Tranquil Times

The marketplace for Sanibel Captiva Community Bank, the only community lender chartered on Sanibel Island, is mostly relaxed and peaceful.

But don't mistake tranquility for silence when it comes to performance.

The $225.7-million-asset institution is one of the leaders among all 45 Gulf Coast-based banks in return on equity and return on assets. Sanibel Captiva posted a 10.75% return on equity in the second quarter, a 12.56% change from the second quarter last year, when the bank held a -1.81% return on equity. The bank's year-over-year turnaround on return on assets also reversed a decline: Sanibel Captiva had 1.03% return on assets in the second quarter, up 1.19% from -0.16% in 2012.

Return on assets measures net income as a percent of average total assets. That indicates how a bank generates profits off its assets, regardless of size. Return on equity, meanwhile, is a bank's annualized net income as a percent of average equity. The metric essentially shows what a bank's owners earn on their investment.

At Sanibel Captiva, founded in 2003, those return figures are all good. President and CEO Craig Albert says the bank is poised to have its most profitable year ever in 2013. The stellar returns, says Albert, mostly stem from the bank's success in selling its backlog of distressed real estate properties. “We are working out the bulk of our foreclosures,” says Albert. “The bank is in a good position to make money now.”

Several other Gulf Coast-based community banks are in a similar good position in return on equity and return on assets. Seminole-based First Home Bank and St. Petersburg-based Freedom Bank of America, for instance, posted year-over-year return on equity improvements of 34.02% and 30.2%, respectively, in the second quarter. Executives at both banks did not return calls be reached for comment.

And Naples-based First National Bank of the Gulf Coast had the region's largest year-over-year percentage gain in both return on equity and return on assets in the second quarter. The bank had a return on equity of 33.1% in the second quarter, a 34.4% improvement over a -1.29% return on equity in the 2012 second quarter. Return on assets at the bank improved 3.76% in the second quarter, from -0.18% last year to 3.5% this year (see charts on page 17 for complete numbers).

First National Bank of the Gulf Coast Chairman and CEO Gary Tice, in previous interviews with the Business Observer, says the bank's solid capital base has been one of its biggest strengths. That includes $148 million it raised from institutional investors in 2011. A First National spokesperson says Tice was in a bank conference in New York, and unavailable for comment on the latest data.

Other banks in the region struggled with returns in the second quarter.

Sarasota-based Gateway Bank of Southwest Florida, for one, posted a decrease of 7.06% in the second quarter, from 17.9% in 2012 to 10.84% in the most recent quarter. But Gateway, like many of its well-capitalized peers, was able to “take advantage of extraordinary opportunities in the investment securities market,” in 2012 says President and CEO Shaun Merriman. That return, therefore, skewed the 2013 results — an issue several other local banks face.

And Sarasota-based Bank of Commerce, for example, posted a drop in return on equity of -21.14%, from 13.7% in 2012 to -7.36% in the second quarter this year. Bank of Commerce CEO Charlie Murphy, in an email response to questions about the bank's returns, says the decrease stems from 2012. That's when Murphy says the bank was “able to take advantage of significant gains in our investment portfolio.”

“During the first six months of 2013, we did not have these opportunities and had unusually high professional fees associated with the pursuit of loans previously charged off,” adds Murphy. “This is a normal cycle where you go through the process of foreclosing and acquiring the property to collecting on the deficiency judgments that are granted due to the charge offs.”