Published Thursday, Oct. 29, 1998 The chairman and chief executive officer for the New Castle holding company realized the company's profits needed a boost, a big one.
While tweaking fees would generate $1 million or so annually, it wasn't enough. There was only one other place to go -- cutting employees.
That's the reason First Western on Wednesday said it would ax 70 employees throughout its organization.
Those who know O'Shane said it was the most painful decision in his 27-year tenure at the bank. He has served as CEO since 1991.
"I haven't slept for two months,'' O'Shane acknowledged Wednesday. "It's not pleasant. This has not been easy for me. I've grown up with this company.''
In reporting third-quarter earnings last week, First Western said it had begun a program to slash its internal costs. Expected savings of $3.5 million to $4.5 million annually should begin to show in the fourth quarter and be fully realized by the end of 1999. The company reported its third-quarter profits were up 2.4 percent from the same year-ago period.
"Certainly not robust, but a reasonable report given what's been happening to the rest of the banking industry,'' said David DeForest, a stock broker with Butler Wick & Co.'s Sharon office.
But in looking ahead the company had to find a way to grow its earnings.
"If you look at their history they continually try to become more efficient in what they do,'' DeForest said.
Investors cheered First Western's move as the stock closed at $24.25, up $1 on 24,600 shares trading hands, which is above average daily volume for the stock.
Over the past year First Western's stock, like almost every other bank stock, has taken a hit. The stock's 52-week high was $32.50 in May while the low of $20.50 was registered on Oct. 12.
Bank stocks have been hurt as part of the overall plunge in stock prices that has gripped worldwide markets. Also, falling interest rates have squeezed profit margins for lending institutions.
"What's happened to First Western has happened to other bank stocks over the same time period,'' DeForest noted.
First Western remains a true power among banks with local offices. With a 30 percent market share in Lawrence County and 21 percent in Mercer County the holding company's First Western Bank affiliate is no shrinking violet.
But as part of its new program to boost earnings, the bank hiked fees for checking and added a fee for those who take out lines of credit. O'Shane said he didn't have specifics on the new checking fees readily available. However, he said, the checking-account options were reduced from five to three.
Shaving costs throughout the organization was an active move, O'Shane said, adding the holding company will continue to shop for bank branches.
He indicated the departure of two top executives, Robert H. Young, executive vice president and chief financial officer, and Kathleen L. Selmier, -- formerly Kathleen Lewis -- senior vice president, was tied to the company's savings program.
"This is a process we've been working on. You just can't pick on the rank and file,'' O'Shane said.
He added the departures were a "mutual agreement'' between the executives and the holding company.
Among other cost-saving measures the bank is eyeing is outsourcing its auditing department work, O'Shane said. But the employee cuts will account for between $3.1 million and $3.2 million of all cost cutting.
All the savings will flow to the company's bottom line, he said.
Stock price was not an issue, he insisted.
"I never manage for stock price. I manage for shareholder value,'' O'Shane said.
Cutting nearly 10 percent of the workforce means managers have shareholders in mind, said Matt Lazaroff, a broker with Robert Thomas Securities Inc., Sharon.
"Anytime a firm downsizes like that, it's to satisfy shareholders,'' Lazaroff said.
Lazaroff and others who follow First Western said Richard L. Stover, First Western's newly named president and chief operating officer, was the mastermind behind the cuts. Joining First Western just a few years ago, Stover built a reputation in banking circles as a cost-cutter.
First Western probably had that in mind when they hired and promoted Stover, Lazaroff said.
"Somebody thought they couldn't pull the trigger so they brought somebody else who could,'' he said.
But O'Shane made it clear the buck stopped at his desk.
"At the end of the day I'm the CEO. I take responsibility for it,'' O'Shane said.
First Western is likely ahead of the pack when it comes to employee cuts, Lazaroff said.
"I think this is just the first shoe to drop,'' he said. "I think you're going to see more and more banks doing this.''
