SLOW AND STEADY AT FIRST AMERICA BANK
8/16/2009

Timing can mean everything in banking, and Dan Hager says that's why First America Bank has been cautious. Opened June 1, 2004, in Bradenton and later in Osprey, First America missed jumping into the real estate lending frenzy that has damaged so many Southwest Florida banks in today's recession.

"We felt the market was pretty much at a peak at that point," said Hager, the bank's chairman and chief executive. "Our approach to growth was to be basically slow and steady. Given the time we opened, we felt we had to take a slower approach to it."

Hager, a Florida banker for 25 years, calls the current economic conditions that banks face "the worst I've ever seen."

First America is now at $132 million in assets, a pace that some other local banks might consider glacial after five years in business.

Of course, two local banks known for the fast-track growth, Bradenton's First Priority Bank and Freedom Bank, failed last year. Then just this month, regulators closed First State Bank of Sarasota and Community National Bank of Sarasota County, two institutions that also played in risky loans during the boom.

There are still others are suffering with large stacks of bad loans.

"Some banks felt that pressure to leverage their capital and to deploy their deposits," Hager said. "The focus was on providing a return to shareholders, but that turned out being at a cost."

Hager says there are "excellent" bankers in the region whose institutions have been caught in the recession and the drastic decline in real estate values.

"I can tell you that had we been opened several years earlier, we probably would have experienced some of these problems," he said.

The bank has maintained an enviable low level of problem loans to total assets, under 1 percent as of March 31. It posted losses of $141,000 in 2008 and $188,000 through the first half of 2009, which Hager attributes to the squeeze between interest rates paid on deposits and the sharp decline of loan rates that began last year.

Hager says the bank will boost its loan-loss reserves this year to prepare for future loan losses.

BauerFinancial, which analyzes all U.S. banks, gave First America its four-star, or "excellent," grade for the first quarter, the highest mark for the 21 banks and thrifts based in Sarasota, Manatee and Charlotte counties.

Prior to First America, Hager, a Manatee County native, headed the Southwest Florida area for Regions Bank, and before that was a top executive at the former Liberty National Bank and Key Florida Bank of Bradenton.

He is optimistic the regional economy will rebound, but it will not be quick.

"It's probably going to take 18 to 24 months for things to start turning around, so we're not anticipating any significant growth in our balance sheet," he said.

Instead, First America plans to double in size by merging with Manatee River Community Bank, an 11-year-old thrift based in Palmetto. Adding Manatee River's $162 million in assets, primarily residential and consumer lending, will complement First America's commercial loan focus.

"We never got involved in the sub-prime or the payment option mortgages or those kind of things," said Allen Langford, Manatee River's president and chief executive.

His bank has avoided some foreclosures by lowering interest rates and making other loan modifications for customers, he said. It sold three foreclosed properties in July that attracted more buyer interest than usual, he said, an indication that prices may be leveling off from their downward spiral.

"It's been a tough economy on the west coast of Florida," Langford said. "I never in all my years would have thought you would see owner-occupied real estate drop 50 percent in value."

The merger, awaiting regulators' and shareholders' approvals, may close in the current quarter.

Others who weathered the storm

Other banks doing business in Florida also have weathered the economic slump in better shape than some rivals.

The Crews Banking Corp. of Wauchula has managed to avoid losses at all four of its Florida banks, including Charlotte State Bank of Port Charlotte and Englewood Bank.

Crews, a privately held family-run company, also owns the Wauchula State Bank and The First State Bank of Arcadia. The four combined hold just over $1 billion in deposits.

All four banks have earned money so far this year, as well as last year. As of the first quarter, none reported a ratio of nonperforming assets to total assets higher than 2.61 percent, compared to an average of 4.78 percent for all Florida banks and more than 7 percent for banks in this region.

None have burned up the growth track, either. Charlotte State, opened in 1987, sits at $242 million in assets. Englewood Bank, opened in 1988 and bought by Crews in 2003, is at $185 million. First State of Arcadia is a $141-million-asset bank. And lead bank Wauchula State, founded in 1929, is at $586 million.

BauerFinancial rates First State of Arcadia and Wauchula State at four stars. Charlotte State rates 31/2 stars, and Englewood is three stars.

An out-of-town S&L, Third Federal Savings & Loan Association, is the only bank doing business in the region to earn the top five-star grade from BauerFinancial in the first quarter.

Cleveland-based Third Federal has long been known as a meat-and potatoes thrift, making home mortgages and equity loans and offering the standard Third Federal remains profitable and well capitalized, although earnings have been bruised. Fiscal second-quarter profits were $5.8 million, down from $14 million one year earlier. The provision for loan losses rose to $28 million from $4.5 million, still a small amount for a $10.4 billion-asset company.

As president Marc Stefanski said in a recent letter to customers: "We didn't make the risky, and now toxic, loans that many other banks did."

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