Vigilance Pays

When you walk into the headquarters of C1 Bank in downtown St. Petersburg, be forewarned. The CEO can see you long before you see him.

Trevor Burgess likes to keep an eye on things. And people. From his desk at the helm of his open-concept corporate center, he can look out at the rows of accountants, underwriters and administrative workers from the three Florida banks he has already acquired. And he can see the bank entrance and the visitor fidgeting on a chair opposite the reflective wall tiles of the foyer.

Burgess can even see his next frontier at the far corner, where workers are hammering away, renovating space for 30 new employees from Doral-based U.S. Century Bank, which C1 is scheduled to acquire Dec. 31. The deal would more than double C1's assets, propelling them to $2.2 billion.

Facing his work force, the CEO's vision is both literal and symbolic. Burgess is staking millions of his own funds in community banking at a time when the industry is still shaking off the effects of the recession. In the face of national concern over the economic fiscal cliff, and a global erosion of confidence in the banking industry, Burgess is daring to grow his bank by taking on the assets of struggling institutions. “We buy troubled banks and rehabilitate them,” he says. But as he proceeds, he insists on vigilance and transparency in the bank's practices as a way to build trust and avoid the problems that led to the credit crisis.

“I think what we need to do is to not repeat the mistakes of the past in Florida banking or in banking in the United States,” says Burgess. “The key is absolutely due diligence.” Not getting caught up in risky practices, even if industry peers allow them, is as important as his growth strategy. His view of lending evolved through insight from the past. “During the bubble a lot of what was done was lending based on assets, and the belief that assets would only go up.” Borrowers got loans on investment property that they couldn't repay unless they sold the property for a profit, he adds.

At the bank's new corporate headquarters, Burgess has centralized the credit, accounting and administrative functions in a design that telegraphs openness. In a fundamental change, he brought in more than a dozen credit underwriters, he says as he leads the way past rows of desks in his world without walls. Even meeting rooms that circle the employee desks have a transparent element, floor-to-ceiling glass doors. He points out the room federal regulators use when they visit, its glass emblazoned with the IBM motto “Think.” The room is feet from his desk, so as he sits at his computer, he can even keep an eye on the regulators.

Pivotal moment
Burgess charts each move with deliberation, selecting banks that are troubled but have not collapsed. His investigators comb the ailing banks for shreds of equity. They pore over deposit and loan figures, ferreting out evidence of mismanagement or systemic problems in lending.

He is poised to make his biggest move yet, if regulators approve the acquisition of U.S. Century Bank. C1 has already received approval from the Florida Office of Financial Regulation and is awaiting the Federal Deposit Insurance Corp.'s decision. The purchase would bring the number of employees at bank headquarters to about 110, and would increase the bank's branches to 45, with nearly 50,000 clients.

When he hunts for an acquisition, what Burgess wants is a bank with turnaround potential, rooted in its community. He and business partner Marcelo Faria de Lima, chairman of the bank's holding company, CBM Florida Holding Co., which has two more international partners, reject many choices, from failed banks to some that underwrote stalled development projects.

Once they decide on a purchase and gain approval, they move swiftly, infusing the bank with fresh capital, moving the credit and accounting departments to St. Petersburg, identifying nonperforming loans and replacing them with healthy loans, the backbone of a sound bank.

The holding company studied 35 banks in Florida before settling on its first, the Bank of Manatee. It closed on that deal in 2009. It was a learning experience, with the key lesson about market timing. The market was still in decline. “We lost money the first quarter that we owned the bank, but we've made money every quarter since,” says Burgess.

In 2011, the partners bought First Community Bank of America, based in Pinellas Park, adding 11 new branches. And in May 2012, they acquired The Palm Bank in Tampa. The consolidated bank name was changed to C1 earlier this year.

So far, the decisions Burgess and his partners made have paid off. In October, C1 announced net income of $2.2 million in the third quarter of 2012, its tenth consecutive quarterly profit, with year-to-date net income of $5.4 million, a 72% increase from the prior year.

But the U.S. Century investment will be costly. C1 has said it will invest $100 million in turning around the new acquisition. And C1 faces potential legal hurdles. Although the majority of U.S. Century shareholders approved acquisition by C1, some minority shareholders filed a lawsuit against U.S. Century in November.

Still, Burgess forges ahead. “We will run the Florida operation from here,” the CEO says, with a sweeping glance at headquarters. “We want everyone to be together to be able to make decisions and move quickly and react.” Responding quickly can make C1 more competitive, he says.

“If our executives can go and meet with the credit department and make a quick decision and get a client their loan two weeks faster than another bank, we're going to win because of that,” Burgess says.

C1 Bank already makes loans up to $20 million. Buying U.S. Century will allow it to lend up to $40 million.

Openness: An early lesson
At the helm of C1, Burgess applies lessons absorbed from a front-row seat in the financial arena earlier in his career. He is a 10-year veteran of investment banking giant Morgan Stanley, where he was a managing director, raising more than $50 billion for his clients. He left in January 2008, just months before the global credit crisis.

The recession convinced him that survival in the industry going forward would require openness in financial dealings and aggressive oversight in lending. He saw the need for better credit practices and communication among transaction participants. And eventually, he concluded that the best way to achieve transparency was to tear down the walls.

Watching the carnage on Wall Street and beyond, Burgess and Lima saw the opportunity for a new market. “We decided in 2008 when Lehman Brothers had failed, and Bear Stearns had failed, that it might be a good opportunity to invest in financial services in the United States.”

Housed in the Tampa Bay Times' former classified ad section, C1's headquarters strives to be worker-friendly, with creature comforts such as a nap chair, showers, and a break room. Its board room resembles a skateboard ramp with striped carpet. But attorneys relocating to C1 from plush, mahogany-laden dens are in for a rude awakening. C1's spare in-house counsel space features a shared white counter for computers, desk chairs on rollers, and nary a stick of mahogany.

“It's interesting,” Burgess points out with a smile, “if you don't have mahogany, and you don't have a lot of walls, it doesn't cost much to build.”

Looking ahead
The pending U.S. Century Bank deal signals C1's path as it climbs the rungs to a greater size. Burgess and his partners were willing to travel to a market more than 250 miles from St. Petersburg to acquire the bank and to invest heavily.

After the acquisition, Burgess plans to hold the line for a while, focusing on core functions, loans and deposits, and striving to assure that it lends in the community from which it draws deposits.

As it develops relationships in Tampa Bay, it also grows its base. C1 underwriters consider mortgages larger banks might not touch, such as jumbo and small business loans, and mortgages for self-employed people.

“We had a very wealthy doctor, very successful, but because he was self-employed, he couldn't get a mortgage. We were very happy to listen to his story and make that loan,” says Burgess.

The bank sells 30-year, fixed-rate residential loans to Fannie Mae or Freddie Mac, and as a correspondent bank, receives a referral fee for each loan. It asks businesses to encourage employees to seek loans and make deposits at C1, and pays attention to detail. At a restaurant near the beach, the bank imprints its name on the check presenters, which hold the bills presented to diners. In outfitting the space at its new headquarters, C1 chose a local lighting company.

With the no-walls approach, Burgess learns the interests of employees, and often supports them. It is a presenting underwriter for the high-profile, 2013 Cattle Barons' Ball, which will raise funds for the American Cancer Society. The ball is a passionate interest of a bank executive.

Vigilance and noticing opportunities pay off, says Burgess: “If you're willing to work a little harder and pay attention to detail, you can succeed.”