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| 6:00 p.m. June 19, 2008
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BANKING by Jean Gruss | Editor/Lee-Collier

Gary Tice and Garrett Richter built a legendary banking franchise on the Gulf Coast before they sold it in 2005 for top dollar. Can they succeed again?

They're back.

Gary Tice and Garrett Richter, two giants of Florida banking, are organizing a new bank called First National Bank of the Gulf Coast that may one day rival the monolith they built and sold to Fifth Third for a record price in 2005.

The two men and a group of 26 other organizers and founders plan to raise between $50 million and $60 million this summer to build another legendary banking franchise headquartered in Naples. They plan to open First National Bank on the first day of 2009.

"There's only one way you get a reputation: you earn it," says Richter, who will be president of the new bank and is currently a state representative running for the state senate.

Their own reputation speaks for itself.

When Tice and Richter sold Naples-based First National Bankshares of Florida to Fifth Third for nearly $1.6 billion in early 2005, they had grown it to the largest bank-holding company in Florida with $5.3 billion in assets, $3.9 billion in deposits and 77 branches stretching from the Tampa Bay area and Orlando to Sarasota, Fort Myers and Naples. Fifth Third paid a stunning 6.5 times tangible-book value to gain a foothold in the once-sizzling Florida market. Today, Fifth Third itself trades barely above tangible book value and many Florida banks trade below par in large part because of the real estate downturn.

The new bank is likely to alter the banking landscape in Naples, where rival community bankers such as Orion Bank and TIB Bank have had more than three years to grow their franchises. Both have grown assets beyond the $1 billion mark since 2005 in some part by seizing unhappy Fifth Third customers and employees, making them formidable competitors today.

But Tice and Garrett say rivals never took full advantage of the local-banking void in Naples that occurred after the Fifth Third acquisition. "No one was able to capitalize on what we were doing," Tice says. "I believe the community banks do a very good job. We'll do a superior job."

Management and the board of the new bank are peppered with First National alumni. Tice will be chairman and CEO, Richter will be president and chief relationship officer, C.C. Coghill will be senior vice president and chief credit officer and Robert Reicher will be senior vice president and chief administrative officer. Alumni organizers include Cape Coral banker David Gomer, Naples Realtor James Lindsay, Naples certified public accountant Edward Mace and Naples-based Summit Medical Supplies President Donald Major.

Start a bank now?

As everyone knows, the banking landscape has changed for the worse since 2005. The real estate market has cooled, retail sales have declined, rivals have multiplied and gotten bigger, and deposit growth has slowed.

Meanwhile, the banking industry in Florida has been hit particularly hard. Real estate lending is the bread-and-butter of Florida community banking and bad loans have been mushrooming at many banks across the state with no end in sight.

Michael McMullan, president and chief executive officer of Bancshares of Florida in Naples, recently told a group of money managers that investors are treating Florida bank stocks like "financial asbestos."

Tom Hebble, executive vice president of commercial banking at Orion Bank, says First National faces a much more difficult task than it would have a few years ago. "The biggest challenge today is the operating environment," he says.

The soft real estate market, shrinking deposits and super-vigilant regulators are just three hurdles. As of June 30, 2007, FDIC data shows there were 40 financial institutions with 148 offices in the area where First National plans to start lending. Hebble says deposits in Collier County shrank $200 million in 2007, the first decline in recent memory. Hebble knows the First National crew well because he was senior credit officer at the predecessor bank.

Still, Tice and Richter cite Orlando-based economist Hank Fishkind, who told them recently that the economy would improve over the next year to 18 months. "There are signs of the economy making a turn," Tice says. For example, home sales rose in April over the same month a year ago. The lack of economic growth is more a function of emotions and perception, Richter says.

What's more, both men say Collier County is in a better position to weather a downturn because of the county's wealthy residents. Even if there was a decline last year, deposits in Collier have grown from $3.4 billion in 1997 to nearly $11 billion last year, according to the latest data from the Federal Deposit Insurance Corp.

And First National Bank will start with what Richter calls a "spanking clean" balance sheet. Translation: no bad loans that are now distracting many competitors. "It got stupid while we were gone," Richter says.

But that's about as much as they'll say about their competitors. "I can't guess what other banks are doing," Tice says. "We never worry about our competition."

Fact is, Richter and Tice started the last First National bank in 1989, in the middle of one of the worst commercial-real-estate recessions in Florida history and emerged to benefit from the subsequent recovery. "We set our plan and we follow our plan," Tice says.

Raising capital in tough times

The challenging banking environment has made it tough to raise capital at all banks, large and small. Tice jokes that he has prospectuses stashed in the trunk of his car to distribute wherever he goes.

Tice says the bank so far has raised close to half the $50 million it plans to collect by July 31. It may extend the offering until Oct. 31and it may raise as much as $60 million if there is demand. "We're about where we expected," Tice says, adding, "You don't know what people will do until the last minute."

Directors and organizers of the bank include well-established business leaders who have the ability to help raise money. These include Brian Cobb of mergers-and-acquisitions firm CobbCorp, business consultant Jeffrey Davis, Upsher-Smith Laboratories Founder, Chairman and Chief Executive Officer Kenneth Evenstad, and private equity investor Robert Feerick.

The bank's management also has substantial investment in the new bank, which Tice says gives investors reassurance that management's interests are aligned with shareholders. The top four managers plan to invest $4 million and, together, the organizers, founders and executive officers will own nearly 37% of the bank if they raise $50 million and 31% if they raise $60 million. Tice says management's investment is three times the average of a new bank.

Focus on Collier and Lee

For the next few years, Tice says the bank will focus on Collier and Lee counties. It is building a new headquarters on Pine Ridge Road in Naples and a branch at Anchor Rode Drive near U.S. 41.

With the words Gulf Coast in its name, it clearly has set its sights on other markets it knows well up the coast: Sarasota and Tampa. But Tice says that will only come after it establishes the bank in Southwest Florida. He estimates it will take two years for the bank to reach profitability.

At the previous First National, Tice and Garrett also grew the bank through acquisition of 10 banks. But both men say there's no immediate plan to do that now. "We do not have a plan to acquire other banks in the next three to five years," Tice says.

However, the bank will be authorized to issue as many as 50 million shares. Initially, the offering calls for the issuance of a maximum 6 million shares at $10 a piece. "We may never use it," Tice says, but it gives the bank extra flexibility should it need money to acquire a rival or expand up the coast. Shareholders whose holdings would be diluted if the bank issues more shares will be able to vote on the decision. The shares will be traded over-the-counter, though initially trading is likely to be thin, if at all.

First National will focus on the kinds of loans Florida community banks have made for years: commercial real estate loans to small and medium-sized businesses and development loans secured by real estate in Collier and Lee counties. That business obviously isn't as robust as it was and Tice acknowledges that interest margins - the difference between what the bank pays out in interest on deposits and what it earns on loans - may be low at first. But they say real estate valuations have returned to more reasonable levels, making loans less credit-risky now.

Tice and Richter say their board will be involved in business development. "The board plays a significant role and they give us the referrals," Tice says.

But rival community banks have well-connected boards, too. For example, the influential Collier and Lutgert families of Naples recently announced plans to invest as much as $20.2 million in TIB Financial, the parent company of TIB Bank, and both families have seats on that board.

At least initially, First National will be limited by the size of loans they can make. Assuming the bank raises at least $50 million, the lending limit will be $7 million for unsecured loans and $11.7 million for secured loans. Tice says First National can be a participating lender on much larger loans with other banks.

In addition, First National will not offer money management and trust services. That's an area banks have promoted as a source of income because lending isn't as profitable now. For example, TIB acquired Naples Capital Advisors for $1.33 million in January, a firm that oversees $80 million in investments. It also is seeking approval to start a trust company. Bank of Florida in Naples is already well established as a wealth-management provider, which includes subsidiary Bank of Florida Trust Co.

But Richter says money management is a difficult business in which to be profitable. Tice says First National will offer what customers want most out of a private bank: a live person to answer their call. "People bank with people," Tice is fond of saying.

And then there's the issue of whether the bank will once again be sold when there's the prospect of shareholder return in about five years. Customers at the previous First National ended up with Fifth Third and some of them weren't happy about it.

Of course, Tice has a fiduciary responsibility to investors, too.

"We owe it to our shareholders to entertain any significant offer," he says. Still, even when Fifth Third made its offer for First National in 2004, Tice says he looked for excuses to turn it down. This time is no different, he says.

"We are not running the bank to sell it," Tice says.

First National Bank of the Gulf Coast

Executive officers, organizers and directors

Name Age Position

Gary Tice 60 Chairman, chief executive officer, director

Garrett Richter 57 President, chief relationship officer, director

C.C. Coghill 64 Senior executive vice president, chief credit officer, director

Robert Reichert 45 Senior executive vice president, chief administrative officer, director

Collier County Deposit Market Share

While large regional banks still control a big share of the deposits in Collier County, community banks are holding their own and growing them in many cases. The latest data is available as of June 30, 2007, from the Federal Deposit Insurance Corp. Here are the top 10 ranked by deposits in Collier (deposits in millions):

Bank 6/30/06 Deposits 6/30/07 Deposits %Change

Bank of America $1,802,497 $1,715,172 ‑5%

Fifth Third Bank 1,869,399 1,587,419 ‑15%

Wachovia Bank 1,323,764 1,375,419 4%

Orion Bank 1,021,431 1,138,168 11%

Regions Bank* 704,537 570,040 ‑19%

Florida Community Bank 552,512 449,491 ‑19%

KeyBank 0 425,875

Bank of Florida Southwest 320,206 339,726 6%

World Savings Bank 259,494 293,881 13%

Northern Trust 252,485 286,989 14%

*Acquired AmSouth Bank's Collier deposits in acquisition.