8-K/A

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K/A

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) July 21, 2010

CENTERSTATE BANKS, INC.

(Exact name of registrant as specified in its charter)

Florida	000-32017	59-3606741
(State or other jurisdiction of incorporation)	(Commission file number)	(IRS employer identification no.)

42745 U.S. Highway 27, Davenport, FL	33837
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (863) 419-7750

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Explanatory Note

On July 19, 2010, CenterState Banks, Inc. (the “Company”) furnished a Current Report on Form 8-K (the “Original Report”) to report that the Company’s wholly owned subsidiary, CenterState Bank of Florida, N.A. (“CenterState”), had acquired substantially all the assets and assumed substantially all the deposits of Olde Cypress Community Bank in Clewiston, Florida (“Olde Cypress) through a purchase and assumption agreement, including loss-sharing (the “P&A Agreement”) with the Federal Deposit Insurance Corporation (“FDIC”) dated as July 16, 2010. The final carrying values and the final list of the assets acquired and liabilities assumed remains subject to finalization by the FDIC and CenterState. The purchase of Olde Cypress’ assets and the assumption of its liabilities was effective on July 16, 2010.

On July 21, 2010, the Company furnished a Current Report on Form 8-K/A (the “First Amendment”) which amended and supplemented the disclosures provided in the Original Report. The Company reported that it anticipated it would further amend the Original Report and the First Amendment at a later date to the extent additional financial information is required by Item 9.01.

This Current Report on Form 8-K/A (the “Second Amendment”) amends and supplements the disclosures provided in Item 2.01 and 9.01 of the Original Report and the First Amendment. Except as otherwise provided herein, the other disclosures made in the Original Report and the First Amendment remain unchanged. The Company does not anticipate that it will further amend this Current Report.

Statements made in this Amendment, other than those concerning historical financial information, may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties. These forward-looking statements include, without limitation, statements regarding the Company’s expectations concerning its financial condition, operating results, cash flows, liquidity and capital resources, including the effects of the Olde Cypress acquisition and the final determination of the assets and liabilities acquired and their respective valuations. A discussion of risks, uncertainties and other factors that could cause actual results to differ materially from management’s expectations is set forth under the captions “Business - Note about Forward-Looking Statements,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

Item 2.01 Completion of Acquisition or Disposition of Assets

The following discussion of assets acquired and liabilities assumed are presented at estimated fair value on the date of the P&A Agreement. The fair values of the assets acquired and liabilities assumed were determined as described in Note 3 to the Company’s statement of assets acquired and liabilities assumed, dated July 16, 2010, and the accompanying notes thereto, which is attached hereto as Exhibit 99.1 and incorporated herein by reference (the “Audited Statement”). These fair value estimates are based on the information available, and are subject to change for up to one year after the closing date of the acquisition as additional information relative to closing date fair values becomes available. CenterState and the FDIC are engaged in on-going discussions that may impact the assets acquired and liabilities assumed and/or the purchase price. In addition, the tax treatment of FDIC assisted acquisitions is complex and subject to interpretations that may result in future adjustments of deferred taxes as of the acquisition date. The disclosure set forth in this Item 2.01 reflects the status of these items to the best of management’s knowledge as of October 1, 2010.

The Olde Cypress acquisition consisted of assets with a fair value of approximately $155.7 million, including $93.4 million of loans, $6.4 million of repossessed real estate (“OREO”), $8.5 million of

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investment securities, $18.6 million of cash and cash equivalents, $26.6 million related to the FDIC’s indemnification of the Company against certain future losses described below and $2.2 million of other assets which included $0.7 million in core deposit intangibles. The Company paid cash of $3.6 million to the FDIC for the net assets acquired from the FDIC. Liabilities with a fair value of approximately $153.7 million were assumed, including $152.3 million of deposits and $1.4 million of other liabilities. The Company recognized a pre-tax bargain purchase gain of $2.0 million, resulting in an after-tax gain of $1.2 million.

The Company also entered into loss sharing agreements with the FDIC that collectively cover legal unpaid principal balances of approximately $120.2 million of loans which include single family residential mortgage loans, commercial real estate loans, other commercial loans, construction/development/land loans and approximately $8.3 million of OREO, which management has estimated the fair value to approximate $6.4 million. Pursuant to the terms of the loss sharing agreements, the FDIC’s obligation to reimburse the Company for losses with respect to covered assets begins with the first dollar of loss incurred. The FDIC will reimburse the Company for 80% of losses with respect to the covered assets. The Company will reimburse the FDIC for its share of recoveries with respect to losses for which the FDIC paid the Company a reimbursement under the loss sharing agreements. Certain other assets of Olde Cypress were acquired by the Company that are not covered by loss sharing agreements with the FDIC. These assets include $8.5 million of marketable securities purchased at fair market value, consumer loans with a fair value of $3.8 million at acquisition date, and other tangible assets.

The loss sharing agreements applicable to single family residential mortgage loans provide for FDIC loss sharing and Company reimbursement to the FDIC for recoveries for ten years. The loss sharing agreement applicable to commercial loans and other covered assets provides for FDIC loss sharing for five years and Company reimbursement to the FDIC for a total of eight years for recoveries.

The loss sharing agreements are subject to certain servicing procedures as specified in an agreement with the FDIC. The fair value of the loss sharing agreements was recorded as an indemnification asset at an estimated fair value of $26.6 million on the acquisition date.

The foregoing summary of the P&A Agreement, including the loss sharing agreements, is not complete and is qualified in its entirety by reference to the full text of the P&A Agreement and certain other exhibits attached to the P&A Agreement, which are incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired

Discussion

As set forth in Item 2.01 above, on July 16, 2010, the Company acquired certain assets and assumed substantially all of the deposits and liabilities of Olde Cypress pursuant to the P&A Agreement. A narrative description of the anticipated effects of the Olde Cypress acquisition (the “Acquisition”) on the Company’s financial condition, liquidity, capital resources and operating results is presented below. This discussion should be read in conjunction with the historical financial statements and the related notes of the Company, which have been filed with the Securities and Exchange Commission (the “Commission”) and the Audited Statement, which is attached hereto as Exhibit 99.1.

The Acquisition increased the Company’s total assets and total deposits by approximately 8.5% and 10.7%, respectively, as compared with the balances at June 30, 2010, and is expected to positively affect

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the Company’s operating results, to the extent the Company earns more from interest earned on its interest earning assets than it pays in interest on its interest bearing liabilities. The ability of the Company to successfully collect interest and principal on loans acquired and collect reimbursement from the FDIC on the related indemnification asset will also impact cash flows and operating results.

The Company estimated the acquisition-date fair value of the acquired assets and assumed liabilities in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (ASC Topic 805) and ASC Topic 820, Fair Value Measurements. However, the amount that the Company realizes on these assets could differ materially from the carrying value reflected in the attached Audited Statement primarily as a result of changes in the timing and amount of collections on the acquired loans in future periods. Because of the loss sharing agreements with the FDIC on these assets, as described in Item 2.01 above, the Company does not expect to incur significant losses. To the extent the actual values realized for the acquired loans differ from the estimated amount, the indemnification asset will generally be impacted in an offsetting manner due to the loss sharing support from the FDIC.

Financial Condition

In the Acquisition, the Company purchased $93.4 million of loans at fair value, net of $30.9 million, or 24.9%, estimated discount to the outstanding principal balance, representing approximately 10% of the Company’s total loans at June 30, 2010. The Company acquired $18.6 million in cash and cash equivalents, net of the $3.6 million of cash the Company paid to the FDIC in conjunction with the acquisition, $6.4 million in OREO at fair value, and $8.5 million of marketable securities at fair value.

The following table presents information with respect to the fair value of certain acquired earning assets and loans, as well as their legal unpaid principal balance (“Book Balance”) at acquisition date, contractual term and average contractual yield.

Schedule of Earning Assets Acquired – July 16, 2010

in thousands of dollars:	book balance		fair value		average months to maturity	average contractual interest rate		effective interest rate
Interest bearing deposits at Federal Reserve Bank	$	16,377	$	16,377	—	0.25	%	0.25	%
Investment securities		8,509		8,509	45.4	4.29	%	2.81	%
Loans:
Single family residential real estate		83,555		64,859	221.9	6.01	%	5.56	%
Commercial real estate		22,969		17,007	139.4	5.31	%	4.43	%
Construction, development and land		11,425		5,728	92.5	5.44	%	4.71	%
Commercial loans		2,299		2,007	32.2	4.90	%	3.63	%
Consumer and other loans		4,093		3,759	37.7	6.33	%	3.81	%
Total loans		124,341		93,360	185.2	5.82	%	5.19	%
Total earning assets	$	149,227	$	118,246

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The following table reflects the scheduled maturities of the acquired loans at July 16, 2010:

in thousands of dollars:	single family residential real estate		commercial real estate		construction, development and land		commercial		consumer		total loans
Contractual maturities:
1 year or less	$	—	$	—	$	1,065	$	1,118	$	964	$	3,147
1 - 5 years		3,643		1,565		2,136		24		1,871		9,239
After 5 years		61,216		15,442		2,527		865		924		80,974
Total	$	64,859	$	17,007	$	5,728	$	2,007	$	3,759	$	93,360
Rate sensitivity:
Fixed	$	6,052	$	3,098	$	618	$	695	$	3,209	$	13,672
Variable		58,807		13,909		5,110		1,312		550		79,688
Total	$	64,859	$	17,007	$	5,728	$	2,007	$	3,759	$	93,360

In the Acquisition, the Company assumed $152.3 million in deposits at estimated fair value. The amount represents approximately 10.7% of the Company’s total deposits of $1,427.4 million at June 30, 2010. Demand and savings deposit accounts make up $50.9 million of these assumed deposits.

In its assumption of the deposit liabilities, the Company believed that the customer relationships associated with these deposits have an intangible value. The Company applied ASC Topic 805, which prescribes the accounting for goodwill and other intangible assets such as core deposit intangibles, in a business combination. The Company determined the estimated fair value of the core deposit intangible asset totaled $0.7 million, which will be amortized utilizing an accelerated amortization method over an estimated economic life not to exceed ten years. In determining the valuation amount, deposits were analyzed based on factors such as type of deposit, deposit retention, interest rates and age of deposit relationships.

Future amortization of this core deposit intangible asset over the estimated life will decrease results of operations, net of any potential tax effect. Since amortization is a non cash item, it will have no effect upon future liquidity and cash flows. For the calculation of regulatory capital, core deposit intangible asset is disallowed and is a reduction to equity capital. The Company expects that disallowing this intangible asset should not materially adversely affect the Company’s or CenterState’s regulatory capital ratios.

The core deposit intangible asset is subject to significant estimates by management of the Company related to the value and the life of the asset. These estimates could change over time. The Company will review the valuation of this asset periodically to ensure that no impairment has occurred. If any impairment is subsequently determined, the Company will record the impairment as an expense in its consolidated statement of operations.

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Non performing loans

The Company acquired performing and non performing loans. The loans acquired included non accrual loans and loans past due greater than 90 days as listed below.

in thousands of dollars:	book value
Non accrual loans	$	12,509
Loans past due 90 days or more and still accruing interest		7,095
Total	$	19,604

All of the loans acquired except for consumer loans are covered pursuant to loss sharing agreements with the FDIC. Management further segregated loans that were either non accrual, past due greater than 60 days, TDRs (Troubled Debt Restructured loans) or past due 30 days at least five times during the loan’s life to date. These loans have been identified as impaired loans in the table below. The Company is currently evaluating which loans will be accounted for pursuant to ASC Topic 310-30. The table below summarizes the non impaired and impaired loans and compares book value to the Company’s estimate of fair value as of the July 16, 2010 acquisition date:

in thousands of dollars:	book value		fair value
Non impaired loans	$	103,873	$	82,246
Impaired loans		20,468		11,114
Total loans	$	124,341	$	93,360

Operating results and cash flows

Management has from time to time become aware of acquisition opportunities and has performed various levels of review related to potential acquisitions in the past. This Acquisition was attractive to the Company for a variety of reasons including the following:

• attractiveness in the pricing of the acquired loan portfolios including the indemnification asset;

• ability to increase the Company’s market share in south central Florida;

• attractiveness of core deposit customer relationships;

• opportunities to enhance income and efficiency due to duplications of effort and decentralized processes as the Company expects to enhance income by centralizing some duties and removing duplications of effort.

Based on these and other factors, including the level of FDIC support related to the acquired loans and OREO, the Company believes that the Acquisition will have an immediate positive impact on its earnings.

The Acquisition had an immediate accretive impact to the Company’s financial results as it recognized a day 1 pre-tax gain upon acquisition of $2.0 million. The transaction resulted in an after-tax gain of approximately $1.2 million. The total assets acquired, approximately $155.7 million, represent approximately 8.5% of the Company’s $1,821.3 million of total assets as of June 30, 2010, and total deposits assumed, approximately $152.3 million, represent approximately 10.7% of the Company’s $1,427.4 million of total deposits reported as of June 30, 2010. The Company believes that the transaction will improve net interest income, as the Company earns more from interest earned on its loans and investments than it pays in interest on deposits.

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The extent to which the Company’s operating results may be adversely affected by the acquired loans is largely offset by the loss sharing agreements and the related discounts reflected in the estimated fair value of these assets at the acquisition date. In accordance with the provisions of ASC Topic 310-30, the fair values of the acquired loans reflect an estimate of expected credit losses related to these assets. As a result, the Company’s operating results would only be adversely affected by loan losses to the extent that such losses exceed the expected credit losses reflected in the fair value of these assets at the acquisition date.

ASC Topic 310-30 applies to a loan with evidence of deterioration of credit quality since origination, for which it is probable, at acquisition, that the investor will be unable to collect all contractually required payments receivable. ASC Topic 310-30 prohibits carrying over or creating an allowance for loan losses upon initial recognition for loans that fall under its scope. The Company is currently evaluating which loans will be accounted for pursuant to ASC Topic 310-30.

The loss sharing agreements will likely have a material impact on the cash flows and operating results of the Company in both the short-term and the long-term. In the short-term, as stated above, it is likely that there will be a significant amount of the covered assets that will experience deterioration in payment performance or will be determined to have inadequate collateral values to repay the loans. In such instances, the Company will likely no longer receive payments from the borrowers, which will impact cash flows. The loss sharing agreements will not fully offset the financial effects of such a situation. However, if a loan is subsequently charged off or charged down after the Company exhausts its best efforts at collection, the loss sharing agreements will cover a substantial portion of the loss associated with the covered assets.

The long-term effects that the Company may experience will depend primarily on the ability of the borrowers under the various loans covered by the loss sharing agreements to make payments over time. As the loss sharing agreements cover up to a 10 year period (5 years for commercial loans and other assets), changing economic conditions will likely impact the timing of future charge-offs and the resulting reimbursements from the FDIC. The Company believes that any recapture of interest income and recognition of cash flows from the borrowers or received from the FDIC (as part of the FDIC indemnification asset) may be recognized unevenly over this period, as the Company exhausts its collection efforts under its normal practices. In addition, the Company recorded substantial discounts related to the purchase of these covered assets. A portion of these discounts will be accretable to income over the economic life of the loans and will be dependent upon the timing and success of the Company’s collection efforts on the covered assets.

Liquidity and capital resources

The transaction enhanced the liquidity position of the Company. The Company acquired $18.6 million of cash and cash equivalents net of the cash paid to the FDIC to consummate the Acquisition, as well as $8.5 million of marketable securities. These additions to the Company’s balance sheet represent additional support for the Company’s liquidity needs.

Deposits in the amount of $152.3 million were also assumed. Of this amount, 33%, or $50.9 million, were in the form of core non time deposits. The time deposits comprised 67%, or $101.4 million.

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As permitted by the FDIC, CenterState had the option to subsequently reprice the acquired deposit portfolios to current market rates. Within seven days of the acquisition date, CenterState sent notification indicating that all internet time deposits, approximately $35 million, will be repriced to market rates effective September 1, 2010. As of August 31, 2010 approximately $28 million of these time deposits were redeemed early. No other deposits were repriced.

At June 30, 2010 the Company and CenterState were considered “well-capitalized” based on calculations of relevant regulatory ratios. The Company and CenterState had the following capital ratios at June 30, 2010.

	regulatory guideline amounts to be considered		actual at June 30, 2010
	well capitalized		Company		CenterState
Tier 1 leverage ratio	5.0	%	11.3	%	7.9	%
Tier 1 risk base ratio	6.0	%	17.6	%	14.6	%
Total risk base ratio	10.0	%	18.9	%	15.8	%

Subsequent to June 30, 2010, the Company raised additional capital pursuant to a follow-on public common stock offering. The common stock offering added approximately $32.8 million to the Company’s common equity after related expenses and underwriting fees. The Company’s pro-forma regulatory capital ratios at June 30, 2010, considering the impact from the common stock offering results in a Tier 1 leverage ratio, Tier 1 risk base ratio and Total risk base ratio of 12.9%, 20.4% and 21.6%, respectively. The acquisition of Olde Cypress did not have a material adverse effect on the Company’s regulatory capital ratios. The Company and CenterState remain “well-capitalized” after taking into consideration the results of the Olde Cypress transaction.

Financial Statements

Attached hereto as Exhibit 99.1 and incorporated by reference into this Item 9.01(a) is an audited Statement of Assets Acquired and Liabilities Assumed by CenterState Bank of Florida, N.A. (a wholly owned subsidiary of CenterState Banks, Inc.) related to the acquisition of Olde Cypress at July 16, 2010 and the accompanying notes thereto.

Report of Independent Registered Public Accounting Firm

Statement of Assets Acquired and Liabilities Assumed at July 16, 2010

Notes to Statement of Assets Acquired and Liabilities Assumed

The Company has omitted certain financial information of Olde Cypress required by Rule 3-05 of Regulation S-X and the related pro forma financial information under Article 11 of Regulation S-X in accordance with a request for relief submitted to the Commission in accordance with the guidance provided in Staff Accounting Bulletin 1:K, Financial Statements of Acquired Troubled Financial Institutions (“SAB 1:K”). SAB 1:K provides relief from the requirements of Rule 3-05 in certain instances, such as a transaction where a registrant engages in an acquisition of a significant amount of assets of a troubled financial institution that involves pervasive federal assistance and audited financial statements of the troubled financial institution that are not reasonably available.

(d) Exhibits

2.1 Purchase and Assumption Agreement Whole Bank All Deposits, by and among the Federal Deposit Insurance Corporation, receiver of Olde Cypress Community Bank, Clewiston, Florida, the Federal Deposit Insurance Corporation, and CenterState Bank of Florida, N.A., Winter Haven, Florida, dated as of July 16, 2010 (filed as Exhibit 2.1 to Form 8-K/A on July 21, 2010, and incorporated herein by reference).

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23.1	Consent of Crowe Horwath LLP
99.1	Report of Independent Registered Public Accounting Firm Statement of Assets Acquired and Liabilities Assumed at July 16, 2010 Notes to Statement of Assets Acquired and Liabilities Assumed

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SIGNATURE

Pursuant to 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 hereunto duly authorized.

CENTERSTATE BANKS, INC.
By:	/s/ James J. Antal
	James J. Antal
	Senior Vice President and   Chief Financial Officer

Date: October 1, 2010

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EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333 159416 on Form S-8 of CenterState Banks, Inc. of our report dated October 1, 2010, with respect to the statement of assets acquired and liabilities assumed by CenterState Bank of Florida, N.A. (a wholly owned subsidiary of CenterState Banks, Inc.) pursuant to the Purchase and Assumption Agreement dated July 16, 2010, as amended, appearing in this Form 8-K/A.

/s/ Crowe Horwath LLP

     Crowe Horwath LLP

Fort Lauderdale, Florida

October 1, 2010

EX-99.1

Exhibit 99.1

INDEX OF FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	2
Statement of Assets Acquired and Liabilities Assumed at July 16, 2010	3
Notes to Statement of Assets Acquired and Liabilities Assumed	4 – 10

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of CenterState Banks, Inc.

We have audited the accompanying statement of assets acquired and liabilities assumed by CenterState Bank of Florida, N.A. (a wholly owned subsidiary of CenterState Banks, Inc.) pursuant to the Purchase and Assumption Agreement dated July 16, 2010 (the Agreement). This statement of assets acquired and liabilities assumed is the responsibility of the Company’s management. Our responsibility is to express an opinion on this statement of assets acquired and liabilities assumed based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement, assessing the account principals used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the statement of assets acquired and liabilities assumed referred to above presents fairly, in all material respects, the assets acquired and liabilities assumed by CenterState Bank of Florida, N.A. (a wholly owned subsidiary of CenterState Banks, Inc.) pursuant to the Agreement, in conformity with U.S. generally accepted accounting principles.

/s/ Crowe Horwath LLP

Crowe Horwath LLP

Fort Lauderdale, Florida

October 1, 2010

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STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED

By CenterState Bank of Florida, N.A.

(a wholly owned subsidiary of CenterState Banks, Inc.)

(dollars are in thousands)

	July 16, 2010
Cash, due from banks and Federal Reserve Bank, Net	$	18,643
Investment securities available for sale		8,509
Covered loans		89,601
Consumer loans not covered by loss sharing agreement		3,759
Total loans		93,360
Covered other repossessed real estate owned (“OREO”)		6,388
FDIC indemnification asset		26,637
FHLB stock		305
Core deposit intangible		714
Other assets		1,159
Total assets acquired	$	155,715
Deposits:
Non interest bearing demand accounts	$	6,693
Interest bearing checking accounts		26,711
Interest bearing savings accounts		17,485
Time deposits		101,375
Total Deposits		152,264
Escrow accounts		1,308
Interest payable on deposits		132
Other liabilities		1
Total liabilities assumed	$	153,705
Net assets acquired	$	2,010
Deferred tax impact	$	775
Net assets acquired, including deferred tax impact	$	1,235

The accompanying notes are an integral part of this financial statement

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STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED

By CenterState Bank of Florida, N.A.

(a wholly owned subsidiary of CenterState Banks, Inc.)

(dollars are in thousands)

Note 1: FDIC assisted acquisition of certain assets and liabilities of Olde Cypress

On July 16, 2010, CenterState Bank of Florida, N.A. (“CenterState”), a wholly owned subsidiary of CenterState Banks, Inc. (the “Company”), entered into a purchase and assumption agreement and certain loss share agreements (the “Agreements”) with the Federal Deposit Insurance Corporation (“FDIC”) and the FDIC as receiver, pursuant to which CenterState acquired certain assets and assumed substantially all of the deposits and certain liabilities of Olde Cypress Community Bank (“Olde Cypress”) located in Clewiston, Florida.

Olde Cypress operated through three branches in Hendry County, Florida and one branch in Polk County, Florida. CenterState assumed $152,264 of the deposits of Olde Cypress at estimated fair value. Additionally, CenterState acquired loans with an estimated fair value of $93,360 and an unpaid principal balance of $124,341, repossessed real estate (“OREO”) and investment securities with estimated fair values of $6,388 and $8,509, respectively. Approximately $89,601 of the $93,360 acquired loans and all of the acquired OREO are covered by loss sharing agreements (“covered assets”) between the FDIC and CenterState.

The assets acquired and liabilities assumed in the transaction are presented at estimated fair value on the date of the acquisition. The fair values of the assets acquired and liabilities assumed were determined as described in Note 3 below. These fair value estimates are considered preliminary, and are subject to change for up to one year after the closing date of the acquisition as additional information relative to closing date fair values becomes available. CenterState and the FDIC are engaged in on-going discussions that may impact which assets and liabilities are ultimately acquired or assumed by CenterState and/or the purchase prices. In addition, the tax treatment of FDIC assisted acquisitions is complex and subject to interpretations that may result in future adjustments of deferred taxes as of the acquisition date.

Note 2: Loss sharing agreement and FDIC indemnification asset

As part of the Agreements, CenterState and the FDIC also entered into certain loss sharing agreements. Pursuant to the terms of these loss sharing agreements, the FDIC’s obligation to reimburse CenterState for losses with respect to certain loans begins with the first dollar of loss incurred. Approximately $128,522 of assets which include $120,248 of loans and $8,274 of OREO are covered under these agreements. The amounts covered by the loss sharing agreements are the pre-acquisition book values of the underlying assets and certain future net direct costs. The FDIC will reimburse CenterState for 80% of losses up to $128,522. CenterState will reimburse the FDIC for its share of recoveries with respect to losses for which the FDIC paid CenterState a reimbursement under the loss sharing agreements. Certain other assets of Olde Cypress were acquired by CenterState that are not covered by loss sharing agreements with the FDIC. These assets include consumer loans and investment securities purchased at fair market value and other tangible assets.

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STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED

By CenterState Bank of Florida, N.A.

(a wholly owned subsidiary of CenterState Banks, Inc.)

(dollars are in thousands)

The following table summarizes the assets covered by the loss sharing agreements, the amount covered by the FDIC and the fair value:

	July 16, 2010 (amounts in thousands of dollars)
Assets subject to stated threshold:	amount covered		fair value
Loans	$	120,248	$	89,601
OREO		8,274		6,388
Total covered assets	$	128,522	$	95,989

The loss sharing agreements applicable to single family residential mortgage loans provides for FDIC loss sharing and Company reimbursement to the FDIC for recoveries for ten years. The loss sharing agreement applicable to commercial loans and other covered assets provides for FDIC loss sharing for five years and Company reimbursement to the FDIC for a total of eight years for recoveries.

The loss sharing agreements are subject to certain servicing procedures as specified in agreements with the FDIC. The expected reimbursements under the loss sharing agreements were recorded as indemnification assets on the statement of assets acquired and liabilities assumed at their estimated fair value of $26,637 on the acquisition date. The FDIC loss share indemnification asset reflects the present value of the expected net cash reimbursement related to the loss sharing agreements described above.

Note 3: Basis of presentation

CenterState has determined that the acquisition of the net assets of Olde Cypress constitutes a business acquisition as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. Accordingly, the assets acquired and liabilities assumed are presented at their estimated fair values as required by that topic.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date reflecting assumptions that a market participant would use when pricing an asset or liability. In some cases, the estimation of fair values requires management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. We describe below the methods used to determine the fair values of the significant assets acquired and liabilities assumed. ASC 820-10 establishes 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;
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 date;
Level 3:	Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

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STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED

By CenterState Bank of Florida, N.A.

(a wholly owned subsidiary of CenterState Banks, Inc.)

(dollars are in thousands)

The following is a description of the methods used to determine the fair values of significant assets and liabilities.

Cash and cash due from banks and Federal Reserve Bank

The carrying amount of these assets is a reasonable estimate of fair value based on their short-term nature.

Investment securities available for sale

The fair value for securities available for sale was 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).

Loans

At the July 16, 2010 acquisition date, the Company estimated the fair value of the acquired loan portfolio at $93,360, which represents the expected cash flows from the portfolio discounted at a market-based rate. Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, risk classification, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and current discount rates. Loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns. The discount rate does not include a factor for credit losses as that has been included in the estimated cash flows. Fair values are considered to be Level 3 pricing.

OREO

Fair values for OREO were 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.

FDIC indemnification asset

These loss sharing assets are measured separately from the related covered assets as they are not contractually embedded in the assets and are not transferable with the assets should CenterState choose to dispose of them. Fair value was estimated using projected cash flows related to the loss sharing agreements based on the expected reimbursements for losses and the applicable loss sharing percentage. These expected reimbursements do not include reimbursable amounts related to future covered expenditures. These cash flows were discounted to reflect the uncertainty of the timing and receipt of the loss sharing reimbursement from the FDIC. Fair value is considered to be Level 3 pricing.

6

STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED

By CenterState Bank of Florida, N.A.

(a wholly owned subsidiary of CenterState Banks, Inc.)

(dollars are in thousands)

FHLB stock

It was not practicable to determine the fair value of Federal Home Loan Bank (“FHLB”) stock due to restrictions placed on its transferability, and as such has been recorded at its redeemable value.

Core deposit intangible

This intangible asset represents the value of the relationships that Olde Cypress had with their deposit customers. The fair value of this intangible asset was estimated based on the discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base, reserve requirements and the net maintenance cost attributable to customer deposits. Fair value is considered to be Level 3 pricing.

Deferred taxes

For income tax purposes, the Olde Cypress acquisition will be accounted for as an asset purchase and the tax bases of assets acquired will be allocated based on fair values in accordance with the Internal Revenue Code and related regulations. We did not acquire any of the tax attributes of Olde Cypress’ assets and liabilities. As a result of the $2,010 bargain purchase gain on the Olde Cypress transaction, the Company recorded a $775 deferred tax liability. Deferred taxes are reported based upon the principles in ASC Topic 740, Income Taxes, and are calculated based on the Company’s expected consolidated statutory federal and state income tax rates.

Deposits

The fair values used for the checking and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand at the reporting date. The fair values for time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered to the interest rates embedded on such time deposits, and are considered to be Level 2 pricing.

Use of estimates

Management made a number of significant estimates and assumptions relating to the reporting of assets and liabilities at the date of the statement of assets acquired and liabilities assumed. Management exercised significant judgment regarding assumptions about discount rates, future expected cash flows, including prepayments, default rates, market conditions and other future events that are highly subjective in nature, and subject to change, and all of which affected the estimation of fair values of the net assets acquired in the Olde Cypress acquisition. Actual results could differ from those estimates; others provided with the same information could draw different reasonable conclusions and calculate different fair values. Changes that may vary significantly from the Company’s assumptions include loan prepayments, the rate of default, the severity of defaults, the estimated market values of collateral at disposition, the timing of such disposition and deposit attrition.

Note 4: Net assets acquired

Under the terms of the purchase and assumption agreements, the FDIC agreed to transfer to CenterState (1) certain assets subject to loss sharing agreements at book value, (2) certain assets that are not subject to the loss sharing agreements at a contractually specified purchase price, (3) certain assets at fair value and (4) certain liabilities at book value. CenterState also agreed to transfer cash of $3,649 to the FDIC to compensate for the $11,792 net assets acquired less the $8,143 agreed upon discount (negative bid).

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STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED

By CenterState Bank of Florida, N.A.

(a wholly owned subsidiary of CenterState Banks, Inc.)

(dollars are in thousands)

Details related to the transfer at acquisition date, are as follows:

in thousands of dollars:	July 16, 2010
Net assets acquired per purchase and assumption agreements	$	11,792
Cash payment to FDIC		(3,649	)
Purchase accounting adjustments:
Loans		(30,981	)
OREO		(1,886	)
FDIC indemnification assets		26,637
Time deposits		(617	)
Core deposit intangible		714
Net assets acquired	$	2,010

Note 5: Investment securities

The table below reflects the acquired investment securities at acquisition date:

	July 16, 2010
in thousands of dollars:	fair value
U.S. government mortgage backed securities	$	8,509

The securities listed in the above table include $8,482 of GNMA single family mortgage backed securities and $27 of FHLMC single family mortgage backed securities. Both groups are adjustable rate instruments with a current weighted average maturity of 3.8 years as of the acquisition date. Mortgage backed securities are not due at a single maturity date. Securities are measured at fair value on a recurring basis and fair value is considered to be level 2 pricing.

Note 6: Loans

The composition of loans acquired at acquisition date is as follows:

	July 16, 2010
in thousands of dollars:	fair value
Covered loans:
Single family residential real estate	$	64,859
Commercial real estate		17,007
Construction, development and land		5,728
Total real estate loans		87,594
Commercial loans		2,007
Total covered loans		89,601
Loans not covered by loss sharing agreement:
Consumer and other loans		3,759
Total loans	$	93,360

The fair value of impaired loans is $38,511. The Company is currently evaluating which loans will be accounted for pursuant to ASC Topic 310-30.

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STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED

By CenterState Bank of Florida, N.A.

(a wholly owned subsidiary of CenterState Banks, Inc.)

(dollars are in thousands)

Note 7: Goodwill and other intangible assets

The statement of assets acquired and liabilities assumed reflects a core deposit intangible asset of $714 at July 16, 2010 related to the Olde Cypress acquisition. The core deposit intangible asset will be amortized utilizing an accelerated amortization method over an estimated economic life not to exceed ten years. Estimated amortization expense for the remainder of 2010 and the five subsequent years thereafter is $49, $100, $85, $72, $64 and $62, respectively. The Company will review the valuation of this intangible asset periodically for impairment. If any impairment is subsequently determined, the Company will record the impairment as an expense in its consolidated statement of operations.

In connection with the Olde Cypress acquisition, the fair value of the assets received exceeded the consideration paid. Accordingly, no goodwill was recorded as a result of the acquisition and the Company recorded a pre-tax gain of $2,010.

Note 8: Deposits

Deposits assumed are composed of the following at acquisition date:

in thousands of dollars:	July 16, 2010 fair value
Non interest bearing checking accounts	$	6,693
Interest bearing checking accounts		26,711
Interest bearing savings deposits		17,485
Time deposits		101,375
Total	$	152,264

At acquisition date, the scheduled maturities and the weighted average interest rates of time deposits of more that $100 and less than $100 were as follows:

	July 16, 2010
	greater than $100				less than $100
in thousands of dollars:	fair value		weighted average interest rate		fair value		weighted average interest rate
Less than 3 months	$	12,541	0.34	%	$	4,541	0.49	%
4 - 6 months		13,477	0.44	%		6,377	0.56	%
7 - 12 months		32,145	0.61	%		14,965	0.85	%
1 - 2 years		9,103	0.60	%		5,212	1.15	%
2 - 3 years		805	1.78	%		1,241	1.83	%
3 - 4 years		220	2.15	%		362	2.15	%
4 - 5 years		102	2.50	%		284	2.50	%
TOTAL	$	68,393	0.55	%	$	32,982	0.86	%

9

STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED

By CenterState Bank of Florida, N.A.

(a wholly owned subsidiary of CenterState Banks, Inc.)

(dollars are in thousands)

Note 9: Subsequent Events

Subsequent events are events and transactions that occur after the balance sheet date but before financial statements are issued or are available to be issued. The effects of subsequent events and transactions are recognized in the financial statements when they provide additional evidence about conditions that existed at the balance sheet date. Subsequent to the July 16, 2010 acquisition date, CenterState sold all $8,509 of investment securities acquired and recognized a pre-tax loss of approximately $13.

As permitted by the FDIC, CenterState had the option to subsequently reprice the acquired deposit portfolios to current market rates. Within seven days of the acquisition date, CenterState sent notification indicating that all internet time deposits, approximately $35 million, will be repriced to market rates effective September 1, 2010. As of August 31, 2010 approximately $28 million of these time deposits were redeemed early. No other deposits were repriced.

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