Interview with: Ernest S. Pinner, Chairman, President and CEO - featuring: their multibank holding company serving Central Florida from more than 30 branch locations.

CenterState Banks of Florida, Inc. (CSFL-NASDAQ)

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CenterState Banks of Florida believes in going the extra mile for its customers in both products and service

Regional – Southeast Banks

CenterState Banks of Florida, Inc.

1101 First Street South, Suite 202
Winter Haven, FL 33880
Phone: 863-293-2600

Ernest S. Pinner
Chairman, President and CEO

Interview conducted by:
Lynn Fosse, Senior Editor
Published – May 25, 2007

Company Profile:
CenterState Banks of Florida is a multibank holding company serving Central Florida from more than 30 branch locations. It owns CenterState Bank of Florida, CenterState Bank West Florida, and CenterState Bank Central Florida. In 2006, the company acquired CenterState Bank Mid Florida, a community bank with three locations. The banks offer standard retail products and services including checking and savings accounts, money market accounts, and CDs. The banks focus on real estate lending: Residential mortgages account for about 30% of the firm's total loan portfolio, while commercial mortgages account for another 40%. The banks also sell mutual funds, annuities, and other investment products. CenterState Banks recently announced a pending merger with Valrico State Bank, located in the neighboring county of Hillsborough.

The acquisition will make CenterState a five bank holding company with 36 offices in nine Central Florida counties. On a consolidated basis at December 31, 2006, CenterState Banks of Florida, Inc. had total assets of approximately $1.1 billion.

CEOCFO: Mr. Pinner, what was your vision when you became CEO and where are you today?
Mr. Pinner:
“My vision has always been to grow a local home owned community bank, to the point that it could be high touch with regard to the customer and yet high-tech like the much larger regional banks. We wanted to be a local hometown bank, but yet have the technology to keep pace with the larger corporate banks and to do it in such a manner that the customer always felt delighted and the employees wanted to get up every morning and go to work.”

CEOCFO: How do you delight your customers?
Mr. Pinner: “Treating people like they were your grandmother. Everybody’s money is green. We have few services that our competitors don’t have. You take what you have and you deliver it in a lot more powerful and personal way so that when a customer leaves they say, ‘gee, that was unique’. Just get out of the rut and go the extra mile with the special touch, the genuine caring touch that I think a community banker should have. I have been a corporate banker and I grew up as a community banker and now I am back to being a community banker.  It is a lot more fun.”

CEOCFO: Will you give us an example of how you go the extra mile?
Mr. Pinner: “I walk through the lobby of the bank and it is 6 minutes to 9:00 and there are eight people waiting at the door; I open the door because nobody says I have to wait until 9:00 to open. More importantly, it is 4:00 and you have to close the door and there are four or five people that drive up, you let them in. If you go out to the drive-ins and there are twenty cars in line and it is five o’clock, stay till seven, or however long you have to stay to get the last customer. It is usually only a six or seven minute wait, but it isn’t the end of the world. Customers appreciate the extra touch. We try to send a personal letter after everyone opens an account, not just a ‘we love ya, thank you for your business’, but a letter that whoever opens the account can add something a little special,, a child’s name, husband’s name or talk about their pet. Something that says we were really listening, not only did we thank them for their business, but we listened! We try to put in the personal touches. It is not in pricing; I don’t try to under price. I would rather deliver an American Express Inc (AXP-NYSE) card attitude than a Wal-Mart Stores Inc.(WMT-NYSE) card attitude and that is no disrespect to either company. I would rather our people have an American Express approach, I have to pay more but I get more from the bank. Generally, we are priced higher, but you get what you pay for. People are willing to pay a little more, especially for service. On the loan side it is just unlimited, you don’t have to fit in the “box”, you don’t fill out an application, submit it and the matrix says, ‘whoops, you don’t fit the box’. We will go the extra term, we will loan more than the book says. We will make the payment customized.”

CEOCFO: Please tell us about your multi-bank structure.
Mr. Pinner: “We are a Florida multi-bank holding company. We are a decentralized operation. Each bank stands on its own. The holding company owns the bank by way of being the only shareholder, but all of our board members of those individual banks are shareholders of the company. In most cases they were charter board members, they helped start the bank. Thanks to decentralizing, the local bank president and the local bank board make 98% of the decisions. The holding company does not have mandates. If you look at our signs, most of our banks have CenterState, all the signs are not alike. They do not have a standard color. I would like to have that, but to do so would be taking away their autonomy, the authority of the local bank board. If they want a funny looking blue vs. the standard blue, I don’t mind, it is their decision. We push responsibility to the lowest level. The guy in the fox hole is the man who makes a call. We let them decide. We have checks and balances in place if somebody goes berserk. We are interlocked with board members and in my personal case; I sit on every board, loan committee, and every investment committee. There is a general fiber that runs through our company that we kind of look alike but it is not mandated. It is a culture. We are only 311 people. It is not a family, don’t misunderstand, because you can’t get thrown out of a family if you do something wrong. There is a similarity in the way we do things but it is not mandated. The local bank makes that call. If anybody wants to stay, open until six o’clock in the evening and the other wants to close at four; that is a local decision. It is a market call; the local banker is doing what is right for his community.”

CEOCFO: What do you look for in the banks that you take under your wing?
Mr. Pinner: “We are a people bank. We are in some markets that may not make sense when you first look at it, but we acquired that market, that branch, that particular segment, due to a person. In other words, I would love to have a bank in Pleasantville all the time, but if I don’t have a banker that grew up and has relations in Pleasantville, I don’t want to build a bank there. We are not as large as a Wachovia Corp. (WB-NYSE) or Bank of America Corp. (BAC-NYSE) that can afford to just place institutions in the right economic markets. I look for bankers; I look to build a market around bankers.  Customers stay with their banker! I look for bankers that are down to earth, high touch, very customer oriented. We are very traditional, very old fashioned, very Deep South, yes ma’am, no ma’am, open the doors for the ladies.”

CEOCFO: How are you faring under the current housing, real estate interest rate market?
Mr. Pinner: “It is a slowdown without question in this marketplace here in the center part of Florida between Tampa and Orlando. Two years ago, it was on a wildfire rush. We all said this can’t last and it has definitely slowed. Deposits are much slower in growth than loans. We are not big commercial, corporate real estate lenders in the sense of acquisition and development or condos or big box financing. We have been more oriented to the mom and pop, doctor, lawyer, merchant chief type lending. Our loans are still above budget; still have good growth, double-digit growth, almost 20%. The deposit side has been dramatically affected since the real estate market has slowed down. There was a lot of money flowing two years ago. People would say the industry in Florida was real estate, so when the real estate market gets hurt, it is like living in a mill town where they are shutting the mill down. It has slowed the dollar flow and at the same time, the interest rate cycle caught up on the deposit side. Loan interest rates are going down and CD rates are going up. This cycle probably has another 12 – 18 months to run its course. The price of money has gone up and there is less money to acquire.”

CEOCFO: How do you counteract the cycle?
Mr. Pinner: “Kiss babies and give the dog a little bone. It is taking personal care of our customer. Some of our title companies used to keep $10 million in their account, this morning they have $300 thousand. You just seek out other customers and the cycle will come back. It has always been that way in Florida and it will continue to be so. We are not highly leveraged; our loan deposit ratio is around 70%. We are not 100% loaned up so it is not the end of the world for us. You don’t try to get ahead of the pack in this process and you sure don’t want to be at the end; you want to stay in the middle. I don’t try to bet on interest rates. I do not know whether it is going to go up or down or high or low. Just keep yourself evenly leveraged and you can ride the flow. You gain the margin by giving high quality service.”

CEOCFO: Future acquisitions and new branches?
Mr. Pinner: “Yes. We want to grow in our market place through acquisitions as well as de novo branching, but we want to find acquisitions, mergers or partners, that fit our culture. I believe that in the center part of the state there are many small banks that have been started over the last twenty years that probably don’t have a solid exit strategy. The president is in his early or mid sixties and he has done a great job. It was easier to sell three or four years ago than it is today, and many times when you sell, you sell out completely. There are a lot of bank presidents like myself that say, ‘well I don’t really want to do that, I need to get my shareholder and myself  liquid but I don’t want to lose the bank or see people gobbled up in the merger mania’. This is where I can raise my hand and say, ‘hey, I am one of the good guys, we are still decentralized, you still run the bank, and you partner with us’. You can get involved with a company that is publicly traded and you have an exit strategy now where your stock can be traded anytime you want, but you don’t lose your bank. You augment what you have and someday you may sell again greatly enhancing your investment. I think there are banks in the next few years that will be looking for this kind of strategy.”

CEOCFO: Please tell us about your recent acquisition of Valrico State Bank and what difference it will make for CenterState?
Mr. Pinner: “Valrico State Bank is one of the opportunities I have been speaking about. Valrico is in our marketplace and in fact fits perfectly in our original vision of building around the major traffic corridors of I-4, US Highway 27 and I-75. More importantly, the staff there is an ideal fit with our culture. The Valrico bankers are very experienced, market savvy, customer focused and successful. Valrico augments not only our asset size but also our profits. Now with Valrico, we better cover the center part of Florida and we now have access to both Orlando and Tampa.”

CEOCFO: Why should investors be looking at CenterState?
Mr. Pinner: “We are in the right market. There is probably not a better market in the country than in Florida and especially in central Florida. The world has always gone to Miami, Fort Lauderdale and Tampa and those are great markets, but because of the growth of the overall state and the overall demographics of this area, the center part of Florida is getting huge move-ins from the coast. The people that were on the coast have said, ‘Geesh, I am tired of all of the hustle and bustle, I am going inland where it is cheaper to live and a better quality of life’. You have this huge growth factor that is coming into central Florida. The demographics of our marketplace are some of the best in the country. It is a great place just to live. I see the sun everyday, where in Cleveland; I may not see it but a few days a year. We also have been able to attract this great cadre of bankers. I think our average bank president has about 30 years experience and very few of them are over sixty. The bankers in this company are very experienced people having gone through the cycle of community banking, then to large corporate banking, and now back to their roots of community banking. Between the people, location, demographics, I think the future is bright.”


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“My vision has always been to grow a local home owned community bank, to the point that it could be high touch with regard to the customer and yet high-tech like the much larger regional banks. We wanted to be a local hometown bank, but yet have the technology to keep pace with the larger corporate banks and to do it in such a manner that the customer always felt delighted and the employees wanted to get up every morning and go to work.” - Ernest S. Pinner does not purchase or make
recommendation on stocks based on the interviews published.