The private stockholders of Vancouver-based First Independent invested $50 million in the 98-year-old bank in late November to help boost its loaning capacity.
Vancouver-based First Independent Investment Group Inc., made up of Firstenburg family members, spent the bulk of the $50 million buying 12 of the bank’s poorly performing real estate and construction loans.
Jeanne Firstenburg, executive vice president and chief executive officer, insisted the cash was not a bailout.
“This is just what a holding company is about all the time,” she said. “If we were in a catastrophic condition, they would have preserved the $50 million for themselves.”
First Independent’s year-over-year deposits were down more than 15 percent at the end of the second quarter and the bank’s third quarter was “not as good as we wanted,” said Stacey Graham, chief strategy officer and executive vice president.
Before the holding company made its investment, the bank put nearly $10 million in its loan loss reserves. That provision was larger than the bank’s net income, leading to a third-quarter loss.
The privately held institution declined to give further information on quarterly results.
“The largest challenge in third quarter was reserving for loans that are starting to have some problems. That took all of our income,” Firstenburg said.
“Keeping classified loans at a minimum is almost an impossible thing to do” for any bank, she added. “We need to help our clients work through these times, and that’s what holding companies are for.”
And what if there had been no $50 million investment?
“Our loan loss reserve would be higher and our number of classified loans would be higher,” Graham said. “It would really impede our ability to loan out in the community.”
As it is now, the cash will help balance the bank’s loan portfolio and position it to make acquisitions, though Firstenburg said no specific companies have been targeted.
Meanwhile, the bank has enacted an aggressive deposit strategy, bringing in $36 million in new money in the last eight weeks. That’s a hefty sum considering it took all of fiscal year 2007 to pull in $50 million in deposits. The bank currently has $670 million in deposits.
The new deposits came from new clients and existing clients who transferred money from struggling banks, such as Washington Mutual. Increased deposits have boosted First Independent’s lending capability, Firstenburg said.
For much of its history, the bank was known for conservatism in lending, especially with businesses. Its business lending group is less than 10 years old, Graham said.
“Now nobody’s laughing about our conservatism,” Firstenburg said.
And to help keep clients afloat, the bank is sending senior-level employees to address client needs at no cost.
“It’s going to take an expert to help you get through this if you’re going to figure out how to save your business, your home, whatever it may be,” Firstenburg said.
To avoid further layoffs, the bank is cutting expenses. There were 15 layoffs in August throughout the bank.
“No bank had a good third quarter and we don’t want to tear apart our infrastructure because of one quarter or one year,” Firstenburg said.
In the 1980s, there were 18,000 community banks in the United States, she said. At the beginning of the economic downturn last year, there were 8,000, and it could be down to 5,000 by the time it’s over.
“It’s been hard on our friends in the banking community,” Firstenburg said. “But on the other hand, we’re here to compete. Like it or not, not all of the banks are going to make it.”
Charity Thompson can be reached at cthompson@vbjusa.com.
