Tax changes take a bite out of income at Pilot Bank, other Tampa Bay banks

Feb 05, 2018

Pilot Bank and handful of other banks headquartered in the Tampa Bay area were in the red for 2017 due to new federal tax legislation.

Pilot recorded a net loss of $1.2 million, according to a call report filed with the Federal Financial Institutions Examination Council.

Overall, net income dropped an average of 20.2 percent for the 19 community banks based in Tampa Bay as of Dec. 31. Two of those banks — Sunshine Bank and USAmeriBank — were acquired by other institutions on Jan. 1.

Other financial indicators were positive for the local banks and the Tampa Bay economy. Assets increased an average of 16.4 percent and loan portfolios increased an average of 10.4 percent. Community banks are a key source of credit for small to mid-size companies in the area, so increased loan portfolios are an indication that local businesses are borrowing more money to grow their operations, buy real estate or equipment, and hire more workers.

Pilot was among a number of banking institutions nationwide that had to immediately revalue deferred tax assets and liabilities on their balance sheet after the Tax Cuts and Jobs Act was signed by President Donald Trump. Deferred tax assets refer to a situation where a business has overpaid taxes, or paid taxes in advance; they are an asset because they eventually will be returned to the business.

The revaluation resulted in a one-time, non-cash income tax expense charge of about $2.1 million, according to a statement from Rita Lowman, president and chief operating officer.

Without the charge, the bank would have had a net profit of $925,000.

The bank’s financial strength was not impacted, with its capital ratio of 12.48 percent well above the 10 percent “well-capitalized” threshold and store loan and core deposit growth, Lowman said.

Long term, she expects the reduction in the federal income tax rate to positively impact earnings in 2018 and beyond.

Other local banks that reported losses for 2017 were First National Bank of Pasco in Dade City, Sabal Palm Bank in Sarasota and Sunshine Bank in Plant City, which was acquired by CenterState Bank (NASDAQ: CSFL) on Jan. 1.

Also reporting 2017 results was USAmeriBank, which was acquired by Valley National Bancorp (NYSE: VLY) on Jan. 1. 

One of the largest profit increases was recorded by First Citrus Bank in Tampa. The bank’s FFIEC call report showed First Citrus, with $358 million in assets, had net income of nearly $2.8 million for 2017, up 87 percent from 2016.

Jack Barrett, president and CEO of parent company First Citrus Bancorporation Inc. (OTC: FCIT), said industry consolidation is one factor behind the gain.

“More than half of Tampa Bay’s community banks were sold over the past 18 months. Thus the opportunity to grow market share is emboldened. It’s no surprise that our 2018 budget projects assets to exceed $400 million with continued record profits,” Barrett said in a press release.

Loans are driving gains at First Home Bancorp Inc., parent of First Home Bank in Seminole, said Anthony Leo, CEO. The bank, with $260 million in assets, had net income of nearly $5.9 million for 2017, according to its call report.

“In addition to achieving record earnings, we accomplished our primary strategic objectives of building a top flight residential mortgage banking operation,” Leo said in a press release. At the end of 2017, First Home’s residential mortgage division reached annualized loan production volume of more than $450 million, he said.

Both First Home and First Citrus are giving back some of their profits to shareholders. First Home’s board of directors declared a two-for-one stock split and a cash dividend of 9 cents a share. The board at First Citrus declared a 20-cent per share special cash dividend for stockholders.

See original article in Tampa Bay Business Journal

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