Like a lot of Florida bankers, John Corbett remembers feeling as though he and his team were very much under siege two years ago, but not for the reasons you'd think.
The problem he was grappling with, as president and CEO of CenterState Bank of Florida, was how to manage the growth of the Winter Haven, Fla., bank and the aggressive building phase that lay ahead.
CenterState's parent had just merged three subsidiaries, acquired three failed banks and raised capital, all within the third quarter of 2010. Corbett knew the acquisitive streak was just getting started. But the company had operated with a $7 million net loss that quarter, and there were still problem loans to be worked out. Could CenterState be a consolidator and a recovery story at the same time?
"I remember being away in a cabin in the mountains on Christmas and doing a lot of soul searching," Corbett says.
When he returned, he called a meeting and offered management two ways to end what had started: "I said, 'Here's what we've got ourselves into. Does everyone feel we should stay in the offense or just hunker down and go on the defense?'"
They took the harder option.
"The team really stiffened its spine and said the right thing to do is to stay on offense," Corbett says. That decision "really improved the confidence of the team, and their trust in one another is sky-high."
It also solidified the confidence that CenterState's executives have in Corbett, who's being groomed under his longtime mentor and the parent company's chairman and CEO, Ernest Pinner, to one day lead the holding company, CenterState Banks Inc. in Davenport, Fla.
"I trust him implicitly," Pinner says. Corbett "is able to deal with the pressures of the business very successfully. He keeps things from getting out of hand or being overly excited and making decisions too quick."
Since 2010, CenterState has completed 12 bank conversions, including six failed banks, one open bank and four branches acquired from TD Bank.
CenterState Banks has grown more than 30 percent in less than three years to $2.4 billion in assets at Sept. 30. It's the most aggressive failed-bank buyer based in Florida that is not backed by private equity—and one of the few multibillion-asset, homegrown banks left in the state.
That kind of growth, and Corbett's strategy for generating more, has helped him to convince several veteran bank CEOs in the state to leave their own institutions to join him. Sometimes they've signed on without even having a defined piece of the company to manage—arriving in anticipation of expansion deals that will take CenterState to new markets.
One of Corbett's recruits, Gilbert Pomar, left his position as president and CEO of The Jacksonville Bank last year in the midst of closing a private equity-backed deal to acquire another bank.
"It [was] clear to me that not only would CenterState be a survivor but it's a bank that would thrive," Pomar says.
It was a risk nonetheless for Pomar to leave the bank he founded to join CenterState, which had no presence in Jacksonville at the time. But in January, CenterState acquired the failed First Guaranty Bank and Trust Co. of Jacksonville, which Pomar now runs as head of the Northeast Florida market for CenterState.
Corbett's tactic of finding top CEOs in markets where CenterState plans to acquire banks has worked out well in several cities. Pomar attributes that success in large part to Corbett's instincts.
He has "a very good grasp on the future and he see things pretty clearly, even 18 months out ... and then you sit back and watch it come true," Pomar says. "So many of us can only look out three to six months and not very clearly. But he has night vision."
Corbett's prescience has helped not only CenterState, but other banks across the Southeast. In 2008, after many companies exited the correspondent banking business due to painful ties to failed banks, Corbett bought his way into it.
CenterState acquired nearly all of the employees in Royal Bank of Canada's bond sales division in Birmingham, Ala. That sales team was combined with the 40 employees CenterState hired in mid-2009 from Silverton Bank, a failed bankers' bank in Atlanta. The team brought with them bank clients from all over the Southeast that had lost relationships with Silverton, including Stonegate Bank, another failed-bank buyer in Florida.
"Corbett called me when we were both buying FDIC deals, and we share war stories and ideas," said Dave Seleski, president and CEO of Fort Lauderdale-based Stonegate. "We also do correspondent banking with them. They're very innovative and a rising star in the state."
CenterState's correspondent division now has roughly 570 bank clients and is a strong revenue generator for the company. For Corbett, adding a correspondent division also was a part of his plan to build relationships with banks he may want to acquire in the future.
Going into the crisis, "we set the company up to do acquisitions but we didn't have the rolodex" of bankers, Corbett said. "A part of our strategy in bringing the correspondent unit on was to get to know downstream banks better."
And Corbett has a knack for getting to know people. He was 16 years old when he met Pinner through church. The connection didn't pay off immediately—as a college student at Bob Jones University, the first time Corbett tried to get a summer job with First Union, where Pinner was then the market president in Winter Haven, Corbett didn't make the cut and joined a carnival instead. The following summer, he tried again and landed a job with First Union as a teller.
In 1990, Pinner sent Corbett through the bank's training program in Charlotte and then Tampa, and Corbett became a commercial banker under Pinner.
"Ernie took chance on me and he's taken a chance on me ever since," Corbett says.
A pivotal moment came in 1999, when Pinner left First Union and suggested that Corbett come with him to start a bank.
Both men were wary of the signals around them at First Union. A round of layoffs had begun, and the two men shared expectations that the corporate culture would become more centralized—sure enough, the company eventually would merge with Wachovia.
"He knew I was frustrated, and really we were looking for the next challenge in life," says Corbett, who worked at First Union for 10 years. "Over a series of lunches, we talked each other into it."
Even after Pinner and Corbett agreed to start CenterState, and had raised $10 million in capital, Corbett's excitement over the new endeavor remained tinged with terror. On the day CenterState opened, "Ernie and I and seven employees opened the door and nobody was there," Corbett says. "I thought, 'Oh gosh, we made the worst mistake of our entire lives.'"
But the customers eventually came, as did the acquisitions.
CenterState purposefully ran separate charters to give market presidents and boards the autonomy to run their own banks. But the strategy broke down in 2008, when management wanted to buy failed banks but found that its capital was tied up across five separate subsidiaries. So CenterState became the first bank in Florida to accept Troubled Asset Relief Program funds, taking $28 million.
"Philosophically and morally, we were totally against that level of government involvement," Corbett says. "But we knew that if you don't participate, you're at a competitive disadvantage."
CenterState later became the first Florida bank to pay off TARP when it raised $86 million in capital in 2009, a time when most Florida banks wouldn't touch the markets for fear of dilution.
A year later, the company had acquired three failed banks and raised another $35 million in capital for more acquisitions.
But trouble arose when the company simultaneously tried to merge the three acquisitions, along with three existing subsidiaries, onto a new platform.
"If I had to point to a low point in all of this, the crucible of the whole management team was in Christmas 2010," says Corbett. While the integration of the existing subsidiaries had been planned, "you don't get to plan out FDIC deals. We didn't have any control of the timing."
CenterState eventually brought an information technology team in-house from a core processing company to convert all of its banks to a larger platform that could handle more deals. After two years, every acquisition has been fully converted.
Despite the growth pangs, Corbett is thankful that CenterState has taken on as many banks as it has.
"You almost have to do four or more to learn how to integrate them," he says. "You get better as you go and now we're at the point where we haven't done anything in nine months, and I think people get a little itchy."
People also are getting itchy about efficiency, with Wall Street pressuring management to deliver more of it.
"Now that they've done all [this], they need to make it work," says Michael Rose, an analyst with Raymond James. "In a depressed market where there's not a ton of growth at this point, investors will be asking: Can you drive greater efficiency and better profitability?"
CenterState has turned a profit and has used its bargain purchase gains to clear out bad loans. The company posted net income of $2.7 million in the third quarter of this year, versus a net loss of $2 million in the year-ago quarter.
Nonperforming assets dropped in half to $35.6 million, or 1.5 percent of total assets. But CenterState's efficiency ratio ballooned above 80 percent this year, with the acquisitions of so many banks and branches.
CenterState has spent the last two quarters working down the efficiency ratio by consolidating 20 branches and overall expenses. It now stands at 72 percent excluding credit costs.
Says Corbett, "I want to march into the mid-60s and keep going."
Management also is promising investors that the company, with 55 branches, will grow to $5 billion in assets in the next three years within its existing Florida footprint. Given the broader market conditions, some analysts are skeptical. But CenterState's competitors are not.
Corbett "has put together a talented team," says John Burden, president of Old Florida National Bank in Orlando, "and it's going to prove itself out."