Sound the Charge

Sound the Charge

By Francis X. Gilpin

Associate Editor

Corey J. Coughlin has few regrets. But the former Marine Corps rifleman does confess to second thoughts about the timing of a Christmas gift he once bestowed on subordinates - the business-management tome "Leadership Secrets of Attila the Hun."

Was that really what his vice presidents should have been reading around the family hearth, Coughlin now jokingly wonders, as chestnuts roasted on the fire?

Another holiday season has passed and Coughlin is calling on his revamped executive team at First State Bank to shake off the eggnog and get back to emulating those conquering Huns.

Coughlin took over as president and chief executive of First State, a unit of Sarasota-based First State Financial Corp., during the summer of 2002. He and Thomas W. Wright, the bank's chairman and the holding company's biggest shareholder, hit it off immediately.

"He and I share that same aggressive posture," says Coughlin. "I talk to Tom almost - well, hell. I talk to Tom two or three times a day. Pretty much sometime before 6 a.m. in the morning, we're on the phone talking."

A self-made millionaire investor from Kentucky, Wright, 52, typically ends his pre-dawn chats with Coughlin by drawling: "Blow the bugle and sound the charge."

That's music to Coughlin's ears. "I like the aggressiveness," says Coughlin. "I like the attitude."

Coughlin is going to have to show that kind of spunk, if First State is to fulfill his ambitious agenda.

The Coughlin team will try to increase assets fourfold. Already, Wright says the bank has brought in more than $100 million in new assets under Coughlin's direction.

But Coughlin adds: "Growth and profitability, we're not going to give up one for the other."

He has succeeded so far, according to the latest Federal Deposit Insurance Corp. data. On Sept. 30, First State's assets stood at $243 million, a 24% increase over the same day in 2003. Net income for the first nine months of 2004 was triple the year-earlier period.

Yet First State, which has three offices in Sarasota and another three in Pinellas County, saw its deposit share in both markets move only fractionally higher between 2003 and last year.

Coughlin wants to do something about that. After the holding company recently raised almost $30 million from an initial public offering, he is eager to create a community banking network extending from Port Charlotte north to Brooksville. That's another tall order for a six-branch bank.

"We're going to be opportunistic," says Coughlin.

Career banker

At age 58, Coughlin says he's having the time of his life at First State. It's been quite a life.

Coughlin, whose last name is pronounced "cog-lynn," is a well-traveled veteran of 33 years in Florida banking. Stops on his resume include Southeast and SouthTrust banks. He hasn't hesitated to leave when a situation didn't suit him.

Good ol' boy connections count for more than the numbers on a loan application? He's gone.

Then there was 1999 when, as president and chief operating officer at CNB Florida Bancshares Inc., he supervised an IPO for the parent of CNB National Bank. He left that $165,000-a-year job soon after he says the company reneged on a pledge to move headquarters from Lake City to Jacksonville.

Born in Miami, Coughlin grew up in St. Petersburg and graduated from Northeast High School. He interrupted college to join the military.

Why the Marines?

"I liked the song," Coughlin casually replies.

Then he gets a bit more serious. "I was a young man, wanted to be challenged," Coughlin says. "It met every aspect of challenge that I ever had wished, and more."

A combat tour of Vietnam garnered a Purple Heart. He says the lessons he learned in the Marines still influence his management style.

"We don't retreat," says Coughlin. "We meet our problems head-on."

After Vietnam, Coughlin went back to earn a degree in business administration in 1971 from Georgetown College in Kentucky. He received a graduate degree in banking five years later from Louisiana State University.

A professional turning point came for Coughlin during the 1970s. While a commercial lender at his first employer in St. Petersburg, Coughlin attended a banking seminar in New Orleans. He won an irreverently dubbed "brass balls" award for a presentation, under tense circumstances, that wowed the seminar instructor.

The seminar was unusual for the time because the instructor was trying to introduce the concept of outreach to a banking industry that was largely content to wait for business to walk in the door.

"You've got to be aggressive," says Coughlin. "You go after it and you do it until you get it."

Turnaround specialist

Living that mantra, Coughlin has helped reverse the fortunes of a number of troubled banks while climbing the executive ladder.

Coughlin says he helped grow a Bay area banking group, which eventually got absorbed into SouthTrust, from $500 million to $5 billion in assets via more than 20 acquisitions.

Later, SouthTrust dispatched him to Jacksonville to fix a regional operation. "It was losing a million a month," Coughlin says, recalling his first CEO job with a mischievous smile. "It was really my kind of deal."

The bank was in such disarray that regulators had to approve Coughlin's appointment. Within three years, SouthTrust Northeast Florida was making $12 million a year instead of losing that much.

"We had a $2 million-a-month swing," says Coughlin.

All good experience for what he found at First State Bank 2 1/2 years ago.

Chartered in 1988 by local investors, First State almost went under, partly on account of insider deals. First State wrote off about $1 million in bad loans to Sarasota recreational-vehicle dealer Robert Boisclair, who went to prison for consumer fraud. At the time, Boisclair's son sat on the board of First State, which lost $1.7 million in 1991 alone.

A year later, the FDIC hit the bank with an order to cease unsafe lending practices. Instead of feeling chastened, First State's then-board demanded the personnel files of the federal examiners who had conducted a damning review of the bank's books.

A group of businessmen primarily from West Virginia, led by then-Sarasota winter resident A.G. "Sonny" Spriggs, assumed control of First State in 1994.

They recapitalized First State and bought Rutland Bank in St. Petersburg. The idea, after bringing the Sarasota offices and Rutland's Pinellas locations into First State Financial, was to piece together a Fort Myers-to-Tampa string of branches.

First State would stress personal service to customers feeling abandoned by other local banks that were getting swallowed by super-regional banks.

But Spriggs eventually succumbed to cancer. His president-CEO, Patrick L. Arnold, who had returned First State to profitability, departed the bank in 2001 for unspecified health reasons.

First State lost momentum. "When Sonny was out of the picture, it just kind of stopped," says Coughlin.

Us and them

Coughlin came to First State in July 2002. There was a lot of work to do.

"It's not like he took on a good bank," Wright says of Coughlin. "This bank was struggling."

Under a caretaker CEO, First State employees in Sarasota and St. Petersburg had split into warring camps.

"It was not a pretty sight," says Coughlin. "There was not a shared enthusiasm. The us-and-them thing, it was not without some rancor or animosity. Not only did people not work together, they didn't like each other. We had to eliminate that immediately."

Coughlin raised performance expectations. Malcontents moved on. "We didn't fire a lot of people," he says. "A lot of people just decided that they didn't want to meet the increased demands."

One important holdover was Michael K. Worthington, 47, an executive vice president and the senior lending officer. Coughlin credits Worthington and others with solidifying the bank's loan business so well that last year's IPO was oversubscribed.

Coughlin started getting top executives to look ahead. "There was no one driving the growth of the bank," he says. "Status quo was really accepted."

Performance incentives were offered to key executives. "They know to the nickel how much they've earned every day," says Coughlin, who made $178,575 in cash compensation for 2003.

"I've never been surrounded by better people," says Coughlin. "I'm talking about tellers to executive vice presidents."

It's a golden age for community banking in Florida. "This is our time," says Coughlin.

Industry consolidation is leaving business owners hunting for the personal touch that out-of-state banking behemoths seldom provide.

The pickings are nowhere better than in Sarasota and St. Petersburg. Sarasota County bank deposits topped $9.8 billion last year, increasing by $3.3 billion since 1999. Pinellas has almost twice as many deposits as Sarasota County.

With Coughlin pushing more loans, however, First State labored to maintain decent capital ratios. Despite a private placement last winter that raised almost $2 million from local investors, the bank was merely adequately capitalized by regulatory standards.

Coughlin hit the road last fall with his investment bankers to pitch the IPO. They spoke to institutional investors in Boston and New York. Mutual and pension fund managers clamored for the two million-plus shares. With nearly $30 million from the IPO, First State's ratios have risen into the well-capitalized range.

That clears the way for Coughlin to reignite lending and resume the hunt for expansion opportunities within the bank's Gulf Coast footprint.

Where the growth is

First, though, First State has a hole or two to patch.

Coughlin acknowledges that non-interest income, largely derived from fees, has been constrained by First State's limited menu of financial products.

Through the first nine months of last year, First State's non-interest income as a percentage of earning assets was last among four local institutions of comparable size. Its 0.51% was bettered by 0.83% at 1st National Bank & Trust in Bradenton, 0.82% at Century Bank in Sarasota, and 0.58% at First Community Bank of America in St. Petersburg.

That is a reason why Coughlin has invited Sarasota-based Global Financial Advisory Inc. into his branches to assist First State customers looking for banking and investment services in one place.

Coughlin is more satisfied with First State's net interest margin, which bankers generally equate to gross profit. But he's looking to advance that, too.

"Except for Pinellas, a lot of these counties have room to grow," Coughlin says.

Pasco and Hernando counties are where Coughlin sees the big deposit growth. Pinellas, Hillsborough and the counties south of the Sunshine Skyway are where he plans to deploy those deposits in the form of business and consumer loans.

"We think that's where the per-capita wealth will be," he says. "We think that's where we want to be."

The divorced Coughlin spent $310,000 on a house for himself in Manatee County two years ago. He says the bungalow near the Braden River is roughly the same driving distance to the Pinellas branches as it is to those in Sarasota.

"I am in every one of my offices once a week," says Coughlin.

Coughlin hopes to pick up a few branches cheap as bigger banks buy out his community rivals and discard overlapping locations. But he and the First State board haven't ruled out de novo expansion or buying a smaller institution whole, for the right price.

Wright says there are Gulf Coast banks in the asset range of $70 million to $120 million suffering from "shareholder fatigue" that could be ripe for takeover.

But First State won't be rushed. "We don't have to do anything," says Wright. "We're growing internally."

When Coughlin isn't contemplating First State's next move, he is reading an average of two books a week. His literary tastes tend to mimic his intense personality: thrillers from Tom Clancy or Sunshine State debauchery from Tim Dorsey.

Battling family members at paintball is another pastime. His only passion that might be the slightest bit leisurely is the guitar.

"I've been playing for 25 years and I haven't gotten any better," says Coughlin, who favors folk and rock songs from the 1960s and '70s. "It's very relaxing, sort of like singing in the shower. You really entertain yourself, but you don't want anybody else to hear."

Coughlin and Wright don't mind the local banking industry hearing of First State's big plans.

"Corey and I are having a lot of fun making this work," says Wright. "He's a thoroughbred. You can't win with a plow horse.

"We'll work with people, but you've got to be willing to run with us. We're not going to be walking."