Even now, after Marine Bank & Trust put together back-to-back years of record earnings and ended 2014 with its eighth consecutive profitable quarter, Bill Penney will not say he won.
He’s too politically sensitive for that. But, really, he did – and it was a win for Vero as well.
Marine’s president and CEO since February 2010, Penney boldly and courageously challenged the Federal Deposit Insurance Corp. in 2011 and emerged the victor in a two-year legal battle to save Vero Beach’s only locally-owned bank.
Yet, to this day, he refuses to even take his share of credit for his unlikely triumph.
“I’m very proud of what we’ve done, but it wasn’t just me,” Penney said in the wake of the Beachland Boulevard-based bank’s latest success.
“I’ve been blessed with the best group of bankers ever assembled. I’m biased, of course, but I really believe that. These people make me proud every single day.
“And just as we kept believing in this community, the community kept believing in us,” he added. “This is a fairly conservative town, but all throughout our fight with the FDIC, we had very little attrition. Instead, we had a lot of people saying, ‘Good for you.’
“We’ve always taken care of our customers and treated them the way we’d want to be treated. So when all that happened, they trusted us, which meant a lot to me, personally.”
An easy smile crept across his face.
Penney has been vindicated by Marine’s rise from recession and its remarkable run of record earnings. He’s excited about the bank’s future. But he hasn’t forgotten the angst and aggravation he endured along the way.
“We did what we believed was right,” he said, “but it was a rough couple of years.”
The worst part?
For Penney, it wasn’t having to fight the FDIC’s troubling charges, which forced him to defend his management, judgment and reputation, as well as his bank’s independence.
Nor was it the four hours he spent on the witness stand at the U.S. Federal Courthouse in Fort Pierce, where he responded to FDIC allegations that Marine had an “excessive volume of poor quality loans,” was operating “with insufficient capital in relation to the kind and quality of assets held by the bank,” and lacked sufficient diversity in its investments.
Those were difficult times, to be sure, as the Florida real-estate bubble burst and put lenders throughout the state – especially the smaller, community banks – on the wrong side of the ledger.
For Penney, however, the most painful aspect of the FDIC’s attacks was the headlines that appeared above the fold of the local daily newspaper in June 2011.
“Right there on the front page, above the fold, you saw: ‘FDIC charges Marine with unsafe and unsound banking practices,’” he said. “That was tough.”
It was tough because Penney, who demanded his bank operate with the highest standards of customer service and integrity, knew the headlines were misleading.
He knew his bank wasn’t irresponsible with its investments or reckless with its loans, to the point where it did not engage in the sub-prime lending that contributed mightily to the collapse of the national economy.
He knew his bank was already taking significant steps to increase its assets and improve its capital position.
He knew the FDIC had acted hastily, given Vero Beach’s real-estate-based economy.
Mostly, he knew his customers.
“A local bank is a reflection of the local community,” Penney said. “Most of our business is local. We know our customers. We knew what they were going through – some of them, because they lost their jobs or the value of their property went down, just couldn’t pay anymore – and we tried to work with them the best we could.
“The loans weren’t speculative; they were all well-underwritten,” he added. “But 2010 was a very difficult year. It was difficult for our customers and it was difficult for us. But we believed in this community. And we believed that if we could just buy some time, things would turn around.
“At that time, most all of Florida’s banks were under some consent order or action.”
So Penney, backed by his board of directors, chose to stand up to the FDIC, which was seeking a consent order that would’ve forced Marine to sell to or merge with a larger financial institution if the bank failed to make the required improvements in an unrealistically short period of time.
Among the FDIC requirements were increases in reserve capital and earnings, and reductions in problem loans and other non-performing assets.
“We agreed we needed to improve our numbers, and we were working on that,” Penney said. “But there were other requirements, particularly in raising capital, that could’ve put us in a situation where the FDIC could force the board to sell the bank.
“We weren’t going to agree to that.”
The bank’s refusal to agree led to the formal charges and a long and arduous legal battle, during which Penney argued before a federal judge that a small community bank’s business plan shouldn’t be judged by big bank standards and that Marine’s financial standing was stronger than portrayed.
Although the judge’s 60-page report sided with the FDIC on several issues, it expressed enough empathy for Marine’s case – and enough confidence in Penney’s efforts to bolster the bank’s bottom line – to get him the time he needed.
Marine’s capital position already was improving in December 2013, when Ken Lehman, a Securities and Exchange Commission attorney from Arlington, Va., and a self-described “banking entrepeneur,” became the local bank’s largest shareholder with the purchase of $4.3 million in stock.
“I could tell in early 2013 that the local economy was getting better and, in turn, the bank was doing a lot better,” said Penney, who joined Marine in March 2004 as executive vice president and chief lending officer and was elected to the bank’s board in 2008. “Homes were selling again. Builders were building again. People started financing again, rather than buying with cash.”
In 2013, Marine made 93 home loans totaling $17 million and enjoyed its most profitable year since the bank’s founding in 1997. And 2014 was even better, with 139 home loans worth $33 million.
Not only did Marine experience a 12 percent increase in total assets – from $145 million at the end of 2013 to $163 million at the end of 2014 – but it also finished the year with record annual earnings of $933,201.
That news followed a November report that the bank raised $2.5 million in capital and, according to regulatory requirements, is now considered “well capitalized.”
“Increased demand for residential housing is driving economic growth in our community,” Penney said. “With the improving housing market, we continued to increase the number of home loans we make. Helping our customers achieve the American dream of home ownership is one of the most satisfying parts of our business.”
That’s why Penney believes Vero Beach needs a community bank.
That’s why he fought so hard to save the only locally-owned bank in town.
That’s why it was so important to Vero.
“We’re still here,” he said. “We’re still serving the community and taking care of our customers. And we plan to be here doing business for a long time.”