First National working to boost earnings in troubled times [The Star, Shelby, N.C.]

Dec. 28--SHELBY -- When families lose their homes to foreclosure and fall behind on their loan payments, Cleveland County's biggest bank sees the effects on its balance sheet.

First National Bank of Shelby is working to boost its earnings and compensate for bad loans under an agreement with federal regulators signed in June. The bank has drafted a three-year strategic plan to improve performance as it weathers economic turmoil.

Helen Jeffords, the bank's president and CEO, said the agreement does not affect customers, their accounts or the status of their loans.

"This is a mirror of what's going on in our community," Jeffords said. "What we are trying to do is to help our people work through this turbulent economy until we can get beyond this and interest rates improve."

First National Bank reported total assets of $926.7 million as of Sept. 30, according to the Federal Deposit Insurance Corp. An American University School of Communication analysis of financial data shows that the bank had $523.7 million in loans and an estimated $50 million in troubled assets as of June 30.

The Shelby-based bank was founded in 1874 and now has 14 branches in Cleveland, Gaston, Lincoln and Rutherford counties. Executives say it has a stable future and will grow as the economy rebounds.

"We are intricately woven into the community," Jeffords said. "We have worked for many of our customers for generations. We have been here 137 years, and we certainly intend on being here for 137 more."

Federal oversight

On June 8, First National signed a formal agreement with the Office of the Comptroller of the Currency, the federal agency that regulates national banks and the U.S. branches of foreign banks. The agreement required First National to complete a three-year strategic plan for earnings growth and create a compliance committee that meets monthly.

The OCC found "unsafe and unsound banking practices relating to credit risk management, liquidity risk management and earnings performance," according to the agreement. The bank says some of its longtime customers are behind on loan payments as families struggle with unemployment and rising prices.

"There are faces behind some of these loans," said Reed Byrum, a consultant working with First National. "These are people on Main Street and Elm Street, and you're going to ride with people who have ridden with you for generations and are having a rough time right now."

The Office of the Comptroller of the Currency signed formal agreements with 118 of the 1,400 banks it regulated in the last fiscal year, said Bryan Hubbard, the agency's director of public affairs.

Hubbard said the OCC is prohibited from discussing specific banks, but he characterized formal agreements as "about middle of the road" in severity. He said they make up about a third of the OCC's enforcement actions.

"There are many actions the OCC can take to work with a bank short of a public formal agreement, but it is short of other actions," he said.

The agreement has no expiration date. Regulators will deem it satisfied when First National has bolstered its balance sheet.

"There's ongoing monitoring throughout the process," Hubbard said. "Before the agreement is lifted, we ensure all the conditions in the agreement have been met."

Byrum said the regulatory involvement will help First National become a stronger bank.

"First National voluntarily signed (the agreement)," he said. "This is becoming a way in which the OCC can enter your bank and make sure you have everything together."

'Here for the long-term'

Jeffords has worked at First National Bank for 28 years, and she said today's economy is the worst she's seen.

"We have been here 137 years," she said. "We have seen some of the best of times, and unfortunately, we have seen some of the worst of times now. We're going to be there for the long-term. What we're going through now is going to make us a better bank."

The unemployment crisis and mortgage meltdown that have hobbled many North Carolina families have taken their toll on the banks that serve those families, Jeffords said.

"At the end of the day, what drives the local economy is also going to drive First National Bank, and we do need the economic impetus to help us rise above," she said.

Jeffords said First National remains a strong bank, boasting capital ratios far above those the FDIC recommends. Banners at First National branches advertise the bank's Borrower's Choice Mortgage, and Jeffords said the bank is still making loans.

"We want to get the message out that we are lending," she said. "We do have the liquidity to build our loan portfolio."

First National's chief executive said the bank will grow as the economy recovers and will be a driver for economic development in Cleveland and surrounding counties.

"We have a long history of working with our customers in this area, and we plan to be here for the long-term, for the long haul with our customers," Jeffords said. "The strength of the bank will be here for the long-term to help our community grow."

Reach City Editor Corey Friedman at 704-669-3331.

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