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By Nathan Peck | MiBiz
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MICHIGAN — Flagstar Bank at one time embodied the worst of the financial crisis.

Almost exclusively a financier of home mortgages, the Troy-based bank flew high on the housing bubble, then watched its assets and stock plummet as the bubble burst in 2008. Flagstar has raised $1.4 billion in new capital and has emerged out the other side of the economic crisis determined to diversify its asset base and enter the business lending market.

As part of that strategy to build its commercial loan portfolio, Flagstar tapped Michael Tierney as EVP and managing director of retail banking to head the Michigan-Indiana market. A banker with more than 33 years of experience — 28 years at Comerica Bank and four as president of People’s State Bank — Tierney expects to avoid the retrenchment as banks expand their footprint and are forced to pull back.

“Typically when banks enter markets, they get too aggressive early on and two years later pull back. Our focus is to do really solid loans, make good loan decisions so that two years from now that doesn’t happen,” Tierney told MiBiz.

Tierney expects to grow commercial lending from $100 million to $500 million in two years and is in the midst of hiring more than 20 commercial lenders to support the expansion into business loans. These lenders will be in the community, spread among the 21 financial centers in West Michigan and around the state, and will be able to make decisions locally.

“I see Flagstar’s position as a super-community bank. We are small enough that we think we can provide the same level of service as a community bank can,” Tierney said. Large loans will be evaluated by senior management at the bank, but “90 percent of the loans will be made by people on the ground in West Michigan. Credit decisions will be made in the local market. I think that will make us much more responsive, where the lender doesn’t need to make decisions at different levels.”

Whereas most banks take a segmented view of the marketplace, Tierney sees value in taking a holistic view of commercial lending.

“We are taking a different approach. We are looking to put loan groups in the market. We’ll take the referral, whether it is a $500,000 loan or a $20 million loan. For companies up to $300 million in sales, we can support any loan they need.”

As the state’s largest banks have dealt with their own issues related to the recession, Flagstar’s improving position means that it can move carefully into commercial lending.

“We have been hard at work putting all the systems in place required for loan accounting (and other services) to support the commercial lending that we didn’t have previously. It’s a tribute to our CEO, Joe Capanelli, who had the wisdom to start into that long before we hired our first commercial lender,” Tierney said. Businesses have had difficulty gaining access to credit over the last two years, but “it is changing now. You will start to see most of the banks becoming more aggressive. There will be more credit available. We certainly see it in loans we’re doing — where not a lot of banks were interested in business lending in the last quarter of last year, they are very interested now.”

Still, the push into commercial lending comes as losses continue at Flagstar related to defaults on mortgages, but those losses are slowing, said Tierney.

“It is a difficult operational environment in all of Michigan — West Michigan has been more diversified, but even the top banks in West Michigan have had a bad run of it lately,” Tierney said. “We are number 11 in the mortgage industry, and frankly that business has been good. We’ve seen a lot of activity in the refinance business.”

It will be the bank’s ability to follow through with customer service that will spell its success in the commercial lending market.

“It depends on if we can establish the brand, if we can wow the customers with the service we have. We know it will take time to get established. We feel we are uniquely positioned.”