Longtime Spokane banker D. Michael Jones says that Banner Bank, the Walla Walla-based institution hes now leading, needs to expand its branch network in the Spokane area substantially, but its ability to grow here is being hindered by a lack of Class A space downtown.


Banner, which has two branches in the Spokane area and will open a 3,500-square-foot commercial loan office in January in the Riverpoint One Building, is a long way from covering the market adequately, says Jones, president and CEO of both the bank and its parent, Banner Corp.


We clearly need to be in downtown Spokane, Jones said from his office in Walla Walla. We also need to reposition ourselves in the Valley. We need to do something on the South Hill.


Yet, a lack of Class A office space downtown likely will keep Banner from opening a city-center office here, Jones says.


When Spokane figures out what theyre going to do with their downtown, maybe well be there, he says.


With Washington Trust Bank in its own office tower downtown, and Bank of America in another office tower, you kind of quickly run out of Class A space, says Jones, who adds that he wouldnt classify the U.S. Bank Building as Class A space, although U.S. Bank has a downtown branch there.


Im not willing to put a bank in a B building downtown, Jones says. One of the reasons that you go into a Class A building is that you hope to bank the customers in the building.


For some time, Spokane businessman K. Wendell Reugh has looked at constructing a new office tower on the block bounded by Howard and Stevens streets and Riverside and Sprague avenues, much of which Reugh owns. Yet, Larry Soehren, vice president of Kiemle & Hagood Co., of Spokane, which would handle leasing and management of the proposed new tower, says Reugh no longer is willing to take on that project by himself, and no partner or buyer of the property has surfaced. (See story, page A3.)


Says Jones, Im sure a number of banks were hopeful that Wendell Rueghs project would go ahead, but I havent heard much about that in a while.


In addition to the lack of downtown Class A office space, the tepidness of Spokanes economy is dampening Banner Banks expansion plans here, Jones says.


I dont think that any of us who have tried for years to get things moving in Spokane would say things are going real well there right now, Jones says.


Still, he says, Spokane easily could come out of its economic malaise much faster than the Puget Sound region lifts itself out of its own funk. Jones says that Spokane, unlike the Puget Sound area, doesnt have a major pillar of its economy, such as Boeing Co., under tremendous pressure from a powerful international competitor. In that competition, the Airbus consortium is trying to displace Boeings No. 1 global industry position.


Even though Banner eventually would like to have a downtown office here, Jones, who graduated from Spokanes Rogers High School and rose to become the No. 2 executive at Spokanes Old National Bancorp. before that institution was sold, has no plans to move Banner Banks home offices to Spokane. The No. 1 reason for that, Jones says, is demographics.


Fifty-five percent of our loan portfolio is west of the Cascades, and 37 percent of our deposits are there, Jones says. That is by far the fastest-growing part of our operation.


In time, it will dwarf what we have over there in Spokane and Eastern Washington.


Banners branch network is far flung, with offices in the Puget Sound area, as far north in Washington state as Bellingham, in Wen-atchee and Yakima in the central part of the state, in Portland, and in Lewiston, Idaho.


Yet, says Jones, What we have is a whole bunch of holes in our network. When I took over, we only had one branch in Spokane. Thats not going to do it. While Banner had three branches in in the Tri-Cities, it didnt have one in Pasco, the fastest-growing part of the Tri-Cities, Jones says.


What Im trying to do is fill in the holes in the smaller submarkets, he says. Banner opened a Pasco branch in the Tri-Cities in the third quarter this year.


Jones says hes at Banner for a reason: To deal with a portfolio problem caused by a sizable embezzlement by a staff member in the Puget Sound area, then to get the bank back on track with a growth plan it had launched before the embezzlement slowed things.


One of his first jobs was to attract what I think are some top-rated people to the company, Jones says. Now, he adds, were out looking for new business.


While it might seem that bank CEOs most important jobs are strategic planning, deployment of offices, and management of personnel, their sales efforts are among their most vital activities, Jones says.


Thats primarily what I do, Jones says. When youre dealing with a large customer, if they get to meet the president and CEO, it helps, especially when you have a bank of the size we are.


As of the end of the third quarter this year, Banner had total assets of $2.23 billion, up 7 percent from a year earlier, and $1.5 billion in deposits, up 14 percent. Loans totaled $1.57 billion, but were flat from a year earlier.


While those numbers are respectable for a Washington state-based institution, they pale compared with the financial muscle of a national bank.


Recently, Jones says, a desirable potential client that has banked with Bank of America for 40 years expressed a desire to begin banking with Banner, but voiced the reservation that Banner, because of its relatively small size, might be acquired.


If that happened, the potential client said, Banner wouldnt be around long enough to have a long-term relationship with the client.


Later, when the potential customer held an event, a number of Banner senior executives and board members attended, Jones says.


They said, weve met more senior management from Banner in one afternoon than weve met from Bank of America in 40 years, Jones says.