Play It Again, Charlie

Play It Again, Charlie

BANKING by Francis X. Gilpin | Associate Editor

He's doing it once more. Charles E. Hughes Jr. is using a struggling Tampa Bay area bank as an unlikely launching pad for statewide expansion.

Hughes is the force behind Florida Capital Bank, a new name in Gulf Coast banking. But Florida Capital is following a playbook employed by Hughes before.

Two years ago, Hughes engineered the sale of Florida Banks Inc. to South Financial Group Inc. Unburdened by a non-compete agreement, Hughes jumped right back into the banking game.

"I woke up one morning and I didn't have a job for the first time since I was 16 years old," Hughes says of the aftermath of the sale to the parent of Mercantile Bank.

Within months, Hughes had reassembled some of his Florida Banks backers and formed Florida Capital Group Inc. The holding company's chairman, local investor W. Andrew Krusen Jr., also sits on the boards of Beall's Inc. and Raymond James Trust Co.

Florida Capital Group collected more than $22 million from former Florida Banks holders and others. With that cash, the company picked up a struggling Tarpon Springs bank.

Hughes was off and running again. Florida Capital already has offices in 10 cities, including Tampa. Hughes now has his eye on Sarasota and Naples.

Finding the right executives, a frequent refrain in community banking, is why Hughes says he has been able to roll out Florida Capital so quickly. "A bank can be very successful in this state with the right people watching their Ps and Qs," Hughes says. "We intend to stay very close to the customer."

Big losses, then big profits

Hughes, 62, started in banking with Wachovia Corp. With the exception of a two-year stint at Baptist Health System Inc. during the early 1990s, Hughes has been a full-time banker.

In Florida, Hughes served as chairman, president and chief executive of SouthTrust Bank's state operation for five years. One of his primary duties was negotiating acquisitions to expand SouthTrust in Florida during the 1990s.

It was good experience that Hughes has put to use ever since.

In 1998, Hughes jumped to Florida Banks and acquired the First National Bank of Tampa. Later that year, Florida Banks went public. Hughes, who was president and CEO, rapidly enlarged the Florida Banks footprint. Hughes chose high-growth areas such as the Bay area, Gainesville, Jacksonville and Palm Beach.

From a $4.6 million loss in 1998, Hughes turned the Florida Banks investment in branching into a $4.7 million profit by 2003. Florida Banks also bettered loan quality by lowering a write-off ratio by 75%.

The improved performance caught the attention of Greenville, S.C.-based South Financial. After entering Florida by purchasing two banks in 1999 and 2002, South Financial paid almost $170 million for Florida Banks in 2004.

The Florida Banks CEO walked away with a bundle. Before taxes, Hughes got at least $6.3 million in stock and cash from the South Financial sale, according to regulatory filings.

Now Hughes had a little something to toss into a pool of $10 million that ex-Florida Banks investors used to jump-start Florida Capital Group.

Through a friend in Atlanta, Hughes heard that the Georgia owner of First National Bank of Tarpon Springs was looking to unload it. Ashburn, Ga.-based Community National Bancorp had bought the Pinellas County bank in 2000. Within two years, however, the U.S. Office of the Comptroller of the Currency had ordered the president removed, loan policies tightened, and First National recapitalized.

Community National executives appeared pleased to get $6 million for the Tarpon Springs bank, which had $25 million in assets.

Hughes argues the price ­- a measly two times First National's book value - was fair, considering the OCC was closely supervising the bank when it was sold in October 2004.

"It wasn't a complete theft," Hughes says jokingly. The OCC, the federal regulator of national banks, terminated the 2002 formal agreement with the Pinellas bank two months after Florida Capital took over.

Background check unneeded

Since then, Florida Capital has moved into high-growth markets around the state. But only where Hughes says he has been able to hire area presidents, such as Wade H. Faircloth in Tampa. "Wade is about as good as you can find in that market," says Hughes. "That's what we like to hire."

Faircloth and Daniel T. Hester, Florida Capital's area president and CEO for Pinellas and Pasco counties, respectively, both came over from Mercantile Bank.

"We moved into cities where we could find experienced bankers who knew those markets and could bring management teams and seasoned loans with them," says Hughes.

Faircloth goes back with Hughes all the way to SouthTrust. Faircloth recalls SouthTrust's sales culture surprised him a bit after starting his banking career at First Florida Bank. "It was loans, loans, loans," Faircloth says of SouthTrust. "They just wanted you booking assets."

Before First Florida was eventually absorbed into Bank of America, the Tampa bank was part of the business empire of the Lykes family, one of the city's founding clans.

"First Florida was more old school," Faircloth says. "With the reputation of that bank, people would be calling on you."

But Faircloth, 41, a University of Florida graduate, enjoyed working for Hughes and followed him to Florida Banks. "He's a dynamic presence," Faircloth says of the boss, who likes to get out and meet customers. "He's very good on calls."

Hughes doesn't mind compensating top performers, either. "The bank will reward you and reward you very well," says Faircloth.

That renown has made it easier for Faircloth to staff up in Tampa, where he hopes to add a Westshore location to the main downtown office by July. A third office, perhaps in the Hillsborough County suburbs, should follow by early next year. Hester is busy doing the same on the other side of the bay.

"We have a real mature working group here," says Faircloth. "We all have gray hair, except for one or two of us."

In some cases, Faircloth's Tampa recruits have worked with him elsewhere. "It's nice when you don't have to do background checks," he says.

Like the rest of the growing Florida Capital network, Faircloth focuses on small businesses with $40 million to $50 million in annual revenue.

The typical commercial or industrial loan is for between $300,000 and $500,000. But Hughes says Florida Capital will go higher in the right situation, or bring in an upstream bank to participate.

Back at the holding company's Jacksonville headquarters, Hughes recently wrapped up a second private placement. That still isn't enough to fund his next push into Southwest Florida. Hughes expects he'll go to the public equity markets within two years.

If it all sounds familiar, Hughes isn't bored by the repetition. "I'm having a blast," he says.