A Florida State of Mind

A Florida State of Mind

BANKING STRATEGIES by Mark Gordon | Managing Editor

A Purple Heart-receiving Marine not accustomed to failure is taking the community banking caravan statewide.

Corey Coughlin was widely credited with resurrecting First State Bank when he was hired as the president and chief executive of the holding company for the publicly traded Sarasota-based bank in 2002. Accomplishments under his leadership include tripling the bank's size in five years, leading a near-$30 million IPO and growing the bank's assets, deposits and profits - sometimes by as much as 25% a year.

And he was paid well enough for his efforts, earning $359,000 in salary and bonus last year.

So why would the 60-year-old Coughlin (pronounced cog-lin) leave First Sate at a time when he could be looking to finish off his banking career in relative peace? And why would he leave for another bank holding company job with several challenges - some standard to community banking, others unique - that will take up the bulk of his time? And finally, why would he add 40 miles to his daily commute, going from a downtown Sarasota office to a downtown Tampa office?

To hear Coughlin tell it, the more pertinent question would be why not?

In April, Coughlin left his post as president and CEO at First State to take on the job of CEO of Florida Bank Group.

Tampa-based Florida Bank Group is attempting to turn community banking on its side: Offer customers a community bank, with all of the service bells and whistles those institutions can provide, but do it across the state, branding each bank under a "Bank of..." label.

The idea, essentially, is to pump statewide muscle into community banking biceps. And so far, the Bank of Florida, which launched its first de novo institution in December, has the Bank of St. Petersburg, the Bank of North Florida and the Bank of Tallahassee under its domain.

The bank's board even comes with a combination of sports and business heft. Its executive chairman and former CEO, who willingly stepped aside to make room for Coughlin, is Robert Rothman, a Tampa insurance executive, financier and entrepreneur who is a minority owner of the NFL's Washington Redskins. And Tampa native Lou Pinella, the former manager of the Tampa Bay Devil Rays and the current Chicago Cubs manager, is on the board, too.

"If there is a better banking job in Florida," Coughlin says, "I don't know what it is."

No retreat

Still, there are some challenges. The golden days of community banking in Florida appear to be dimming, as the real estate slump lingers. And a statewide growth plan takes more capital than the traditional community bank growth method of expanding by county.

What's more, the holding company's specific banks have felt the slowdown. Its flagship Bank of St. Petersburg, for example, with branches in downtown Tampa, downtown St. Petersburg and North and South Tampa, among other locations, saw its net income, return on assets and return on equity all drop in the first quarter of 2007 as compared to 2006.

The bank's income dropped 90%, from $1.2 million to $120,000 in the quarter. And in the return on assets category, it joined nearly every Gulf Coast bank in slipping, as it went from 1.24% to .10%. Assets at the Bank of St. Petersburg did grow 25% in the same time period, though, from $386.6 million to $482 million.

Overall, Bank of Florida reported $523 million in total assets at of the end of the first quarter of 2007, according to the Federal Deposit Insurance Corp. It lost $239,000 in net income and reported -.18% in return on assets and -1.47% in return on equity.

Coughlin, who earned a Purple Heart for his tour with the Marines in the Vietnam War and is well known for bringing a no-nonsense, no-retreat management style to his executive roles, says improving return ratios is a problem of managing numbers, as opposed to managing people.

"This bank will be a high-performing bank," Coughlin says. "We just to have make sure we arm and train our folks and let them go."

Wants and needs

An entrepreneurial attitude such as that is the only way the concept of a statewide holding company running community banks across the state can work, Coughlin says. The plan is to allow each branch to run independently, he says, with as little interference from the Tampa-based mother ship as possible.

This way, there is local ownership, local managers and local governance. So in theory, Coughlin says, when the company enters a new area, the local executives will already be entrenched in their respective markets.

Coughlin says there are markets the bank needs to be in and then there are markets it wants to be in, which in total, covers 10 areas. The future want-list includes Sarasota, Orlando and Palm Beach.

On current markets, North Florida works because it includes the growing Jacksonville area and its nearby high-end beach communities. The main branch for that market was chartered as a de novo late last year and Florida Bank Group added to the portfolio last month when it bought Ponte Vedra Beach-based Cygnet Private Bank, a $114 million asset institution.

The Sunshine State capital is another recent addition to Florida Bank Group. The holding company closed on a deal to buy the Bank of Tallahassee in April, bringing in $81 million in assets. "If you want to be a statewide bank," Coughlin says, "you have to be in the state capital."

REVIEW SUMMARY

Business. Florida Bank Group

Industry. Banking

Key. The holding company plans on being in as many as 10 markets across the state, with each area running as an independent community bank.

BY THE NUMBERS

Florida Bank Group, Inc.

(Performance represents the only two quarters the holding company was in control of both the Bank of North Florida and the Bank of St. Petersburg. Dollars in thousands).

ASSETS AND LIBILITES YTD 12/31/06 YTD 03/31/07 %change

Total assets 515,986 523,091 .01%

Net loans and leases 369,995 393,310 .06%

Total liabilities 450,898 458,110 .01%

Equity capital 65,088 64,98 N/A

Noncurrent loans and leases 0 0 N/A

Average assets, year-to-date 462,466 519,539 12%

Insider loans 17,099 18,632 .08%

Tier 1 (core) capital 60,641 60,587 N/A

INCOME AND EXPENSES YTD 12/31/06 YTD 3/31/07 %change

Total interest income 27,830 8,375 -70%

Total interest expense 14,858 4,896 -67%

Net interest income 12,522 3,479 -72%

Provision for loan and lease losses 1,108 272 -75%

Total noninterest income 1,360 205 -85%

Total noninterest expense 10,436 3,771 -64%

Salaries and employee benefits 5,882 1,751 -70%

Pre-tax net operating income 2,338 -359 N/A

Net income 2,117 -239 N/A

PERFORMANCE RATIOS YTD 12/31/06 YTD 3/31/07

Net interest margin 2.87% 2.82%

Return on assets .46% -.18%

Return on equity 3.46% -1.47%

Efficiency ratio 73.99% 101.25%

Noncurrent assets/other real estate owned to assets 0 0

Core capital (leverage) ratio 13.03% 11.82%

Tier 1 risk-based capital 15.01% 14.24%

Total risk-based capital ratio 16.01% 15.34%

Source: FDIC

'Another campaign'

Corey Coughlin has had his share of messy bank departures over his three-decade career in executive banking. He once gave up a president and chief operating officer position when, he says, the board of the bank's parent company reneged on a promise to move the headquarters from Lake City to Jacksonville after he supervised the company's IPO.

Leaving Sarasota-based First State Bank, where he had been the president and chief executive since 2002, is not one of the messy ones, says Coughlin. "It's bittersweet," he adds, "but it was time for me to find another campaign."

The move originated, when he ran into Robert Rothman, then the CEO and chairman of the board of Florida Bank Group, at a Gulf Coast banking event. Rothman, a minority owner of the NFL's Washington Redskins and a Tampa-area insurance executive, wowed Coughlin with his strategy to build a statewide bank through community branches.

Additionally, Rothman's organization, while not failing like some of the other bank's Coughlin had worked for, was still in need of some leadership assistance. Coughlin, a Miami native who once led a large-scale turnaround at SouthTrust Bank, was sold. "This company is good," Coughlin says, "but it can be great."

Executives at First State Bank say they don't hold any grudges against Coughlin, who was a big part of turning the bank into a top performer in Sarasota and Pinellas counties.

"He wanted to make his mark and go for it," First State board chairman Thomas Wright says.

-Mark Gordon