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

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 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 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.”

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