SARASOTA — For the past four years, Bank of Commerce President and CEO Charles Murphy had been promising better days ahead in letters to the company’s share holders.
Tuesday was different.
The Sarasota bank reported profits in two consecutive quarters for the first time this week since the housing crash took grip of its assets.
Bank of Commerce greatly reduced its non-performing loans, while recent improvements in real estate values have helped bolster returns on bank-owned properties — keeping the lender in the black.
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The bank reported a profit of $66,833 in the second quarter that ended June 30, an improvement from the $180,980 loss from the time last year. Through six months, the lender’s earnings of $502,103 remain above the negative $126,194 through the first half of 2011, according to a letter issued to shareholders Tuesday.
Murphy said the back-to-back profitable quarters are a sign the company has turned the corner from the problems that ultimately drove last year’s $8.12 million loss.
“We have identified our issues,” he said. “We have worked through our issues, and we have started to see real estate settle.”
For more than a year, Bank of Commerce had flirted with financial disaster.
An outside financial audit of the holding company that owns Bank of Commerce had questioned in May whether the bank could remain viable without raising additional capital, pointing to a net worth of negative $2.9 million.
But an improving economy has helped. The bank’s $8.12 million loss last year was muscled largely by gross devaluations in the residential and commercial real estate markets, which have regained some of their values.
Nearly $5.5 million of the loss also was due to valuation allowances for a deferred tax asset, or the result of net operating losses that enable a business to record future tax breaks on its books — somewhat like an accounts receivable, Murphy said.
Bank of Commerce started to turn the corner in the first quarter that ended March 31, reporting $435,270 in profits.
In the second quarter, the lender held its Tier-1 capital ratio at 3.09 percent. The bank also reported $36.9 million in classified loans, down from the recessionary high of $66.5 million two and a half years ago.
Over the past 18 months, the number of non-performing loans has slipped 55 percent, and as of June 30, 81 percent of the non-performing assets have been reduced to manageable numbers, the bank said.
But fundraising remains a priority.
Bank of Commerce has been operating under a consent order by the FDIC for the past year, which requires the company to meet certain standards, including raising capital.
Bank of Commerce has opened a stock offering of 15 million additional shares at $1 a piece. Murphy now is seeking key investors to get that “reinvigorated,” he said.
The bank currently has 1.289 million shares, most of which were issued during the original offering in 2000 at a price of $10 a piece, raising just more than $9 million at the time, records show.
If the company’s fundraising efforts are successful, current shareholders only would own about 8 percent of the company if current share holders opt not to participate in the share offering.
The bank received a zero-star showing in Bauer Financial ratings in March.
For more on this story, check Bradenton.com later or read Wednesday’s Bradenton Herald.
Josh Salman, Herald business writer, can be reached at 941-745-7095. Follow him on Twitter @JoshSalman