Familiar bankers

Executive Summary
Company. Seaside National Bank & Trust Industry. Banking Key. Veteran bankers lead expansion.

Seaside National Bank & Trust may be based in Orlando, but its Gulf Coast bankers are familiar to many business owners.

For example, the president of the bank's West Florida operations is Michael McMullan, the former CEO of Naples-based Bank of Florida. David Ruppel, former president and CEO of Florida Bank of Pinellas County, is now a client adviser in the bank's Tampa office. In all, 15 former bank CEOs now work for Seaside, McMullan says.

It's no surprise then that Seaside looks a lot like Barnett and SunTrust. The bank's chairman is Thomas Yochum, a well-known veteran of SunTrust and Barnett Banks in Central Florida who formed Seaside in 2006.

Besides making loans, the bank provides trust services and money management, providing business borrowers with additional financial services. In May, Seaside acquired The Vaughn Group, an insurance brokerage firm in Orlando. The bank recently reported $1.2 billion in assets and its wealth management arm manages $500 million.

Most recently, Seaside opened an office in Naples, where board member and retired banker Charles Valentine has a home. Seaside recently appointed Wayne Griest, a 35-year bank veteran who was the founder, president and CEO of Pennsylvania-based Continental Bank Holdings, Naples market president. Griest moved to Naples after he sold Continental to Bryn Mawr Trust last year for $125 million.

Building the network from Tampa to Naples is part of the bank's greater plan to expand throughout the state. “Our plan is to be a multibillion-dollar franchise,” says McMullan.

Tampa beachhead
Unlike many of the rival banks that survived the recession, Seaside didn't grow by acquiring struggling or failed banks. Instead, it opened its own offices and staffed them with veteran bankers, many of them refugees of the banking crisis that engulfed the industry during the downturn.

Seaside established its presence on the Gulf Coast by opening offices in Tampa and Sarasota in 2007. McMullan joined the bank in 2013, relocating from Naples to Tampa, where he now lives in a condo in the Channel District.

The Tampa office is centrally located in the Westshore Business District, which provides easy access to Pinellas County across Tampa Bay. “Tampa has the best business climate for middle-market entrepreneurial companies,” says McMullan.

To tap into that entrepreneurial network, Seaside hired Ruppel, the longtime Pinellas banker. Until he was named president and CEO of Florida Bank of Pinellas County in 2000, Ruppel was executive vice president of SouthTrust Bank of West Florida. Most recently, Ruppel was market executive and senior vice president with First Home Bank.

McMullan says Hillsborough and Pinellas counties have a broad economic base that includes international trade, manufacturing, warehousing and medical industries. “Tampa Bay is such a wonderful, big market,” McMullan says.

In Sarasota, McMullan says the nonprofit, wealth management and medical specialty groups are especially strong areas. “Health care is a key part of the wheelhouse,” McMullan says.
Seaside opened an office in Naples when McMullan and Valentine met Griest. When he sold Continental, Griest retired to Naples in December. Retirement was short-lived: “I hated every minute of it,” Griest chuckles.

Griest's territory includes Fort Myers and that may include opening an office there, though he says Seaside can operate in both communities from Naples. “If you know what ponds you want to fish out of you're very effective,” Griest says.

Griest faces plenty of competition despite the fact that many locally headquartered banks folded during the downturn. They include First Florida Integrity Bank and Encore Bank, both based in Naples, and Fort Myers-based Finemark National Bank & Trust. “We've gotten a lot of clients from bigger banks,” says McMullan.

Still, McMullan says Seaside doesn't need to grab big market share to succeed in Naples, a market that's predominantly made up of wealthy retirees and highly educated professionals such as lawyers and doctors. “Twenty-five to 30 clients builds a significant base,” he says, noting that Valentine has already brought one large undisclosed customer to the bank.

McMullan, a veteran of 20 mergers over his career, says Seaside hasn't ruled out acquisitions even though it hasn't made any to grow. “The culture is the most important part of it,” he says. “The right opportunities will be out there.”

In banking today, McMullan agrees that size matters. Because of intense bank regulations and conservative capital requirements, banks need at least $1 billion in assets to generate meaningful profits. “The inflection point of scale started three years ago,” McMullan says of Seaside's profitability. For the first six months of this year, Seaside posted net income of $2.6 million compared with $983,000 in the same period in 2014, according to the FDIC.

Revenue diversification
The bread and butter lending for most Florida banks has been commercial real estate, which is one reason why many banks folded during the recession. Commercial real estate values crashed, leading to a surge in bad loans and bank closures including McMullan's Bank of Florida.

But Seaside's loan portfolio reflects the kind of diversification that might help it weather another recession when it comes. According to the latest data from the Federal Deposit Insurance Corp. for the period ending June 30, nearly half of Seaside's loans were commercial loans not tied to real estate.

Such commercial and industrial loans accounted for $424 million out of $880 million in net loans at Seaside, FDIC data show. In fact, commercial real estate loans that traditionally make up the bulk of lending at many Florida-based banks accounted for $234 million at Seaside.

Seaside prefers making commercial real estate loans for owner-occupied buildings and making jumbo loans on the residential side for business owners. Speculators need not apply:
“We're not into acquisition and development and investor real estate,” McMullan says.

But with interest rates low and competition tough, profit margins from lending remain thin.

That's why banks such as Seaside have turned to other businesses to boost “non-interest” income. Seaside generated $3 million in non-interest income in the first six months of this year, for example. Although that's less than the $17.2 million in net interest income from lending in the same period a year ago, it's a faster-growing part of the business.

The idea behind adding wealth management and trust services to banking is to capture more business from entrepreneurs and business owners. “If you can take care of that, they don't have to go somewhere else,” McMullan reasons.

That's why Seaside acquired The Vaughn Group, a 42-year-old insurance and group-benefit brokerage firm in Orlando. Its founder, Hardy Vaughn, has been named president of Seaside Insurance.

“The model is built to be sustainable,” says McMullan. “We're building for the cycle.”