Central Florida Mortgage Lender Not Immune to Housing Slump

After nearly two decades of smooth sailing, Federal Trust Bank has run into some serious head winds in its Florida home loan lending.

Profit has plummeted, bad loans have skyrocketed and assets have decreased for the longtime Central Florida housing market lending institution.

• The only publicly traded bank based in Orlando has also seen its stock prices fall precipitously.
• Federal Trust closed at $8.05 a share Tuesday, down 33 percent so far this year and close to its 52-week low of $8 a share.
• Federal Trust was the 17th-largest bank in Central Florida in 2006, based on deposit market share, but deposits slipped nearly 3 percent to $480 million in the first quarter.

It is a dramatic departure for a savings and loan that ranked 53rd in a 2005 survey of the nation’s 100 best-performing public thrifts.

Federal Trust is not the only Florida mortgage lender to see such troubles, said John McCune, research director for research firm SNL Financial LLC.

But the housing slump has especially hurt thrifts, because many invested heavily in Florida real estate development during the boom years.

“The thrift industry as a whole is getting hit, but Federal Trust is being hit harder than most,” McCune said.

Bank officials said they have launched a multifaceted effort to right the ship. An aggressive branching program has more than doubled its “footprint” since early 2006. Federal Trust now has nine offices in Orange, Seminole, Lake and Volusia County.

It has implemented a bankwide training program that introduced a new sales and customer-service culture, and an aggressive marketing campaign.

Although the measures have contributed to its profit erosion, Federal Trust is confident it will result in a turnaround, said James V. Suskiewich, the thrift’s president and chairman.

“That’s our challenge. This new strategy will take time, but we believe it will bring positive changes and the market will respond,” he said.

“I’ve talked to our investors and institutional people and they are plotting our plan, wishing us great success and giving us an opportunity.”

For almost a year, the bank has cited the “softer Florida housing market” along with a series of other factors that have hurt its profit.

Among others, there were Florida mortgage problems, the costs of building new branches, defending litigation related to an adversarial proxy battle last year and bringing aboard new executives and branch employees.

But one of the bank’s most problematic issues has been the large increase in nonperforming assets, or bad Florida home loans that are in default.

Florida mortgages that are non-current or past due jumped almost fivefold to $16.7 million in the first quarter. Overall, such assets totaled $18.8 million, a 376 percent jump.

The bank said the default of two major real estate related loans accounted for much of the increase in non-performing assets.

Suskiewich said the portfolio has stabilized, and the bank is making every effort to recover the value of the defaulted home loans, which were well-secured. Federal Trust was not involved in any bad credit Florida home loan or other higher risk lending, he said.

“These are the most financially challenging times for us, certainly in recent memory,” Suskiewich said.

“But I find that in challenging times, there are also opportunities, and we believe we are going in the right direction.”

SOURCE: Orlando Sentinel