Caution emerges amid income, lending gains for Tampa-St. Pete banks

Freedom Bank and Pilot Bank led all other local community banks in two key industry measures for the first quarter of 2019.

Freedom, a $300 million-asset bank based in St. Petersburg, posted a 68 percent gain in net income in Q1 2019 compared to the same quarter a year ago, while Pilot Bank, a Tampa bank that opened a St. Pete branch last year, grew its loan portfolio by 24.7 percent.

While both banks indicated they are being cautious as they move forward, the gains still are encouraging news for small to mid-size local businesses in the area, who are the primary customers of community banks.

Banks with a healthy bottom line can focus more on external operations, such as making loans available, because they don’t have to focus internally on fixing problems.

As a group, the eight community banks based in the Tampa-St. Petersburg-Clearwater metro area had an average 19.5 percent increase in net income in Q1 2019, compared to Q1 2018, based on filings with the Federal Financial Institutions Examination Council as of May 1.

“Income for the first quarter 2019 reflects our focus on growing our SBA [Small Business Administration] and USDA loan portfolios, with in-house expertise delivering these government guaranteed lending programs,” said Cathy Swanson, CEO of Freedom Bank. “Additionally, an improved net interest margin was a key driver in our year-over-year performance, as we reacted and benefited from the rise in interest rates during 2018.”

Cathy Swanson, CEO, Freedom Bank

Loan volumes also remained strong for Freedom, and the company is keeping pace with a strategic growth plan. Still, the bank is keeping in mind the potential impact of an anticipated eventual change in the economy.

“As with banks and businesses alike, the lessons from the past recession are not forgotten and liquidity with borrowers is a bigger factor when underwriting,” a statement from the bank said.

That’s similar to the sentiment from Al Rogers, senior vice president and executive lending officer for the West Coast Florida region for Valley National Bank (Nasdaq: VLY), the Wayne, New Jersey-based institution that bought USAmeriBank. Valley has dialed back the amount of lending it will do for any one deal, and is requiring more equity in projects, Rogers said at an Urban Land Institute meeting last week.

The eight local banks averaged 12.8 percent growth in loan portfolios in Q1 19, compared to a year earlier. Increases in loan portfolios are an indication that banks are making credit available to businesses borrowers who want to expand their operations, buy equipment or real estate, or hire workers.

Pilot Bank, with $383.7 million in total assets as of March 31, provides aircraft financing through its affiliate, National Aircraft Finance Co., in addition to commercial loans and SBA loans.

The increase in its loan portfolio was driven by roughly balanced production by aviation lending and commercial lines of business, according to a statement from Roy Hellwege, chairman and CEO.

The bank’s loan pipeline in aviation, commercial and SBA lending reflects continuing market strength. “That said, competition in each of these sectors continues to strengthen,” the statement said. “We are beginning to see a higher number of ‘cash-out’ loan requests and we continue to evaluate the multi-family carefully as a significant amount of product is coming online.”

Rita Lowman

Pilot has hired an SBA director, Javier Jorge, former president of the University of South Florida St. Petersburg Student Council.

“Our clients and potential clients enjoy banking with local bankers and when you can speak with the president or CEO of a bank, that makes a difference,” said Rita Lowman, Pilot Bank’s president.

Freedom Bank said local ownership gives it an advantage.

“The bank’s board of directors, management and lenders have first-hand knowledge of the business community and can keep an accurate pulse on local economic impacts, translating into flexible and sound underwriting practices,” the statement from Freedom Bank said.