Saying No to TARP: Charles Antonucci Sr., CEO, Park Avenue Bank

"I don't need TARP money." That's the message to depositors from Charles Antonucci Sr., CEO of Park Avenue Bank, which recently withdrew its application for federal Troubled Asset Relief Plan (TARP) funds.

In an exclusive interview, Antonucci discusses:

Why his bank withdrew its application;
The message to his depositors;
What the banking industry truly needs to recover in the months ahead.

Charles Antonucci, Sr. is The Park Avenue Bank's President and Chief Executive Officer, who brings more than 30 years of banking experience to his position. He is responsible for significantly expanding the bank's asset base and branch network throughout the New York marketplace.

TOM FIELD: Hi this is Tom Field, Editorial Director with Information Security Media Group. We're talking about an interesting banking case today, about a bank that has withdrawn its application for TARP funds. We are talking with Charles Antonucci, CEO of Park Avenue Bank. Charles, thank you so much for joining me.

CHARLES ANTONUCCI: You're quite welcome. It's my pleasure.

FIELD: Just for a little background, why don't you tell us a little bit about your institution and yourself?

ANTONUCCI: Okay. Park Avenue Bank has been in existence since the late 80's, 1987. It was acquired by a group which I was a part of in June of 2004, and in June 2004 it was about an $85 million dollar bank -- very different model than it is now, but we basically turned it into a small business bank in Manhattan, and with retail branches we are now a little over $500 million with four branches in Manhattan.

For myself, I have been in and out of banking for 35 years in various positions, a couple of CEO spots and in an ownership position in some of the cases as I am here in this institution.

Where we are right now, I guess the bank is very active in the New York City market and seeing more business opportunities than we have seen since we acquired the bank in June of 2004.

FIELD: Well, that's good news. Now you made the news recently, Charles, because you withdrew your application for TARP funds. Why is that?

ANTONUCCI: Yes. Well, a couple of reasons. Primarily there are a lot of issues with the TARP funding and the perception. It was two things: Nobody really knows what the rules are going to be in terms of those who take and utilize the TARP money, and that is very unsettling in any business and even more so in the banking business because we are already highly regulated. And secondly, there is market perception that if you take TARP money, that you are now a bad bank, which is a perception that nobody wants whether you are or you aren't. Nobody needs that perception in a marketplace where everybody is concerned about safety.

FIELD: Sure. So why did you apply in the first place, and what changed between the time you applied and when you made your decision to withdraw?

ANTONUCCI: Well, we applied when the program initially came out. Again, at that time the perception was if you didn't apply and get TARP money, you were too weak to get it; in other words, in order to get the money you had to be a strong bank. So the perception in the marketplace is if you didn't apply for it then, if you didn't get TARP money initially when you applied for it then you were a troubled bank. It was just kind of reverse to where it is now.

And the rules then were much simpler. It was a program that was evolving, and everybody was encouraged to apply for TARP money by the regulatory agencies. Some were basically told to take it, and so there was a very different perception in the market. When we applied and the program evolved over time, we recognized that it wasn't the best thing to be involved with, and I think we had pretty much come to that conclusion in November/December and we finally withdrew the application, I believe in February.

FIELD: The phrase comes to mind, "damned if you do and damned if you don't."

ANTONUCCI: Correct. Correct. You know, I think that it was very hastily put together, and nobody really knew the rules, so the fact that we were a little slow pulling the trigger and applying actually helped us more than hurt us.

FIELD: So by withdrawing the application, what would you say the message is to your bank's depositors?

ANTONUCCI: Well you know, in conjunction with withdrawing the application, we are also putting additional capital in. The capital is coming primarily from myself and other members of my board. It is the insiders that are investing capital into the bank, so the message to the depositors is at this point, I don't need TARP money, I don't necessarily want TARP money, we are a strong bank, and management is committed to putting capital in as it is needed.

FIELD: Very good. Now given the recent economic events and certainly what is happening in your own city down on Wall Street, what would you say is the state of your own institution's safety and soundness then?

ANTONUCCI: Once we put in the additional capital, we are going to be very strong. We have some real estate issues, nothing--no subprime issues, but the economy has turned down a little bit. But I think the one advantage we have is that we are, because of our size and our relationship with our borrowers, we are able to work with them on a one to one basis to get through this sort of downturn in the economy. So I think that overall we are going to emerge from this much stronger with a much better customer base than we started.

FIELD: What are the areas that you are looking at right now for growth?

ANTONUCCI: Primarily small businesses. Small business customers right now have credit needs, and we are working with many of them. The existing customers we have, we have expanded our lending to them, and we are probably a little bit more stringent than we were; we are pricing it a little higher than we were in the past, and the pricing mechanism does two things: It controls the demand to a certain extent and, we are getting paid for the risk that we are taking in the marketplace. So I think we are going to continue to focus on the small business market and there has been plenty of demand in the past few months.

FIELD: Again, very encouraging. So a good new administration in office, and they have certainly made banking and financial services a part of their agenda. What do you see so far from the Obama administration, and what are your thoughts on what you see?

ANTONUCCI: Well I think there is a lot of confusion out there. Most recently I see a lot of anger as to what is going on with some of the firms that they have bailed out with this bonus situation.

Again, I think that it is really too early, and I don't mean to be critical, but they have tried to do too much too soon, and they didn't think through some of these issues, like the bonus issues. What is the long-term viability of these institutions that they are trying to prop up and save? Nobody really evaluated what would happen if these institutions didn't survive. Nobody really knows, so to take the action that they have taken I think has caused more confusion and more uncertainty in the market than had they let these institutions just handle their own problems. Or not handle their own problems. I'm not a big proponent of government bailouts.

FIELD: Well you are on the front lines right now, and you have certainly been in the midst of the biggest banking crisis we have seen in our lifetimes, what do you think the banking industry really needs to recover in the coming months?

ANTONUCCI: Well, first of all, this is my third banking crisis that I have been involved in, and I think we all said the same thing in the late 80's and early 90's -- when the RTC was around, it was the biggest banking crisis ever. I think the two things that have to be what stand out to me are there is a big distinction between Wall Street bankers and Main Street bankers.

Wall Street is gone, which from a Main Street banker's perspective is probably a good thing, because we are getting a splash of the problems that they created. And I think one of the big problems that the public has is they don't see the distinction between what I do and what a Wall Street banker does. I make loans to companies directly. I make mortgages to people directly. There is no third party involved in what I do, so there is a relationship we have, so that is the first thing.

And secondly I think that the banking industry really--what Main Street bankers do is very basic, and what Wall Street does is create a hybrid of a basic product. So I think if we stay with basics and rebuild on the basics, I think the banking system is going to be fine.

I don't think there is anything wrong with 15,000 small banks in this country; you know the "larger is better" obviously has turned out to be more of a myth than reality, so I think that as the banking industry comes back, it is going to come back with much smaller banks that are just dealing with the customers that they know, and I think that is part of the problem that we have had with these large mega-banks.

FIELD: That's well said. Charles I appreciate your time and your insight today.

ANTONUCCI: Thank you very much. It was certainly my pleasure.

FIELD: We've been speaking with Charles Antonucci, CEO of Park Avenue Bank. For Information Security Media Group, I'm Tom Field. Thank you very much.

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