Rising tide

Shamrock Bank of Florida might be one of the region's smallest banks, but it posted the biggest percentage increase in profits in the first quarter.

Naples with $112 million in assets, posted a 571% increase in net income in the first quarter compared with the same quarter one year ago as the weight of troubled loans dissipated. “This bank took a lot of hits from legacy loans,” says Colleen Kvetko, Shamrock's president and CEO. “Now all the banks are coming out of that.”

Indeed, 46 banks on the Gulf Coast from Pasco to Collier counties posted a combined 16% increase in net income in the first quarter compared with the same quarter in 2012.

Profitability came from a number of different areas. These included improved interest margins on loans, sales on gains of securities, higher fee income from services such as money management and expense controls.

In some cases, the boost in profits came from one-time events that reflect a recovering economy. For example, at Flagship Community Bank in Clearwater, CEO and President Frank Burke says the bank recently collected on a problem loan that festered for two years. “We got paid in full so we recouped a substantial amount in reserves,” he says. “I'd like to say we'd like to have those things happen every quarter.”

Net income at Flagship Community Bank rose 173% in the first quarter compared with the same quarter one year ago. “We anticipate the year will be profitable, but it just might not grow in a straight line,” says Burke, noting that loan demand is not as strong as he'd like.

At Gulfshore Bank in Tampa, where net income rose 181% in the first quarter, President and CEO Joseph Caballero says the lower cost of deposits helped boost profits. Banks make money on the difference between what they pay for deposits and what they charge on a loan, so lower interest expenses help the bottom line.

Caballero says Gulfshore Bank targets business customers who bring non-interest deposits to the bank. “Part of our long-term strategy is bringing in lower-cost deposits,” Caballero says. “We're seeing the continued success of that strategy.”

That appears to also be a key to Raymond James Bank's profits. Securities and Exchange Commission filings by parent company Raymond James Financial in St. Petersburg say that the bank benefits from brokerage accounts whose clients' funds are deposited at the bank. So-called “sweep accounts” are a low-cost source of deposits. (Raymond James Bank President and CEO Steve Raney was not available to discuss the bank's performance, a spokeswoman says.)

In many cases, banks don't have to set aside as much money for bad loans as they did during the downturn, making profit comparisons easier. “The primary reason for the increase in profitability is that our credit-related costs continued to decline,” says Gregory Bryant, president and CEO of Bay Cities Bank in Tampa, which posted an 88% increase in net income in the first quarter.

“Our bank historically has been aggressive about identifying and marking down problem loans,” Bryant says. “We have some bad assets to resolve, but we've made substantial headway.”

Not all banks were as profitable in the first quarter as they were a year ago. Most notably, fast-growing C1 Bank's net income fell 68%. Officials with the St. Petersburg-based bank couldn't be reached to discuss results, but the bank's income statement shows substantially higher expenses in the first quarter compared with the first three months of 2012.

Two banks headquartered on the Gulf Coast showed substantial losses in the first quarter. These included First Community Bank of Southwest Florida in Fort Myers and Florida Bank in Tampa.

Neither bank's officers could be reached to discuss the results, but FDIC data show both banks continue to struggle with soured loans. First Community Bank posted $2.5 million in loan-loss provisions in the first quarter and Florida Bank posted $1.5 million against losses.

Still, more banks swung to a profit in the first quarter from a loss in the same quarter in 2012. These included First National Bank of the Gulf Coast in Naples, Sanibel Captiva Community Bank, Republic Bank in Port Richey, Encore Bank in Port Charlotte, First America Bank in Bradenton and Preferred Community Bank in Fort Myers.

Craig Albert, the president and CEO of Sanibel Captiva Community Bank, says expenses incurred during the downturn have fallen. “All the attorneys' fees and expenses that go along with the foreclosures are waning,” Albert says. “We've written everything down.”

Some banks' earnings have benefited from income other than loans. At Shamrock Bank, Kvetko says the bank benefited from the gains on sale of bonds from its securities portfolio. At Charlotte State Bank & Trust in Port Charlotte, the trust business represented 19% of earnings, says Craig DeYoung, the bank's president. “The trust department is a huge success for us,” he says.