Small yet mighty: Two community banks outperforming many of their peers

Editor's note: Two of the most consistent performing community banks in the region, Sanibel Captiva Community Bank and First Citrus Bank, have outperformed many peers since before the recession. This story looks at the strategy for each bank. 

Sanibel Captiva Community Bank

While some small financial institutions are being swallowed up, forgotten about or merged into the huge banking corporations that have household name recognition, Sanibel Captiva Community Bank is performing quite admirably.

The bank is preparing to open its eighth branch, has goals to expand with more branches in and out of Lee County, and its board of directors recently voted to give bonuses to its staff for the second year in a row.

More success? The bank recently surpassed $1 billion in residential mortgage loan originations through more than 3,125 loans, according to a statement. It achieved the $1 billion milestone 11 years to the month after its residential lending division was created with two loan officers, in 2008. The division now has eight loan officers and 14 additional loan servicing staff, accounting for about one-fourth of the bank's payroll. 

So what’s its secret of not only staying afloat but also outperforming other similar-sized community banks?

“We’re kind of like a speed boat in the different areas that we are able to go in and do loans that bigger banks don’t seem to be interested in,” President and CEO Craig Albert says. “The other thing is, it’s just our service. We can just do things where employees at bigger banks may not have the authority to waive fees. We don’t have fees, where a lot of bigger banks will fee their customers to death.”

Out of the 33 other small Florida banks with similar assets — $250 million to $500 million, Sanibel Captiva bank ranks first in return on equity, which was 21.75% through June 30, according to Federal Deposit Insurance Corp. data. Compared to all 111 other banks in Florida, Sanibel Captiva is No. 2, Albert adds. Return on equity measures a bank's profitability relative to stockholders' equity.  

Through June 30, the bank had $461.9 million in assets, up 10.3% from $418.8 million in June 2018. In 2017, the bank had a net interest income of $16.2 million, which increased to $18.7 million in 2018. Bank officials are projecting roughly $20 million in net interest income in 2019.

Albert says the bank experienced savings two years in a row thanks to adjusted federal tax laws. That led to the board’s decision to provide employees with bonuses, which ranged from $250 to $1,000, depending on length of service. Bonuses were provided to every employee except for the executive management team.

'We can just do things where employees at bigger banks may not have the authority to waive fees. We don’t have fees, where a lot of bigger banks will fee their customers to death.' Sanibel Captiva Community Bank President and CEO Craig Albert

David Hall, executive vice president of the bank and its COO and CFO, says the bank's success is also due to the board and management being “very cost conscious.” Instead of purchasing new furniture for each new branch the bank opens or acquires, for example, Hall says they search for deals on gently used desks and other equipment for employees in areas where customers aren’t served.

“We try to be frugal with every dollar that comes through our bank,” Hall says. “We buy new furniture for areas where there is customer contact, but in the back rooms, we don’t need it. We find what works well for us. We have some furniture that is 15 to 20 years old, but it’s in good shape, and we got a great deal.”

Both Hall and Albert have been with the bank since it was founded on Sanibel in 2003. Today, the bank employs about 100 people in its seven Lee County branches, with two on Sanibel Island and five in Fort Myers. The eighth branch will be unveiled in mid-2020 in a building the bank purchased near the corner of College Parkway and McGregor Boulevard in Fort Myers.

Although they saved money on things like furniture and taxes, Albert says the bank’s leaders knew they had to invest in the technology needed to provide the same level of service as the big banks. As a result, they are also able to offer online, secure transactions via computers and mobile devices.

Another factor in the success? Albert and Hall say it's the unique demographics in Southwest Florida, with people from the baby boomer generation still wanting to conduct their banking business in person.

“I think our market is a little bit different than say Chicago because we have a population that is older,” Albert says. “They still want to come into the bank; they want to deposit their check and get a receipt. And they want to talk to somebody. Some are lonely and want to have human contact and get a little bit of social interaction.”

Albert says he and the board are pleased with the bank’s growth but that they prefer “limited” growth to maintain high quality service. Once the eighth branch is opened next year, he says they will consider opening others in places like Estero, Bonita Springs, Cape Coral and Naples, but they want to be cautious and “not go crazy.”

— Jay Schlichter

First Citrus Bank, Tampa 

Founded in 1999, First Citrus Bank has weathered a recession and tsunami of consolidation in Florida’s banking industry while barely missing a beat. Two decades later, it’s one of the last Tampa-based community banks standing, shepherded through good times and bad by founding CEO Jack Barrett and Chief Banking Officer Jessica Hornof, the latter who started as a teller in 2002 and worked her way up.

Consistency at the top has been key, FCB leaders say, but even more crucial has been the way the bank zigs when others zag — taking a qualitative over quantitative approach to lending in an age of Big Data and analytics, as well as not trying to be everything to everyone.

“Basically, we want to deliver growth capital at the local level,” Barrett, 55, says. “Bigger is not always better. We have a passion for local ownership.”

Today, Barrett adds, fewer banks than ever are headquartered in Florida, which means out-of-market decision makers are “playing God with our financial futures and economic destinies. … People are relegated to a credit score or an algorithm.”

That’s not the way FCB likes to do business. That makes it something of an anomaly in a community banking climate in which many peers and competitors for deposits, even credit unions, are buying community banks. That's OK with Barrett, who doesn’t view a potential credit union takeover as a credible threat.

“The credit unions, they’re shooting themselves in the foot,” he says. “They’re going to forfeit their tax exemption. They’re acquiring banks, they don’t pay taxes, and they oftentimes can pay a little more on yields and charge a little less on loans. Well, you can’t have your cake and eat it too.”

Barrett lobbies the U.S. Treasury Department about the credit union issue, traveling to Washington, D.C., to argue for removal of the tax exemption or a financial delineation between the two types of entities. “There needs to be some sort of cutoff, say, $1 billion,” he says. “If you’re over a billion, guess what? You’re not a credit union.”

There’s only so much the leader of a community bank with just five branches and some $400 million in assets can do to sway national affairs. So Barrett and Hornof, 38, intend to ensure FCB continues to take care of its mission at home, which the chief banking officer describes as “the democratization of capital.”

“Ninety-eight cents of every dollar deposited in our bank is reinvested in the form of a loan to a small business owner in Tampa Bay," she adds. "No other bank has had that percentage over the past 20 years. That’s our history; that’s what we do.”

Now the bank wants to do more of that. Its market share of area deposits — which allow the bank to increase its loan portfolio — is less less than 1%, providing a big opportunity. “Checking accounts and deposits are the inventory, and we need more,” Hornof says. “But it’s not a deep thirst or desire for personal checking accounts and deposits because as we grow, we will evolve more into the consumer side of banking with permanent mortgages. But for now, we want deposits."

FCB has set a strategic goal of growing its core deposits to $355 million by the end of 2021. That would be up nearly 10% over $323 million in 2018 and 24% over $286 million in 2017.  Gross annual revenue is also on the rise, increasing 51%, from $12.3 million in 2016 to $18.66 million last year.

'Checking accounts and deposits are the inventory, and we need more,' Jessica Hornof, First Citrus Bank

That performance has made FCB a regional banking superstar: In 2018, S&P Global Market Intelligence rated it the second-best Southeast bank stock for total return. The Greater Tampa Chamber of Commerce also also recently named the bank a 2019 Small Business of the Year winner in the 51-250 employees category. 

When it comes to survival, another strategy that’s worked well for FCB is diversification of ownership. Barrett says the bank has nearly 800 shareholders — which far outpaces its local competition — while less than 1% of its equity is controlled by institutional investors, which translates into significantly less pressure to sell.

“How have we resisted [consolidation]? It’s because we have patient capital,” Barrett says. "[First Citrus] is the only stock I hold. I eat my own cooking.”

— Brian Hartz