By Linda Goodspeed
When Michael N. Vittorio took over the helm of the First National Bank of Long Island 10 years ago, the bank looked more like a securities house than a bank.
“We were over-capitalized,” said Vittorio, president and CEO. “We had a very low loan-to-deposit ratio, only 35 percent. Most banks have an 85 percent ratio. With the yield curve flattening, we had to make some strategic changes.”
Those changes included a four-part plan that has helped the once-sleepy bank more than triple in size over the last decade. First National now has more than $2 billion in assets and a growing network of 35 branches in Long Island and Manhattan. More impressively, Vittorio grew the bank during one of the worst economic downturns in 75 years, and did it without assuming undue risk or through acquisitions.
“We actually have a bias against acquisitions,” Vittorio said.“Most bank acquisitions are not all that successful. They make great country club talk, but I could care less about country club talk.”
Instead, Vittorio grew the bank organically. His four-part plan started with turning First National’s composition of earnings assets from securities to loans.
“With loan growth, you can drive relationships and deposits,” he said.
Next, he had to make massive capital investments in First National’s aging plant and technology functions.
“I didn’t even have email when I came 10 years ago,” Vittorio said. “the bank’s computers, core processing system, wiring was very old. We had to make a total upgrade.”
His third priority was people.
“We did very selective hiring of key people, both senior and middle management,” Vittorio said. “With people comes additional networks and, hopefully, customers.”
Finally, he undertook a complete review of the bank’s policies, protocols and underwriting standards.
“We wanted to make sure that as we went into credit mode, we were not going to damage the bank or our stockholders,” he said. “A lot of people go into credit without policies, documentation, underwriting guidelines, and it can be disastrous.”
Ahead of his time
First National avoided disaster by adopting very conservative underwriting standards even during the heady go-go years before the financial meltdown in 2008.
“Most banks were doing even 100 percent financing,” Vittorio noted. “We always did 70 percent. When most banks were not doing stress testing, I started it. We introduced FICO scoring. Credit risk is the most important thing for large and regional commercial banks to address. You have to be almost cult-like about it. It’s the fastest thing that can take a bank down.”
The attention to credit risk has paid off. In the bank’s $1.1 billion loan portfolio, which is divided about equally between commercial and residential loans, there are just five nonperforming loans, and 10 delinquent loans.
“They have a pristine balance sheet,” noted Brian Kleinhanzl, a bank analyst and vice president at KBW in New York City. “They have been able to avoid a lot of credit problems other banks faced, which has allowed them to take market share.”
Vittorio said the bank’s stock price has increased 104 percent over the last 10 years, and that Morningstar rates the bank among the top 25 public companies for increasing dividends paid to shareholders over the last five and 10 years.
Looking ahead, Vittorio says the future is fraught with peril for all banks: flat economy, continued high unemployment, declining disposable income, Uncertain political and regulatory environment, Low interest rates, turbulent world events.
But he has no plans to alter First National’s strategy or direction. With a 62 percent loan-to-deposit ratio, he says the bank has room to grow its lending, branches (two more in 2013), and hiring – “We continue to look for key people.”
At the same time, he remains his usual cautious self. “We’re very concerned about being over-aggressive,” he said. “We want to stay very measured, disciplined. We don’t want to expand dramatically in a low-interest environment.”
Alex Twerdahl, associate director at Sandler O’Neill and Partners in NYC who follows First National, says there is room for growth for them.
“Nassau is a very populous county,” Twerdahl said. “They have an excellent balance sheet and management team, and are positioned well to take market share from other competitors.”