Corporate Profile

First Citrus Bank is a state-chartered commercial bank located in Tampa, Florida. The bank was capitalized at $5.6 million in 1998 and opened for business in February 1999. Independent, community owned, and staffed by long time residents, First Citrus Bank focuses its lending and banking services on businesses and individuals.

First Citrus Bank is a member of the Federal Deposit Insurance Corporation (FDIC) and the Federal Home Loan Bank of Atlanta (FHLB). The bank offers a complete array of banking services to individual and corporate customers throughout the Tampa Bay area.

First Citrus Bank has five convenient locations in Hillsborough County: Citrus Park, South Tampa, Brandon, Carrollwood and Kennedy.

Vision

Grow First Citrus Bank to become the acclaimed independent premier bank in Tampa Bay; recognized for integrity, teamwork and professionalism.

Mission Statement

Provide premier independent community banking services to individuals, professionals, executives and entrepreneurs. Deliver banking services that go beyond customer expectations. Nurture loyal customer relationships. Proactively contribute in the community. Invest in the future through our people and workplace.

Cardinal Business Principle

Safety and soundness first.

Core Values

Integrity

Teamwork

Professionalism

President's Letter

Dear Shareholder:

The year 2010 will be a period in which everyone attempts to determine what is the new “normal.” The banking industry will have lower growth, less risk, and continued consolidation. Lending in the future will not be conducted the way it was done in the past. First Citrus Bank is uniquely positioned to take advantage of these new market paradigms with an expanded footprint and deeper capital base.

In 2009, there were 8,109 banks in America; and of those, 140 failed. In 2010, the number of failures will be higher, and those banks will be smaller. Florida banking is recovering but will conclude this business cycle with more failures. There are 287 banks in Florida, and many analysts predict that 10% to 20% of these institutions will exit in the coming 18 months. In this circumstance, a shrinking field of competitors is healthy consolidation.

On the economic front, the financial markets were in disarray this time last year. The Government was rescuing Wall Street investment firms, AIG, automobile manufacturers, mega banks and calling it a “bank bailout.” The bursting of the housing bubble gave rise to double-digit unemployment, perilous deficit spending and continued deterioration of real estate values.

The root cause of this economic malaise was flawed government policy coupled with a lack of regulatory execution at the money-center level. Congress, the Department of Treasury and the Administration responded by criticizing the banking industry for not lending more. Paradoxically, the agencies they control which actually regulate banks take a dim view of financial institutions that introduce new risk to already impaired industry loan portfolios.

Unlike in previous recessions, I do not expect the consumers to spend us out of this downturn since they are still generally overleveraged with reduced incomes and liquidity. However, market corrections are not all bad. Consumers are saving more and beginning to amortize excess debt, which is good. Additionally, we are beginning to see a healthier return to higher capitalized investing which is tangential to long-term economic prosperity. The banking industry is more stabilized as well.

When the Government propped up teetering mega banks with “too big to fail” taxpayer-funded injections, they inherently weakened the valuations of healthy institutions, in essence allowing our competitors to survive. Despite this circumstance and a net loss for 2009, the book value of your investment in First Citrus Bank is up 59% since inception when adjusting for dividends paid.

Capital will drive the future and our industry is bifurcating into the haves and have-nots: those like First Citrus that have access to capital because they have demonstrated the ability to build value and manage risk well, and those banks that have not succeeded in shepherding their capital much less growing it.

What is First Citrus doing differently? Although we are not exempt from the real estate recession, we sat on the sidelines more than most during the credit boom. Banks today are graded on the strength of their balance sheets and once again, First Citrus Bank has maintained the highest regulatory rating, “Well Capitalized” as recognized by the FDIC. The Bank’s total capital ratio improved in 2009 to 11.78% from 11.55% at FYE 2008. Our asset quality improved as well with a 20% reduction in non-performing assets, a decrease of $2.4 million in 2009.

For the year, the Bank posted a loss of $1.5 million in comparison to a $159,000 profit in 2008. It was advantageous to accelerate write-downs in the Fourth Quarter to gain a significant tax refund, which our accountants estimate to be several hundred thousand dollars. We eschewed the Troubled Asset Recovery Program (TARP) as government funded banks are excluded from participating in this tax benefit. You will be pleased to know that during the First Quarter of 2010, the Bank returned to six-figure profitability.

Total assets for the year remained steady at $237 million, which is near 2008’s levels of $233 million. Because of muted demand, total loans were $180 million and within 5% of last year’s level of $188 million.

Overall, deposits remained static at $182 million. More importantly, though, the composition improved with a $12 million dollar increase in lower cost core deposits to $95 million, coupled with an $11 million dollar reduction in more expensive certificates of deposit.

Bucking the industry trend of shedding bank branches to reduce costs, we take the opposite view, as branching is increasingly more affordable. We opened our newest office in the high visibility market of the Westshore business district on Kennedy Boulevard.

Other big wins in 2009 included transforming the loan delivery function to be more collaborative in serving client needs and successfully completing the debenture campaign, which raised 13% more in fresh capital.

Our economic outlook influences our strategy, and the reality is that the current environment offers only limited growth prospects. However, we are on pace for restored profitability, improved asset quality and expanded deposit market share. Though we remain engaged in evaluating FDIC-assisted acquisition transactions as they surface, our daily opportunity resides in claiming new customers from larger competitors who discover the power of a personal banking relationship. Just as people want to work for successful organizations now more than ever, customers want to bank at a successful bank.

People bank at First Citrus because we are able to pay more for deposits, charge less on fees, and provide highly personalized client experiences. We continue to make enhancements along the way with our new web site launched last month and with the expanded Management Training program that will add new jobs to the local economy this fall.

Banking is still very special, and the First Citrus brand helps businesses and individuals become more economically successful. As the business cycle evolves, we are emerging into a stronger bank with a larger footprint, deeper presence in desirable locations and market share gains.

While there has been a sea of change in the economy, one thing that will not change is our commitment to you, our shareholders, customers, and bank associates. On behalf of your Board and management team, thank you for your continued trust and confidence.

Sincerely,

John M. Barrett

President and Chief Executive Officer

2009 Third Quarter Letter

Dear Shareholder:

We are pleased to report the bank continues to maintain steadfast poise with stable asset quality as we maneuver through the business cycle. 

Deposits continue flowing in and grew $20 million increasing 11% to over $200 million.   Our new Kennedy branch is elevating the bank’s profile and capturing more deposit market share.  Total assets surpassed the $250 million benchmark and the balance sheet reflects increased cash holdings at the Federal Reserve resultant from decreased loan demand.   As you know, banks earn money by making good loans and we encourage you to refer your friends and business associates to First Citrus for their financing needs!

Due to increased FDIC premiums of $147,000 in the Second Quarter and approximately $200,000 in new branch expense at our recently opened Kennedy office, the bank posted a modest $96,000 loss through September.  During the Third Quarter however, the bank earned a $95,000 pre-tax profit. 

As we enter the fourth week of our recently launched 7% Subordinated Debt Investment Offering, it is already 40% subscribed.  If you would like to participate, please send your subscription agreement prior to the November 27th expiration date.

According to the FDIC’s Uniform Bank Performance Report, First Citrus Bank has maintained an unprecedented current year loan recovery rate to prior year charge offs capturing 97% of principal in comparison to 16% for the Tampa Bay bank peer group.  These successes originated at the closing table through more prudent underwriting that required substantial borrower provided cash equity, irrespective of appraised values.  In addition, personal guaranties have always been an underwriting standard.  While conservative lending habits do not exempt banks from being impacted by economic downturns, they do minimize downside exposure as evidenced by our lack of significant losses.  As the cycle progresses, we will continue building more profitable market share against our more bruised competitors.

I am confident the commercial real estate market will bring more challenges through 2010.  As with any adversity, opportunity appears and for First Citrus Bank it resides in the form of less expensive branching or bank acquisition at substantially reduced costs.  Maintaining a highly capitalized balance sheet throughout this period, by way of subordinated debt, contributes to maximizing the Bank’s strategic options and the value of your stock.  Thus, I encourage you to take advantage of this investment opportunity. 

Enclosed you will find the Balance Sheet and P&L Summary for your review.  On behalf of your board and management team, we would like to thank you, our clients and shareholders, for your continued trust and confidence.

Sincerely,

 

John M. Barrett
President and
Chief Executive Officer

Quarterly Report