Published: Saturday, Jun. 13, 2009

Updated: Saturday, Jun. 13, 2009

Two local banks head toward merger

First America, Manatee River Community Bank awaiting approval

Two local banks are awaiting the approval of a merger officials believe will make them well positioned for the eventual turnaround of the local economy.

First America Bank and Manatee River Community Bank announced their intentions to merge in April and expect the merger to pass through the regulatory process by the latter part of the third quarter.

The bank would continue to operate as First America Bank.

“We’re still awaiting regulatory approval, and regulatory approval is taking a little longer these days because of the environment we’re in,” said Dan Hager, chairman of the board and chief executive officer of First America.

First America, with branches in Bradenton, Sarasota and Osprey, is considered well-capitalized from a regulatory standpoint despite logging a small net loss of $100,000 during the first quarter.

While local banks have struggled with non-performing loans in the midst of the real estate downturn, First America Bank has a mere $150,000 of non-performers on its books.

“Our non-accruing loans are minimal,” Hager said. “We actually opened June 1, 2004, and the economy was going fairly strong at that point and time, however, we were taking the approach that slow and steady was going to be the better choice for us. So we didn’t try to grow our portfolio too much.”

Manatee River Community Bank has about $4.6 million in non-performing loans and lost $940,000 in the first quarter.

The bank, with branches in Palmetto and Ellenton, is considered adequately capitalized by regulators.

Allen Langford, president and chief executive officer of Manatee River Community Bank, could not be reached Friday for comment about the merger.

However, Langford said in a statement that the merger would create an ideal partnership.

“This combination is about great banking teams joining similar cultures and a shared commitment to provide the best possible customer service,” Langford said. “We are taking a significant step in positioning ourselves for future growth.”

Hager said the deal was a “merger of equals,” meaning no cash was changing hands.

There has been no mention of closing branches or reducing employees.

The combined banks would have $285 million in assets and could easily deal with the non-performing loans Manatee River Community Bank has on its books, he said.

“That portfolio is manageable and on a consolidated basis will be much easier to handle,” Hager said.

Philip van Doorn, senior banking analyst with TheStreet.com Ratings, said the merger would be beneficial to both institutions.

“Manatee River Community Bank’s troubles present a good opportunity for First America to leverage its capital and expand,” van Doorn said.

The analyst said that Manatee River Community Bank was forced to add to its loan-loss reserves, which had hurt its capital position.

“The leverage ratio was 5.95 percent and the total risk-based capital ratio was 9.63 percent as of March 31, leaving Manatee River adequately capitalized under ordinary regulatory guidelines,” van Doorn said. “Of course, in the current environment, adequate isn’t good. So it looks like a very good time for Manatee to combine itself with a stronger institution.”

Frank Knautz, a local banking consultant, believes there may be more such mergers in the future.

“As banks try to make their way through this particular economy we may see banks who have particular differences in market areas served get together to make a stronger bank,” he said. “I think we may see more of this in the future when banks are looking at what are referred to as mergers of equals to make a stronger bank that can work its way through these economic times.”

Hager said he approached Langford and other board members he had long-term relationships with at Manatee River Community Bank about the idea of merging.

“They were not out looking. Let me put it that way,” Hager said. “I just felt it was an excellent fit and the feelings were mutual.”

Hager acknowledges that it is still a challenging time for banking and thinks it could be at least until the second half or third quarter of 2010 before we see a turnaround.

He said the newly merged bank, if approved, would still remain committed to the personal service of a community bank.

“As a community bank, it’s important we do all we can to assist our customers,” he said. “We don’t’ want to put people out of their homes so between Manatee River and First America that philosophy won’t change. We’ll do anything we can to work with the customer.”