Las Vegas Business Press :: News : First National looks to raise $200 million in fresh capital

First National looks to raise $200 million in fresh capital

BY JOHN G. EDWARDS

First National Bank Holding Co., a $4.6 billion financial company with operations in Nevada and Arizona, wants to raise $200 million in additional capital from private equity firms, a task it says is easier said than done.

"The financial markets are in a bit of turmoil these days," explained Joel Gottesman, executive vice president and chief administrative officer. "There's just a lot of not very good news about financial institutions and financial markets."

This month, for instance, federal regulators seized IndyMac Bancorp, a $32 billion asset holding company based in Pasadena, Calif., and the federal government unveiled a plan to prop up Fannie Mae and Freddie Mac, two publicly held but government-sponsored enterprises.

Publicly-held banks have already tapped investors for additional capital in recent months, Gottesman said, and these investors have seen poor results. That makes it that much harder for First National to raise money, he said.

Investors "would like to get some better visibility as to where the bottom is (for banks)," Gottesman said.

The money, which could come in the form of preferred stock, would be added to the bank's $230 million in existing capital, he said. The Lamb family would like to retain stock ownership in the bank holding company, he said.

Holding company Chairman Raymond Lamb has owned banks since 1969. Lamb has owned the Nevada institution since he acquired Laughlin National Bank in 1998 and renamed it First National Bank.

The holding company combined its Arizona and Nevada banks under a Nevada charter effective July 1 and is operating its new First Heritage Bank in Southern California under a separate charter.

First National has also named James Claffee to take over as CEO on June 5, succeeding Gary Dorris, who retired.

Like many banks struggling with the real estate slump, First National needs to replenish its capital, because it has reduced its capital to set up loan loss reserves for problem loans, Gottesman said.

"We continue to be proactive, to take reserves and recognize value problems in our (loan) portfolios," he said. "We do think we're out in front on that."

Gottesman declined to disclose financial results for the second quarter before federal bank regulators report the numbers for institutions around the country. The holding company lost $131.3 million in the first quarter, compared to $1.8 million in profit a year ago.

First National invested in residential mortgage loans and also made a heavy commitment to residential construction loans, two areas that the economic downturn slammed.

The bank bought residential home mortgage loans around the country during the boom days but closed that operation in August 2007. The division held $750 million at the time, but the total dropped to $550 million. The bank expects most of the other loans to be paid off in three to four years, given refinancings and homeowners who move and sell.

A small portion of the home loans are subprime, but most are either prime loans and Alt-A loans, which are stronger credits than subprime but lower than prime. The portfolio includes both adjustable-rate and fixed-rate loans.

First National stopped originating new home loans from retail customers in January.

The supply of land available for development in the Las Vegas Valley is limited, unlike the Phoenix metropolitan area which sprawls over a large area, Oakley said.

Meanwhile, bank officers say they have diversified lending in recent years, focusing more on non-real estate commercial and industrial loans, including Small Business Administration loans.

First Heritage Capital, the small business lending division of First National Bank of Arizona, was named the 2008 Excellence in Lending Award winner for the district that includes California, Nevada, Hawaii, Guam and Arizona.

One of the bank's biggest success stories has been its Community Association Banc and a related program called CondoCerts. These operations help property managers collect dues and manage accounts for homeowner associations around the country. The program provides First National with $1.2 billion in deposits, said Phil Lamb, executive vice president and board member. The bank has $60 million in loans for homeowner associations,

The bank started a gaming division three years ago and has $250 million in that portfolio now.

Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.

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