Tenacity pays.

After four years of unrelenting losses, Bank of Ireland's New Hampshire banking unit will post a slight profit for 1993.

Douglas O'Brien, president and chief executive of the Irish bank's U.S. holding company, Bank of Ireland First Holdings Inc. in Manchester, N.H., said he expects First NH Banks Inc. to rack up earnings of $4 million to $5 million for this year.

Earnings next year, he predicted, "will be in multiples of that."

Success has not come cheaply.

Until recently, purchase of the $3.6 billion-asset Manchester, N.H., bank looked like Bank of Ireland's own private nightmare. A casualty of the go-go 1980s, First NH and other state banks spun out of control in the middle of the last decade, tossing loans at questionable commercial real estate and other ventures in New Hampshire and around the country.

Paid Too Much, Moved Too Fast

The chickens came home to roost soon after Bank of Ireland acquired First NH in 1988.

The Irish bank paid $370 million, or 2.4 times book value, in a bid to diversify revenues and avoid dependence on its home market in Ireland.

Bank of Ireland hoped to duplicate the success of Allied Irish Banks PLC, which acquired Baltimore-based First Maryland Bancorp. in the early 1980s.

But some bankers and analysts say that unlike Allied Irish, which took several years to assume control of First Maryland, Bank of Ireland paid too much, moved too fast, and failed to do its homework.

Hit by the economic downturn and collapse in commercial real estate prices, First NH racked up $30 million in losses in 1989, $93 million in 1990, $124 million in 1991, and $77 million last year.

Since then, Bank of Ireland has pumped more than $500 million in fresh capital and other funding into First NH, part of which was used to make further U.S. acquisitions.

First NH still has something of a shell-shocked quality to it.

Privately. sources at the bank concede that had Bank of Ireland not been there, First NH would have collapsed along with five of the state's seven biggest banks in October 1991.

But Bank of Ireland not only kept First NH afloat, it helped First NH grow by financing the acquisition of Amoskeag Bank Shares and BankEast in 1991.

|Stuck to Its Guns'

Both organizations were taken over and sold by the Federal Deposit Insurance Corp.

"Bank of Ireland stuck to its guns," said Mr. O'Brien. "They helped us push ahead and double our size and market share."

The acquisitions boosted First NH assets from around $3 billion to $4.2 billion and increased the number of branches to 114 from 57.

Since then, First NH has merged many of the acquired branches into 72 offices, consolidating technology operations and trimming staff by 15%.

Some 300 employees have been cut over the last 18 months in a bid to reduce costs and eliminate duplication.

Approximately $500 million in bad assets have been sold off since 1990, including $300 million this year alone, leaving First NH with only $23 million in nonperforming loans, or 1.2% of total loans of $1.9 billion.

Loan-loss reserves equal 267% of nonperforming assets and total risk-based capital stood at 11.8%, as of Sept. 30 well above the regulatory 8% minimum.

Tide Seen Turning

To be sure, First NH's prospects still depend very much on where New Hampshire's economy goes. But analysts are now more bullish about the state than they have been for years.

"Sparked by fundamental strengths, a return to financial stability, and evidence of economic recovery in the state, New Hampshire's credit trend is revised to improving from stable," New York-based Fitch Investors Services Inc. noted in a recent review. Fitch gives New Hampshire a AA credit rating.

Judging by results so far, the tide finally appears to be turning in First NH's favor.

Real estate prices have stopped falling, commercial property inventories are slowly being reduced, and new mortgages originated by First NH climbed over 15% this year to $1.2 billion.

New business loans booked this year increased slightly to $186 million, while new consumer loans totaled $187 million, also up slightly over the previous year.

With most of its problems behind it, First NH is determined to capitalize on its position as the largest local bank in New Hampshire.

With $3.6 billion of assets, it is nearly twice the size of its main rivals, Fleet Bank/NH and New Dartmouth Bank, each with $1.7 billion of assets.

First NH is more than three times the size of Bank of New Hampshire, the state's fourth-biggest bank.

The bank's main advantage over its big rivals and the other 60 odd banks it competes with in New Hampshire, officials say, is its local headquarters.

A Wider Role

Being a hometown bank that provides conventional retail services and can also cater to sophisticated corporate clients is something of a rarity.

"People want a local bank they can deal with that also offers a broad array of other services," Mr. O'Brien said.

"Before we started calling on companies here, most of them went to Boston or New York.

"We've become much more corporate-oriented and fee-based than before," he said.

International Growth

International business is also growing. First NH offers foreign exchange, trade finance, and commercial letters of credit.

Fees from such business grew 100% last year and will be up another 25% to 30% next year, Mr. O'Brien predicted.

Trust and asset management services, through First NH Investment Corp., are also improving, he said.

Still, with few prospects for any significant growth in revenue, First NH hopes New Hampshire's lack of income and sales taxes, combined with an improvement in communication and transportation in the state, will attract more U.S. and foreign companies.

By far the best prospects for growth will come through further acquisition or from stealing business away from the competition.

Like other banks across the country, First NH is also "looking at cutting costs and gaining market share," he said.

"A lot of mergers in the banking industry are being driven by lack of growth in home markets," Mr. O'Brien added.

"In time, this bank could well make another acquisition."

Mr. O'Brien declines to elaborate on whether any such acquisitions are in the works.

Close to Home

But he does concede that First NH is far more interested in acquiring banks "in-state" rather than across state lines.

"You can eliminate 50% of the costs through an in-state acquisition," he said. "You can't achieve the same out of state.

Were First NH to move out of state, he added, it would most likely be into similar markets in nearby states like Massachusetts and New York.

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