##### Table of Contents





U.S. SECURITIES AND EXCHANGE
COMMISSION

Washington, D. C. 20549





Form 10-Q





(Mark One)

|x | Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------

For the quarterly period ended March 31, 2011



| ̈ | Transition report under Section 13 or 15(d) of the Exchange Act
|- | ---------------------------------------------------------------

For the transition period from  to

Commission file number 000-32017





CENTERSTATE BANKS, INC.

(Exact Name of Registrant as Specified in Its Charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Florida                                                        |  | 59-3606741                          
|(State or Other Jurisdiction of
Incorporation or Organization) |  | (I.R.S. Employer Identification No.)

42745 U.S. Highway 27

Davenport, Florida 33837

(Address of Principal Executive Offices)

(863) 419-7750

(Issuers Telephone Number, Including Area Code)





Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    YES  x    NO   ̈

Check whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated
filer or a smaller reporting company.



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  | x
|                        |  |   | 
|Non-accelerated filer   |  |  ̈ |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    YES   ̈    NO   ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act):    YES   ̈    NO  x

State the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date:



|                                       |  |                              
|-------------------------------------- |  | -----------------------------
|Common stock, par value $.01 per share |  | 30,035,292 shares            
|(class)                                |  | Outstanding at April 30, 2011









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##### Table of Contents

CENTERSTATE BANKS, INC. AND SUBSIDIARIES

INDEX



|                                                                                                                                     |  |      |    | 
|------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | -- | 
|                                                                                                                                     |  | Page |   
|PART I. FINANCIAL INFORMATION                                                                                                        |  |      |    | 
|                                                                                                                                     | 
|Item 1. Financial Statements                                                                                                         |  |      |    | 
|                                                                                                                                     | 
|Condensed consolidated balance sheets at March 31, 2011 (unaudited) and December 
31, 2010 (audited)                                 |  |      | 2  | 
|                                                                                                                                     | 
|Condensed consolidated statements of earnings for the three months ended March 
31, 2011 and 2010 (unaudited)                        |  |      | 3  | 
|                                                                                                                                     | 
|Condensed consolidated statements of changes in stockholders equity for the three months ended March 31,
 2011 and 2010 (unaudited) |  |      | 5  | 
|                                                                                                                                     | 
|Condensed consolidated statements of cash flows for the three months ended March 
31, 2011 and 2010 (unaudited)                      |  |      | 6  | 
|                                                                                                                                     | 
|Notes to condensed consolidated financial statements (unaudited)                                                                     |  |      | 7  | 
|                                                                                                                                     | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations                                        |  |      | 25 | 
|                                                                                                                                     | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                                                                   |  |      | 44 | 
|                                                                                                                                     | 
|Item 4. Controls and Procedures                                                                                                      |  |      | 44 | 
|                                                                                                                                     | 
|PART II. OTHER INFORMATION                                                                                                           |  |      |    | 
|                                                                                                                                     | 
|Item 1. Legal Proceedings                                                                                                            |  |      | 45 | 
|                                                                                                                                     | 
|Item 1A. Risk Factors                                                                                                                |  |      | 45 | 
|                                                                                                                                     | 
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                                                  |  |      | 45 | 
|                                                                                                                                     | 
|Item 3. Defaults Upon Senior Securities                                                                                              |  |      | 45 | 
|                                                                                                                                     | 
|Item 4. [Removed and Reserved]                                                                                                       |  |      | 45 | 
|                                                                                                                                     | 
|Item 5. Other Information                                                                                                            |  |      | 45 | 
|                                                                                                                                     | 
|Item 6. Exhibits                                                                                                                     |  |      | 45 | 
|                                                                                                                                     | 
|SIGNATURES                                                                                                                           |  |      | 46 | 
|                                                                                                                                     | 
|CERTIFICATIONS                                                                                                                       |  |      | 47 | 



1



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##### Table of Contents

CenterState Banks, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands of dollars)



|                                                                                                                                                                           |  |                     |           |   |                        |   |           |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------- | --------- | - | ---------------------- | - | --------- | -
|ASSETS                                                                                                                                                                     |  | As ofMarch 31, 2011 |           |   | As ofDecember 31, 2010 |  
|Cash and due from banks                                                                                                                                                    |  | $                   | 19,542    |   |                        | $ | 23,251    |  
|Federal funds sold and Federal Reserve Bank deposits                                                                                                                       |  |                     | 146,275   |   |                        |   | 154,264   |  
|                                                                                                                                                                           |  |                     |           |   |                        |   |           |  
|Cash and cash equivalents                                                                                                                                                  |  |                     | 165,817   |   |                        |   | 177,515   |  
|Trading securities, at fair value                                                                                                                                          |  |                     | 2,192     |   |                        |   | 2,225     |  
|Investment securities available for sale, at fair value                                                                                                                    |  |                     | 575,098   |   |                        |   | 500,927   |  
|Loans held for sale, at lower of cost or fair value                                                                                                                        |  |                     | 168       |   |                        |   | 673       |  
|                                                                                                                                                                           |  |                    
|Loans covered by FDIC loss share agreements                                                                                                                                |  |                     | 189,708   |   |                        |   | 198,285   |  
|Loans, excluding those covered by FDIC loss share agreements                                                                                                               |  |                     | 1,039,311 |   |                        |   | 930,670   |  
|Less allowance for loan losses                                                                                                                                             |  |                     | (28,245   | ) |                        |   | (26,267   | )
|                                                                                                                                                                           |  |                     |           |   |                        |   |           |  
|Net Loans                                                                                                                                                                  |  |                     | 1,200,774 |   |                        |   | 1,102,688 |  
|                                                                                                                                                                           |  |                    
|Bank premises and equipment, net                                                                                                                                           |  |                     | 86,652    |   |                        |   | 84,982    |  
|Accrued interest receivable                                                                                                                                                |  |                     | 6,764     |   |                        |   | 6,570     |  
|Federal Home Loan Bank and Federal Reserve Bank stock                                                                                                                      |  |                     | 10,122    |   |                        |   | 10,122    |  
|Goodwill                                                                                                                                                                   |  |                     | 38,035    |   |                        |   | 38,035    |  
|Core deposit intangible                                                                                                                                                    |  |                     | 4,582     |   |                        |   | 3,921     |  
|Bank owned life insurance                                                                                                                                                  |  |                     | 27,678    |   |                        |   | 27,440    |  
|Other repossessed real estate owned covered by FDIC loss share agreements                                                                                                  |  |                     | 11,332    |   |                        |   | 11,104    |  
|Other repossessed real estate owned (OREO)                                                                                                                               |  |                     | 10,222    |   |                        |   | 12,239    |  
|FDIC indemnification asset                                                                                                                                                 |  |                     | 60,122    |   |                        |   | 59,456    |  
|Deferred income taxes, net                                                                                                                                                 |  |                     | 8,263     |   |                        |   | 8,439     |  
|Prepaid expense and other assets                                                                                                                                           |  |                     | 17,690    |   |                        |   | 16,588    |  
|                                                                                                                                                                           |  |                     |           |   |                        |   |           |  
|TOTAL ASSETS                                                                                                                                                               |  | $                   | 2,225,511 |   |                        | $ | 2,062,924 |  
|                                                                                                                                                                           |  |                     |           |   |                        |   |           |  
|                                                                                                                                                                           |  |                    
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                       |  |                     |           |   |                        |   |           |  
|Deposits:                                                                                                                                                                  |  |                     |           |   |                        |   |           |  
|Demand - non-interest bearing                                                                                                                                              |  | $                   | 378,395   |   |                        | $ | 323,224   |  
|Demand - interest bearing                                                                                                                                                  |  |                     | 310,660   |   |                        |   | 282,405   |  
|Savings and money market accounts                                                                                                                                          |  |                     | 485,419   |   |                        |   | 422,152   |  
|Time deposits                                                                                                                                                              |  |                     | 653,428   |   |                        |   | 657,813   |  
|                                                                                                                                                                           |  |                     |           |   |                        |   |           |  
|Total deposits                                                                                                                                                             |  |                     | 1,827,902 |   |                        |   | 1,685,594 |  
|                                                                                                                                                                           |  |                    
|Securities sold under agreement to repurchase                                                                                                                              |  |                     | 15,522    |   |                        |   | 13,789    |  
|Federal funds purchased                                                                                                                                                    |  |                     | 92,111    |   |                        |   | 68,495    |  
|Federal Home Loan Bank advances                                                                                                                                            |  |                     | 6,000     |   |                        |   | 15,000    |  
|Corporate debentures                                                                                                                                                       |  |                     | 12,500    |   |                        |   | 12,500    |  
|Accrued interest payable                                                                                                                                                   |  |                     | 1,104     |   |                        |   | 1,148     |  
|Settlement payments due FDIC                                                                                                                                               |  |                     | 6,247     |   |                        |   | 6,258     |  
|Accounts payables and accrued expenses                                                                                                                                     |  |                     | 11,138    |   |                        |   | 7,891     |  
|                                                                                                                                                                           |  |                     |           |   |                        |   |           |  
|Total liabilities                                                                                                                                                          |  |                     | 1,972,524 |   |                        |   | 1,810,675 |  
|                                                                                                                                                                           |  |                    
|Stockholders equity:                                                                                                                                                      |  |                     |           |   |                        |   |           |  
|Preferred Stock, $.01 par value; 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2011 and
December 31, 2010                                     |  |                     |          |   |                        |   |          |  
|Common stock, $.01 par value: 100,000,000 shares authorized; 30,035,292 and 30,004,761 shares issued and outstanding at
March 31, 2011 and December 31, 2010, respectively |  |                     | 300       |   |                        |   | 300       |  
|Additional paid-in capital                                                                                                                                                 |  |                     | 227,845   |   |                        |   | 227,464   |  
|Retained earnings                                                                                                                                                          |  |                     | 21,434    |   |                        |   | 21,569    |  
|Accumulated other comprehensive income                                                                                                                                     |  |                     | 3,408     |   |                        |   | 2,916     |  
|                                                                                                                                                                           |  |                     |           |   |                        |   |           |  
|Total stockholders equity                                                                                                                                                 |  |                     | 252,987   |   |                        |   | 252,249   |  
|                                                                                                                                                                           |  |                     |           |   |                        |   |           |  
|                                                                                                                                                                           |  |                    
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                 |  | $                   | 2,225,511 |   |                        | $ | 2,062,924 |  
|                                                                                                                                                                           |  |                     |           |   |                        |   |           |  

See notes to the accompanying condensed consolidated financial statements



2



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##### Table of Contents

CenterState Banks, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)

(in thousands of dollars, except per share data)



|                                                          |  |                    |        |  |               |   |        | 
|--------------------------------------------------------- |  | ------------------ | ------ |  | ------------- | - | ------ | 
|                                                          |  | Three months ended |       
|                                                          |  | Mar. 31, 2011      |        |  | Mar. 31, 2010 |  
|Interest income:                                          |  |                    |        |  |               |   |        | 
|Loans                                                     |  | $                  | 16,327 |  |               | $ | 13,235 | 
|Investment securities available for sale:                 |  |                    |        |  |               |   |        | 
|Taxable                                                   |  |                    | 3,569  |  |               |   | 4,429  | 
|Tax-exempt                                                |  |                    | 347    |  |               |   | 362    | 
|Federal funds sold and other                              |  |                    | 134    |  |               |   | 135    | 
|                                                          |  |                    |        |  |               |   |        | 
|                                                          |  |                    | 20,377 |  |               |   | 18,161 | 
|                                                          |  |                    |        |  |               |   |        | 
|                                                          |  |                   
|Interest expense:                                         |  |                    |        |  |               |   |        | 
|Deposits                                                  |  |                    | 3,209  |  |               |   | 4,047  | 
|Securities sold under agreement to repurchase             |  |                    | 24     |  |               |   | 24     | 
|Federal funds purchased                                   |  |                    | 19     |  |               |   | 35     | 
|Federal Home Loan Bank advances                           |  |                    | 48     |  |               |   | 108    | 
|Corporate debentures                                      |  |                    | 103    |  |               |   | 101    | 
|                                                          |  |                    |        |  |               |   |        | 
|                                                          |  |                    | 3,403  |  |               |   | 4,315  | 
|                                                          |  |                    |        |  |               |   |        | 
|                                                          |  |                   
|Net interest income                                       |  |                    | 16,974 |  |               |   | 13,846 | 
|Provision for loan losses                                 |  |                    | 11,276 |  |               |   | 4,075  | 
|                                                          |  |                    |        |  |               |   |        | 
|Net interest income after loan loss provision             |  |                    | 5,698  |  |               |   | 9,771  | 
|                                                          |  |                    |        |  |               |   |        | 
|                                                          |  |                   
|Other income:                                             |  |                    |        |  |               |   |        | 
|Service charges on deposit accounts                       |  |                    | 1,556  |  |               |   | 1,596  | 
|Income from correspondent banking and bond sales division |  |                    | 4,470  |  |               |   | 6,356  | 
|Commissions from sale of mutual funds and annuities       |  |                    | 439    |  |               |   | 104    | 
|Debit card and ATM fees                                   |  |                    | 656    |  |               |   | 402    | 
|Loan related fees                                         |  |                    | 165    |  |               |   | 130    | 
|BOLI income                                               |  |                    | 239    |  |               |   | 152    | 
|Gain on sale of securities                                |  |                    | 9      |  |               |   | 1,436  | 
|Trading securities revenue                                |  |                    | 161    |  |               |   | 84     | 
|Bargain purchase gain                                     |  |                    | 11,129 |  |               |   |       | 
|Adjustment to FDIC indemnification asset                  |  |                    | 1,136  |  |               |   |       | 
|FDIC indemnification asset accretion                      |  |                    | 468    |  |               |   |       | 
|Other non interest revenue and fees                       |  |                    | 871    |  |               |   | 213    | 
|                                                          |  |                    |        |  |               |   |        | 
|Total other income                                        |  |                    | 21,299 |  |               |   | 10,473 | 
|                                                          |  |                    |        |  |               |   |        | 

See notes to the accompanying condensed consolidated financial statements.



3



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##### Table of Contents

CenterState Banks, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)

(in thousands of dollars, except per share data)

(continued)



|                                                             |  |                    |            |   |               |   |            | 
|------------------------------------------------------------ |  | ------------------ | ---------- | - | ------------- | - | ---------- | 
|                                                             |  | Three months ended |           
|                                                             |  | Mar. 31, 2011      |            |   | Mar. 31, 2010 |  
|Other expenses:                                              |  |                    |            |   |               |   |            | 
|Salaries, wages and employee benefits                        |  |                    | 13,506     |   |               |   | 11,882     | 
|Occupancy expense                                            |  |                    | 1,814      |   |               |   | 1,447      | 
|Depreciation of premises and equipment                       |  |                    | 999        |   |               |   | 755        | 
|Supplies, stationary and printing                            |  |                    | 312        |   |               |   | 215        | 
|Marketing expenses                                           |  |                    | 728        |   |               |   | 555        | 
|Data processing expense                                      |  |                    | 1,381      |   |               |   | 534        | 
|Legal, auditing and other professional fees                  |  |                    | 925        |   |               |   | 632        | 
|Core deposit intangible (CDI) amortization                   |  |                    | 190        |   |               |   | 104        | 
|Postage and delivery                                         |  |                    | 231        |   |               |   | 110        | 
|ATM and debit card related expenses                          |  |                    | 316        |   |               |   | 286        | 
|Bank regulatory expenses                                     |  |                    | 800        |   |               |   | 614        | 
|Loss on sale of repossessed real estate (OREO)             |  |                    | 518        |   |               |   | 27         | 
|Valuation write down of repossessed real estate (OREO)     |  |                    | 2,035      |   |               |   | 882        | 
|Loss on repossessed assets other than real estate            |  |                    | 21         |   |               |   | 107        | 
|Foreclosure related expenses                                 |  |                    | 987        |   |               |   | 418        | 
|Other expenses                                               |  |                    | 2,279      |   |               |   | 1,157      | 
|                                                             |  |                    |            |   |               |   |            | 
|Total other expenses                                         |  |                    | 27,042     |   |               |   | 19,725     | 
|                                                             |  |                   
|Income (loss) before benefit for income taxes                |  |                    | (45        | ) |               |   | 519        | 
|(Benefit) provision for income taxes                         |  |                    | (210       | ) |               |   | 126        | 
|                                                             |  |                    |            |   |               |   |            | 
|Net income                                                   |  | $                  | 165        |   |               | $ | 393        | 
|                                                             |  |                    |            |   |               |   |            | 
|                                                             |  |                   
|Earnings per share:                                          |  |                    |            |   |               |   |            | 
|Basic                                                        |  | $                  | 0.01       |   |               | $ | 0.02       | 
|Diluted                                                      |  | $                  | 0.01       |   |               | $ | 0.02       | 
|                                                             |  |                   
|Common shares used in the calculation of earnings per share: |  |                    |            |   |               |   |            | 
|Basic                                                        |  |                    | 30,020,035 |   |               |   | 25,776,820 | 
|Diluted                                                      |  |                    | 30,047,618 |   |               |   | 25,975,584 | 

See notes to the accompanying
condensed consolidated financial statements.



4



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##### Table of Contents

CenterState Banks, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY

For the three months ended March 31, 2011 and 2010 (unaudited)

(in thousands of dollars)



|                                                                                                     |  |                       |            |  |             |   |     |                          |  |   |                  |  |  |                                           |        |   |                          |   |       |   |  |   |         |  
|---------------------------------------------------------------------------------------------------- |  | --------------------- | ---------- |  | ----------- | - | --- | ------------------------ |  | - | ---------------- |  |  | ----------------------------------------- | ------ | - | ------------------------ | - | ----- | - |  | - | ------- | -
|                                                                                                     |  | Number ofcommonshares |            |  | Commonstock |   |     | Additionalpaid incapital |  |   | Retainedearnings |  |  | Accumulatedothercomprehensiveincome(loss) |        |   | Totalstockholdersequity |  
|Balances at January 1, 2010                                                                          |  |                       | 25,773,229 |  |             | $ | 258 |                          |  | $ | 193,464          |  |  | $                                         | 28,623 |   |                          | $ | 7,065 |   |  | $ | 229,410 |  
|                                                                                                     |  |                       |            |  |             |  
|Comprehensive income:                                                                                |  |                       |            |  |             |   |     |                          |  |   |                  |  |  |                                           |        |   |                          |   |       |   |  |   |         |  
|Net income                                                                                           |  |                       |            |  |             |   |     |                          |  |   |                  |  |  |                                           | 393    |   |                          |   |       |   |  |   | 393     |  
|Unrealized holding loss on available for sale securities, net of deferred income tax benefit of $139 |  |                       |            |  |             |   |     |                          |  |   |                  |  |  |                                           |        |   |                          |   | (223  | ) |  |   | (223    | )
|                                                                                                     |  |                       |            |  |             |   |     |                          |  |   |                  |  |  |                                           |        |   |                          |   |       |   |  |   |         |  
|Total comprehensive income                                                                           |  |                       |            |  |             |   |     |                          |  |   |                  |  |  |                                           |        |   |                          |   |       |   |  |   | 170     |  
|                                                                                                     |  |                       |            |  |             |  
|Dividends paid - common ($0.01 per share)                                                            |  |                       |            |  |             |   |     |                          |  |   |                  |  |  |                                           | (258   | ) |                          |   |       |   |  |   | (258    | )
|Stock options exercised, including tax benefit                                                       |  |                       | 5,538      |  |             |   |     |                          |  |   | 46               |  |  |                                           |        |   |                          |   |       |   |  |   | 46      |  
|Stock based compensation expense                                                                     |  |                       |            |  |             |   |     |                          |  |   | 105              |  |  |                                           |        |   |                          |   |       |   |  |   | 105     |  
|                                                                                                     |  |                       |            |  |             |   |     |                          |  |   |                  |  |  |                                           |        |   |                          |   |       |   |  |   |         |  
|Balances at March 31, 2010                                                                           |  |                       | 25,778,767 |  |             | $ | 258 |                          |  | $ | 193,615          |  |  | $                                         | 28,758 |   |                          | $ | 6,842 |   |  | $ | 229,473 |  
|                                                                                                     |  |                       |            |  |             |   |     |                          |  |   |                  |  |  |                                           |        |   |                          |   |       |   |  |   |         |  
|                                                                                                     |  |                       |            |  |             |  
|Balances at January 1, 2011                                                                          |  |                       | 30,004,761 |  |             | $ | 300 |                          |  | $ | 227,464          |  |  | $                                         | 21,569 |   |                          | $ | 2,916 |   |  | $ | 252,249 |  
|                                                                                                     |  |                       |            |  |             |  
|Comprehensive income:                                                                                |  |                       |            |  |             |   |     |                          |  |   |                  |  |  |                                           |        |   |                          |   |       |   |  |   |         |  
|Net income                                                                                           |  |                       |            |  |             |   |     |                          |  |   |                  |  |  |                                           | 165    |   |                          |   |       |   |  |   | 165     |  
|Unrealized holding gain on available for sale securities, net of deferred income tax of $297         |  |                       |            |  |             |   |     |                          |  |   |                  |  |  |                                           |        |   |                          |   | 492   |   |  |   | 492     |  
|                                                                                                     |  |                       |            |  |             |   |     |                          |  |   |                  |  |  |                                           |        |   |                          |   |       |   |  |   |         |  
|Total comprehensive income                                                                           |  |                       |            |  |             |   |     |                          |  |   |                  |  |  |                                           |        |   |                          |   |       |   |  |   | 657     |  
|                                                                                                     |  |                       |            |  |             |  
|Dividends paid - common ($0.01 per share)                                                            |  |                       |            |  |             |   |     |                          |  |   |                  |  |  |                                           | (300   | ) |                          |   |       |   |  |   | (300    | )
|Stock options exercised, including tax benefit                                                       |  |                       | 14,903     |  |             |   |     |                          |  |   | 95               |  |  |                                           |        |   |                          |   |       |   |  |   | 95      |  
|Stock grants issued                                                                                  |  |                       | 15,628     |  |             |   |     |                          |  |   | 171              |  |  |                                           |        |   |                          |   |       |   |  |   | 171     |  
|Stock based compensation expense                                                                     |  |                       |            |  |             |   |     |                          |  |   | 115              |  |  |                                           |        |   |                          |   |       |   |  |   | 115     |  
|                                                                                                     |  |                       |            |  |             |   |     |                          |  |   |                  |  |  |                                           |        |   |                          |   |       |   |  |   |         |  
|Balances at March 31, 2011                                                                           |  |                       | 30,035,292 |  |             | $ | 300 |                          |  | $ | 227,845          |  |  | $                                         | 21,434 |   |                          | $ | 3,408 |   |  | $ | 252,987 |  
|                                                                                                     |  |                       |            |  |             |   |     |                          |  |   |                  |  |  |                                           |        |   |                          |   |       |   |  |   |         |  



|                                                                                                                                             |  |                                     |     |   |                                     |   |      |  
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------- | --- | - | ----------------------------------- | - | ---- | -
|Disclosure of reclassification amounts:                                                                                                      |  | Three monthperiod endedMar 31, 2011 |     |   | Three monthperiod endedMar 31, 2010 |  
|Unrealized holding gain (loss) arising during the period, net of income taxes                                                                |  | $                                   | 498 |   |                                     | $ | 669  |  
|Less: reclassified adjustments for gain included in net income, net of income taxes, at March 31, 2011 and 2010 of $3 and
$544, respectively |  |                                     | (6  | ) |                                     |   | (892 | )
|                                                                                                                                             |  |                                     |     |   |                                     |   |      |  
|Net unrealized gain (loss) on securities, net of income taxes                                                                                |  | $                                   | 492 |   |                                     | $ | (223 | )
|                                                                                                                                             |  |                                     |     |   |                                     |   |      |  

See notes to the accompanying condensed consolidated financial statements



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CenterState Banks, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands of dollars)



|                                                                                  |  |                            |          |   |      |   |          |  
|--------------------------------------------------------------------------------- |  | -------------------------- | -------- | - | ---- | - | -------- | -
|                                                                                  |  | Three months ended Mar 31, |         
|                                                                                  |  | 2011                       |          |   | 2010 |  
|Cash flows from operating activities:                                             |  |                            |          |   |      |   |          |  
|Net income                                                                        |  | $                          | 165      |   |      | $ | 393      |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                            |          |   |      |   |          |  
|Provision for loan losses                                                         |  |                            | 11,276   |   |      |   | 4,075    |  
|Depreciation of premises and equipment                                            |  |                            | 999      |   |      |   | 755      |  
|Amortization of purchase accounting adjustments                                   |  |                            | (3,707   | ) |      |   | (4       | )
|Net amortization/accretion of investment securities                               |  |                            | 1,909    |   |      |   | 1,078    |  
|Net deferred loan origination fees                                                |  |                            | (8       | ) |      |   | (14      | )
|Gain on sale of securities available for sale                                     |  |                            | (9       | ) |      |   | (1,436   | )
|Trading securities revenue                                                        |  |                            | (161     | ) |      |   | (84      | )
|Purchases of trading securities                                                   |  |                            | (64,549  | ) |      |   | (21,091  | )
|Proceeds from sale of trading securities                                          |  |                            | 64,743   |   |      |   | 20,022   |  
|Repossessed real estate owned valuation write down                                |  |                            | 2,035    |   |      |   | 882      |  
|Loss on sale of repossessed real estate owned                                     |  |                            | 518      |   |      |   | 27       |  
|Repossessed assets other than real estate valuation write down                    |  |                            | 15       |   |      |   |         |  
|Loss on sale of repossessed assets other than real estate                         |  |                            | 6        |   |      |   | 107      |  
|Gain on sale of loans held for sale                                               |  |                            | (25      | ) |      |   | (12      | )
|Loans originated and held for sale                                                |  |                            | (929     | ) |      |   | (1,357   | )
|Proceeds from sale of loans held for sale                                         |  |                            | 1,459    |   |      |   | 796      |  
|Gain on disposal of and or sale of fixed assets                                   |  |                            | (27      | ) |      |   |         |  
|Deferred income taxes                                                             |  |                            | (121     | ) |      |   | (787     | )
|Stock based compensation expense                                                  |  |                            | 195      |   |      |   | 158      |  
|Bank owned life insurance income                                                  |  |                            | (239     | ) |      |   | (152     | )
|Bargain purchase gain from TD acquisition                                         |  |                            | (11,129  | ) |      |   |         |  
|Net cash from changes in:                                                         |  |                            |          |   |      |   |          |  
|Net changes in accrued interest receivable, prepaid expenses, and other assets    |  |                            | (819     | ) |      |   | (3,040   | )
|Net change in accrued interest payable, accrued expense, and other liabilities    |  |                            | 3,141    |   |      |   | 2,439    |  
|                                                                                  |  |                            |          |   |      |   |          |  
|Net cash provided by operating activities                                         |  |                            | 4,738    |   |      |   | 2,755    |  
|                                                                                  |  |                            |          |   |      |   |          |  
|Cash flows from investing activities:                                             |  |                            |          |   |      |   |          |  
|Purchases of investment securities available for sale                             |  |                            | (22,753  | ) |      |   | (118,846 | )
|Purchases of mortgage backed securities available for sale                        |  |                            | (135,786 | ) |      |   | (14,151  | )
|Purchases of FHLB and FRB stock                                                   |  |                            |         |   |      |   | (603     | )
|Proceeds from maturities of investment securities available for sale              |  |                            | 244      |   |      |   | 133      |  
|Proceeds from called investment securities available for sale                     |  |                            | 17,900   |   |      |   | 25,765   |  
|Proceeds from pay-downs of mortgage backed securities available for sale          |  |                            | 31,764   |   |      |   | 31,547   |  
|Proceeds from sales of mortgage backed securities available for sale              |  |                            | 33,349   |   |      |   | 42,018   |  
|Net decrease in loans                                                             |  |                            | 8,704    |   |      |   | 7,969    |  
|Purchases of premises and equipment, net                                          |  |                            | (1,981   | ) |      |   | (2,191   | )
|Proceeds from sale of repossessed real estate                                     |  |                            | 3,799    |   |      |   | 623      |  
|Proceeds from insurance claims related to repossessed real estate                 |  |                            | 263      |   |      |   |         |  
|Proceeds from sale of fixed assets                                                |  |                            | 70       |   |      |   |         |  
|Net cash from bank acquisition                                                    |  |                            | 4,349    |   |      |   |         |  
|                                                                                  |  |                            |          |   |      |   |          |  
|Net cash used in investing activities                                             |  |                            | (60,078  | ) |      |   | (27,736  | )
|                                                                                  |  |                            |          |   |      |   |          |  

See notes to the accompanying condensed consolidated financial statements.



6



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##### Table of Contents

CenterState Banks, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands of dollars)

(continued)



|                                                                         |  |                            |         |   |      |   |         |  
|------------------------------------------------------------------------ |  | -------------------------- | ------- | - | ---- | - | ------- | -
|                                                                         |  | Three months ended Mar 31, |        
|                                                                         |  | 2011                       |         |   | 2010 |  
|Cash flows from financing activities:                                    |  |                            |         |   |      |   |         |  
|Net increase in deposits                                                 |  |                            | 27,498  |   |      |   | 35,998  |  
|Net increase (decrease) in securities sold under agreement to repurchase |  |                            | 1,733   |   |      |   | (4,195  | )
|Net increase (decrease) increase in federal funds purchased              |  |                            | 23,616  |   |      |   | (5,907  | )
|Net decrease in FHLB advances                                            |  |                            | (9,000  | ) |      |   | (3,000  | )
|Stock options exercised, including tax benefit                           |  |                            | 95      |   |      |   | 46      |  
|Dividends paid                                                           |  |                            | (300    | ) |      |   | (258    | )
|                                                                         |  |                            |         |   |      |   |         |  
|Net cash provided by financing activities                                |  |                            | 43,642  |   |      |   | 22,684  |  
|                                                                         |  |                            |         |   |      |   |         |  
|                                                                         |  |                           
|Net decrease in cash and cash equivalents                                |  |                            | (11,698 | ) |      |   | (2,297  | )
|Cash and cash equivalents, beginning of period                           |  |                            | 177,515 |   |      |   | 192,407 |  
|                                                                         |  |                            |         |   |      |   |         |  
|Cash and cash equivalents, end of period                                 |  | $                          | 165,817 |   |      | $ | 190,110 |  
|                                                                         |  |                            |         |   |      |   |         |  
|                                                                         |  |                           
|Transfer of loans to other real estate owned                             |  | $                          | 4,826   |   |      | $ | 1,395   |  
|                                                                         |  |                            |         |   |      |   |         |  
|                                                                         |  |                           
|Cash paid during the period for:                                         |  |                            |         |   |      |   |         |  
|Interest                                                                 |  | $                          | 3,920   |   |      | $ | 4,534   |  
|                                                                         |  |                            |         |   |      |   |         |  
|Income taxes                                                             |  | $                          | 25      |   |      | $ | 206     |  
|                                                                         |  |                            |         |   |      |   |         |  

See notes to the accompanying condensed consolidated financial statements.

All dollar amounts presented herein are in thousands, except per share data.



|NOTE 1: | Nature of Operations and basis of presentation
|------- | ----------------------------------------------

Our consolidated financial statements include the accounts of CenterState Banks, Inc. (the Parent Company, Company or CSFL), and our wholly owned subsidiary banks,
CenterState Bank of Florida, N.A. and Valrico State Bank, and our non bank subsidiary, R4ALL, Inc. Our subsidiary banks operate through 52 full service banking locations in 14 counties throughout Central Florida, providing traditional deposit and
lending products and services to their commercial and retail customers. R4ALL, Inc. is a separate non bank subsidiary of CSFL. Its purpose is to purchase troubled loans from our two subsidiary banks and manage their eventual disposition.

In addition, we also operate a correspondent banking and bond sales division. The division is integrated with and part of our lead
subsidiary bank located in Winter Haven, Florida, although the majority of our bond salesmen, traders and operational personnel are physically housed in leased facilities located in Birmingham, Alabama, Atlanta, Georgia and Winston Salem, North
Carolina. The business lines of this division are primarily divided into three inter-related revenue generating activities. The first, and largest, revenue generator is commissions earned on fixed income security sales. The second category includes
correspondent bank deposits (i.e. federal funds purchased) and correspondent bank checking account deposits. The third revenue generating category includes fees from safe-keeping activities, bond accounting services for correspondents,
asset/liability consulting related activities, international wires, and other clearing and corporate checking account services. The customer base includes small to medium size financial institutions primarily located in Florida, Alabama, Georgia,
North Carolina, South Carolina, Tennessee, Virginia and West Virginia.



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The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by
accounting principles generally accepted in the United States of America for complete financial statements. These statements should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the
year ended December 31, 2010. In our opinion, all adjustments, consisting primarily of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods have been made. The results of operations of the three
month period ended March 31, 2011 are not necessarily indicative of the results expected for the full year.



|NOTE 2: | Common stock outstanding and earnings per share data
|------- | ----------------------------------------------------

Basic earnings per share is based on the weighted average number of common shares outstanding during the periods. Diluted earnings per share includes the weighted average number of common shares
outstanding during the periods and the further dilution from stock options using the treasury method. There were 1,175,000 stock options that were anti dilutive at March 31, 2011 and 2010, respectively. The following is a reconciliation of the
numerators and denominators of the basic and diluted earnings per share computations for the periods presented.



|                                                    |  |      |            |  |      |   |            | 
|--------------------------------------------------- |  | ---- | ---------- |  | ---- | - | ---------- | 
|For the three months ended March 31,                |  | 2011 |            |  | 2010 |  
|Numerator for basic and diluted earnings per share: |  |      |            |  |      |   |            | 
|Net income                                          |  | $    | 165        |  |      | $ | 393        | 
|                                                    |  |      |            |  |      |   |            | 
|Net (loss) income available for common shareholders |  | $    | 165        |  |      | $ | 393        | 
|                                                    |  |      |            |  |      |   |            | 
|                                                    |  |     
|Denominator:                                        |  |      |            |  |      |   |            | 
|Denominator for basic earnings per share            |  |      |            |  |      |   |            | 
|- weighted-average shares                           |  |      | 30,020,035 |  |      |   | 25,776,820 | 
|Effect of dilutive securities:                      |  |      |            |  |      |   |            | 
|Employee stock options and stock grants             |  |      | 27,583     |  |      |   | 198,764    | 
|Denominator for diluted earnings per share          |  |      |            |  |      |   |            | 
|                                                    |  |      |            |  |      |   |            | 
|- adjusted weighted-average shares                  |  |      | 30,047,618 |  |      |   | 25,975,584 | 
|                                                    |  |      |            |  |      |   |            | 
|Basic earnings per share                            |  | $    | 0.01       |  |      | $ | 0.02       | 
|Diluted earnings per share                          |  | $    | 0.01       |  |      | $ | 0.02       | 



|NOTE 3: | Fair value
|------- | ----------

Generally accepted
accounting principles establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be
used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the
entity has the ability to access as of the measurement date.



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Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices
for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing and asset or liability.

The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges
(Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities
relationship to other benchmark quoted securities (Level 2 inputs).

The fair values of trading securities are determined as
follows: (1) for those securities that have traded prior to March 31, 2011 but have not settled (date of sale) until after such date, the sales price is used as the fair value; and, (2) for those securities which have not traded as of
March 31, 2011, the fair value was determined by broker price indications of similar or same securities.

All of the
mortgaged back securities (MBSs) listed below are FNMA, FHLMC, and GNMA MBSs. Assets and liabilities measured at fair value on a recurring basis are summarized below.



|                                                |  |   |         |  |                                                              |  |   |                                           |  |   |                                        |  |  |  |   | 
|----------------------------------------------- |  | - | ------- |  | ------------------------------------------------------------ |  | - | ----------------------------------------- |  | - | -------------------------------------- |  |  |  | - | 
|                                                |  |   |         |  | Fair value measurements using                                | 
|                                                |  |   |         |  | Quoted prices inactive 
markets foridentical assets(Level 1) |  |   | SignificantOtherObservableInputs(Level 2) |  |   | Significantunobservableinputs(Level 3) | 
|at March 31, 2011                               |  |   |         |  |                                                              |  |   |                                           |  |   |                                        |  |  |  |   | 
|Assets:                                         |  |   |         |  |                                                              |  |   |                                           |  |   |                                        |  |  |  |   | 
|Trading securities                              |  | $ | 2,192   |  |                                                              |  |  |                                           |  | $ | 2,192                                  |  |  |  |  | 
|Available for sale securities                   |  |   |         |  |                                                              |  |   |                                           |  |   |                                        |  |  |  |  | 
|U.S. government sponsored entities and agencies |  |   | 115,929 |  |                                                              |  |  |                                           |  |   | 115,929                                |  |  |  |  | 
|Mortgage backed securities                      |  |   | 423,194 |  |                                                              |  |  |                                           |  |   | 423,194                                |  |  |  |  | 
|Municipal securities                            |  |   | 35,975  |  |                                                              |  |  |                                           |  |   | 35,975                                 |  |  |  |  | 
|                                                |  |   |         | 
|at December 31, 2010                            |  |   |         |  |                                                              |  |   |                                           |  |   |                                        |  |  |  |   | 
|Assets:                                         |  |   |         |  |                                                              |  |   |                                           |  |   |                                        |  |  |  |   | 
|Trading securities                              |  | $ | 2,225   |  |                                                              |  |  |                                           |  | $ | 2,225                                  |  |  |  |  | 
|Available for sale securities                   |  |   |         |  |                                                              |  |   |                                           |  |   |                                        |  |  |  |   | 
|U.S. government sponsored entities and agencies |  |   | 113,416 |  |                                                              |  |  |                                           |  |   | 113,416                                |  |  |  |  | 
|Mortgage backed securities                      |  |   | 354,258 |  |                                                              |  |  |                                           |  |   | 354,258                                |  |  |  |  | 
|Municipal securities                            |  |   | 33,253  |  |                                                              |  |  |                                           |  |   | 33,253                                 |  |  |  |  | 



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Assets and liabilities measured at fair value on a non-recurring basis are summarized below.



|                                        |  |   |       |  |                                                              |  |   |                                           |  |  |                                        |  |  |   |       | 
|--------------------------------------- |  | - | ----- |  | ------------------------------------------------------------ |  | - | ----------------------------------------- |  |  | -------------------------------------- |  |  | - | ----- | 
|                                        |  |   |       |  | Fair value measurements using                                | 
|                                        |  |   |       |  | Quoted prices inactive 
markets foridentical assets(Level 1) |  |   | SignificantOtherObservableInputs(Level 2) |  |  | Significantunobservableinputs(Level 3) | 
|at March 31, 2011                       |  |   |       |  |                                                              |  |   |                                           |  |  |                                        |  |  |   |       | 
|Assets:                                 |  |   |       |  |                                                              |  |   |                                           |  |  |                                        |  |  |   |       | 
|Impaired loans                          |  |   |       |  |                                                              |  |   |                                           |  |  |                                        |  |  |   |       | 
|Residential real estate                 |  | $ | 1,973 |  |                                                              |  |  |                                           |  |  |                                       |  |  | $ | 1,973 | 
|Commercial real estate                  |  |   | 3,330 |  |                                                              |  |  |                                           |  |  |                                       |  |  |   | 3,330 | 
|Construction, land development and land |  |   | 5,290 |  |                                                              |  |  |                                           |  |  |                                       |  |  |   | 5,290 | 
|Commercial                              |  |   |      |  |                                                              |  |  |                                           |  |  |                                       |  |  |   |      | 
|Consumer                                |  |   |      |  |                                                              |  |  |                                           |  |  |                                       |  |  |   |      | 
|Other real estate owned                 |  |   |       |  |                                                              |  |   |                                           |  |  |                                        |  |  |   |       | 
|Residential real estate                 |  | $ | 1,600 |  |                                                              |  |  |                                           |  |  |                                       |  |  | $ | 1,600 | 
|Commercial real estate                  |  |   | 2,576 |  |                                                              |  |  |                                           |  |  |                                       |  |  |   | 2,576 | 
|Construction, land development and land |  |   | 2,900 |  |                                                              |  |  |                                           |  |  |                                       |  |  |   | 2,900 | 
|Commercial                              |  |   |      |  |                                                              |  |  |                                           |  |  |                                       |  |  |   |      | 
|Consumer                                |  |   |      |  |                                                              |  |  |                                           |  |  |                                       |  |  |   |      | 
|                                        |  |   |       | 
|at December 31, 2010                    |  |   |       |  |                                                              |  |   |                                           |  |  |                                        |  |  |   |       | 
|Assets:                                 |  |   |       |  |                                                              |  |   |                                           |  |  |                                        |  |  |   |       | 
|Impaired loans                          |  |   |       |  |                                                              |  |   |                                           |  |  |                                        |  |  |   |       | 
|Residential real estate                 |  | $ | 2,000 |  |                                                              |  |  |                                           |  |  |                                       |  |  | $ | 2,000 | 
|Commercial real estate                  |  |   | 4,931 |  |                                                              |  |  |                                           |  |  |                                       |  |  |   | 4,931 | 
|Construction, land development and land |  |   | 3,949 |  |                                                              |  |  |                                           |  |  |                                       |  |  |   | 3,949 | 
|Commercial                              |  |   |      |  |                                                              |  |  |                                           |  |  |                                       |  |  |   |      | 
|Consumer                                |  |   |      |  |                                                              |  |  |                                           |  |  |                                       |  |  |   |      | 
|Other real estate owned                 |  |   |       |  |                                                              |  |   |                                           |  |  |                                        |  |  |   |       | 
|Residential real estate                 |  | $ | 2,372 |  |                                                              |  |  |                                           |  |  |                                       |  |  | $ | 2,372 | 
|Commercial real estate                  |  |   | 6,851 |  |                                                              |  |  |                                           |  |  |                                       |  |  |   | 6,851 | 
|Construction, land development and land |  |   | 3,016 |  |                                                              |  |  |                                           |  |  |                                       |  |  |   | 3,016 | 
|Commercial                              |  |   |      |  |                                                              |  |  |                                           |  |  |                                       |  |  |   |      | 
|Consumer                                |  |   |      |  |                                                              |  |  |                                           |  |  |                                       |  |  |   |      | 

Impaired loans, which
are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $15,085, with a valuation allowance of $4,492, at March 31, 2011, and a carrying amount of $14,074, with a valuation
allowance of $3,194, at December 31, 2010. The Company recorded a provision for loan loss expense of $2,176 on these loans during the three month period ending March 31, 2011.

The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate
appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach.

The fair value of our repossessed real estate (other real estate owned or OREO) is determined using Level 3 inputs which include current and prior appraisals and estimated costs to
sell. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. The decline in fair value of other real estate owned was $2,035 during the three month period
ending March 31, 2011. Changes in fair value were recorded directly as an adjustment to current earnings through non interest expense.



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Fair Value of Financial Instruments

The methods and assumptions used to estimate fair value are described as follows:

Carrying amount is the estimated fair value for cash and cash equivalents, interest bearing deposits, accrued interest receivable and
payable, demand deposits, short-term debt, and variable rate loans or deposits that reprice frequently and fully. Security fair values are based on market prices or dealer quotes, and if no such information is available, on the rate and term of the
security and information about the issuer. For fixed rate loans or deposits and for variable rate loans or deposits with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the
estimated life and credit risk. Fair values for impaired loans are estimated using underlying collateral values. For the FDIC indemnification asset, fair value is based on discounted cash flows using current market rates applied to the estimated
life. Fair value of debt is based on current rates for similar financing. It was not practicable to determine the fair value of Federal Home Loan Bank stock or Federal Reserve Bank stock due to restrictions placed on its transferability. The fair
value of off-balance-sheet items is not considered material.

The following table presents the carry amounts and estimated
fair values of the Companys financial instruments:



|                                                                                                                    |  |                |           |  |              |   |           |                |  |   |           |  |  |   |           | 
|------------------------------------------------------------------------------------------------------------------- |  | -------------- | --------- |  | ------------ | - | --------- | -------------- |  | - | --------- |  |  | - | --------- | 
|                                                                                                                    |  | Mar 31, 2011   |           |  | Dec 31, 2010 |  
|                                                                                                                    |  | CarryingAmount |           |  | FairValue    |   |           | CarryingAmount |  |   | FairValue | 
|                                                                                                                    |  |                |          
|Financial assets:                                                                                                   |  |                |           |  |              |   |           |                |  |   |           |  |  |   |           | 
|Cash and cash equivalents                                                                                           |  | $              | 165,817   |  |              | $ | 165,817   |                |  | $ | 177,515   |  |  | $ | 177,515   | 
|Trading securities                                                                                                  |  |                | 2,192     |  |              |   | 2,192     |                |  |   | 2,225     |  |  |   | 2,225     | 
|Investment securities available for sale                                                                            |  |                | 575,098   |  |              |   | 575,098   |                |  |   | 500,927   |  |  |   | 500,927   | 
|FHLB and FRB stock                                                                                                  |  |                | 10,122    |  |              |   | n/a       |                |  |   | 10,122    |  |  |   | n/a       | 
|Loans held for sale                                                                                                 |  |                | 168       |  |              |   | 168       |                |  |   | 673       |  |  |   | 673       | 
|Loans, less allowance for loan losses of $28,245 and $26,267, at March 31, 2011 and December 31, 2010,
respectively |  |                | 1,200,774 |  |              |   | 1,210,881 |                |  |   | 1,102,688 |  |  |   | 1,110,844 | 
|FDIC indemnification asset                                                                                          |  |                | 60,122    |  |              |   | 60,122    |                |  |   | 59,098    |  |  |   | 59,098    | 
|Accrued interest receivable                                                                                         |  |                | 6,764     |  |              |   | 6,764     |                |  |   | 6,570     |  |  |   | 6,570     | 
|                                                                                                                    |  |                |           | 
|Financial liabilities:                                                                                              |  |                |           |  |              |   |           |                |  |   |           |  |  |   |           | 
|Deposits- without stated maturities                                                                                 |  | $              | 1,174,474 |  |              | $ | 1,174,474 |                |  | $ | 1,027,781 |  |  | $ | 1,027,781 | 
|Deposits- with stated maturities                                                                                    |  |                | 653,428   |  |              |   | 662,653   |                |  |   | 657,813   |  |  |   | 667,632   | 
|Securities sold under agreement to repurchase                                                                       |  |                | 15,522    |  |              |   | 15,522    |                |  |   | 13,789    |  |  |   | 13,789    | 
|Federal funds purchased (correspondent bank deposits)                                                               |  |                | 92,111    |  |              |   | 92,111    |                |  |   | 68,495    |  |  |   | 68,495    | 
|Federal Home Loan Bank advances and other borrowed funds                                                            |  |                | 6,000     |  |              |   | 6,072     |                |  |   | 15,000    |  |  |   | 15,113    | 
|Corporate debentures                                                                                                |  |                | 12,500    |  |              |   | 6,101     |                |  |   | 12,500    |  |  |   | 6,075     | 
|Accrued interest payable                                                                                            |  |                | 1,104     |  |              |   | 1,104     |                |  |   | 1,148     |  |  |   | 1,148     | 



11



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|NOTE 4: | Reportable segments
|------- | -------------------

The
Companys reportable segments represent the distinct product lines the Company offers and are viewed separately for strategic planning purposes by management. The table below is a reconciliation of the reportable segment revenues, expenses, and
profit to the Companys consolidated total for the three month periods ending March 31, 2011 and 2010.



|                               |  |                                          |           |   |                                            |   |         |                                    |  |    |                    |   |  |       |         |   |  |   |           |  
|------------------------------ |  | ---------------------------------------- | --------- | - | ------------------------------------------ | - | ------- | ---------------------------------- |  | -- | ------------------ | - |  | ----- | ------- | - |  | - | --------- | -
|                               |  | Three month period ending March 31, 2011 |           |   |                                            |   |         |                                    | 
|                               |  | Commercialand retailbanking              |           |   | Correspondentbanking andbond salesdivision |   |         | Corporateoverheadandadministration |  |    | Eliminationentries |   |  | Total |        
|Interest income                |  | $                                        | 19,695    |   |                                            | $ | 682     |                                    |  |    |                    |   |  |       |         |   |  | $ | 20,377    |  
|Interest expense               |  |                                          | (3,280    | ) |                                            |   | (20     | )                                  |  |    | (103               | ) |  |       |         |   |  |   | (3,403    | )
|                               |  |                                          |           |   |                                            |   |         |                                    |  |    |                    |   |  |       |         |   |  |   |           |  
|Net interest income            |  |                                          | 16,415    |   |                                            |   | 662     |                                    |  |    | (103               | ) |  |       |         |   |  |   | 16,974    |  
|Provision for loan losses      |  |                                          | (11,276   | ) |                                            |   |        |                                    |  |    |                   |   |  |       |         |   |  |   | (11,276   | )
|Non interest income            |  |                                          | 16,315    |   |                                            |   | 4,984   |                                    |  |    |                   |   |  |       |         |   |  |   | 21,299    |  
|Non interest expense           |  |                                          | (21,284   | ) |                                            |   | (4,978  | )                                  |  |    | (780               | ) |  |       |         |   |  |   | (27,042   | )
|                               |  |                                          |           |   |                                            |   |         |                                    |  |    |                    |   |  |       |         |   |  |   |           |  
|Net income before taxes        |  |                                          | 170       |   |                                            |   | 668     |                                    |  |    | (883               | ) |  |       |         |   |  |   | (45       | )
|Income tax provision (benefit) |  |                                          | 137       |   |                                            |   | (251    | )                                  |  |    | 324                |   |  |       |         |   |  |   | 210       |  
|                               |  |                                          |           |   |                                            |   |         |                                    |  |    |                    |   |  |       |         |   |  |   |           |  
|Net (loss) income              |  | $                                        | 307       |   |                                            | $ | 417     |                                    |  | ($ | 559                | ) |  |       |         |   |  | $ | 165       |  
|                               |  |                                          |           |   |                                            |   |         |                                    |  |    |                    |   |  |       |         |   |  |   |           |  
|Total assets                   |  | $                                        | 2,047,968 |   |                                            | $ | 174,431 |                                    |  | $  | 267,981            |   |  | ($    | 264,869 | ) |  | $ | 2,225,511 |  
|                               |  |                                          |           |   |                                            |   |         |                                    |  |    |                    |   |  |       |         |   |  |   |           |  



|                              |  |                                          |           |   |                                            |   |         |                                    |  |    |                    |   |  |       |         |   |  |   |           |  
|----------------------------- |  | ---------------------------------------- | --------- | - | ------------------------------------------ | - | ------- | ---------------------------------- |  | -- | ------------------ | - |  | ----- | ------- | - |  | - | --------- | -
|                              |  | Three month period ending March 31, 2010 |           |   |                                            |   |         |                                    | 
|                              |  | Commercialand retailbanking              |           |   | Correspondentbanking andbond salesDivision |   |         | CorporateOverheadAndAdministration |  |    | Eliminationentries |   |  | Total |        
|Interest income               |  | $                                        | 16,597    |   |                                            | $ | 1,564   |                                    |  |    |                    |   |  |       |         |   |  | $ | 18,161    |  
|Interest expense              |  |                                          | (4,176    | ) |                                            |   | (38     | )                                  |  |    | (101               | ) |  |       |         |   |  |   | (4,315    | )
|                              |  |                                          |           |   |                                            |   |         |                                    |  |    |                    |   |  |       |         |   |  |   |           |  
|Net interest income           |  |                                          | 12,421    |   |                                            |   | 1,526   |                                    |  |    | (101               | ) |  |       |         |   |  |   | 13,846    |  
|Provision for loan losses     |  |                                          | (4,075    | ) |                                            |   |        |                                    |  |    |                   |   |  |       |         |   |  |   | (4,075    | )
|Non interest income           |  |                                          | 3,851     |   |                                            |   | 6,622   |                                    |  |    |                   |   |  |       |         |   |  |   | 10,473    |  
|Non interest expense          |  |                                          | (12,815   | ) |                                            |   | (6,164  | )                                  |  |    | (746               | ) |  |       |         |   |  |   | (19,725   | )
|                              |  |                                          |           |   |                                            |   |         |                                    |  |    |                    |   |  |       |         |   |  |   |           |  
|Net income before taxes       |  |                                          | (618      | ) |                                            |   | 1,984   |                                    |  |    | (847               | ) |  |       |         |   |  |   | 519       |  
|Income tax (benefit)provision |  |                                          | 315       |   |                                            |   | (764    | )                                  |  |    | 323                |   |  |       |         |   |  |   | (126      | )
|                              |  |                                          |           |   |                                            |   |         |                                    |  |    |                    |   |  |       |         |   |  |   |           |  
|Net (loss) income             |  | ($                                       | 303       | ) |                                            | $ | 1,220   |                                    |  | ($ | 524                | ) |  |       |         |   |  | $ | 393       |  
|                              |  |                                          |           |   |                                            |   |         |                                    |  |    |                    |   |  |       |         |   |  |   |           |  
|Total assets                  |  | $                                        | 1,572,126 |   |                                            | $ | 208,045 |                                    |  | $  | 244,523            |   |  | ($    | 248,040 | ) |  | $ | 1,776,654 |  
|                              |  |                                          |           |   |                                            |   |         |                                    |  |    |                    |   |  |       |         |   |  |   |           |  

Commercial and retail banking: The Companys primary business is commercial and retail banking. Currently, the
Company operates through two subsidiary banks and a non bank subsidiary, R4ALL, with 52 locations in fourteen counties throughout Central Florida providing traditional deposit and lending products and services to its commercial and retail customers.

Corresponding banking and bond sales division: Operating as a division of our largest subsidiary bank, its primary revenue generating
activities are as follows: 1) the first, and largest, revenue generator is commissions earned on fixed income security sales; 2) the second category includes spread income earned on correspondent bank deposits (i.e. federal funds purchased) and
service fees on correspondent bank checking accounts; and, 3) the third revenue generating category, includes fees from safe-keeping activities, bond accounting services for correspondents, asset/liability consulting related activities,
international wires, and other clearing and corporate checking account services. The customer base includes small to medium size financial institutions primarily located in Florida, Alabama, Georgia, North Carolina, South Carolina, Tennessee,
Virginia and West Virginia.



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Corporate overhead and administration: Corporate overhead and administration is comprised primarily
of compensation and benefits for certain members of management, interest on parent company debt, office occupancy and depreciation of parent company facilities, merger related costs and other expenses.



|NOTE 5: | Investment Securities Available for Sale
|------- | ----------------------------------------

All of the mortgaged back securities listed below are FNMA, FHLMC, and GNMA MBSs. The fair value of available for sale securities and the related gross unrealized gains and losses recognized in
accumulated other comprehensive income (loss) were as follows:



|                                                               |  |                   |         |  |                      |   |       |                       |  |   |            |  |  |   |         | 
|-------------------------------------------------------------- |  | ----------------- | ------- |  | -------------------- | - | ----- | --------------------- |  | - | ---------- |  |  | - | ------- | 
|                                                               |  | March 31, 2011    |        
|                                                               |  | AmortizedCost     |         |  | GrossUnrealizedGains |   |       | GrossUnrealizedLosses |  |   | FairValue  | 
|Obligations of U.S. government sponsored entities and agencies |  | $                 | 115,993 |  |                      | $ | 546   |                       |  | $ | 610        |  |  | $ | 115,929 | 
|Mortgage backed securities                                     |  |                   | 417,673 |  |                      |   | 6,250 |                       |  |   | 729        |  |  |   | 423,194 | 
|Municipal securities                                           |  |                   | 35,968  |  |                      |   | 433   |                       |  |   | 426        |  |  |   | 35,975  | 
|                                                               |  |                   |         |  |                      |   |       |                       |  |   |            |  |  |   |         | 
|Total                                                          |  | $                 | 569,634 |  |                      | $ | 7,229 |                       |  | $ | 1,765      |  |  | $ | 575,098 | 
|                                                               |  |                   |         |  |                      |   |       |                       |  |   |            |  |  |   |         | 
|                                                               | 
|                                                               |  | December 31, 2010 |        
|                                                               |  | AmortizedCost     |         |  | GrossUnrealizedGains |   |       | GrossUnrealizedLosses |  |   | Fair Value | 
|Obligations of U.S. government sponsored entities and agencies |  | $                 | 113,183 |  |                      | $ | 732   |                       |  | $ | 499        |  |  | $ | 113,416 | 
|Mortgage backed securities                                     |  |                   | 348,990 |  |                      |   | 6,563 |                       |  |   | 1,295      |  |  |   | 354,258 | 
|Municipal securities                                           |  |                   | 34,079  |  |                      |   | 259   |                       |  |   | 1,085      |  |  |   | 33,253  | 
|                                                               |  |                   |         |  |                      |   |       |                       |  |   |            |  |  |   |         | 
|Total                                                          |  | $                 | 496,252 |  |                      | $ | 7,554 |                       |  | $ | 2,879      |  |  | $ | 500,927 | 
|                                                               |  |                   |         |  |                      |   |       |                       |  |   |            |  |  |   |         | 

The cost of securities sold is determined using the specific identification method. Sales of available for
sale securities were as follows:



|                            |  |             |        |  |             |   |        | 
|--------------------------- |  | ----------- | ------ |  | ----------- | - | ------ | 
|For the three months ended: |  | Mar 31,2011 |        |  | Mar 31,2010 |  
|Proceeds                    |  | $           | 33,349 |  |             | $ | 42,018 | 
|Gross gains                 |  |             | 140    |  |             |   | 1,436  | 
|Gross losses                |  |             | 131    |  |             |   |       | 

The tax provision
related to these net realized gains was $3 and $544, respectively.

The fair value of available for sale securities at
March 31, 2011 by contractual maturity were as follows. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.



|                                         |  |           |         |  |               |   |         | 
|---------------------------------------- |  | --------- | ------- |  | ------------- | - | ------- | 
|Investment securities available for sale |  | FairValue |         |  | AmortizedCost |  
|Due in one year or less                  |  | $         | 10,796  |  |               | $ | 10,785  | 
|Due after one year through five years    |  |           | 20,967  |  |               |   | 20,854  | 
|Due after five years through ten years   |  |           | 59,302  |  |               |   | 59,239  | 
|Due after ten years through thirty years |  |           | 60,839  |  |               |   | 61,083  | 
|Mortgage backed securities               |  |           | 423,194 |  |               |   | 417,673 | 
|                                         |  |           |         |  |               |   |         | 
|                                         |  | $         | 575,098 |  |               | $ | 569,634 | 
|                                         |  |           |         |  |               |   |         | 



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Securities pledged at March 31, 2011 and December 31, 2010 had a carrying amount
(estimated fair value) of $173,549 and $157,087 respectively. These securities were pledged primarily to secure public deposits and repurchase agreements.

At March 31, 2011 and December 31, 2010, there were no holdings of securities of any one issuer, other than the U.S. Government sponsored entities and agencies, in an amount greater than 10% of
stockholders equity.

The following tables show the Companys investments gross unrealized losses and fair
value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2011 and December 31, 2010.



|                                                               |  |                     |         |  |                   |   |       |            |  |   |                  |  |  |            |     |  |                  |   |         |  |  |   |       | 
|-------------------------------------------------------------- |  | ------------------- | ------- |  | ----------------- | - | ----- | ---------- |  | - | ---------------- |  |  | ---------- | --- |  | ---------------- | - | ------- |  |  | - | ----- | 
|                                                               |  | March 31, 2011      |        
|                                                               |  | Less than 12 months |         |  | 12 months or more |   |       | Total      | 
|                                                               |  | Fair Value          |         |  | UnrealizedLosses  |   |       | Fair Value |  |   | UnrealizedLosses |  |  | Fair Value |     |  | UnrealizedLosses |  
|Obligations of U.S. government sponsored entities and agencies |  | $                   | 33,733  |  |                   | $ | 610   |            |  | $ |                 |  |  | $          |    |  |                  | $ | 33,733  |  |  | $ | 610   | 
|Mortgage backed securities                                     |  |                     | 171,919 |  |                   |   | 729   |            |  |   |                 |  |  |            |    |  |                  |   | 171,919 |  |  |   | 729   | 
|Municipal securities                                           |  |                     | 11,588  |  |                   |   | 287   |            |  |   | 1,312            |  |  |            | 139 |  |                  |   | 12,900  |  |  |   | 426   | 
|                                                               |  |                     |         |  |                   |   |       |            |  |   |                  |  |  |            |     |  |                  |   |         |  |  |   |       | 
|Total temporarily impaired securities                          |  | $                   | 217,240 |  |                   | $ | 1,626 |            |  | $ | 1,312            |  |  | $          | 139 |  |                  | $ | 218,552 |  |  | $ | 1,765 | 
|                                                               |  |                     |         |  |                   |   |       |            |  |   |                  |  |  |            |     |  |                  |   |         |  |  |   |       | 
|                                                               | 
|                                                               |  | December 31, 2010   |        
|                                                               |  | Less than 12 months |         |  | 12 months or more |   |       | Total      | 
|                                                               |  | Fair Value          |         |  | UnrealizedLosses  |   |       | Fair Value |  |   | UnrealizedLosses |  |  | Fair Value |     |  | UnrealizedLosses |  
|Obligations of U.S. government sponsored entities and agencies |  | $                   | 14,501  |  |                   | $ | 499   |            |  | $ |                 |  |  | $          |    |  |                  | $ | 14,501  |  |  | $ | 499   | 
|Mortgage backed securities                                     |  |                     | 130,937 |  |                   |   | 1,295 |            |  |   |                 |  |  |            |    |  |                  |   | 130,937 |  |  |   | 1,295 | 
|Municipal securities                                           |  |                     | 19,135  |  |                   |   | 880   |            |  |   | 1,246            |  |  |            | 205 |  |                  |   | 20,381  |  |  |   | 1,085 | 
|                                                               |  |                     |         |  |                   |   |       |            |  |   |                  |  |  |            |     |  |                  |   |         |  |  |   |       | 
|Total temporarily impaired securities                          |  | $                   | 164,573 |  |                   | $ | 2,674 |            |  | $ | 1,246            |  |  | $          | 205 |  |                  | $ | 165,819 |  |  | $ | 2,879 | 
|                                                               |  |                     |         |  |                   |   |       |            |  |   |                  |  |  |            |     |  |                  |   |         |  |  |   |       | 

Mortgage-backed securities: At March 31, 2011, 100% of the mortgage-backed securities held by the
Company were issued by U.S. government-sponsored entities and agencies, primarily Fannie Mae, Freddie Mac, and Ginnie Mae, institutions which the government has affirmed its commitment to support. Because the decline in fair value is attributable to
changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these mortgage-backed securities and it is likely that it will not be required to sell the securities before their
anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at March 31, 2011

Municipal securities: Unrealized losses on municipal securities have not been recognized into income because the issuers bonds are of high quality, and because management does not intend to sell these
investments or more likely than not will not be required to sell these investments before their anticipated recovery. The fair value is expected to recover as the securities approach maturity.



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|NOTE 6: | Loans
|------- | -----

The following
table sets forth information concerning the loan portfolio by collateral types as of the dates indicated.



|                                                         |  |              |           |   |              |   |           |  
|-------------------------------------------------------- |  | ------------ | --------- | - | ------------ | - | --------- | -
|                                                         |  | Mar 31, 2011 |           |   | Dec 31, 2010 |  
|Loans not covered by FDIC loss share agreements (note 2) |  |              |           |   |              |   |           |  
|Real estate loans                                        |  |              |           |   |              |   |           |  
|Residential                                              |  | $            | 259,327   |   |              | $ | 255,571   |  
|Commercial                                               |  |              | 500,512   |   |              |   | 410,162   |  
|Construction, development, land                          |  |              | 107,179   |   |              |   | 109,380   |  
|                                                         |  |              |           |   |              |   |           |  
|Total real estate                                        |  |              | 867,018   |   |              |   | 775,113   |  
|Commercial                                               |  |              | 116,424   |   |              |   | 100,906   |  
|Consumer and other loans, at fair value (note 1)         |  |              | 2,599     |   |              |   | 3,264     |  
|Consumer and other                                       |  |              | 53,990    |   |              |   | 52,115    |  
|                                                         |  |              |           |   |              |   |           |  
|Loans before unearned fees and cost                      |  |              | 1,040,031 |   |              |   | 931,398   |  
|Unearned fees/costs                                      |  |              | (720      | ) |              |   | (728      | )
|                                                         |  |              |           |   |              |   |           |  
|Total loans not covered by FDIC loss share agreements    |  |              | 1,039,311 |   |              |   | 930,670   |  
|                                                         |  |              |           |   |              |   |           |  
|Loans covered by FDIC loss share agreements              |  |              |           |   |              |   |           |  
|Real estate loans                                        |  |              |           |   |              |   |           |  
|Residential                                              |  |              | 106,655   |   |              |   | 110,586   |  
|Commercial                                               |  |              | 65,975    |   |              |   | 68,286    |  
|Construction, development, land                          |  |              | 12,217    |   |              |   | 13,653    |  
|                                                         |  |              |           |   |              |   |           |  
|Total real estate                                        |  |              | 184,847   |   |              |   | 192,525   |  
|Commercial                                               |  |              | 4,861     |   |              |   | 5,760     |  
|                                                         |  |              |           |   |              |   |           |  
|Total loans covered by FDIC loss share agreements        |  |              | 189,708   |   |              |   | 198,285   |  
|                                                         |  |              |           |   |              |   |           |  
|                                                         |  |             
|Total loans                                              |  |              | 1,229,019 |   |              |   | 1,128,955 |  
|Allowance for loan losses                                |  |              | (28,245   | ) |              |   | (26,267   | )
|                                                         |  |              |           |   |              |   |           |  
|Total loans, net of allowance for loan losses            |  | $            | 1,200,774 |   |              | $ | 1,102,688 |  
|                                                         |  |              |           |   |              |   |           |  



|Note 1: | Consumer loans acquired pursuant to three FDIC assisted transactions of failed financial institutions during the third quarter of 2010. These loans are not covered by
an FDIC loss share agreement. The loans have been written down to estimated fair value and are being accounted for pursuant to ASC Topic 310-30.
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Note 2: | Includes $114,737 of loans that are subject to a two year put back option with TD Bank, N.A., so that if any of these loans become 30 days past due or are adversely
classified pursuant to bank regulatory guidelines, the Company has the option to put back the loan to TD Bank.
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



15



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The table below sets forth the activity in the allowance for loan losses for the periods
presented, in thousands of dollars.



|                                         |  |                                     |        |  
|---------------------------------------- |  | ----------------------------------- | ------ | -
|                                         |  | Three monthperiod endedMar 31, 2011 |       
|Allowance at beginning of period         |  | $                                   | 26,267 |  
|Charge-offs                              |  |                                     |        |  
|Residential real estate loans            |  |                                     | (2,772 | )
|Commercial real estate loans             |  |                                     | (3,977 | )
|Construction, development and land loans |  |                                     | (2,101 | )
|Non real estate commercial loans         |  |                                     | (257   | )
|Non real estate consumer and other loans |  |                                     | (351   | )
|                                         |  |                                     |        |  
|Total charge-offs                        |  |                                     | (9,458 | )
|                                         | 
|Recoveries                               |  |                                     |        |  
|Residential real estate loans            |  |                                     | 108    |  
|Commercial real estate loans             |  |                                     | 12     |  
|Construction, development and land loans |  |                                     | 2      |  
|Non real estate commercial loans         |  |                                     | 11     |  
|Non real estate consumer and other loans |  |                                     | 27     |  
|                                         |  |                                     |        |  
|Total recoveries                         |  |                                     | 160    |  
|                                         | 
|Net charge-offs                          |  |                                     | (9,298 | )
|                                         | 
|Provision for loan losses                |  |                                     |        |  
|Residential real estate loans            |  |                                     | 2,416  |  
|Commercial real estate loans             |  |                                     | 5,528  |  
|Construction, development and land loans |  |                                     | 3,275  |  
|Non real estate commercial loans         |  |                                     | (275   | )
|Non real estate consumer and other loans |  |                                     | 332    |  
|                                         |  |                                     |        |  
|Total provision for loan losses          |  |                                     | 11,276 |  
|                                         | 
|Allowance at end of period               |  | $                                   | 28,245 |  
|                                         |  |                                     |        |  

The following tables present the balance in the allowance for loan losses and the recorded investment in
loans by portfolio segment and based on impairment method as of March 31, 2011 and December 31, 2010, excluding loans purchased from the FDIC with evidence of credit deterioration and covered by FDIC loss share agreements (in thousands of
dollars). Accrued interest receivable is not included in the recorded investment because it is not material.



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|                                                   |  |                   |         |  |            |   |         |                       |  |   |                   |  |  |                 |         |  |       |   |        |  |  |   |           | 
|-------------------------------------------------- |  | ----------------- | ------- |  | ---------- | - | ------- | --------------------- |  | - | ----------------- |  |  | --------------- | ------- |  | ----- | - | ------ |  |  | - | --------- | 
|                                                   |  | Real Estate Loans |         |  |            |   |         |                       |  |   |                   | 
|As of March 31, 2011                               |  | Residential       |         |  | Commercial |   |         | Constr.,develop.,land |  |   | Comm. &industrial |  |  | Consumer& other |         |  | Total |  
|                                                   |  |                   |         |  |            |  
|Allowance for loan losses:                         |  |                   |         |  |            |   |         |                       |  |   |                   |  |  |                 |         |  |       |   |        |  |  |   |           | 
|                                                   |  |                   |         |  |            |  
|Ending allowance balance attributable to loans:    |  |                   |         |  |            |   |         |                       |  |   |                   |  |  |                 |         |  |       |   |        |  |  |   |           | 
|Individually evaluated for impairment              |  | $                 | 679     |  |            | $ | 1,984   |                       |  | $ | 1,829             |  |  |                 |        |  |       |   |       |  |  | $ | 4,492     | 
|Collectively evaluated for impairment              |  |                   | 6,777   |  |            |   | 8,166   |                       |  |   | 6,240             |  |  |                 | 1,661   |  |       |   | 909    |  |  |   | 23,753    | 
|Acquired with deteriorated credit quality          |  |                   |        |  |            |   |        |                       |  |   |                  |  |  |                 |        |  |       |   |       |  |  |   |          | 
|                                                   |  |                   |         |  |            |   |         |                       |  |   |                   |  |  |                 |         |  |       |   |        |  |  |   |           | 
|Total ending allowance balance                     |  |                   | 7,456   |  |            |   | 10,150  |                       |  |   | 8,069             |  |  |                 | 1,661   |  |       |   | 909    |  |  |   | 28,245    | 
|                                                   |  |                   |         |  |            |   |         |                       |  |   |                   |  |  |                 |         |  |       |   |        |  |  |   |           | 
|                                                   |  |                   |         |  |            |  
|Loans, excluding loans covered by FDIC loss share: |  |                   |         |  |            |   |         |                       |  |   |                   |  |  |                 |         |  |       |   |        |  |  |   |           | 
|Loans individually evaluated for impairment        |  |                   | 14,207  |  |            |   | 46,651  |                       |  |   | 16,765            |  |  |                 | 5,500   |  |       |   | 679    |  |  |   | 83,802    | 
|Loans collectively evaluated for impairment (1)    |  |                   | 245,120 |  |            |   | 453,861 |                       |  |   | 90,414            |  |  |                 | 110,924 |  |       |   | 53,311 |  |  |   | 953,630   | 
|Loans acquired with deteriorated credit quality    |  |                   |        |  |            |   |        |                       |  |   |                  |  |  |                 |        |  |       |   | 2,599  |  |  |   | 2,599     | 
|                                                   |  |                   |         |  |            |   |         |                       |  |   |                   |  |  |                 |         |  |       |   |        |  |  |   |           | 
|                                                   |  |                   |         |  |            |  
|Total ending loans balance                         |  | $                 | 259,327 |  |            | $ | 500,512 |                       |  | $ | 107,179           |  |  | $               | 116,424 |  |       | $ | 56,589 |  |  | $ | 1,040,031 | 
|                                                   |  |                   |         |  |            |   |         |                       |  |   |                   |  |  |                 |         |  |       |   |        |  |  |   |           | 



|(1) | Includes $114,737 of loans purchased from TD Bank during the first quarter of 2011. The loans purchased are all performing loans with a two year put back option. This
segment of the loan portfolio has no allocation of the allowance for loan loss.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                   |  |                   |         |  |            |   |         |                       |  |   |                   |  |  |                 |         |  |       |   |        |  |  |   |         | 
|-------------------------------------------------- |  | ----------------- | ------- |  | ---------- | - | ------- | --------------------- |  | - | ----------------- |  |  | --------------- | ------- |  | ----- | - | ------ |  |  | - | ------- | 
|                                                   |  | Real Estate Loans |         |  |            |   |         |                       |  |   |                   | 
|As of December 31, 2010                            |  | Residential       |         |  | Commercial |   |         | Constr.,develop.,land |  |   | Comm. &industrial |  |  | Consumer& other |         |  | Total |  
|                                                   |  |                   |         |  |            |  
|Allowance for loan losses:                         |  |                   |         |  |            |   |         |                       |  |   |                   |  |  |                 |         |  |       |   |        |  |  |   |         | 
|                                                   |  |                   |         |  |            |  
|Ending allowance balance attributable to loans:    |  |                   |         |  |            |   |         |                       |  |   |                   |  |  |                 |         |  |       |   |        |  |  |   |         | 
|Individually evaluated for impairment              |  | $                 | 679     |  |            | $ | 1,981   |                       |  | $ | 534               |  |  |                 |        |  |       |   |       |  |  | $ | 3,194   | 
|Collectively evaluated for impairment              |  |                   | 7,025   |  |            |   | 6,606   |                       |  |   | 6,359             |  |  |                 | 2,182   |  |       |   | 901    |  |  |   | 23,073  | 
|Acquired with deteriorated credit quality          |  |                   |        |  |            |   |        |                       |  |   |                  |  |  |                 |        |  |       |   |       |  |  |   |        | 
|                                                   |  |                   |         |  |            |   |         |                       |  |   |                   |  |  |                 |         |  |       |   |        |  |  |   |         | 
|Total ending allowance balance                     |  | $                 | 7,704   |  |            | $ | 8,587   |                       |  | $ | 6,893             |  |  | $               | 2,182   |  |       | $ | 901    |  |  | $ | 26,267  | 
|                                                   |  |                   |         |  |            |   |         |                       |  |   |                   |  |  |                 |         |  |       |   |        |  |  |   |         | 
|                                                   |  |                   |         |  |            |  
|Loans, excluding loans covered by FDIC loss share: |  |                   |         |  |            |   |         |                       |  |   |                   |  |  |                 |         |  |       |   |        |  |  |   |         | 
|                                                   |  |                   |         |  |            |  
|Loans individually evaluated for impairment        |  |                   | 14,856  |  |            |   | 49,427  |                       |  |   | 16,298            |  |  |                 | 5,712   |  |       |   | 684    |  |  |   | 86,977  | 
|Loans collectively evaluated for impairment        |  |                   | 240,715 |  |            |   | 360,735 |                       |  |   | 93,082            |  |  |                 | 95,194  |  |       |   | 51,431 |  |  |   | 841,157 | 
|Loans acquired with deteriorated credit quality    |  |                   |        |  |            |   |        |                       |  |   |                  |  |  |                 |        |  |       |   | 4,343  |  |  |   | 4,343   | 
|                                                   |  |                   |         |  |            |   |         |                       |  |   |                   |  |  |                 |         |  |       |   |        |  |  |   |         | 
|                                                   |  |                   |         |  |            |  
|Total ending loans balance                         |  |                   | 255,571 |  |            |   | 410,162 |                       |  |   | 109,380           |  |  |                 | 100,906 |  |       |   | 56,458 |  |  |   | 932,477 | 
|                                                   |  |                   |         |  |            |   |         |                       |  |   |                   |  |  |                 |         |  |       |   |        |  |  |   |         | 



The table below summarizes
impaired loan data for the periods presented.



|                                                                |  |             |        |  |             |   |        | 
|--------------------------------------------------------------- |  | ----------- | ------ |  | ----------- | - | ------ | 
|                                                                |  | Mar 31,2011 |        |  | Dec 31,2010 |  
|Impaired loans with a specific valuation allowance              |  | $           | 15,085 |  |             | $ | 72,903 | 
|Impaired loans without a specific valuation allowance           |  |             | 68,717 |  |             |   | 14,074 | 
|                                                                |  |             |        |  |             |   |        | 
|Total impaired loans                                            |  | $           | 83,802 |  |             | $ | 86,977 | 
|Amount of allowance for loan losses allocated to impaired loans |  |             | 4,492  |  |             | $ | 3,194  | 
|                                                                |  |            
|Performing TDRs                                                 |  | $           | 8,659  |  |             | $ | 10,591 | 
|Non performing TDRs, included in NPLs                           |  |             | 12,517 |  |             |   | 11,731 | 
|                                                                |  |             |        |  |             |   |        | 
|Total TDRs (TDRs are required to be included in impaired loans) |  | $           | 21,176 |  |             | $ | 22,322 | 
|Impaired loans that are not TDRs                                |  |             | 62,626 |  |             |   | 64,655 | 
|                                                                |  |             |        |  |             |   |        | 
|Total impaired loans                                            |  | $           | 83,802 |  |             | $ | 86,977 | 

The following
tables present loans individually evaluated for impairment by class of loans as of March 31, 2011 and December 31, 2010. The recorded investment is less than the unpaid principal balance due to partial charge-offs.



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|                                    |  |                        |        |  |                    |   |        |                                   |  |   |       | 
|----------------------------------- |  | ---------------------- | ------ |  | ------------------ | - | ------ | --------------------------------- |  | - | ----- | 
|As of March 31, 2011                |  | Unpaidprincipalbalance |        |  | Recordedinvestment |   |        | Allowance forloan lossesallocated | 
|                                    |  |                        |       
|With no related allowance recorded: |  |                        |        |  |                    |   |        |                                   |  |   |       | 
|Residential real estate             |  | $                      | 12,918 |  |                    | $ | 11,555 |                                   |  | $ |      | 
|Commercial real estate              |  |                        | 47,183 |  |                    |   | 41,337 |                                   |  |   |      | 
|Construction, development, land     |  |                        | 14,552 |  |                    |   | 9,646  |                                   |  |   |      | 
|Commercial                          |  |                        | 5,624  |  |                    |   | 5,500  |                                   |  |   |      | 
|Consumer, other                     |  |                        | 737    |  |                    |   | 679    |                                   |  |   |      | 
|                                    |  |                        |       
|With an allowance recorded:         |  |                        |        |  |                    |   |        |                                   |  |   |       | 
|Residential real estate             |  |                        | 2,652  |  |                    |   | 2,652  |                                   |  |   | 679   | 
|Commercial real estate              |  |                        | 5,817  |  |                    |   | 5,314  |                                   |  |   | 1,984 | 
|Construction, development, land     |  |                        | 8,154  |  |                    |   | 7,119  |                                   |  |   | 1,829 | 
|Commercial                          |  |                        |       |  |                    |   |       |                                   |  |   |      | 
|Consumer, other                     |  |                        |       |  |                    |   |       |                                   |  |   |      | 
|                                    |  |                        |        |  |                    |   |        |                                   |  |   |       | 
|                                    |  |                        |       
|Total                               |  | $                      | 97,637 |  |                    | $ | 83,802 |                                   |  | $ | 4,492 | 
|                                    |  |                        |        |  |                    |   |        |                                   |  |   |       | 
|                                    |  |                        |       
|As of December 31, 2010             |  | Unpaidprincipalbalance |        |  | Recordedinvestment |   |        | Allowance forloan lossesallocated | 
|                                    |  |                        |       
|With no related allowance recorded: |  |                        |        |  |                    |   |        |                                   |  |   |       | 
|Residential real estate             |  | $                      | 13,313 |  |                    | $ | 12,177 |                                   |  | $ |      | 
|Commercial real estate              |  |                        | 46,616 |  |                    |   | 42,515 |                                   |  |   |      | 
|Construction, development, land     |  |                        | 15,539 |  |                    |   | 11,815 |                                   |  |   |      | 
|Commercial                          |  |                        | 5,712  |  |                    |   | 5,712  |                                   |  |   |      | 
|Consumer, other                     |  |                        | 684    |  |                    |   | 684    |                                   |  |   |      | 
|                                    |  |                        |       
|With an allowance recorded:         |  |                        |        |  |                    |   |        |                                   |  |   |       | 
|Residential real estate             |  |                        | 2,679  |  |                    |   | 2,679  |                                   |  |   | 679   | 
|Commercial real estate              |  |                        | 7,123  |  |                    |   | 6,912  |                                   |  |   | 1,981 | 
|Construction, development, land     |  |                        | 4,483  |  |                    |   | 4,483  |                                   |  |   | 534   | 
|Commercial                          |  |                        |       |  |                    |   |       |                                   |  |   |      | 
|Consumer, other                     |  |                        |       |  |                    |   |       |                                   |  |   |      | 
|                                    |  |                        |        |  |                    |   |        |                                   |  |   |       | 
|                                    |  |                        |       
|Total                               |  | $                      | 96,149 |  |                    | $ | 86,977 |                                   |  | $ | 3,194 | 
|                                    |  |                        |        |  |                    |   |        |                                   |  |   |       | 



|                                |  |                        |        |  |                                          |   |     |                                    |  |   |   | 
|------------------------------- |  | ---------------------- | ------ |  | ---------------------------------------- | - | --- | ---------------------------------- |  | - | - | 
|As of March, 31, 2011           |  | Averageofimpairedloans |        |  | Interestincomerecognizedduringimpairment |   |     | Cash basisinterestincomerecognized | 
|Real estate loans:              |  |                        |        |  |                                          |   |     |                                    |  |   |   | 
|Residential                     |  | $                      | 14,531 |  |                                          | $ | 27  |                                    |  | $ |  | 
|Commercial                      |  |                        | 48,039 |  |                                          |   | 197 |                                    |  |   |  | 
|Construction, development, land |  |                        | 16,532 |  |                                          |   | 11  |                                    |  |   |  | 
|                                |  |                        |        |  |                                          |   |     |                                    |  |   |   | 
|Total real estate loans         |  |                        | 79,102 |  |                                          |   | 235 |                                    |  |   |  | 
|                                |  |                        |       
|Commercial loans                |  |                        | 5,606  |  |                                          |   | 62  |                                    |  |   |  | 
|Consumer and other loans        |  |                        | 681    |  |                                          |   | 0   |                                    |  |   |  | 
|                                |  |                        |        |  |                                          |   |     |                                    |  |   |   | 
|Total                           |  | $                      | 85,389 |  |                                          | $ | 297 |                                    |  | $ |  | 
|                                |  |                        |        |  |                                          |   |     |                                    |  |   |   | 



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|                                             |  |   |        | 
|-------------------------------------------- |  | - | ------ | 
|As of March 31, 2010                         |  |   |       
|Average impaired loans during the year       |  | $ | 80,851 | 
|Interest income recognized during impairment |  |   | 575    | 
|Cash-basis interest income recognized        |  |   | 551    | 

Nonperforming loans include both
smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.



|                                                        |  |              |        |  |              |   |        | 
|------------------------------------------------------- |  | ------------ | ------ |  | ------------ | - | ------ | 
|Nonperforming loans were as follows:                    |  |              |       
|                                                        |  | Mar 31, 2011 |        |  | Dec 31, 2010 |  
|Non accrual loans                                       |  | $            | 71,631 |  |              | $ | 62,553 | 
|Loans past due over 90 days and still accruing interest |  |              |       |  |              |   | 3,200  | 
|                                                        |  |              |        |  |              |   |        | 
|Total non performing loans                              |  | $            | 71,631 |  |              | $ | 65,753 | 
|                                                        |  |              |        |  |              |   |        | 

The following table presents the recorded investment in nonaccrual loans and loans past due over 90 days
still on accrual by class of loans as of March 31, 2011 and December 31, 2010, excluding loans acquired from the FDIC with evidence of credit deterioration:



|                                |  |            |        |  |                                          |   |       | 
|------------------------------- |  | ---------- | ------ |  | ---------------------------------------- | - | ----- | 
|As of March 31, 2011            |  | Nonaccrual |        |  | Loans past dueover 90 daysstill accruing |  
|Residential real estate         |  | $          | 17,940 |  |                                          | $ |      | 
|Commercial real estate          |  |            | 33,529 |  |                                          |   |      | 
|Construction, development, land |  |            | 18,730 |  |                                          |   |      | 
|Commercial                      |  |            | 808    |  |                                          |   |      | 
|Consumer, other                 |  |            | 624    |  |                                          |   |      | 
|                                |  |            |        |  |                                          |   |       | 
|Total                           |  | $          | 71,631 |  |                                          | $ |      | 
|                                |  |            |        |  |                                          |   |       | 
|                                |  |           
|As of December 31, 2010         |  | Nonaccrual |        |  | Loans past dueover 90 daysstill accruing |  
|Residential real estate         |  | $          | 17,282 |  |                                          | $ | 1,820 | 
|Commercial real estate          |  |            | 28,364 |  |                                          |   | 869   | 
|Construction, development, land |  |            | 15,546 |  |                                          |   | 366   | 
|Commercial                      |  |            | 615    |  |                                          |   | 83    | 
|Consumer, other                 |  |            | 746    |  |                                          |   | 62    | 
|                                |  |            |        |  |                                          |   |       | 
|Total                           |  | $          | 62,553 |  |                                          | $ | 3,200 | 
|                                |  |            |        |  |                                          |   |       | 

The following table presents the aging of the recorded investment in past due loans as of March 31,
2011 and December 31, 2010, excluding loans acquired from the FDIC with evidence of credit deterioration:



|                        |  |                |           |  |                     |   |        |                     |  |   |                            |  |  |               |   |  |                   |   |        |                 |  |   |         |  |  |   |        | 
|----------------------- |  | -------------- | --------- |  | ------------------- | - | ------ | ------------------- |  | - | -------------------------- |  |  | ------------- | - |  | ----------------- | - | ------ | --------------- |  | - | ------- |  |  | - | ------ | 
|                        |  | Accruing Loans |           |  |                     |  
|As of March 31, 2010    |  | Total          |           |  | 30 - 59days pastdue |   |        | 60 - 89days pastdue |  |   | Greaterthan 90days pastdue |  |  | TotalPast Due |   |  | Loans NotPast Due |   |        | NonaccrualLoans | 
|Residential Real Estate |  | $              | 259,327   |  |                     | $ | 5,431  |                     |  | $ | 164                        |  |  | $             |  |  |                   | $ | 5,595  |                 |  | $ | 235,792 |  |  | $ | 17,940 | 
|Commercial Real Estate  |  |                | 500,512   |  |                     |   | 7,001  |                     |  |   | 2,185                      |  |  |               |  |  |                   |   | 9,186  |                 |  |   | 457,797 |  |  |   | 33,529 | 
|Construction/Dev/Land   |  |                | 107,179   |  |                     |   | 1,741  |                     |  |   | 214                        |  |  |               |  |  |                   |   | 1,955  |                 |  |   | 86,494  |  |  |   | 18,730 | 
|Commercial              |  |                | 116,424   |  |                     |   | 197    |                     |  |   | 54                         |  |  |               |  |  |                   |   | 251    |                 |  |   | 115,365 |  |  |   | 808    | 
|Consumer                |  |                | 53,660    |  |                     |   | 259    |                     |  |   | 13                         |  |  |               |  |  |                   |   | 272    |                 |  |   | 53,094  |  |  |   | 624    | 
|                        |  |                |           |  |                     |   |        |                     |  |   |                            |  |  |               |   |  |                   |   |        |                 |  |   |         |  |  |   |        | 
|                        |  | $              | 1,037,432 |  |                     | $ | 14,629 |                     |  | $ | 2,630                      |  |  | $             |  |  |                   | $ | 17,259 |                 |  | $ | 948,542 |  |  | $ | 71,631 | 



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|                        |  |                |         |  |                     |   |        |                     |  |   |                            |  |  |               |       |  |                   |   |        |                 |  |   |         |  |  |   |        | 
|----------------------- |  | -------------- | ------- |  | ------------------- | - | ------ | ------------------- |  | - | -------------------------- |  |  | ------------- | ----- |  | ----------------- | - | ------ | --------------- |  | - | ------- |  |  | - | ------ | 
|                        |  | Accruing Loans |         |  |                     |  
|As of December 31, 2010 |  | Total          |         |  | 30 - 59days pastdue |   |        | 60 - 89days pastdue |  |   | Greaterthan 90days pastdue |  |  | TotalPast Due |       |  | Loans NotPast Due |   |        | NonaccrualLoans | 
|Residential Real Estate |  | $              | 255,571 |  |                     | $ | 4,901  |                     |  | $ | 800                        |  |  | $             | 1,820 |  |                   | $ | 7,521  |                 |  | $ | 230,768 |  |  | $ | 17,282 | 
|Commercial Real Estate  |  |                | 410,162 |  |                     |   | 4,093  |                     |  |   | 1,945                      |  |  |               | 869   |  |                   |   | 6,907  |                 |  |   | 374,891 |  |  |   | 28,364 | 
|Construction/Dev/Land   |  |                | 109,380 |  |                     |   | 2,575  |                     |  |   | 619                        |  |  |               | 366   |  |                   |   | 3,560  |                 |  |   | 90,274  |  |  |   | 15,546 | 
|Commercial              |  |                | 100,906 |  |                     |   | 1,293  |                     |  |   | 627                        |  |  |               | 83    |  |                   |   | 2,003  |                 |  |   | 98,288  |  |  |   | 615    | 
|Consumer                |  |                | 52,115  |  |                     |   | 710    |                     |  |   | 236                        |  |  |               | 62    |  |                   |   | 1,008  |                 |  |   | 50,361  |  |  |   | 746    | 
|                        |  |                |         |  |                     |   |        |                     |  |   |                            |  |  |               |       |  |                   |   |        |                 |  |   |         |  |  |   |        | 
|                        |  | $              | 928,134 |  |                     | $ | 13,572 |                     |  | $ | 4,227                      |  |  | $             | 3,200 |  |                   | $ | 20,999 |                 |  | $ | 844,582 |  |  | $ | 62,553 | 

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service
their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to
credit risk. This analysis includes loans with an outstanding balance greater than $500 and non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed on at least an annual basis. The Company uses the
following definitions for risk ratings:

Special Mention: Loans classified as special mention have a potential weakness that
deserves managements close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institutions credit position at some future date.

Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of
the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the
deficiencies are not corrected.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as
substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.



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Loans not meeting the criteria above that are analyzed individually as part of the above
described process are considered to be pass rated loans. Loans listed as not rated are either less than $500 or are included in groups of homogeneous loans. As of March 31, 2011 and December 31, 2010, and based on the most recent analysis
performed, the risk category of loans by class of loans, excluding loans with evidence of deterioration of credit quality purchased from the FDIC, is as follows:



|                        |  |                      |           |  |                |   |        |             |  |   |          |  |  |   |   | 
|----------------------- |  | -------------------- | --------- |  | -------------- | - | ------ | ----------- |  | - | -------- |  |  | - | - | 
|                        |  | As of March 31, 2011 |          
|Loan Category           |  | Pass                 |           |  | SpecialMention |   |        | Substandard |  |   | Doubtful | 
|Residential Real Estate |  | $                    | 241,349   |  |                | $ | 7,765  |             |  | $ | 29,897   |  |  | $ |  | 
|Commercial Real Estate  |  |                      | 522,870   |  |                |   | 25,892 |             |  |   | 57,381   |  |  |   |  | 
|Construction/Dev/Land   |  |                      | 100,477   |  |                |   | 6,659  |             |  |   | 20,378   |  |  |   |  | 
|Commercial              |  |                      | 108,197   |  |                |   | 2,816  |             |  |   | 9,148    |  |  |   |  | 
|Consumer                |  |                      | 54,006    |  |                |   | 776    |             |  |   | 1,376    |  |  |   |  | 
|                        |  |                      |           |  |                |   |        |             |  |   |          |  |  |   |   | 
|                        |  | $                    | 1,026,899 |  |                | $ | 43,908 |             |  | $ | 118,180  |  |  | $ |  | 



|                        |  |                         |         |  |                |   |        |             |  |   |          |  |  |   |   | 
|----------------------- |  | ----------------------- | ------- |  | -------------- | - | ------ | ----------- |  | - | -------- |  |  | - | - | 
|                        |  | As of December 31, 2010 |        
|Loan Category           |  | Pass                    |         |  | SpecialMention |   |        | Substandard |  |   | Doubtful | 
|Residential Real Estate |  | $                       | 216,164 |  |                | $ | 8,555  |             |  | $ | 30,852   |  |  | $ |  | 
|Commercial Real Estate  |  |                         | 336,869 |  |                |   | 19,300 |             |  |   | 53,993   |  |  |   |  | 
|Construction/Dev/Land   |  |                         | 77,811  |  |                |   | 8,001  |             |  |   | 23,568   |  |  |   |  | 
|Commercial              |  |                         | 88,290  |  |                |   | 2,806  |             |  |   | 9,810    |  |  |   |  | 
|Consumer                |  |                         | 49,586  |  |                |   | 838    |             |  |   | 1,691    |  |  |   |  | 
|                        |  |                         |         |  |                |   |        |             |  |   |          |  |  |   |   | 
|                        |  | $                       | 768,720 |  |                | $ | 39,500 |             |  | $ | 119,914  |  |  | $ |  | 

The Company considers
the performance of the loan portfolio and its impact on the allowance for loan losses. For residential and consumer loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by
payment activity. The following table presents the recorded investment in residential and consumer loans, excluding loans with evidence of deterioration of credit quality purchased from the FDIC, based on payment activity as of March 31, 2011:



|              |  |             |         |  |          |   |        | 
|------------- |  | ----------- | ------- |  | -------- | - | ------ | 
|              |  | Residential |         |  | Consumer |  
|Performing    |  | $           | 241,387 |  |          | $ | 53,366 | 
|Nonperforming |  |             | 17,940  |  |          |   | 624    | 
|              |  |             |         |  |          |   |        | 
|Total         |  | $           | 259,327 |  |          | $ | 53,990 | 
|              |  |             |         |  |          |   |        | 

Loans purchased from the FDIC:

Income recognized on loans we purchased from the FDIC is recognized pursuant to ASC Topic 310-30. A portion of the fair value discount has been ascribed as an accretable yield that is accreted into
interest income over the estimated remaining life of the loans. The remaining non-accretable difference represents cash flows not expected to be collected. Accretable yield, or interest income expected to be collected is as follows:



|                                                |  |   |        |  
|----------------------------------------------- |  | - | ------ | -
|Balance at December 31, 2010                    |  | $ | 39,051 |  
|Accretion of interest income                    |  |   | (3,248 | )
|Reclassification from non-accretable difference |  |   |       |  
|                                                |  |   |        |  
|Balance at March 31, 2011                       |  | $ | 35,803 |  
|                                                |  |   |        |  



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The table below summarizes the total contractually required principal and interest cash
payments, managements estimate of expected total cash payments and carrying value of the loans as of March 31, 2011.



|                                              |  |                        |         |  
|--------------------------------------------- |  | ---------------------- | ------- | -
|                                              |  | Balance atMar 31, 2011 |        
|Contractually required principal and interest |  | $                      | 322,149 |  
|Non-accretable difference                     |  |                        | (94,039 | )
|                                              |  |                        |         |  
|Cash flows expected to be collected           |  |                        | 228,110 |  
|Accretable yield                              |  |                        | (35,803 | )
|                                              |  |                        |         |  
|Carrying value of acquired loans              |  | $                      | 192,307 |  
|                                              |  |                        |         |  



|NOTE 7: | FDIC indemnification asset
|------- | --------------------------

The activity in the FDIC loss share indemnification asset which resulted from the July 16, 2010 acquisition of Olde Cypress Community
Bank and the August 20, 2010 acquisitions of the Community National Bank of Bartow and Independent National Bank in Ocala loss share agreements is as follows:



|                        |  |                                      |        |   |                                       |   |        | 
|----------------------- |  | ------------------------------------ | ------ | - | ------------------------------------- | - | ------ | 
|                        |  | Three monthsperiod endedMar 31, 2011 |        |   | Twelve monthsperiod endedDec 31, 2010 |  
|Beginning of the year   |  | $                                    | 59,456 |   |                                       | $ |       | 
|Effect of acquisitions  |  |                                      |       |   |                                       |   | 58,309 | 
|Discount accretion      |  |                                      | 468    |   |                                       |   | 598    | 
|Indemnification revenue |  |                                      | 1,136  |   |                                       |   | 549    | 
|Proceeds from FDIC      |  |                                      | (938   | ) |                                       |   |       | 
|Impairment              |  |                                      |       |   |                                       |   |       | 
|                        |  |                                      |        |   |                                       |   |        | 
|End of the year         |  | $                                    | 60,122 |   |                                       | $ | 59,456 | 
|                        |  |                                      |        |   |                                       |   |        | 



|NOTE 8: | Acquisition of certain assets and liabilities
|------- | ---------------------------------------------

On January 20, 2011 the Company completed its previously announced transaction as described in the Purchase and Assumption Agreement dated as of August 8, 2010 by and among CenterState, Carolina
First Bank and, to the extent provided therein, The South Financial Group, Inc. and TD Bank, National Association (the P&A Agreement). The reason for this transaction is as follows. The seller had recently entered into several acquisition
transactions and pursuant to certain concentration of deposit regulations, was required to divest a certain amount of deposit liabilities in Putnam County, Florida. CenterState (purchaser) was in a position to assist them with this divesture, if the
seller was willing to sell performing loans, selected by CenterState, and to sell them at a discount with a put back option.

Pursuant to the P&A Agreement, CenterState acquired deposits with an estimated fair value of approximately $115,283, two branch
offices and assumed the leases on an additional two branch offices within Putnam County, Florida. CenterState did not pay a premium for the deposits and purchased the two owned branches for approximately $700. In addition, CenterState purchased
performing loans with an estimated fair value of approximately $119,387 previously selected by CenterState and located within CenterStates fourteen County market areas within Central Florida. CenterState purchased the performing loans for 90%
of their face value amount, plus accrued and unpaid interest. During the two year period following the closing of this transaction and subject to the terms of the P&A Agreement, CenterState may put back to TD Bank N.A. (TD) any
acquired loan that (1) becomes more than 30 days delinquent or (2) becomes classified as nonaccrual, substandard, doubtful, or loss in accordance with applicable regulatory standards for loss
classification.



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The loans acquired pursuant to this transaction are not being accounted for pursuant to ASC
Topic 310-30. We arrived at this conclusion because none of these loans have specifically identifiable or implied credit deficiencies associated with them. We base this on the results of our due diligence team who reviewed and selected only
qualified performing loans rejecting approximately 80% of the potential loan pool offered in terms of dollars. That is, our team looked at a total loan population of approximately $800 million in order to identify enough qualified loans to fill the
$120 million target amount. In addition, the Company has the option during a two year period to put back any loan that becomes 30 days past due or becomes adversely classified, as discussed previously. This transaction has a different fact pattern
than the three FDIC fail banks we purchased during the third quarter of 2010. The loans we purchased pursuant to the FDIC failed bank transactions are being accounted for pursuant to ASC Topic 310-30 because we acquired all the loans in those
troubled loan portfolios. These loans had either specifically identifiable credit deficiencies factors or implied factors such that we believed there to be an element of elevated risk as to whether all contractual cash flows will eventually be
received. In this case, the loans were not hand selected from fourteen counties within Central Florida, but acquired as an entire portfolio in a single county. This is a combined loan portfolio of three failed financial institutions, which implies
potentially deficient, or at least questionable, credit underwriting.

The following table summarizes the fair values of the
assets acquired and liabilities assumed at the date of acquisition:



|                                                   |  |   |         | 
|-------------------------------------------------- |  | - | ------- | 
|Assets:                                            |  |   |         | 
|Cash                                               |  | $ | 724     | 
|Cash due from seller                               |  |   | 3,624   | 
|Loans, net                                         |  |   | 119,388 | 
|Interest receivable                                |  |   | 357     | 
|Premises and equipment                             |  |   | 731     | 
|Put back option                                    |  |   | 876     | 
|CDI                                                |  |   | 851     | 
|Other assets                                       |  |   | 3       | 
|                                                   |  |   |         | 
|Total assets acquired                              |  | $ | 126,554 | 
|                                                   |  |   |         | 
|                                                   | 
|Liabilities:                                       |  |   |         | 
|Deposits                                           |  | $ | 115,283 | 
|Interest payable                                   |  |   | 131     | 
|Other liabilities                                  |  |   | 11      | 
|                                                   |  |   |         | 
|Total assets assumed                               |  | $ | 115,425 | 
|                                                   |  |   |         | 
|                                                   | 
|Net assets acquired                                |  | $ | 11,129  | 
|                                                   |  |   |         | 
|Deferred tax impact                                |  |   | 4,188   | 
|                                                   |  |   |         | 
|Net assets acquired, including deferred tax impact |  | $ | 6,941   | 
|                                                   |  |   |         | 



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|NOTE 9: | Measurement period adjustments
|------- | ------------------------------

On July 16, 2010 the Company acquired substantially all the assets and assumed substantially all the deposits of Olde Cypress Community Bank through a purchase and assumption agreement, including
loss sharing with the Federal Deposit Insurance Corporation (FDIC). As previously disclosed, the fair values initially assigned to the assets acquired and liabilities assumed were preliminary and subject to refinement for up to one year
after the closing date of the acquisition as new information relative to closing date fair values became available. Preliminary valuation and purchase price allocation adjustments are reflected in the table below.



|                                                   |  |                                       |         |  |                                         |   |      |                            |  |   |         | 
|-------------------------------------------------- |  | ------------------------------------- | ------- |  | --------------------------------------- | - | ---- | -------------------------- |  | - | ------- | 
|                                                   |  | July 16, 2010(as initially 
reported) |         |  | Preliminarymeasurementperiodadjustments |   |      | July 16, 2010(as adjusted) | 
|Cash due from banks and Federal Reserve Bank, net  |  | $                                     | 18,643  |  |                                         | $ |     |                            |  | $ | 18,643  | 
|Investment securities available for sale           |  |                                       | 8,509   |  |                                         |   |      |                            |  |   | 8,509   | 
|Loans                                              |  |                                       | 93,360  |  |                                         |   | (991 | )                          |  |   | 92,369  | 
|Other repossessed real estate owned (OREO)       |  |                                       | 6,388   |  |                                         |   |      |                            |  |   | 6,388   | 
|FDIC indemnification asset                         |  |                                       | 26,637  |  |                                         |   | 358  |                            |  |   | 26,995  | 
|FHLB stock                                         |  |                                       | 305     |  |                                         |   |      |                            |  |   | 305     | 
|Core deposit intangible                            |  |                                       | 714     |  |                                         |   |      |                            |  |   | 714     | 
|Other assets                                       |  |                                       | 1,159   |  |                                         |   |      |                            |  |   | 1,159   | 
|                                                   |  |                                       |         |  |                                         |   |      |                            |  |   |         | 
|Total assets acquired                              |  | $                                     | 155,715 |  |                                         | $ | (633 | )                          |  | $ | 155,082 | 
|                                                   |  |                                       |         |  |                                         |   |      |                            |  |   |         | 
|                                                   |  |                                       |        
|Deposits                                           |  | $                                     | 152,264 |  |                                         |   |      |                            |  | $ | 152,264 | 
|Escrow accounts                                    |  |                                       | 1,308   |  |                                         |   |      |                            |  |   | 1,308   | 
|Interest payable on deposits                       |  |                                       | 132     |  |                                         |   |      |                            |  |   | 132     | 
|other liabilities                                  |  |                                       | 1       |  |                                         |   |      |                            |  |   | 1       | 
|                                                   |  |                                       |         |  |                                         |   |      |                            |  |   |         | 
|Total liabilities assumed                          |  | $                                     | 153,705 |  |                                         | $ |     |                            |  | $ | 153,705 | 
|                                                   |  |                                       |         |  |                                         |   |      |                            |  |   |         | 
|                                                   |  |                                       |        
|Net assets acquired                                |  | $                                     | 2,010   |  |                                         | $ | (633 | )                          |  | $ | 1,377   | 
|Deferred tax impact                                |  | $                                     | 775     |  |                                         | $ | (238 | )                          |  | $ | 537     | 
|Net assets acquired, including deferred tax impact |  | $                                     | 1,235   |  |                                         | $ | (395 | )                          |  | $ | 840     | 



|NOTE 10: | Effect of new pronouncements
|-------- | ----------------------------

In April 2011, the FASB amended existing guidance for assisting a creditor in determining whether a restructuring is a troubled debt restructuring. The amendments clarify the guidance for a
creditors evaluation of whether it has granted a concession and whether a debtor is experiencing financial difficulties. This guidance is effective for interim and annual reporting periods beginning after June 15, 2011, and should be
applied retrospectively to the beginning of the annual period of adoption. For purposes of measuring impairment on newly identified troubled debt restructurings, the amendments should be applied prospectively for the first interim or annual period
beginning on or after June 15, 2011. The Company has not determined the impact, if any, upon adoption of this standard.



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##### Table of Contents

|ITEM 2: | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

COMPARISON OF BALANCE SHEETS AT MARCH 31, 2011 AND DECEMBER 31, 2010

Overview

Our total assets increased approximately 7.9% during the three month period ending March 31, 2011 primarily due to the TD Bank
transaction discussed in Note 8, as well as organic growth in deposits and in federal funds purchased related to our correspondent banking customers. These changes are discussed and analyzed below and on the following pages.

Federal funds sold and Federal Reserve Bank deposits

Federal funds sold and Federal Reserve Bank deposits were $146,275 at March 31, 2011 (approximately 6.6% of total assets) as compared to $154,264 at December 31, 2010 (approximately 7.5% of
total assets). We use our available-for-sale securities portfolio, as well as federal funds sold and Federal Reserve Bank deposits for liquidity management and for investment yields. These accounts, as a group, will fluctuate as a function of loans
outstanding, and to some degree the amount of correspondent bank deposits (i.e. federal funds purchased) outstanding.

Investment securities
available for sale

Securities available-for-sale, consisting primarily of U.S. government agency securities and municipal tax
exempt securities, were $575,098 at March 31, 2011 (approximately 26% of total assets) compared to $500,927 at December 31, 2010 (approximately 24% of total assets), an increase of $74,171 or 15%. We use our available-for-sale securities
portfolio, as well as federal funds sold and Federal Reserve Bank deposits for liquidity management and for investment yields. These accounts, as a group, will fluctuate as a function of loans outstanding as discussed above, under the caption
Federal funds sold and Federal Reserve Bank deposits. Our securities are carried at fair value. We classify our securities as available-for-sale to provide for greater flexibility to respond to changes in interest rates as
well as future liquidity needs.

Trading securities

We also have a trading securities portfolio. Realized and unrealized gains and losses are included in trading securities revenue, a component of our non interest income, in our Condensed Consolidated
Statement of Earnings. Securities purchased for this portfolio have primarily been various municipal securities. At March 31, 2011 our trading securities had a fair market value of $2,192, which were two municipal securities. A list of the
activity in this portfolio is summarized below.



|                           |  |                                     |         |   |                                     |   |         |  
|-------------------------- |  | ----------------------------------- | ------- | - | ----------------------------------- | - | ------- | -
|                           |  | Three monthperiod endedMar 31, 2011 |         |   | Three monthperiod endedMar 31, 2010 |  
|Beginning balance          |  | $                                   | 2,225   |   |                                     | $ |        |  
|Purchases                  |  |                                     | 64,549  |   |                                     |   | 21,091  |  
|Proceeds from sales        |  |                                     | (64,743 | ) |                                     |   | (20,022 | )
|Net realized gain on sales |  |                                     | 159     |   |                                     |   | 91      |  
|Mark to market adjustment  |  |                                     | 2       |   |                                     |   | (7      | )
|                           |  |                                     |         |   |                                     |   |         |  
|Ending balance             |  | $                                   | 2,192   |   |                                     | $ | 1,153   |  
|                           |  |                                     |         |   |                                     |   |         |  



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##### Table of Contents

Loans held for sale

We also have a loans held for sale portfolio, whereby we originate single family home loans and sell those mortgages into the secondary market, servicing released. These loans are recorded at the lower of
cost or market. Gains and losses on the sale of loans held for sale are included as a component of non interest income in our Condensed Consolidated Statement of Earnings. A list of the activity in this portfolio is summarized below.



|                           |  |                                     |        |   |                                     |   |       |  
|-------------------------- |  | ----------------------------------- | ------ | - | ----------------------------------- | - | ----- | -
|                           |  | Three monthperiod endedMar 31, 2011 |        |   | Three monthperiod endedMar 31, 2010 |  
|Beginning balance          |  | $                                   | 673    |   |                                     | $ |      |  
|Loans originated           |  |                                     | 929    |   |                                     |   | 1,357 |  
|Proceeds from sales        |  |                                     | (1,459 | ) |                                     |   | (796  | )
|Net realized gain on sales |  |                                     | 25     |   |                                     |   | 12    |  
|                           |  |                                     |        |   |                                     |   |       |  
|Ending balance             |  | $                                   | 168    |   |                                     | $ | 573   |  
|                           |  |                                     |        |   |                                     |   |       |  

Loans

Lending-related income is the most important component of our net interest income and is a major contributor to profitability. The loan portfolio is the largest component of earning assets, and it
therefore generates the largest portion of revenues. The absolute volume of loans and the volume of loans as a percentage of earning assets is an important determinant of net interest margin as loans are expected to produce higher yields than
securities and other earning assets. Average loans during the quarter ended March 31, 2011, were $1,212,512, or 64% of average earning assets, as compared to $951,009, or 59% of average earning assets, for the quarter ending March 31,
2010. Total loans at March 31, 2011 and December 31, 2010 were $1,229,019 and $1,130,034, respectively, an increase of $98,985, or 8.8%. This represents a loan to total asset ratio of 55% and 55% and a loan to deposit ratio of 67% and 67%,
at March 31, 2011 and December 31, 2010, respectively.

The current weak economy in general and the struggling
Florida real estate market in particular, have made it difficult to grow our loan portfolio. Although our loans increased by $98,985, or 8.8% as indicated above, this was primarily due to the TD Bank transaction described in Note 8. Excluding these
purchased loans (outstanding balance of $114,737 at March 31, 2011), our loan portfolio decreased by $15,752, or 1.4% during the three month period ending March 31, 2011. Part of this decrease was due to charge-offs (approximately $9,298),
and transfers out of loans into OREO and repossessed assets other than real estate (approximately $4,826 and $286, respectively). Excluding these components, loans deceased $1,342 which is a net amount comprised of new loan originations less
maturities, pay-offs and normal amortization.

Approximately 15.4% of our loans, or $189,708, is covered by FDIC loss sharing
agreements. Pursuant to and subject to the terms of the loss sharing agreements, the FDIC is obligated to reimburse CenterState for 80% of losses with respect to the covered loans beginning with the first dollar of loss incurred. CenterState will
reimburse the FDIC for its share of recoveries with respect to the covered loans. The loss sharing agreements applicable to single family residential mortgage loans provide for FDIC loss sharing and CenterState reimbursement to the FDIC for
recoveries for ten years. The loss sharing agreements applicable to commercial loans provide for FDIC loss sharing for five years and CenterState reimbursement to the FDIC for a total of eight years for recoveries. All of the covered loans acquired
are accounted for pursuant to ASC Topic 310-30. Within the FDIC covered loan portfolio, ninety-seven percent (97%) is collateralized by real estate, of which single family loans represent the largest component at $106,655 or 56% of total
covered real estate loans.



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##### Table of Contents

In addition to the loans covered by FDIC loss share agreements discussed above,
approximately 9.3% of our total loans, or $114,737, are subject to a two year put back option with TD Bank, whereas if any of these loans become 30 days past due or are adversely classified pursuant to bank regulatory guidelines, we have the option
to put back these loans to TD Bank subject to the terms of our agreement with TD Bank. We have no allowance for loan losses set aside for either the FDIC covered loans or the loans subject to the put back options discussed above. There is a total of
approximately $924,574, or 75.3% of our total loans, that are not subject to either of these agreements of which we have set aside a total allowance for loan losses of $28,245 or 3.05%.

Loan concentrations are considered to exist where there are amounts loaned to multiple borrowers engaged in similar activities, which
collectively could be similarly impacted by economic or other conditions and when the total of such amounts would exceed 25% of total capital. Due to the lack of diversified industry and the relative proximity of markets served, the Company has
concentrations in geographic as well as in types of loans funded.

Our total loans, including those with and without loss
protection agreements, total $1,229,019 at March 31, 2011. Of this amount approximately 86% are collateralized by real estate, 10% are commercial non real estate loans and the remaining 4% are consumer and other non real estate loans. We have
approximately $365,982 of single family residential loans which represents about 30% of our total loan portfolio. As with all of our loans, these are originated in our geographical market area in central Florida. Our largest category of loans is
commercial real estate which represents approximately 46% of our total loan portfolio.

The following table sets forth
information concerning the loan portfolio by collateral types as of the dates indicated.



|                                                         |  |              |           |   |              |   |           |  
|-------------------------------------------------------- |  | ------------ | --------- | - | ------------ | - | --------- | -
|                                                         |  | Mar 31, 2011 |           |   | Dec 31, 2010 |  
|Loans not covered by FDIC loss share agreements (note 2) |  |              |           |   |              |   |           |  
|Real estate loans                                        |  |              |           |   |              |   |           |  
|Residential                                              |  | $            | 259,327   |   |              | $ | 255,571   |  
|Commercial                                               |  |              | 500,512   |   |              |   | 410,162   |  
|Construction, development, land                          |  |              | 107,179   |   |              |   | 109,380   |  
|                                                         |  |              |           |   |              |   |           |  
|Total real estate                                        |  |              | 867,018   |   |              |   | 775,113   |  
|Commercial                                               |  |              | 116,424   |   |              |   | 100,906   |  
|Consumer and other loans, at fair value (note 1)         |  |              | 2,599     |   |              |   | 3,264     |  
|Consumer and other                                       |  |              | 53,990    |   |              |   | 52,115    |  
|                                                         |  |              |           |   |              |   |           |  
|Loans before unearned fees and cost                      |  |              | 1,040,031 |   |              |   | 931,398   |  
|Unearned fees/costs                                      |  |              | (720      | ) |              |   | (728      | )
|                                                         |  |              |           |   |              |   |           |  
|Total loans not covered by FDIC loss share agreements    |  |              | 1,039,311 |   |              |   | 930,670   |  
|                                                         |  |              |           |   |              |   |           |  
|Loans covered by FDIC loss share agreements              |  |              |           |   |              |   |           |  
|Real estate loans                                        |  |              |           |   |              |   |           |  
|Residential                                              |  |              | 106,655   |   |              |   | 110,586   |  
|Commercial                                               |  |              | 65,975    |   |              |   | 68,286    |  
|Construction, development, land                          |  |              | 12,217    |   |              |   | 13,653    |  
|                                                         |  |              |           |   |              |   |           |  
|Total real estate                                        |  |              | 184,847   |   |              |   | 192,525   |  
|Commercial                                               |  |              | 4,861     |   |              |   | 5,760     |  
|                                                         |  |              |           |   |              |   |           |  
|Total loans covered by FDIC loss share agreements        |  |              | 189,708   |   |              |   | 198,285   |  
|                                                         |  |              |           |   |              |   |           |  
|                                                         |  |             
|Total loans                                              |  | $            | 1,229,019 |   |              | $ | 1,128,955 |  
|                                                         |  |              |           |   |              |   |           |  



|Note 1: | Consumer loans acquired pursuant to three FDIC assisted transactions of failed financial institutions during the third quarter of 2010. These loans are not covered by
an FDIC loss share agreement. The loans have been written down to estimated fair value and are being accounted for pursuant to ASC Topic 310-30.
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|Note 2: | Includes $114,737 of loans that are subject to a two year put back option with TD Bank, N.A., so that if any of these loans become 30 days past due or are adversely
classified pursuant to bank regulatory guidelines, the Company has the option to put back the loan to TD Bank.
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Credit quality
and allowance for loan losses

Commercial, commercial real estate, construction, land, and land development loans in excess of
$500 are monitored and evaluated for impairment on an individual loan basis. Commercial, commercial real estate, construction, land, and land development loans less than $500 are evaluated for impairment on a pool basis. All consumer and single
family residential loans are evaluated for impairment on a pool basis.

On at least a quarterly basis, management reviews each
impaired loan to determine whether it should have a specific reserve or partial charge-off. Management relies on appraisals to help make this determination. Updated appraisals are obtained for collateral dependent loans when a loan is scheduled for
renewal or refinance. In addition, if the classification of the loan is downgraded to substandard, identified as impaired, or placed on non accrual status (collectively Problem Loans), an updated appraisal is obtained if the loan amount
is greater than $500 and individually evaluated for impairment.

After an updated appraisal is obtained for a Problem Loan, as
described above, an additional updated appraisal will be obtained on at least an annual basis. Thus, current appraisals for Problem Loans in excess of $500 will not be older than one year.

After the initial updated appraisal is obtained for a Problem Loan and before its next annual appraisal update is due, management
considers the need for a downward adjustment to the current appraisal amount to reflect current market conditions, based on managements analysis, judgment and experience. In an extremely volatile market, management may update the appraisal
prior to the one year anniversary date.

We maintain an allowance for loan losses that we believe is adequate to absorb
probable losses incurred in our non covered loan portfolio. The FDIC is obligated to reimburse us for 80% of losses incurred in our covered loan portfolio subject to the terms of our loss share agreements with the FDIC. Our covered loan portfolio,
loans purchased from the FDIC with specific identified credit deficiencies and those with implied credit deficiencies, has been marked to fair value at the acquisition date, which considers an estimate of probable losses, and is evaluated for
impairment on a pool basis on a quarterly basis, pursuant to ASC Topic 310-30. Performing loans purchased pursuant to the TD Bank transaction described in Note 8, are performing loans without any specific or implied credit deficiencies. These loans
are included in our allowance for loan loss analysis, but do not have any loss factor assigned to them since they are at fair value and due to the two year put back option in place with TD Bank as described in Note 8. We believe that our total loans
are adequately recorded to absorb probable losses.

The allowance is increased by the provision for loan losses, which is a
charge to current period earnings and decreased by loan charge-offs net of recoveries of prior period loan charge-offs. Loans are charged against the allowance when management believes collection of the principal is unlikely.

The allowance consists of two components. The first component is an allocation for impaired loans, as defined by generally accepted
accounting principles. Impaired loans are those loans whereby management has arrived at a determination that the Company will not be repaid according to the original terms of the loan agreement. Each of these loans is required to have a written
analysis supporting the amount of specific allowance allocated to the particular loan, if any. That is to say, a loan may be impaired (i.e., not expected to be repaid as agreed), but may be sufficiently collateralized such that we expect to recover
all principal and interest eventually, and therefore no specific allowance is warranted.



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The second component is a general allowance on all of the Companys loans other than
those identified as impaired. We group these loans into five general categories with similar characteristics, and then apply an adjusted loss factor to each group of loans to determine the total amount of this second component of our allowance for
loan losses. The adjusted loss factor for each category of loans is a derivative of our historical loss factor for that category, adjusted for current internal and external environmental factors, as well as for certain loan grading factors.

In the table below we have shown the two components, as discussed above, of our allowance for loan losses at March 31,
2011 and December 31, 2010. The data in the table below excludes loans covered by FDIC loss share agreement.



|                                                                                                                                   |  |              |           |   |              |   |         |                    |  |    |         |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | - | ------------ | - | ------- | ------------------ |  | -- | ------- | -
|                                                                                                                                   |  | Mar 31, 2011 |           |   | Dec 31, 2010 |   |         | Increase(decrease) | 
|Impaired loans                                                                                                                     |  | $            | 83,802    |   |              | $ | 86,977  |                    |  | ($ | 3,175   | )
|Component 1 (specific allowance)                                                                                                   |  |              | 4,492     |   |              |   | 3,194   |                    |  |    | 1,298   |  
|Specific allowance as percentage of impaired loans                                                                                 |  |              | 5.36      | % |              |   | 3.67    | %                  |  |    | 169 bps |  
|                                                                                                                                   |  |              |          
|Performing loans purchased from TD Bank and subject to put back option                                                             |  |              | 114,737   |   |              |   |        |                    |  |    | 114,737 |  
|Component 2 (general allowance)                                                                                                    |  |              |          |   |              |   |        |                    |  |    |        |  
|General allowance as percentage of purchased loans                                                                                 |  |              |          |   |              |   |        |                    |  |    |        |  
|                                                                                                                                   |  |              |          
|Total loans other than impaired loans                                                                                              |  |              | 840,772   |   |              |   | 843,693 |                    |  |    | (2,921  | )
|Component 2 (general allowance)                                                                                                    |  |              | 23,753    |   |              |   | 23,073  |                    |  |    | 680     |  
|General allowance as percentage of non impaired loans                                                                              |  |              | 2.83      | % |              |   | 2.73    | %                  |  |    | 10 bps  |  
|                                                                                                                                   |  |              |          
|Total loans, excluding loans covered by FDIC loss share agreements                                                                 |  |              | 1,039,311 |   |              |   | 930,670 |                    |  |    | 108,641 |  
|Total allowance for loan losses                                                                                                    |  |              | 28,245    |   |              |   | 26,267  |                    |  |    | 1,978   |  
|Allowance for loan losses as percentage of non covered loans                                                                       |  |              | 2.72      | % |              |   | 2.82    | %                  |  |    | (10 bps | )
|Allowance for loan losses as percentage of non covered loans excluding loans purchased from TD Bank and subject to put back
option |  |              | 3.05      | % |              |   | 2.82    | %                  |  |    | 23 bps  |  

As shown in the table
above, our allowance for loan losses (ALLL) as a percentage of total loans not covered by FDIC loss share agreements outstanding was 2.72% (3.05% excluding loans purchased from TD Bank and subject to put back option) at March 31,
2011 compared to 2.82% at December 31, 2010. Our ALLL increased by a net amount of $1,978 during this three month period. Component 2 (general allowance) increased by $680 during the period. This increase is primarily due to changes in our
historical charge-off rates and changes in our current environmental factors.

Component 1 (specific allowance) increased by
$1,298. This Component is the result of a specific allowance analysis prepared for each of our impaired loans excluding loans covered by FDIC loss share agreements. Our specific allowance is the aggregate of the results of individual analysis
prepared for each one of these impaired loans on a loan by loan basis. The increase in our specific allowance is the result of charge-offs taken during the period, as well as the change in mix and evaluation of impaired loans.



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The table below sets forth the activity in the allowance for loan losses for the periods
presented, in thousands of dollars.



|                                         |  |                                 |        |   |      |   |        |  
|---------------------------------------- |  | ------------------------------- | ------ | - | ---- | - | ------ | -
|                                         |  | Three month periodended Mar 31, |       
|                                         |  | 2011                            |        |   | 2010 |  
|Allowance at beginning of period         |  | $                               | 26,267 |   |      | $ | 23,289 |  
|Charge-offs                              |  |                                 |        |   |      |   |        |  
|Residential real estate loans            |  |                                 | (2,772 | ) |      |   | (767   | )
|Commercial real estate loans             |  |                                 | (3,977 | ) |      |   | (1,195 | )
|Construction, development and land loans |  |                                 | (2,101 | ) |      |   | (832   | )
|Non real estate commercial loans         |  |                                 | (257   | ) |      |   | (361   | )
|Non real estate consumer and other loans |  |                                 | (351   | ) |      |   | (155   | )
|                                         |  |                                 |        |   |      |   |        |  
|Total charge-offs                        |  |                                 | (9,458 | ) |      |   | (3,310 | )
|                                         |  |                                
|Recoveries                               |  |                                 |        |   |      |   |        |  
|Residential real estate loans            |  |                                 | 108    |   |      |   | 3      |  
|Commercial real estate loans             |  |                                 | 12     |   |      |   | 13     |  
|Construction, development and land loans |  |                                 | 2      |   |      |   | 5      |  
|Non real estate commercial loans         |  |                                 | 11     |   |      |   |       |  
|Non real estate consumer and other loans |  |                                 | 27     |   |      |   | 13     |  
|                                         |  |                                 |        |   |      |   |        |  
|Total recoveries                         |  |                                 | 160    |   |      |   | 34     |  
|                                         |  |                                
|Net charge-offs                          |  |                                 | (9,298 | ) |      |   | (3,276 | )
|Provision for loan losses                |  |                                 | 11,276 |   |      |   | 4,075  |  
|                                         |  |                                 |        |   |      |   |        |  
|Allowance at end of period               |  | $                               | 28,245 |   |      | $ | 24,088 |  
|                                         |  |                                 |        |   |      |   |        |  

Our charge-offs increased during the current quarter compared to the same quarter from the previous year as
indicated in the table above. This is consistent with the continued degradation of real estate values in Florida and the poor economic environment in general.

We acquired three FDIC failed financial institutions during the third quarter of 2010, including loans covered by FDIC loss share agreements. All of the loans acquired are being accounted for pursuant to
ASC Topic 310-30. We arrived at this conclusion as follows.

First, we segregated all acquired loans with specifically
identified credit deficiency factor(s). The factors we used were all acquired loans that were non-accrual, 60 days or more past due, designated as Trouble Debt Restructured (TDR), graded special mention or
substandard, had more than five 30 day past due notices or had any 60 day or 90 day past due notices during the loan term. For this disclosure purpose, we refer to these loans as Type A loans. As required by generally accepted accounting
principles, we are accounting for these loans pursuant to ASC Topic 310-30.

Second, all remaining acquired loans, those
without specifically identified credit deficiency factors, we refer to as Type B loans for disclosure purposes, were then grouped into pools with common risk characteristics. These loans were then evaluated to determine estimated fair values as of
the acquisition date. Although no specific credit deficiencies were identifiable, we believe there is an element of risk as to whether all contractual cash flows will be eventually received. Factors that were considered included the poor economic
environment both nationally and locally as well as the unfavorable real estate market particularly in Florida. In addition, these loans were acquired from three failed financial institutions, which implies potentially deficient, or at least
questionable, credit underwriting. Based on managements estimate of fair value, each of these pools was assigned a discount credit mark. We have applied ASC Topic 310-30 accounting treatment by analogy to Type B loans. The result is that all
loans acquired from these three failed financial institutions will be accounted for under ASC Topic 310-30.



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The carrying amount of the loans we acquired from the FDIC, both Type A and Type B, as we
defined in the two preceding paragraphs, are summarized as follows:



|                                                  |  |              |         |  |              |   |         | 
|------------------------------------------------- |  | ------------ | ------- |  | ------------ | - | ------- | 
|                                                  |  | Mar 31, 2011 |         |  | Dec 31, 2010 |  
|Real estate loans                                 |  |              |         |  |              |   |         | 
|Residential                                       |  | $            | 106,655 |  |              | $ | 110,586 | 
|Commercial                                        |  |              | 65,975  |  |              |   | 68,286  | 
|Construction, development, land                   |  |              | 12,217  |  |              |   | 13,653  | 
|                                                  |  |              |         |  |              |   |         | 
|Total real estate loans                           |  |              | 184,847 |  |              |   | 192,525 | 
|Commercial                                        |  |              | 4,861   |  |              |   | 5,760   | 
|                                                  |  |              |         |  |              |   |         | 
|Total loans covered by FDIC loss share agreements |  |              | 189,708 |  |              |   | 198,285 | 
|Consumer                                          |  |              | 2,599   |  |              |   | 3,264   | 
|                                                  |  |              |         |  |              |   |         | 
|Total loans purchased from the FDIC               |  | $            | 192,307 |  |              | $ | 201,549 | 
|                                                  |  |              |         |  |              |   |         | 

Income recognized on loans we purchased from the FDIC is recognized pursuant to ASC Topic 310-30. A portion
of the fair value discount has been ascribed as an accretable yield that is accreted into interest income over the estimated remaining life of the loans. The remaining non-accretable difference represents cash flows not expected to be collected.
Accretable yield, or interest income expected to be collected is as follows:



|                                                |  |   |        |  
|----------------------------------------------- |  | - | ------ | -
|Balance at December 31, 2010                    |  | $ | 39,051 |  
|Accretion of interest income                    |  |   | (3,248 | )
|Reclassification from non-accretable difference |  |   |       |  
|                                                |  |   |        |  
|Balance at March 31, 2011                       |  | $ | 35,803 |  
|                                                |  |   |        |  

The table below summarizes the total contractually required principal and interest cash payments,
managements estimate of expected total cash payments and carrying value of the loans as of the respective acquisition dates during the third quarter of 2010 and as of March 31, 2011.



|                                              |  |               |         |   |                                               |   |        |              |  |   |              |   |  |              |         |   |  |   |         |  
|--------------------------------------------- |  | ------------- | ------- | - | --------------------------------------------- | - | ------ | ------------ |  | - | ------------ | - |  | ------------ | ------- | - |  | - | ------- | -
|                                              |  | atacquisition |         |   | activity during thethree month periods
ending |   |        | Balance at   | 
|                                              |  | dates         |         |   | Sep 30, 2010                                  |   |        | Dec 31, 2010 |  |   | Mar 31, 2011 |   |  | Mar 31, 2011 |        
|Contractually required principal and interest |  | $             | 357,946 |   |                                               | $ | (6,477 | )            |  | $ | (16,830      | ) |  | $            | (12,490 | ) |  | $ | 322,149 |  
|Non-accretable difference                     |  |               | (94,039 | ) |                                               |   |        |              |  |   |              |   |  |              |         |   |  |   | (94,039 | )
|                                              |  |               |         |   |                                               |   |        |              |  |   |              |   |  |              |         |   |  |   |         |  
|Cash flows expected to be collected           |  |               | 263,907 |   |                                               |   | (6,477 | )            |  |   | (16,830      | ) |  |              | (12,490 | ) |  |   | 228,110 |  
|Accretable yield                              |  |               | (43,334 | ) |                                               |   | 1,696  |              |  |   | 2,587        |   |  |              | 3,248   |   |  |   | (35,803 | )
|                                              |  |               |         |   |                                               |   |        |              |  |   |              |   |  |              |         |   |  |   |         |  
|Carry value of acquired loans                 |  | $             | 220,573 |   |                                               | $ | (4,781 | )            |  | $ | (14,243      | ) |  | $            | (9,242  | ) |  | $ | 192,307 |  
|                                              |  |               |         |   |                                               |   |        |              |  |   |              |   |  |              |         |   |  |   |         |  





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Nonperforming loans and nonperforming assets

Non performing loans, excluding loans covered by FDIC loss share agreements, are defined as non accrual loans plus loans past due 90 days
or more and still accruing interest. Generally we place loans on non accrual status when they are past due 90 days and management believes the borrowers financial condition, after giving consideration to economic conditions and collection
efforts, is such that collection of interest is doubtful. When we place a loan on non accrual status, interest accruals cease and uncollected interest is reversed and charged against current income. Interest received on such loans is accounted for
on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Non
performing loans, excluding loans covered by FDIC loss share agreements, as a percentage of total loans, excluding loans covered by FDIC loss share agreements, were 6.89% at March 31, 2011, compared to 7.07% at December 31, 2010.

Non performing assets, excluding assets covered by FDIC loss share agreements, (which we define as non performing loans, as
defined above, plus (a) OREO (i.e., real estate acquired through foreclosure, in substance foreclosure, or deed in lieu of foreclosure); and (b) other repossessed assets that are not real estate), were $82,334 at March 31, 2011,
compared to $78,524 at December 31, 2010. Non performing assets as a percentage of total assets were 3.70% at March 31, 2011, compared to 3.81% at December 31, 2010.

The following table sets forth information regarding the components of nonperforming assets at the dates indicated.



|                                                                                                    |  |             |        |   |             |   |        |  
|--------------------------------------------------------------------------------------------------- |  | ----------- | ------ | - | ----------- | - | ------ | -
|                                                                                                    |  | Mar 31,2011 |        |   | Dec 31,2010 |  
|Non-accrual loans (note 1)                                                                          |  | $           | 71,631 |   |             | $ | 62,553 |  
|Past due loans 90 days or more and still accruing interest (note 1)                                 |  |             |       |   |             |   | 3,200  |  
|                                                                                                    |  |             |        |   |             |   |        |  
|Total non-performing loans (NPLs)(note 1)                                                           |  |             | 71,631 |   |             |   | 65,753 |  
|                                                                                                    |  |            
|Other real estate owned (OREO) (note 1)                                                             |  |             | 10,222 |   |             |   | 12,239 |  
|Repossessed assets other than real estate (note 1)                                                  |  |             | 481    |   |             |   | 532    |  
|                                                                                                    |  |             |        |   |             |   |        |  
|Total non-performing assets (NPAs)(note 1)                                                          |  | $           | 82,334 |   |             | $ | 78,524 |  
|                                                                                                    |  |             |        |   |             |   |        |  
|                                                                                                    |  |            
|Total NPLs as a percentage of total loans (note 1)                                                  |  |             | 6.89   | % |             |   | 7.07   | %
|Total NPAs as a percentage of total assets (note 1)                                                 |  |             | 3.70   | % |             |   | 3.81   | %
|Loans past due between 30 and 89 days and accruing interest as a percentage of total loans (note 1) |  |             | 1.66   | % |             |   | 1.96   | %
|Allowance for loan losses                                                                           |  | $           | 28,245 |   |             | $ | 26,267 |  
|Allowance for loan losses as a percentage of NPLs (note 1)                                          |  |             | 39     | % |             |   | 40     | %



|Note 1: | Excludes loans, OREO and other repossessed assets covered by FDIC loss share agreements.
|------- | ----------------------------------------------------------------------------------------

As shown in the table above, the largest component of non performing loans excluding loans covered by FDIC loss share agreements is non
accrual loans. As of March 31, 2011 the Company had reported a total of 319 non accrual loans with an aggregate book value of $71,631, compared to December 31, 2010 when 268 non accrual loans with an aggregate book value of $62,553 were
reported. All but one of the five categories increased over the three month period, with the largest increases occurring in commercial real estate (approximately $5,165 net increase) followed by land related loans (approximately $3,184).



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This amount is further delineated by collateral category and number of loans in the table
below.



|                                          |  |                                    |        |  |                                    |  |     |                                      |  |  |     | 
|----------------------------------------- |  | ---------------------------------- | ------ |  | ---------------------------------- |  | --- | ------------------------------------ |  |  | --- | 
|Collateral category                       |  | Total amountin thousandsof dollars |        |  | Percentageof totalnon accrualloans |  |     | Number ofnon accrualloans incategory | 
|Residential real estate loans             |  | $                                  | 17,940 |  |                                    |  | 25  | %                                    |  |  | 128 | 
|Commercial real estate loans              |  |                                    | 33,529 |  |                                    |  | 47  | %                                    |  |  | 76  | 
|Construction, development and land loans  |  |                                    | 18,730 |  |                                    |  | 26  | %                                    |  |  | 67  | 
|Non real estate commercial loans          |  |                                    | 808    |  |                                    |  | 1   | %                                    |  |  | 21  | 
|Non real estate consumer and other loans  |  |                                    | 624    |  |                                    |  | 1   | %                                    |  |  | 27  | 
|                                          |  |                                    |        |  |                                    |  |     |                                      |  |  |     | 
|Total non accrual loans at March 31, 2010 |  | $                                  | 71,631 |  |                                    |  | 100 | %                                    |  |  | 319 | 
|                                          |  |                                    |        |  |                                    |  |     |                                      |  |  |     | 

There are no construction or development loans with national builders. The Company has historically done
business with local builders and developers that have typically been long time customers. However, the Company believes that this category (i.e. construction, development and land) is the loan category where the most risk is present. On the positive
side, the category only represents about 10% of the total loan portfolio excluding loans covered by FDIC loss share agreements. Evidencing the riskier nature of the category, it represents a disproportionate 26% of the Companys total non
accrual loans and approximately 22% of the Companys total OREO, excluding OREO covered by FDIC loss share agreements.

As indicated above, non accrual construction, development, and land loans totaled $18,730 at March 31, 2011. Most of this relates to
land, either developed or not developed, commercial and residential. About $710 is single family residential construction and $466 is commercial construction.

During the first three months of the current year, the Company charged off, net of recoveries, approximately $2,099 of its construction, development and land loans, about 23% of the total net charge offs.
During the year ending December 31, 2010, the Company had total charge offs, net of recoveries, of $26,646. About 18% ($4,827) came from this same category.

The second largest component of non performing assets after non accrual loans is OREO, excluding OREO covered by FDIC loss share agreements. At March 31, 2011, total OREO was $21,554. Of this amount,
$11,332 is covered by FDIC loss sharing agreements. Pursuant and subject to the terms of the loss sharing agreements, the FDIC is obligated to reimburse the Company for 80% of losses with respect to the covered OREO beginning with the first dollar
of loss incurred. The Company will reimburse the FDIC for its share of recoveries with respect to the covered OREO. The loss sharing agreements applicable to single family residential mortgage loans provide for FDIC loss sharing and the Company
reimbursement to the FDIC for recoveries for ten years. The loss sharing agreements applicable to commercial loans provides for FDIC loss sharing for five years and Company reimbursement to the FDIC for a total of eight years for recoveries.



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##### Table of Contents

OREO not covered by FDIC loss share agreements is $10,222 at March 31, 2011. OREO is
carried at the lower of cost or market less the estimated cost to sell. Further declines in real estate values can affect the market value of these assets. Any further decline in market value beyond its cost basis is recorded as a current expense in
the Companys Statement of Operations. OREO is further delineated in the table below.



|                                                            |  |                                |        | 
|----------------------------------------------------------- |  | ------------------------------ | ------ | 
|(unaudited) Description of repossessed real estate          |  | carrying amountat Mar 31, 2011 |       
|29 single family homes                                      |  | $                              | 2,482  | 
|6 mobile homes with land                                    |  |                                | 74     | 
|48 residential building lots                                |  |                                | 848    | 
|18 commercial buildings                                     |  |                                | 5,431  | 
|Land / various acreages                                     |  |                                | 1,387  | 
|                                                            |  |                                |        | 
|Total, excluding OREO covered by FDIC loss share agreements |  | $                              | 10,222 | 

In this current
depressed real estate environment that the Nation in general and Florida in particular has been experiencing, it has become more common to restructure or modify the terms of certain loans under certain conditions (i.e. troubled debt restructure or
TDRs). In those circumstances it may be beneficial to restructure the terms of a loan and work with the borrower for the benefit of both parties, versus forcing the property into foreclosure and having to dispose of it in an unfavorable
and depressed real estate market. When we have modified the terms of a loan, we usually either reduce the monthly payment and/or interest rate for generally about twelve months. We have not forgiven any material principal amounts on any loan
modifications to date. We have approximately $21,176 of TDRs. Of this amount $8,659 are performing pursuant to their modified terms, and $12,517 are not performing and have been placed on non accrual status and included in our non performing loans
(NPLs). Current accounting standards generally require TDRs to be included in our impaired loans, whether they are performing or not performing. Only non performing TDRs are included in our NPLs.



|                                            |  |         |        |  |         |   |        | 
|------------------------------------------- |  | ------- | ------ |  | ------- | - | ------ | 
|Troubled debt restructured loans (TDRs):  |  | Mar 31, |        |  | Dec 31, |  
|(in thousands of dollars)                   |  | 2011    |        |  | 2010    |  
|Performing TDRs                             |  | $       | 8,659  |  |         | $ | 10,591 | 
|Non performing TDRs, included in NPLs above |  |         | 12,517 |  |         |   | 11,731 | 
|                                            |  |         |        |  |         |   |        | 
|Total TDRs                                  |  | $       | 21,176 |  |         | $ | 22,322 | 
|                                            |  |         |        |  |         |   |        | 

TDRs as of March 31, 2011 quantified by loan type classified separately as accrual (performing loans)
and non-accrual (non performing loans) are presented in the table below.



|                                |  |          |       |  |             |   |        |       |  |   |        | 
|------------------------------- |  | -------- | ----- |  | ----------- | - | ------ | ----- |  | - | ------ | 
|TDRs                            |  | Accruing |       |  | Non Accrual |   |        | Total | 
|Real estate loans:              |  |          |       |  |             |   |        |       |  |   |        | 
|Residential                     |  | $        | 5,521 |  |             | $ | 5,725  |       |  | $ | 11,246 | 
|Commercial                      |  |          | 1,862 |  |             |   | 6,065  |       |  |   | 7,927  | 
|Construction, development, land |  |          | 459   |  |             |   | 466    |       |  |   | 925    | 
|                                |  |          |       |  |             |   |        |       |  |   |        | 
|Total real estate loans         |  |          | 7,842 |  |             |   | 12,256 |       |  |   | 20,098 | 
|Commercial                      |  |          | 349   |  |             |   | 50     |       |  |   | 399    | 
|Consumer and other              |  |          | 468   |  |             |   | 211    |       |  |   | 679    | 
|                                |  |          |       |  |             |   |        |       |  |   |        | 
|Total TDRs                      |  | $        | 8,659 |  |             | $ | 12,517 |       |  | $ | 21,176 | 
|                                |  |          |       |  |             |   |        |       |  |   |        | 

Our policy is to return non accrual TDR loans to accrual status when all the principal and interest amounts
contractually due, pursuant to its modified terms, are brought current and future payments are reasonably assured. Our policy also considers the payment history of the borrower, but is not dependent upon a specific number of payments.



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Loans are modified to minimize loan losses when we believe the modification will improve the
borrowers financial condition and ability to repay the loan. We typically do not forgive principal. We generally either reduce interest rates or decrease monthly payments for a temporary period of time and those reductions of cash flows are
capitalized into the loan balance. A summary of the types of concessions made are presented in the table below.



|                                |  |              |        | 
|------------------------------- |  | ------------ | ------ | 
|                                |  | Mar 31, 2011 |       
|3 months interest only          |  | $            | 270    | 
|6 months interest only          |  |              | 2,538  | 
|7 months interest only          |  |              | 50     | 
|9 months interest only          |  |              | 307    | 
|12 months interest only         |  |              | 10,256 | 
|18 months interest only         |  |              | 191    | 
|payment reduction for 12 months |  |              | 4,425  | 
|all other                       |  |              | 3,139  | 
|                                |  |              |        | 
|Total TDRs                      |  | $            | 21,176 | 
|                                |  |              |        | 

It is still early in our experience with these types of activities, but approximately 41% of our TDRs are
current pursuant to their modified terms, and about $12,517, or approximately 59% of our total TDRs are not performing pursuant to their modified terms. Long-term success with our performing TDRs is an unknown, and will depend to a great extent on
the future of our economy and our local real estate markets. Thus far, there does not appear to be any significant difference in success rates with one type of concession versus another. Non performing TDRs average approximately nineteen months in
age from their modification date through March 31, 2011. Performing TDRs average approximately fourteen months in age from their modification date through March 31, 2011.

Impaired loans are defined as loans that management has concluded will not repay as agreed. (Small balance homogeneous loans are not
considered for impairment purposes.) Once management has determined a loan is impaired, we perform a specific reserve analysis to determine if it is probable that we will eventually collect all contractual cash flows. If management determines that a
shortfall is probable, then a specific valuation allowance is placed against the loan. This loan is then placed on non accrual basis, even if the borrower is current with his/her contractual payments, and will remain on non accrual until payments
collected reduce the loan balance such that it eliminates the specific valuation allowance or other economic conditions change. At March 31, 2011 we have identified a total of $83,802 impaired loans, excluding loans covered by FDIC loss share
agreements. A specific valuation allowance of $4,492 has been attached to $15,085 of the total identified impaired loans.

The
table below summarizes impaired loan data for the periods presented.



|                                                                |  |             |        |  |             |   |        | 
|--------------------------------------------------------------- |  | ----------- | ------ |  | ----------- | - | ------ | 
|                                                                |  | Mar 31,2011 |        |  | Dec 31,2010 |  
|Impaired loans with a specific valuation allowance              |  | $           | 15,085 |  |             | $ | 72,903 | 
|Impaired loans without a specific valuation allowance           |  |             | 68,717 |  |             |   | 14,074 | 
|                                                                |  |             |        |  |             |   |        | 
|Total impaired loans                                            |  | $           | 83,802 |  |             | $ | 86,977 | 
|Amount of allowance for loan losses allocated to impaired loans |  |             | 4,492  |  |             | $ | 3,194  | 
|                                                                |  |            
|Performing TDRs                                                 |  | $           | 8,659  |  |             | $ | 10,591 | 
|Non performing TDRs, included in NPLs                           |  |             | 12,517 |  |             |   | 11,731 | 
|                                                                |  |             |        |  |             |   |        | 
|Total TDRs (TDRs are required to be included in impaired loans) |  | $           | 21,176 |  |             | $ | 22,322 | 
|Impaired loans that are not TDRs                                |  |             | 62,626 |  |             |   | 64,655 | 
|                                                                |  |             |        |  |             |   |        | 
|Total impaired loans                                            |  | $           | 83,802 |  |             | $ | 86,977 | 

We continually
analyze our loan portfolio in an effort to recognize and resolve problem assets as quickly and efficiently as possible. As of March 31, 2011, we believe the allowance for loan losses was adequate. However, we recognize that many factors can
adversely impact various segments of the market. Accordingly, there is no assurance that losses in excess of such allowance will not be incurred.



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Bank premises and equipment

Bank premises and equipment was $86,652 at March 31, 2011 compared to $84,982 at December 31, 2010, an increase of $1,670 or 2%. This amount is the result of purchases and construction in
process of $2,669 less $999 of depreciation expense. The $2,669 of purchases and construction cost can be further delineated as follows: approximately $887 for purchases of buildings, land and construction costs; approximately $378 in capitalization
of certain software development costs related to our correspondent banking division; and, the remaining $1,404 is a combination of purchases of equipment, furniture and software, net of disposals.

Deposits

During the three
month period ending March 31, 2011, time deposits decreased by $4,385 and non time deposits increased by $146,693. In these two sequential quarters, cost of deposits decreased in each deposit category, but the category affecting the overall
decrease the most was time deposits. In addition to repricing maturing time deposits to current market rates, time deposits as a percentage of total deposits decreased from 39% to 36%. During the same time, core deposits (non time deposits) as a
percentage of total deposits increased, both in terms of actual dollars and as a percentage of total deposits. A summary of our deposit mix over the previous five quarters is presented in the table below.



|                              |  |              |           |  |           |  |     |              |  |   |           |  |  |  |     |  
|----------------------------- |  | ------------ | --------- |  | --------- |  | --- | ------------ |  | - | --------- |  |  |  | --- | -
|                              |  | Mar 31, 2011 |           |  | % oftotal |  |     | Dec 31, 2010 |  |   | % oftotal | 
|Demand - non-interest bearing |  | $            | 378,395   |  |           |  | 21  | %            |  | $ | 323,224   |  |  |  | 19  | %
|Demand - interest bearing     |  |              | 310,660   |  |           |  | 17  | %            |  |   | 282,405   |  |  |  | 17  | %
|Savings deposits              |  |              | 209,690   |  |           |  | 11  | %            |  |   | 198,428   |  |  |  | 12  | %
|Money market accounts         |  |              | 275,729   |  |           |  | 15  | %            |  |   | 223,724   |  |  |  | 13  | %
|Time deposits                 |  |              | 653,428   |  |           |  | 36  | %            |  |   | 657,813   |  |  |  | 39  | %
|                              |  |              |           |  |           |  |     |              |  |   |           |  |  |  |     |  
|Total deposits                |  | $            | 1,827,902 |  |           |  | 100 | %            |  | $ | 1,685,594 |  |  |  | 100 | %

Securities sold under agreement to
repurchase

Our subsidiary banks enter into borrowing arrangements with our retail business customers by agreements to
repurchase (securities sold under agreements to repurchase) under which the banks pledge investment securities owned and under their control as collateral against the one-day borrowing arrangement. These short-term borrowings totaled
$15,522 at March 31, 2011 compared to $13,789 at December 31, 2010.

Federal funds purchased

Federal funds purchased are overnight deposits from correspondent banks. Federal funds purchased acquired from other than our
correspondent bank deposits are included with Federal Home Loan Bank advances and other borrowed funds as described below, if any. At March 31, 2011 we had $92,111 of correspondent bank deposits or federal funds purchased, compared to $68,495
at December 31, 2010.



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##### Table of Contents

Federal Home Loan Bank advances and other borrowed funds

From time to time, we borrow either through Federal Home Loan Bank advances or Federal Funds Purchased, other than correspondent bank
deposits (i.e. federal funds purchased) listed above. At March 31, 2011 and December 31, 2010, advances from the Federal Home Loan Bank were as follows.



|                                                           |  |              |       |  |              |   |        | 
|---------------------------------------------------------- |  | ------------ | ----- |  | ------------ | - | ------ | 
|                                                           |  | Mar 31, 2011 |       |  | Dec 31, 2010 |  
|Matures January 7, 2011, interest rate is fixed at 3.63%   |  | $            |      |  |              | $ | 3,000  | 
|Matures January 10, 2011, interest rate is fixed at 1.84%  |  |              |      |  |              |   | 3,000  | 
|Matures January 11, 2011, interest rate is fixed at 0.61%  |  |              |      |  |              |   | 3,000  | 
|Matures June 27, 2011, interest rate is fixed at 3.93%     |  |              | 3,000 |  |              |   | 3,000  | 
|Matures December 30, 2011, interest rate is fixed at 2.30% |  |              | 3,000 |  |              |   | 3,000  | 
|                                                           |  |              |       |  |              |   |        | 
|Total                                                      |  | $            | 6,000 |  |              | $ | 15,000 | 
|                                                           |  |              |       |  |              |   |        | 

Corporate debentures

We formed CenterState Banks of Florida Statutory Trust I (the Trust) for the purpose of issuing trust preferred securities. On September 22, 2003, we issued a floating rate corporate
debenture in the amount of $10,000. The Trust used the proceeds from the issuance of a trust preferred security to acquire the corporate debenture of the Company. The trust preferred security essentially mirrors the corporate debenture, carrying a
cumulative preferred dividend at a variable rate equal to the interest rate on the corporate debenture (three month LIBOR plus 305 basis points). The corporate debenture and the trust preferred security each have 30-year lives. The trust preferred
security and the corporate debenture are callable by the Company or the Trust, at their respective option, subject to prior approval by the Federal Reserve Board, if then required. The Company has treated the trust preferred security as Tier 1
capital up to the maximum amount allowed under the Federal Reserve guidelines for federal regulatory purposes.

In September
2004, Valrico Bancorp Inc. (VBI) formed Valrico Capital Statutory Trust (Valrico Trust) for the purpose of issuing trust preferred securities. On September 9, 2004, VBI issued a floating rate corporate debenture in the
amount of $2,500. The Trust used the proceeds from the issuance of a trust preferred security to acquire the corporate debenture. On April 2, 2007, the Company acquired all the assets and assumed all the liabilities of VBI pursuant to the
merger agreement, including VBIs corporate debenture and related trust preferred security discussed above. The trust preferred security essentially mirrors the corporate debenture, carrying a cumulative preferred dividend at a variable rate
equal to the interest rate on the corporate debenture (three month LIBOR plus 270 basis points). The corporate debenture and the trust preferred security each have 30-year lives. The trust preferred security and the corporate debenture are callable
by the Company or the Valrico Trust, at their respective option, subject to prior approval by the Federal Reserve, if then required. The Company has treated the trust preferred security as Tier 1 capital up to the maximum amount allowed under the
Federal Reserve guidelines for federal regulatory purposes.



37



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##### Table of Contents

Stockholders equity

Stockholders equity at March 31, 2011, was $252,987, or 11.4% of total assets, compared to $252,249, or 12.2% of total assets at December 31, 2010. The increase in stockholders
equity was due to the following items:



|         |  |                                                                                     
|-------- |  | ------------------------------------------------------------------------------------
|$252,249 |  | Total stockholders equity at December 31, 2010                                     
|165      |  | Net income during the period                                                        
|(300)    |  | Dividends paid on common shares, $0.01 per common share                             
|492      |  | Net increase in market value of securities available for sale, net of deferred taxes
|95       |  | Employee stock options exercised                                                    
|286      |  | Employee equity based compensation                                                  
|         |  |                                                                                     
|$252,987 |  | Total stockholders equity at March 31, 2011                                        

The federal bank regulatory agencies have established risk-based capital requirements for banks. These guidelines are intended to provide an additional measure of a banks capital adequacy by
assigning weighted levels of risk to asset categories. Banks are also required to systematically maintain capital against such off- balance sheet activities as loans sold with recourse, loan commitments, guarantees and standby letters of
credit. These guidelines are intended to strengthen the quality of capital by increasing the emphasis on common equity and restricting the amount of loan loss reserves and other forms of equity such as preferred stock that may be included in
capital. As of March 31, 2011, each of our subsidiary banks exceeded the minimum capital levels to be considered well capitalized under the terms of the guidelines.

Selected consolidated capital ratios at March 31, 2011 and December 31, 2010 are presented in the table below.



|                                         |  |        |         |  |                  |  |      |        |  |   |         |  |  |        |      |   |  |   |         | 
|---------------------------------------- |  | ------ | ------- |  | ---------------- |  | ---- | ------ |  | - | ------- |  |  | ------ | ---- | - |  | - | ------- | 
|                                         |  | Actual |         |  | Well capitalized |  |      | Excess | 
|                                         |  | Amount |         |  | Ratio            |  |      | Amount |  |   | Ratio   |  |  | Amount |     
|March 31, 2011                           |  |        |         |  |                  |  |      |        |  |   |         |  |  |        |      |   |  |   |         | 
|Total capital (to risk weighted assets)  |  | $      | 227,136 |  |                  |  | 18.0 | %      |  | $ | 126,269 |  |  |        | > 10 | % |  | $ | 100,867 | 
|Tier 1 capital (to risk weighted assets) |  |        | 211,199 |  |                  |  | 16.7 | %      |  |   | 75,761  |  |  |        | > 6  | % |  |   | 135,438 | 
|Tier 1 capital (to average assets)       |  |        | 211,199 |  |                  |  | 10.0 | %      |  |   | 105,704 |  |  |        | > 5  | % |  |   | 105,495 | 
|                                         |  |        |         |  |                 
|December 31, 2010                        |  |        |         |  |                  |  |      |        |  |   |         |  |  |        |      |   |  |   |         | 
|Total capital (to risk weighted assets)  |  | $      | 227,907 |  |                  |  | 19.3 | %      |  | $ | 118,230 |  |  |        | > 10 | % |  | $ | 109,677 | 
|Tier 1 capital (to risk weighted assets) |  |        | 212,986 |  |                  |  | 18.0 | %      |  |   | 70,938  |  |  |        | > 6  | % |  |   | 142,048 | 
|Tier 1 capital (to average assets)       |  |        | 212,986 |  |                  |  | 10.3 | %      |  |   | 103,053 |  |  |        | > 5  | % |  |   | 109,933 | 



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##### Table of Contents

COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2011 AND 2010

Overview

We recognized net
income of $165 or $0.01 per share basic and diluted for the three month period ended March 31, 2011, compared to net income of $393 or $0.02 per share basic and diluted for the same period in 2010.

Although the net income amounts were similar between these two quarters, there were significant differences in the components, including:



| |  |  | increase in net interest income due to the acquisition of three failed financial institutions from the FDIC during the third quarter of 2010 and from
the purchase of loans and deposits from TD Bank, N.A. during January 2011; these acquisitions were also a primary contributing factor causing the increase in operating expenses;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | significant increase in loan loss provision which is reflective of the deteriorating real estate market in Central Florida;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | offsetting the increase in credit related expenses during the current quarter was a significant bargain purchase gain related to the acquisition and
assumption of certain assets and liabilities from TD Bank, N.A. as discussed in Note 8; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | commission revenue from bond sales at our correspondent banking division was lower primarily due to the interest rate environment.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------

Each of the above referenced income and expense categories, along with other items are discussed and
analyzed in greater detail below.

Net interest income/margin

Net interest income increased $3,128 or 23% to $16,974 during the three month period ended March 31, 2011 compared to $13,846 for the same period in 2010. The $3,128 increase was the result of a
$2,216 increase in interest income and a $912 decrease in interest expense.

Interest earning assets averaged $1,896,577
during the three month period ended March 31, 2011 as compared to $1,608,823 for the same period in 2010, an increase of $287,754, or 18%. The yield on average interest earning assets decreased 22bps to 4.36% (22bps to 4.41% tax equivalent
basis) during the three month period ended March 31, 2011, compared to 4.58% (4.63% tax equivalent basis) for the same period in 2010. The combined effects of the $287,754 increase in average interest earning assets and the 22bps (22bps tax
equivalent basis) decrease in yield on average interest earning assets resulted in the $2,216 ($2,249 tax equivalent basis) increase in interest income between the two periods.

Interest bearing liabilities averaged $1,537,416 during the three month period ended March 31, 2011 as compared to $1,275,676 for
the same period in 2010, an increase of $261,740, or 21%. The cost of average interest bearing liabilities decreased 47bps to 0.90% during the three month period ended March 31, 2011, compared to 1.37% for the same period in 2010. The combined
effects of the $261,740 increase in average interest bearing liabilities and the 47bps decrease in cost of average interest bearing liabilities resulted in the $912 decrease in interest expense between the two periods.



39



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##### Table of Contents

The table below summarizes the analysis of changes in interest income and interest expense
for the three month periods ended March 31, 2011 and 2010 on a tax equivalent basis.



|                                               |  |                              |           |   |                   |   |        |             |  |  |                |   |  |                   |           |   |             |   |        |  |  |  |      |  
|---------------------------------------------- |  | ---------------------------- | --------- | - | ----------------- | - | ------ | ----------- |  |  | -------------- | - |  | ----------------- | --------- | - | ----------- | - | ------ |  |  |  | ---- | -
|                                               |  | Three months ended March 31, |          
|                                               |  | 2011                         |           |   | 2010              |  
|                                               |  | AverageBalance               |           |   | InterestInc / Exp |   |        | AverageRate |  |  | AverageBalance |   |  | InterestInc / Exp |           |   | AverageRate |  
|Loans (1) (2) (8)                              |  | $                            | 1,212,512 |   |                   | $ | 16,393 |             |  |  | 5.48           | % |  | $                 | 951,009   |   |             | $ | 13,261 |  |  |  | 5.66 | %
|Securities- taxable                            |  |                              | 506,699   |   |                   |   | 3,569  |             |  |  | 2.86           | % |  |                   | 463,128   |   |             |   | 4,429  |  |  |  | 3.88 | %
|Securities- tax exempt (8)                     |  |                              | 33,902    |   |                   |   | 509    |             |  |  | 6.09           | % |  |                   | 35,833    |   |             |   | 531    |  |  |  | 6.01 | %
|Fed funds sold and other (3)                   |  |                              | 143,464   |   |                   |   | 134    |             |  |  | 0.38           | % |  |                   | 158,853   |   |             |   | 135    |  |  |  | 0.34 | %
|                                               |  |                              |           |   |                   |   |        |             |  |  |                |   |  |                   |           |   |             |   |        |  |  |  |      |  
|Total interest earning assets                  |  |                              | 1,896,577 |   |                   |   | 20,605 |             |  |  | 4.41           | % |  |                   | 1,608,823 |   |             |   | 18,356 |  |  |  | 4.63 | %
|                                               |  |                              |           |   |                   |  
|Allowance for loan losses                      |  |                              | (26,614   | ) |                   |   |        |             |  |  |                |   |  |                   | (23,731   | ) |             |   |        |  |  |  |      |  
|All other assets                               |  |                              | 294,991   |   |                   |   |        |             |  |  |                |   |  |                   | 174,697   |   |             |   |        |  |  |  |      |  
|                                               |  |                              |           |   |                   |   |        |             |  |  |                |   |  |                   |           |   |             |   |        |  |  |  |      |  
|Total assets                                   |  | $                            | 2,164,954 |   |                   |   |        |             |  |  |                |   |  | $                 | 1,759,789 |   |             |   |        |  |  |  |      |  
|                                               |  |                              |           |   |                   |   |        |             |  |  |                |   |  |                   |           |   |             |   |        |  |  |  |      |  
|                                               |  |                              |           |   |                   |  
|Interest bearing deposits (4)                  |  |                              | 1,422,934 |   |                   |   | 3,209  |             |  |  | 0.91           | % |  | $                 | 1,077,922 |   |             |   | 4,047  |  |  |  | 1.52 | %
|Fed funds purchased                            |  |                              | 77,311    |   |                   |   | 19     |             |  |  | 0.10           | % |  |                   | 140,595   |   |             |   | 35     |  |  |  | 0.10 | %
|Other borrowings (5)                           |  |                              | 24,671    |   |                   |   | 72     |             |  |  | 1.18           | % |  |                   | 44,659    |   |             |   | 132    |  |  |  | 1.20 | %
|Corporate debenture                            |  |                              | 12,500    |   |                   |   | 103    |             |  |  | 3.34           | % |  |                   | 12,500    |   |             |   | 101    |  |  |  | 3.28 | %
|                                               |  |                              |           |   |                   |   |        |             |  |  |                |   |  |                   |           |   |             |   |        |  |  |  |      |  
|Total interest bearing liabilities             |  |                              | 1,537,416 |   |                   |   | 3,403  |             |  |  | 0.90           | % |  |                   | 1,275,676 |   |             |   | 4,315  |  |  |  | 1.37 | %
|                                               |  |                              |           |   |                   |  
|Demand deposits                                |  |                              | 354,036   |   |                   |   |        |             |  |  |                |   |  |                   | 242,490   |   |             |   |        |  |  |  |      |  
|Other liabilities                              |  |                              | 21,814    |   |                   |   |        |             |  |  |                |   |  |                   | 11,536    |   |             |   |        |  |  |  |      |  
|Stockholders equity                           |  |                              | 251,688   |   |                   |   |        |             |  |  |                |   |  |                   | 230,087   |   |             |   |        |  |  |  |      |  
|                                               |  |                              |           |   |                   |   |        |             |  |  |                |   |  |                   |           |   |             |   |        |  |  |  |      |  
|Total liabilities and stockholders equity     |  | $                            | 2,164,954 |   |                   |   |        |             |  |  |                |   |  | $                 | 1,759,789 |   |             |   |        |  |  |  |      |  
|                                               |  |                              |           |   |                   |   |        |             |  |  |                |   |  |                   |           |   |             |   |        |  |  |  |      |  
|Net interest spread (tax equivalent basis) (6) |  |                              |           |   |                   |   |        |             |  |  | 3.51           | % |  |                   |           |   |             |   |        |  |  |  | 3.26 | %
|                                               |  |                              |           |   |                   |   |        |             |  |  |                |   |  |                   |           |   |             |   |        |  |  |  |      |  
|Net interest income (tax equivalent basis)     |  |                              |           |   |                   | $ | 17,202 |             |  |  |                |   |  |                   |           |   |             | $ | 14,041 |  |  |  |      |  
|                                               |  |                              |           |   |                   |   |        |             |  |  |                |   |  |                   |           |   |             |   |        |  |  |  |      |  
|Net interest margin (tax equivalent basis) (7) |  |                              |           |   |                   |   |        |             |  |  | 3.68           | % |  |                   |           |   |             |   |        |  |  |  | 3.54 | %
|                                               |  |                              |           |   |                   |   |        |             |  |  |                |   |  |                   |           |   |             |   |        |  |  |  |      |  



|Note 1: | Loan balances are net of deferred origination fees and costs.
|------- | -------------------------------------------------------------

|Note 2: | Interest income on average loans includes amortization of loan fee recognition of $64 and $76 for the three month periods ended March 31, 2011 and 2010.
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------

|Note 3: | Includes federal funds sold, interest earned on deposits at the Federal Reserve Bank and earnings on Federal Reserve Bank stock and Federal Home Loan Bank stock.
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|Note 4: | Includes interest bearing deposits only. Non-interest bearing checking accounts are included in the demand deposits listed above. Also, includes net amortization of
fair market value adjustments related to various acquisitions of time deposits of ($473) and ($96) for the three month periods ended March 31, 2011 and 2010.
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Note 5: | Includes securities sold under agreements to repurchase and Federal Home Loan Bank advances.
|------- | --------------------------------------------------------------------------------------------

|Note 6: | Represents the average rate earned on interest earning assets minus the average rate paid on interest bearing liabilities.
|------- | --------------------------------------------------------------------------------------------------------------------------

|Note 7: | Represents net interest income divided by total interest earning assets.
|------- | ------------------------------------------------------------------------

|Note 8: | Interest income and rates include the effects of a tax equivalent adjustment using applicable statutory tax rates to adjust tax exempt interest income on tax exempt
investment securities and loans to a fully taxable basis.
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Provision for loan losses

The provision for loan losses increased $7,201, or 177%, to $11,276 during the three month period ending March 31, 2011 compared to
$4,075 for the comparable period in 2010. Our policy is to maintain the allowance for loan losses at a level sufficient to absorb probable incurred losses inherent in the loan portfolio. The allowance is increased by the provision for loan losses,
which is a charge to current period earnings, and is decreased by charge-offs, net of recoveries on prior loan charge-offs. Therefore, the provision for loan losses (Income Statement effect) is a residual of managements determination of
allowance for loan losses (Balance Sheet approach). In determining the adequacy of the allowance for loan losses, we consider the conditions of individual borrowers, the historical loan loss experience, the general economic environment, the overall
portfolio composition, and other information. As these factors change, the level of loan loss provision changes. See Credit quality and allowance for loan losses for additional information regarding the allowance for loan losses.



40



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##### Table of Contents

Non-interest income

Non-interest income for the three months ended March 31, 2011 was $21,299 compared to $10,473 for the comparable period in 2010. This increase was the result of the following components listed in the
table below.



|                                                          |  |             |        |  |             |   |        |                     |  |   |                     |   |  |  |       |   
|--------------------------------------------------------- |  | ----------- | ------ |  | ----------- | - | ------ | ------------------- |  | - | ------------------- | - |  |  | ----- | --
|Three month period ending:                                |  | Mar 31,2011 |        |  | Mar 31,2010 |   |        | $increase(decrease) |  |   | %increase(decrease) |  
|Service charges on deposit accounts                       |  | $           | 1,556  |  |             | $ | 1,596  |                     |  | $ | (40                 | ) |  |  | (2.5  | %)
|Income from correspondent banking and bond sales division |  |             | 4,470  |  |             |   | 6,356  |                     |  |   | (1,886              | ) |  |  | (29.7 | %)
|Correspondent banking division  other fees               |  |             | 339    |  |             |   | 135    |                     |  |   | 204                 |   |  |  | 151.1 | % 
|Commissions from sale of mutual funds and annuities       |  |             | 439    |  |             |   | 104    |                     |  |   | 335                 |   |  |  | 322.1 | % 
|Debit card and ATM fees                                   |  |             | 656    |  |             |   | 402    |                     |  |   | 254                 |   |  |  | 63.2  | % 
|Loan related fees                                         |  |             | 190    |  |             |   | 130    |                     |  |   | 60                  |   |  |  | 46.2  | % 
|BOLI income                                               |  |             | 239    |  |             |   | 152    |                     |  |   | 87                  |   |  |  | 57.2  | % 
|Trading securities revenue                                |  |             | 161    |  |             |   | 84     |                     |  |   | 77                  |   |  |  | 91.7  | % 
|FDIC indemnification asset- accretion of discount rate    |  |             | 468    |  |             |   |       |                     |  |   | 468                 |   |  |  | n/a   |   
|FDIC OREO indemnification income                          |  |             | 1,136  |  |             |   |       |                     |  |   | 1,136               |   |  |  | n/a   |   
|Other service charges and fees                            |  |             | 507    |  |             |   | 78     |                     |  |   | 429                 |   |  |  | 550.0 | % 
|Gain on sale of securities                                |  |             | 9      |  |             |   | 1,436  |                     |  |   | (1,427              | ) |  |  | (99.4 | %)
|                                                          |  |             |        |  |             |   |        |                     |  |   |                     |   |  |  |       |   
|Subtotal                                                  |  | $           | 10,170 |  |             | $ | 10,473 |                     |  | $ | (303                | ) |  |  | (2.9  | %)
|Bargain purchase gain                                     |  |             | 11,129 |  |             |   |       |                     |  |   | 11,129              |   |  |  | n/a   |   
|                                                          |  |             |        |  |             |   |        |                     |  |   |                     |   |  |  |       |   
|Total non-interest income                                 |  | $           | 21,299 |  |             | $ | 10,473 |                     |  | $ | 10,826              |   |  |  | 103.4 | % 
|                                                          |  |             |        |  |             |   |        |                     |  |   |                     |   |  |  |       |   

The increase in non-interest income between the two quarters presented above was primarily due to the
bargain purchase gain recognized pursuant to the TD Bank, N.A. transaction discussed in Note 8.

We recognized revenue of
approximately $1,136 relating to FDIC OREO indemnification during the current quarter. This relates to the acquisition of three failed financial institutions we acquired during the third quarter of 2010. To the extent we recognize further
degradation of value related to these OREO properties, the loss or charge-down is recognized as non interest expense, and approximately 80% of the recognized loss is recognized as income in our non interest income, pursuant to the loss sharing
agreements we have with the FDIC.

We also recognized accretion income relating to our FDIC indemnification asset of
approximately $468. This also relates to the acquisition of three failed financial institutions we acquired during the third quarter of 2010. We make estimates of expected losses on the loans we purchased from the FDIC and we estimate the time
period we expect those losses to occur. Pursuant to our loss share agreements (indemnification agreements) with the FDIC, we expect to be reimbursed for those expected future losses during those expected future periods. The present value of these
expected future reimbursements is the estimated value of our indemnification asset carried on our balance sheet. Over time, we accrete non interest income based on the discount factor(s) we used to present value our expected future reimbursements.
During the current quarter, this accretion was $468.

Commissions earned on bond sales (Income from correspondent
banking and bond sales division) was lower this quarter due to lower volume of bond sales which was management believes is related to the current interest rate environment. Our customers our small to medium size financial institutions
primarily located in the southeast. When interest rates are falling, these institutions generate significant unrealized gains in their security portfolios, some of which they will lock in by selling bonds, and reinvesting. That type of interest rate
environment will generally increase volume, which will increase our commission revenue. When interest rates are low, with the propensity to increase, volume tends to slow, which will tend to generally decrease our revenue from bond sales
commissions.



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Non-interest expense

Non-interest expense for the three months ended March 31, 2011 increased $7,317, or 37.1%, to $27,042, compared to $19,725 for the same period in 2010. Components of our non-interest expenses are
listed in the table below.



|                                                         |  |             |        |   |             |   |        |                     |  |   |                     |   |  |  |        |   
|-------------------------------------------------------- |  | ----------- | ------ | - | ----------- | - | ------ | ------------------- |  | - | ------------------- | - |  |  | ------ | --
|Three month period ending:                               |  | Mar 31,2011 |        |   | Mar 31,2010 |   |        | $increase(decrease) |  |   | %increase(decrease) |  
|Employee salaries and wages                              |  | $           | 10,572 |   |             | $ | 9,250  |                     |  | $ | 1,322               |   |  |  | 14.3   | % 
|Employee incentive/bonus compensation                    |  |             | 612    |   |             |   | 708    |                     |  |   | (96                 | ) |  |  | (13.6  | %)
|Employee stock based compensation                        |  |             | 195    |   |             |   | 158    |                     |  |   | 37                  |   |  |  | 23.4   | % 
|Employer 401K matching contributions                     |  |             | 279    |   |             |   | 170    |                     |  |   | 109                 |   |  |  | 64.1   | % 
|Deferred compensation expense                            |  |             | 116    |   |             |   | 67     |                     |  |   | 49                  |   |  |  | 73.1   | % 
|Health insurance and other employee benefits             |  |             | 833    |   |             |   | 840    |                     |  |   | (7                  | ) |  |  | (0.8   | %)
|Payroll taxes                                            |  |             | 933    |   |             |   | 687    |                     |  |   | 246                 |   |  |  | 35.8   | % 
|Other employee related expenses                          |  |             | 92     |   |             |   | 129    |                     |  |   | (37                 | ) |  |  | (28.7  | %)
|Incremental direct cost of loan origination              |  |             | (126   | ) |             |   | (127   | )                   |  |   | 1                   |   |  |  | 0.8    | % 
|                                                         |  |             |        |   |             |   |        |                     |  |   |                     |   |  |  |        |   
|Total salaries, wages and employee benefits              |  | $           | 13,506 |   |             | $ | 11,882 |                     |  | $ | 1,624               |   |  |  | 13.7   | % 
|                                                         |  |             |        |  
|Occupancy expense                                        |  |             | 2,106  |   |             |   | 1,447  |                     |  |   | 659                 |   |  |  | 45.5   | % 
|Depreciation of premises and equipment                   |  |             | 999    |   |             |   | 755    |                     |  |   | 244                 |   |  |  | 32.3   | % 
|Supplies, stationary and printing                        |  |             | 312    |   |             |   | 215    |                     |  |   | 97                  |   |  |  | 45.1   | % 
|Marketing expenses                                       |  |             | 728    |   |             |   | 555    |                     |  |   | 173                 |   |  |  | 31.2   | % 
|Data processing expense                                  |  |             | 1,381  |   |             |   | 534    |                     |  |   | 847                 |   |  |  | 158.6  | % 
|Legal, auditing and other professional fees              |  |             | 925    |   |             |   | 632    |                     |  |   | 293                 |   |  |  | 46.4   | % 
|Bank regulatory related expenses                         |  |             | 800    |   |             |   | 614    |                     |  |   | 186                 |   |  |  | 30.3   | % 
|Postage and delivery                                     |  |             | 231    |   |             |   | 110    |                     |  |   | 121                 |   |  |  | 110.0  | % 
|ATM and debit card related expenses                      |  |             | 316    |   |             |   | 286    |                     |  |   | 30                  |   |  |  | 10.5   | % 
|CDI amortization                                         |  |             | 190    |   |             |   | 104    |                     |  |   | 86                  |   |  |  | 82.7   | % 
|Loss on sale of repossessed real estate (OREO)         |  |             | 518    |   |             |   | 27     |                     |  |   | 491                 |   |  |  | 1818.5 | % 
|Valuation write down of repossessed real estate (OREO) |  |             | 2,035  |   |             |   | 882    |                     |  |   | 1,153               |   |  |  | 130.7  | % 
|Loss on repossessed assets other than real estate        |  |             | 21     |   |             |   | 107    |                     |  |   | (86                 | ) |  |  | (80.4  | %)
|Foreclosure related expenses                             |  |             | 987    |   |             |   | 418    |                     |  |   | 569                 |   |  |  | 136.1  | % 
|Internet and telephone banking                           |  |             | 185    |   |             |   | 134    |                     |  |   | 51                  |   |  |  | 38.1   | % 
|Put-back option amortization                             |  |             | 73     |   |             |   |       |                     |  |   | 73                  |   |  |  | n/a    |   
|Visa/Mastercard processing and prepaid card expenses     |  |             | 389    |   |             |   | 47     |                     |  |   | 342                 |   |  |  | 727.7  | % 
|Operational write-offs and losses                        |  |             | 121    |   |             |   | 40     |                     |  |   | 81                  |   |  |  | 202.5  | % 
|Correspondent accounts and Federal Reserve charges       |  |             | 118    |   |             |   | 72     |                     |  |   | 46                  |   |  |  | 63.9   | % 
|Conferences/Seminars/Education/Training                  |  |             | 74     |   |             |   | 155    |                     |  |   | (81                 | ) |  |  | (52.3  | %)
|Director fees                                            |  |             | 68     |   |             |   | 95     |                     |  |   | (27                 | ) |  |  | (28.4  | %)
|Travel expenses                                          |  |             | 37     |   |             |   | 114    |                     |  |   | (77                 | ) |  |  | (67.5  | %)
|Other expenses                                           |  |             | 922    |   |             |   | 453    |                     |  |   | 469                 |   |  |  | 103.5  | % 
|                                                         |  |             |        |   |             |   |        |                     |  |   |                     |   |  |  |        |   
|Total non-interest expense                               |  | $           | 27,042 |   |             | $ | 19,725 |                     |  | $ | 7,317               |   |  |  | 37.1   | % 
|                                                         |  |             |        |   |             |   |        |                     |  |   |                     |   |  |  |        |   

We continue the integration process of the three failed institutions acquired from the FDIC during the third
quarter. These institutions continue to operate on their legacy core processing systems. Conversion is scheduled for summer and early fall 2011. We will not fully realize the expected operating efficiencies from these acquisitions until that time.
In addition, several seasoned bank management teams were hired last year and two new offices were opened. The teams are growing and developing business in the new markets rapidly and are expected to eventually add significant contributions to the
Companys profitability, but at the present time they have added additional overhead expenses. The Company has conversion teams in place for the upcoming three FDIC bank conversions and the merger of the remaining subsidiary bank not yet merged
into the lead bank. This team has contributed to the elevated operating expenses, as well as the due diligence team used for evaluating potential FDIC and other acquisition transactions, and a large special asset disposition department that is
charged with the task of resolving the Companys NPAs and OREO. All of these activities have elevated the Companys operating expenses, but much of this added expense is temporary in nature.



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Benefit for income taxes

We recognized an income tax benefit for the three months ended March 31, 2011 of $210 on pre-tax loss of $45 (an effective tax rate of 467%) compared to an income tax provision of $126 on pre-tax
earnings of $519 (an effective tax rate of 24.3%) for the comparable quarter in 2010. Net tax exempt income generally decreases a companys effective tax rate (compared to statutory rates) when the company reports earnings. When there is a
loss, the same net tax exempt income will generally produce higher effective tax rates. In addition, we had more tax exempt income during the current quarter compared to the same quarter last year.

Liquidity

Liquidity is defined
as the ability to meet anticipated customer demands for funds under credit commitments and deposit withdrawals at a reasonable cost and on a timely basis. We measure liquidity position by giving consideration to both on- and off-balance sheet
sources of and demands for funds on a daily and weekly basis.

Each of our subsidiary banks regularly assesses the amount and
likelihood of projected funding requirements through a review of factors such as historical deposit volatility and funding patterns, present and forecasted market and economic conditions, individual client funding needs, and existing and planned
business activities. Each subsidiary banks asset/liability committee (ALCO) provides oversight to the liquidity management process and recommends guidelines, subject to the approval of its board of directors, and courses of action to address
actual and projected liquidity needs.

Short term sources of funding and liquidity include cash and cash equivalents, net of
federal requirements to maintain reserves against deposit liabilities; investment securities eligible for pledging to secure borrowings from customers pursuant to securities sold under repurchase agreements; loan repayments; deposits and certain
interest rate-sensitive deposits; and borrowings under overnight federal fund lines available from correspondent banks. In addition to interest rate-sensitive deposits, the primary demand for liquidity is anticipated fundings under credit
commitments to customers.

Off-Balance Sheet Arrangements

We do not currently have any off-balance sheet arrangements, other than approved and unfunded loans and letters of credit to our customers in the ordinary course of business.



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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES: MARKET RISK

Market risk

We believe interest
rate risk is the most significant market risk impacting us. Each of our subsidiary banks monitors and manages its interest rate risk using interest rate sensitivity gap analysis to measure the impact of market interest rate changes on
net interest income. See our Annual Report on Form 10-K for the fiscal year ended December 31, 2010 for disclosure of the quantitative and qualitative information regarding the interest rate risk inherent in interest rate risk sensitive
instruments as of December 31, 2010. There have been no changes in the assumptions used in monitoring interest rate risk as of March 31, 2011. The impact of other types of market risk, such as foreign currency exchange risk and equity
price risk, is deemed immaterial. We do not maintain a portfolio of trading securities and do not intend to engage in such activities in the immediate future.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and
Procedures

As of the end of the period covered by this report, an evaluation was carried out under the supervision and
with the participation of our management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) or
15d-15(e)). Based on that evaluation and the identification of the material weakness in our internal control over financial reporting as described below, the CEO and CFO have concluded that our disclosure controls and procedures were not effective
to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 are recorded, processed, summarized and reported within the time periods specified in Securities and Exchange
Commission rules and forms.

Changes in Internal Control over Financial Reporting

As reported in our 2010 Annual Report, management conducted a thorough and methodical evaluation and testing of our internal controls over
financial reporting as of December 31, 2010, which resulted in the identification of one material control weakness. Management continues their ongoing efforts to correct and revise the existing processes surrounding this material weakness and
additional changes will be implemented as determined necessary.

Allowance for Loan Losses

During the fourth quarter of 2010, management determined that we did not maintain effective internal control over specific reserves on
impaired loans. Specifically, management identified a material weakness in our internal controls related to the timing of specific reserve recognition on our impaired loans.



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##### Table of Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1a. Risk Factors

There has been no material changes in our risk factors from our disclosure in Item 1A of our December 31, 2010 annual report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.
Defaults Upon Senior Securities

None.

Item 4. [Removed and Reserved]

Item 5. Other Information

None.

Item 6. Exhibits



|             |  |                                                                                                                                 
|------------ |  | --------------------------------------------------------------------------------------------------------------------------------
|             | 
|Exhibit 31.1 |  | The Chairman, President and Chief Executive Officers certification required under section 302 of the Sarbanes-Oxley Act of 2002
|             | 
|Exhibit 31.2 |  | The Chief Financial Officers certification required under section 302 of the Sarbanes-Oxley Act of 2002                        
|             | 
|Exhibit 32.1 |  | The Chairman, President and Chief Executive Officers certification required under section 906 of the Sarbanes-Oxley Act of 2002
|             | 
|Exhibit 32.2 |  | The Chief Financial Officers certification required under section 906 of the Sarbanes-Oxley Act of 2002                        



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CENTERSTATE BANKS, INC.

SIGNATURES

In
accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CENTERSTATE BANKS, INC.

(Registrant)



|                   |  |     |  |                              
|------------------ |  | --- |  | -----------------------------
|Date: May 10, 2011 |  | By: |  | /s/ Ernest S. Pinner         
|                   |  |     |  | Ernest S. Pinner             
|                   |  |     |  | Chairman, President and Chief
|                   |  |     |  | Executive Officer            
|                   |  |    
|Date: May 10, 2011 |  | By: |  | /s/ James J. Antal           
|                   |  |     |  | James J. Antal               
|                   |  |     |  | Senior Vice President        
|                   |  |     |  | and Chief Financial Officer  



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