Lenders First

Lenders First

Banking by Mark Gordon | Managing Editor

Bradenton-based First Priority made a point to grow through its employees first. Now it plans on growing to other parts of the Gulf Coast.

During more than 25 years of living in Florida, George Najmy's voice has lost a lot of the fast-talking New York staccato that normally comes with being born in Brooklyn.

But his bank has taken on that fast-growing persona. Bradenton-based First Priority Bank has grown rapidly since the first branch opened on Cortez Road in Bradenton in December 2003. Since then, three new branches have opened, with two more to follow early next year in the Sarasota-Manatee market. Loan production offices are in the works for Tampa and Port Charlotte, too.

The significant growth, though, comes in recent financial numbers, both in performance measures, such as assets and deposits, and in reaching profitability.

On the former, from September 2005 to September 2006, the bank increased deposits 73%, to $189 million from $109 million, while assets increased 80%, to $225 million. First Priority's gain in assets was one of the largest in Greater Bradenton over the past year, trumping nearby competitors such as the Community Bank of Manatee and Flagship National Bank. Freedom Bank, another young Bradenton-based community operation opening new branches, had asset growth of just more than 210% during the same time frame, $160.1 million. First Priority also outdid some of its local competitors in return on assets and return on equity.

The bank, which raised $9 million in initial startup funds and $35 million overall, crossed the profitability mark within two years of opening, a fast pace considering the competitive Sarasota-Manatee market. The bank turned a profit of about $19,000 in 2005, Najmy says, and he expects it to be just short of $200,000 this year.

On demand decisions

First Priority's original strategy was to build through its lenders, banking on the theory that good lenders will bring good clients. Forming the strategy in the early part of the decade, the plan was also to focus on commercial lending in soon-to-be booming Bradenton, as opposed to retail banking. "We wanted to grow the bank around the bankers, not through locations," says Najmy, 44. "People normally bank with an individual, not a an actual bank."

To put the plan into action, Najmy, a former executive with Barnett Bank, brought four of his former colleagues with him to the startup, including First Priority CFO Brian Watterson and Stephen Putnam, the bank's chief lending officer. Then he got out of their way: Najmy's management style, says First Priority board Vice Chairman Brian Sullivan, is akin to a professional services firm. Najmy sets up a successful atmosphere and then doesn't meddle with the people he put in place to do the work.

The style has produced a key competitive edge, says Najmy and Sullivan. The lenders developed an on-demand style of setting up loan decision meetings. So instead of meeting every other week, as some competitors do, the lenders will meet around the clients' schedule. That has produced both quick results and goodwill with customers. "We offer the expertise from a lending standpoint," Najmy says, "that no other bank can offer."

Najmy acknowledges that for sustainability, the strategy has to go deeper than bringing in top lenders and their clients. So as he looks to grow to other markets, such as Tampa and Port Charlotte, Najmy hired people already working in those areas, as opposed to promoting a top performer from within the Bradenton circle to open the new office. Mark Hvozdovich, who was an original lender with Tampa-based Bay Cities Bank when the operation opened in 2000, is running a First Priority loan production office in Tampa, while Bruce Lamb, formerly a commercial lender with M&I Bank and its predecessor, Gold Bank, is heading up efforts to eventually open an office in Port Charlotte.

Banking battles

Even as Najmy looks to grow the bank's presence in areas outside of its current market, he says he's not interested in opening a branch "on every corner." Next year, two new First Priority branches will open. One, scheduled to open by the first quarter of 2007, will be a 15,000-square-foot building on State Road 70 and Lakewood Ranch Boulevard, which the bank will occupy parts of and lease the rest. It's also converting a storefront in the Bird Bay Plaza in Venice to a full service branch.

Najmy's future worries include big-picture issues, such as the national economy and when the Gulf Coast's housing market will make a comeback, as well as more micro-concerns, such as having enough staff to stay ahead of the paperwork.

What's more, Najmy is cognizant of any growing bank's chief issue: Access to capital to pay for the growth. The bank's most recent stock offering, held earlier this year at $13.50 a share, totaled $18 million, bringing it to a total of $35 million over three years. Najmy says he doesn't expect to have to raise more capital.

Najmy's been through many of these banking battles before. After graduating from the University of Florida with a degree in finance, Najmy joined dozens of other aspiring young bankers in working for Barnett Bank, then one of the Sunshine State's banking powers. He worked with Barnett from 1984 to 1996, where, among several roles, he ran the bank's conversion of a savings & loan operation to a Barnett branch in Columbus, Ga.

After leaving Barnett, Najmy worked for First Union for about four years, where he ran the retail side of the bank's dozen Sarasota-Manatee branches. Along with his wife, Sandy Najmy, he bought an accounting practice in 2000 as he prepared the plans for First Priority.

By the numbers

First Priority Bank

PERFORMANCE RATIOS YTD 9/30/05 YTD 9/30/05

Net interest margin 3.47% 3.79%

Return on assets -0.21% 0.04%

Return on equity -1.51% 0.30%

Efficiency ratio 85.06% 73.81%

Noncurrent assets plus real estate owned to assets 0 1.10%

Core capital (leverage) ratio 12.84% 15.80%

Tier 1 risk-based capital ratio 12.11% 15.73%

Total risk-based capital ratio 13.11% 16.95%

Source: FDIC

By the numbers

First Priority Bank

(Dollars in thousands)

ASSETS AND LIABILITES YTD 9/30/05 YTD 9/30/06 % Change

Total assets 124,893 225,024 80%

Net loans and leases 106,393 180,558 79%

Total liabilities 109,548 191,079 74%

Total deposits 109,287 189,729 73%

Equity capital 15,345 33,945 121%

Noncurrent loans leases 0 2,476 -

Average assets, year-to-date 92,194 184,771 100%

Insider loans 1,811 2,858 58%

Tier 1 (core) capital 14,628 33,985 132%

INCOME AND EXPENSES YTD 9/30/05 YTD 9/30/06 % Change

Total Interest income 4,163 10,044 141%

Total Interest expense 1,887 5,089 169%

Net Interest income 2,276 4,955 118%

Provision for loan and lease losses 641 1,279 100%

Total noninterest income 622 387 -38%

Total noninterest expense 2,465 3,943 60%

Salaries and employee benefits 1,558 2,359 51%

Pre-tax net operating income -208 120 -

Net income -148 61 -

Source: FDIC