On The Trail

The number of Gulf Coast-based community banks dropped from more than 65 just a few years ago to 43 by the end of 2013.

But several banks that survived the tumultuous times of the past five years are back in growth mode. While some remain in a struggle, other institutions even had stellar years — beyond one-time tax gains. Sarasota-based Gateway Bank of Southwest Florida is one lender on the stellar side, says president and CEO Shaun Merriman. “Last year was hands down the best year we've had since the bank was founded in 2008,” Merriman says. “It was a phenomenal year. We could not be more proud of our performance.”

On pages 12-16, see how other banks fared in key metrics.

SUMMARY
Industry. Banking Trend. Several community bankers say the climate has started to improve. Key. A majority of the 43 Gulf Coast-based community banks posted an increase in assets in 2013 fourth quarter over 2012.

Return on assets/Return on equity
These ratios measure a bank's performance on its money. Return on equity is annualized net income as a percent of average equity, which is what a bank's owners earn on their investment. Return on assets measures net income over average total assets. That shows how a bank manages its assets to generate profits regardless of size.

The fourth quarter figures in these two categories mostly follow a trend seen in other 2013 quarters: Improvements stem from tax rules that prevented banks from having tax credits against losses in 2012. Multiple banks also sold securities in 2012 to capitalize on one-time gains, which again skews 2013 data.

Return on assets in the fourth quarter at Punta Gorda-based Calusa National Bank, for example, rose 1.24% over 2012, from 0.55 to 1.79. But Calusa CEO Lew Albert isn't overly excited. “It's simply a matter of the CPAs feeling confident you can receive the benefit,” Albert says. “That inflated earnings.”

Tampa-based Southern Commerce Bank had the largest year-over-year gain, by far, among all Gulf Coast based community banks in return on assets. A division of Kansas City-based Dickinson Financial Corp., Southern Commerce posted an increase of 16.9 percentage points, from -1.91 to 14.99. Dickinson Financial officials didn't return several calls for comment.

On fourth quarter return on equity data some banks significantly outperformed peers, while others posted large negative swings. Southern Commerce, with an increase of 86.46 percentage points, was an area leader, followed by Freedom Bank of America, up 39.56 points, and Seminole-based First Home Bank, up 29.28.

Freedom President and CEO Cathy Swanson couldn't be reached for comment. First Home Bank CEO Tony Leo declined to comment on his bank's specific fourth quarter numbers. He cites the bank's recent shift under new leadership and says 2013 “represented the completion of First Home Bank's transition to a new era of profitability.” The bank is also an S corporation, which impacts its tax status and results.

Banks that posted drops in return on equity include three Sarasota-based institutions: Gateway, Sabal Palm and Bank of Commerce. Merriman, with Gateway, Sabal Palm President and CEO Neil McCurry and Bank of Commerce President and CEO Charlie Murphy all point to 2012 sales of securities for the drop. Bank of Commerce, which fell 20.39 points year-over-year, from 5.34 to -15.05, had the largest fall among the three lenders.

Quarterly income/year-to-date income
Tax gains, security sales and other one-time happenings skewed income results at several institutions in the fourth quarter, several banking executives say.

Year-over-year quarterly net income at Bank of Commerce, for instance, dropped 230.2%, from a loss of $63 million in 2012 to a loss of $208 million in the fourth quarter. That was the largest quarterly decrease on the Gulf Coast. But the drop, also connected to a 2012 securities sale, says President and CEO Charlie Murphy, hasn't altered the bank's mission and focus: To rid itself of under-performing assets accumulated during the recession. Says Murphy: “We are still hanging around.”

Other banks with significant drops in quarterly net income include St. Petersburg-based C1 Bank and Sarasota-based Insignia Bank. At C1, the fast-growing bank was down 71.9%, from $7.69 million in the 2012 fourth quarter to $2.16 million in 2013.

The decrease, says CEO Trevor Burgess, was predicated on a large one-time sale in the 2012 fourth quarter that skewed the 2013 data. The bank, Burgess says, is still doing well, especially in loan demand. Says Burgess: “We are honored that our story of banking for entrepreneurs by entrepreneurs has resonated in the community.”

The 74.5% year-over-year decrease in quarterly net income at Insignia is also connected to a one-time recovery of a loan in 2012 that was a “huge windfall,” says Insignia CEO Charlie Brown. The drop, from $715,000 in the 2012 fourth quarter to $182,000 last year, didn't dent Brown's enthusiasm for the rebound, which he says the residential housing market is driving. The bank has more than doubled its loan staff, from three people to eight, to meet the demand. “That's how much I believe in what we are starting to see in the market,” Brown says.

Other banks posted large gains in net income, especially on a year-to-date basis. Sanibel Captiva Community Bank is one of those lenders: Its profits doubled, from $1 million in 2012 to $2 million in 2013. Sanibel Captiva President and CEO Craig Albert credits both an improved economy and the sale of one of the bank's largest foreclosure properties for the increase. It was the bank's most profitable year since 2006, he says. “We feel good about things,” says Albert. “Now we want to build on that the rest of this year and in 2015.”

Other institutions with a sizable increase in profitability include Naples-based First National Bank of the Gulf Coast and Plant City-based Hillsboro Bank. With a 958.73% increase, First National posted the largest year-to-date net income percentage gain on the Gulf Coast. A large chunk of that increase, says First National Chairman and CEO Gary Tice, is from a tax credit the bank realized in June. But even beyond that, the bank, says Tice, has positive momentum. “The banking climate is excellent,” Tice says. “We are doing really well in Collier County.”

Hillsboro Bank's gain was on a quarterly basis, from $49,000 in the 2012 fourth quarter to $307,000 in 2013. That's a 526.5% jump, the highest quarterly gain on the Gulf Coast. Hillsboro executives didn't return several messages left for comment.

Assets
Assets for all Gulf Coast community banks combined in the fourth quarter increased 8.8% over 2012, from $23.1 billion to $25.4 billion.

But not all banks posted an increase. Tampa-based Bay Cities Bank, with a drop of -18.58%, from $650,606 in 2012 to $529,723 in 2013, was one of the banks that fell in assets. Bay Cities President and CEO Greg Bryant says the drop stems from a decision to get out of the automated clearing house industry, where the bank had processed large volumes of credit transactions. “As we exited that line of business,” says Bryant, “the deposits from that client left.”

Bryant says the bank is instead focused in other directions. That includes boosting its presence in Sarasota, where it recently launched a loan production office with four employees. The Gulf Coast market, in general, is better, but Bryant believes it can grow more. “There is loan demand,” he says, “but it's certainly not brisk.”

Other banks that turned demand into an assets gain in the fourth quarter include C1, up 41.6%; Fort Myers-based FineMark National Bank & Trust, up 36.76%; Preferred Community Bank in Fort Myers, up 16.3%; and Sabal Palm, up 16.5%.

FineMark Executive Vice President and CFO Brian Eagleston says the bank has posted several consecutive quarters of solid asset growth. Like Brown at Insignia, Eagleston partially attributes the increase to a housing market rebound. The bank opened an office in Naples in January, which he says should help drive asset growth even more in 2014. “You are always a little bit pessimistic because you never know what's going to happen,” Eagleston says, “but things are going really well.”

Neil McCurry, president and CEO at Sabal Palm, says the increase at his bank also foreshadows what he projects will be a good year. “We have worked hard to get through our issues,” says McCurry. “That frees us up to go out there in the community and do what we need to do.”