Edward Furash, the outgoing chief executive at City First Bank of D.C., has high hopes for his successor, Dorothy Bridges.
She could "double the size of this bank within three years," Mr. Furash said, citing Ms. Bridges' track record in community development lending, most recently as the president and CEO at Franklin National Bank in Minneapolis.
Ms. Bridges, 53, is no stranger to Washington. She heads the American Bankers Association's Community Bankers Council and serves on the Federal Reserve Board's Consumer Advisory Council.
But she has never been a banker in the city, and the $143 million-asset community development bank has had its challenges. City First, a unit of City First Enterprises Inc., remains under a regulatory agreement with the Office of the Comptroller of the Currency for violations related to the Bank Secrecy Act. In recent quarters its earnings have been inconsistent at best, and, like many banks, its nonperforming loans have increased as real estate conditions have weakened.
Mr. Furash said that most of the problems cited in the 2006 regulatory agreement have been addressed, and that the 10-year-old City First Bank is ready to move forward with a new CEO who can focus on growth.
The bank is well capitalized, and Ms. Bridges, who will start her new job Sept. 2, said in an interview last week that she will look to increase its assets organically, rather than through acquisitions.
She said that she expects to be doing lots of cold calling and networking with prospective customers as she gets acquainted with her new surroundings, and that she is counting on the board and current customers to generate leads.
"Sometimes the low-hanging fruit are existing customers that refer business to you," Ms. Bridges said.
She has held executive positions at a traditional bank and a bank regulatory compliance-consulting firm, and she is the former chief credit officer of the Community Reinvestment Fund USA, a not-for-profit corporation that invests in community development projects on a national scale.
When she joined Franklin National Bank, another community development bank, in 1999, Ms. Bridges became the only African-American woman to head a Minnesota bank. In her nine years there the bank's assets more than doubled, to $114 million.
Ms. Bridges has "done it all in mainstream banking and the community development world," said C.F. Muckenfuss 3rd, City First Bank's chairman. "Plus she has a great track record of community involvement and outreach."
The timing of the OCC formal agreement "forced us to look internally at exactly the right time both in our history and in what was happening externally," Mr. Muckenfuss said. "Now at a time when others are pulling back, there's both a need and an opportunity for us to expand and make a contribution."
Mr. Furash, a longtime local banker and bank consultant, was a City First Bank director when he was selected in late 2005 to fix its compliance issues, which included Bank Secrecy Act matters and operational deficiencies in its credit administration.
The bank's problems stemmed in part from having "a lot of loans that didn't have the proper documentations, and all that had to be cleaned up," he said.
In June he informed the board that his job was done, and that he planned to retire in September — for the fourth time in his career.
Mr. Furash, 74, has known Ms. Bridges for many years, and though he did not participate in her selection, he said she was a good choice, because she has demonstrated ability in community development banking.
He said he is also resigning from the board, so that he does not appear to be looking over Ms. Bridges' shoulder.
"I've seen too many CEOs that kicked around and screwed up their successor," Mr. Furash said. When there are difficult issues facing the bank, other directors are apt to turn to the former CEO and ask, "'What do you think?' I don't want to be in that position."
Ms. Bridges said she is particularly excited about the prospects of working with a bank that has been awarded $163 million of New Markets Tax Credit funds from the Treasury Department.
The program allows investors to receive federal income tax credits for seven years in exchange for investing in projects in low-income areas. The funding allows the relatively small bank to participate in much larger community development projects than its legal lending limit would allow, she said.
She is also eager to ramp up deposit-gathering through remote deposit capture technology City First recently rolled out. She said Franklin introduced similar technology about a year ago, but the effort picked up steam in the last four months when she hired a cash manager who added six business customers to the bank.
Karen Dorway, the president and director of research at BauerFinancial Inc. in Coral Gables, Fla., said City First has very strong capital ratios, including a risk-based ratio of 17.78%. She also said that its assets have continued to increase despite the compliance issues.
David Danielson, the president of Danielson Capital LLC in Vienna, Va., said City First needs more consistent earnings. It has been "flipping between profit/loss" for the past four quarters, he said, and it lost $343,000 in 2006. It did earn $282,000 in the second quarter of this year, though its nonperforming loans as a percentage of total loans rose from zero to 2.77% over the past year.
That ratio "is probably not too far out there," Mr. Danielson said, considering the bank's focus on inner city development. Ms. Bridges said City First's chief lending officer is monitoring the nonperformers closely and seeing if they can be salvaged.
She also said one of the reasons earnings have been inconsistent is the bank's participation in the New Market Tax Credit program. In short, City First earns fee income when the projects are under way, but when the projects are completed that income stops.
Though the bank will continue pursuing the tax credits, Ms. Bridges said she also will focus on developing a more consistent and stable income stream with core lending products and services, particularly commercial and industrial ones.
"You bring in new customers and visit with existing customers and make sure they are aware that you want to build a relationship with them," she said. "They may have additional needs. This is core business practices, getting more business in the door."
