Interview With The Chairman, President And CEO: CenterState Banks, Inc. (CSFL) - Ernest S. Pinner

Wall Street Transcript

67 WALL STREET, New York - May 2, 2012 - The Wall Street Transcript has just published its U.S. Banking Report: An Investor's Guide offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Money Center Bank Balance Sheets - Dodd-Frank Act, Volcker Rule and Durbin Amendment - Cost Reduction and Consolidation Activity - Macroeconomic Cyclical Recovery

Companies include: 1st United (FUBC); BBCN Bancorp (BBCN); Bar Harbor Bankshares (BHB); Central Pacific Financial (CPF); and many more.

In the following brief excerpt from the U.S. Banking Report: An Investor's Guide, expert analysts discuss the outlook for the sector and for investors.

Ernest S. Pinner, Chairman, President and Chief Executive Officer of CenterState Banks, Inc., began his banking career at 16 at State Bank of Haines City while attending high school in Haines City, Fla. After graduation from the University of Florida and at 27, he became President of the bank, which eventually was acquired by First Union National Bank. At First Union, Mr. Pinner served as Area President over five counties in central Florida. After retiring from First Union, he established the first CenterState Bank in April 2000. Currently, CenterState operates through two subsidiary banks with a 58-branch network in 17 counties throughout central Florida. Mr. Pinner is active on the Polk State College board of trustees and the Polk State College Foundation. He is a Past Member of the board of governors of the Polk Museum of Art and the Imperial Symphony Orchestra. He is a Past Director of the Heart of Florida Educational Foundation and the Polk County Industrial Development Authority. In 2010, he was chosen one of the Ten Best Industry-Loved Bank CEOs by TheStreet publication.

TWST: Please begin with a historical sketch of this company that will put CenterState Banks into context. What do you see as its business today?

Mr. Pinner: CenterState Banks (CSFL) is a consolidation of a group of small Florida community banks that merged around 2001. Previously, there were three banks that had been individually chartered and operating prior to that time, but they had kinsmanship by way of the Chairman and the board. I knew all the bankers and was previously involved with them for years. At the time when I left First Union, we chartered a new bank and agreed to form a multibank holding company together that would be publicly traded. We merged the three banks into the new holding company around 2001. Later we merged the new bank into the holding company. Today it is basically that holding company with two banks, the lead bank, which is about a $2 billion company, and one other small $200 million bank we had acquired. Both banks will be merged in the next few months, and it will become one bank owned by a publicly traded Florida multibank holding company. We function as a community bank in the center part of the state of Florida with correspondent offices in Alabama, Georgia and North Carolina. We operate the business day to day as if it is locally oriented, locally owned and locally controlled in each of these communities. The vision is to continue to grow this company with a goal to be $5 billion in the next three to five years. We're pursuing that goal aggressively.

TWST: What are some of the key trends or issues the banking industry, particularly community banks, are facing today that you believe will have an impact on CenterState over the next few years?

Mr. Pinner: I think the one that jumps off the page is all the new financial compliance rules that are coming via Dodd-Frank and similar new rules. In my opinion, it's going to be very hard for a community bank that is not at least $500 million in size to be able to survive financially over the next few years. When you consider there are new costs being forced on us for compliance reasons, it is just going to be financially unrewarding to be a small bank. I am not sure investors when considering ROE will rush in to invest in small banks. This theory could vary geographically, although I am of the opinion it's probably countrywide. I think it is more difficult in some of the areas like the Southeast, where we've just gone through this tremendous real estate bubble. So you've got the credit issue that's hindering banks.

And then compounded with the compliance issues and the cost, it's going to be difficult for small community banks to survive and provide an acceptable return to their investors unless one merges or consolidates so a size can be attained that allows better competition. At one time, there were six banks in this company, and we saw the need for consolidation and began to merge over the last three years. There is a need to be a larger bank, yet we still try to deliver customer service as small bank customers expect and deserve.

TWST: Would you think of a large-scale economic, demographic or public policy factor, in addition to Dodd-Frank, that may affect CenterState in the next few years?

Mr. Pinner: In Florida, the credit issue is still going to be very difficult to manage. This business cycle has been a major recession that in my opinion is a balance-sheet recession, not a P&L recession. A P&L recession can allow one to bounce back fairly quickly. But when you destroy people's balance sheets, that's a long-term healing process. So I think for the next three to five years, the credit cost associated with the past real estate bubble that continues to push itself through the Southeast and especially Florida is going to be a major impact on small community banks.

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