffs, the bank is concentrating certain work at its Evansville headquarters, taking those functions from offices in the Chicago and Cincinnati areas. Integra is also cutting fees paid to consultants, couriers, ratings agencies and taking similar steps.
Altogether, the cuts are expected to save the bank $8 million in future expenses. In the short run, though, the bank will pay severance benefits to the employees losing their jobs.
Those, coupled with charges related to a nonperforming loan made to Peoples Community Bancorp, Inc., based in Cincinnati, may cause Integra to record a pre-tax charge of between $25 million and $30 million in the second quarter. Integra had at one time planned to acquire Peoples Community Bank, but the agreement was terminated in January 2008.
Meanwhile, Integra is taking steps meant to raise its future revenues by $3 million a year. Like many banks, it is increasing a number of its service fees.
Integra is also promoting a "debit rewards" program, which encourages customers to use debit cards issued by the bank. When customers buy something with the cards, they receive points which can be redeemed for various prizes. Integra also collects a fee from every transaction.
Alley said the cost-cutting measures were not imposed on Integra by regulators. In May, the bank entered into a formal agreement with the Office of the Comptroller of the Currency, mandating steps the bank must take to deal with some of the bad loans on its books.
Nor are the cuts related to take part in the Capital Purchase Program, Alley said. Integra took part in that program in February, raising $83.6 by selling the government preferred shares of stock.