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President's Letter
Dear Shareholders,
During 2007, First Citrus Bank performed well and grew during an increasingly difficult economic climate characterized by imbalances in which the financial services industry largely brought upon itself. Unlike many peers, however, we are not displeased with our asset quality and again managed our third consecutive year without a single net loan charge-off.
While the aforementioned may be a testament to our cardinal business principle of safety and soundness first, it is equally a reflection of the caliber of people and organizations that do business with First Citrus Bank.
What does this mean to you as a shareholder? It means that you can feel secure, confident and very good about your investment in First Citrus Bank.
In some business cycles, robust growth is the enemy of excellence. As such, our balance sheet reflected modest growth in comparison to prior years. Total assets climbed 5.5% from $219 million to $231 million during the year. Additionally, our loan portfolio grew 9% to $186 million. Since we started the bank, 86 new competing bank branches opened in Hillsborough County. In addition, the deposit base county wide has atrophied over the past 12 months according to the FDIC. Despite these circumstances, both our market share and deposit levels are increasing, though at a more modest pace. Total deposits were virtually static on the year at $168 million. Our biggest long term challenge both as an industry and at First Citrus Bank is adding new deposit clients. That is why we are excited about remote deposit capture which is now available and enables business clients to make deposits without leaving the convenience of their offices.While the balance sheet showed modest growth, total revenues increased 18% to $15.9 million. During this period, we have set aside increased loan loss reserves as well. When excluding the non-recurring gains resulting primarily from the sale of our Citrus Park Operations Annex in 2006, pre-tax profits of $2.2 million neared our previous year’s earnings performance. We are not displeased with consistent seven-figure profits during a magnified economic downturn.
Looking forward to 2008 we are forecasting moderately increasing profits. However margin compression with the abrupt interest rate decreases will be a key challenge to overcome and second only to adding new deposit clients. You can help the home team and make your investment grow by introducing your favorite First Citrus Banker to your friends and colleagues. They will be glad you did.
Chronicled in our Strategic Plan, our five-year proforma after-tax profits exceed fourteen million dollars. The quality of our personnel is the difference maker that will engender that outstanding performance. We are constantly developing our people and investing in our management associates by exposing them to new disciplines and business experiences that deepen their skill set as executives. Our habit of “growing our people” will continue to defend and enhance our competitive advantage.
Today, First Citrus Bank is better positioned as the bank of choice for the growing business and family. This is being achieved in part through an intensification of marketing efforts and expanded sales initiatives which also began this past year.
To acknowledge your bank’s continued success and profitability, your Board of Directors declared a $1 per share cash dividend in 2007.
On the national front, we are in the sixth year of economic expansion. Although a once pronounced driver of that growth, consumer spending is down dramatically in comparison to prior years and the risk of recession is increasing and already present by some journalistic accounts. While the Country may not be in a recession technically, the chronic drip of pessimistic headlines in the news media likely influences consumer spending habits and sentiment.
Although the investment banks and money center financial institutions largely created the problems with this economy, the community banking industry is suffering the market consequences related to Wall Street’s behavior primarily in the form of a reduced housing market.
While housing is still the biggest drag on the economy, the November 4th ballot initiative to roll back property taxes could be the vanguard of a reinvigorated housing market for Florida. Also, as First Citrus Bankers and as an industry, it is vital not to decelerate lending activities to responsible prudent borrowers as that practice will only prolong the depth and length of the current business cycle. As a result, we want all of your loan business too!
The President has signed a $152 billion economic stimulus package that takes effect in May of 2008. The jumpstart is insignificant relative to our multi-trillion dollar economy; however, the intangible momentum could prove useful.
Our strategy is to get through this period with as little impact as possible while positioning the bank and our personnel to capitalize on opportunities when the business cycle returns.
As First Citrus Bank has grown in stature, your board would like to make available a liquidity benefit for your investment. As such, the bank is able to redeem stock of any individual desirous of selling their shares at a price of $15.85. This offer is available for the first 25,000 shares redeemed through June 30, 2008.
Although 2007 was a very challenging year economically, First Citrus Bank answered with solid earnings, zero loan losses and overall sound asset quality. While our performance is self evident, our best days lie ahead.
On behalf of your Board and management team, I would like to thank our outstanding bank associates for their efforts shaping our success and especially you, our valued clients and shareholders, for your continued trust and confidence.
Sincerely,
John M. Barrett
President and Chief Executive Officer
