First Bank of the Palm Beaches has managed to maintain a middle-of-the-road status in the treacherous world of Florida banking.
That is not good enough, however, for the $75 million-asset bank's new president and chief executive.
"There are definitely banks with a lot bigger problems. But we are taking our issues seriously, and we need to get to a position of strength," said Joseph B. Shearouse 3rd, who was announced last week as the head of a new management team for the West Palm Beach bank. "We are not going to settle for mediocrity."
Shearouse's first step toward improvement is strengthening capital. This month the bank started a $6 million private placement offering that, if completed, would boost its capital ratios from merely above guidelines to well above them.
Though fresh capital to complement fresh management has become the rule in the world of turnarounds, First Bank is a bit of a rarity because the new management team's approval was not made conditional on additional equity.
Banking observers said that this speaks to the important role that qualified management plays. Capital might be king, but management holds the key to the castle.
"They approved all these de novo banks because they had capital, but there was a real management void in the last five to 10 years," said Paula Johannsen, a managing director in the Florida office of the investment bank Carson Medlin. The firm counts First Bank among its clients. "So with all of the recapitalizations we are seeing, they can have all the capital in the world, but they lead with management," she said.
Shearouse was most recently the president of the southeast Florida market at National City Corp.; he got the post after the Cleveland company's $1 billion purchase of Fidelity Bankshares in 2007. Shearouse had worked at Fidelity for 28 years.
His management team is rounded out by three other Fidelity managers. John M. Ahrenholz is chief operating officer; Steve Eassa is chief lending officer and Brian Mahoney is awaiting regulatory approval to be chief financial officer. Cindy Sheppard, formerly of Community Savings of North Palm Beach, is vice president and operations officer.
Shearouse said that, collectively, the new management team would contribute roughly one-quarter of the $6 million in new capital.
"It is important for our shareholders to know we also have skin in the game," Shearouse said, adding that the four-year-old bank's previous two CEOs were not equity owners.
Ken Thomas, a Miami banking consultant and economist, said that the bank's small size and the management team's cachet might have been the reason that regulators did not condition the team's approval on raising capital.
"With so many banks in need of bigger infusions, $6 million is not a lot to ask for, so that is working in their favor," Thomas said. "To get approval in Florida and Georgia, the regulators had to be confident that this team could bring in additional capital if it needed it."
The additional equity would give the bank a leverage ratio of nearly 17%, Shearouse said. At Sept. 30, this ratio was 8.35%. That would be enough to let the company get its arms around its noncurrent loans, which made up 7.38% of total loans at the end of the third quarter. Though a high share, it is 99 basis points below the average for all banks in Florida in that quarter. "It gives us some space to do cleanup work but should allow for some growth, too."
Shearouse said the strategy for growth would largely be focused on mining the contacts that the new executive team has amassed as career South Florida bankers.