COMPARISON OF BALANCE SHEETS AT MARCH 31, 2009 AND DECEMBER 31, 2008

Overview

Total assets were $1,802,024,000 as of March 31, 2009, compared to $1,333,143,000 at December 31, 2008, an increase of $468,881,000 or 35%. The increase was due primarily from the acquisition of the Ocala branches from the FDIC, growth in correspondent bank deposits (i.e. federal funds purchased), and internally generated deposit growth.

Federal funds sold

Federal funds sold were $108,073,000 at March 31, 2009 (approximately 6.0% of total assets) as compared to $57,850,000 at December 31, 2008 (approximately 4.3% of total assets). We use our available-for-sale securities portfolio, as well as federal funds sold 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

Securities available-for-sale, consisting primarily of U.S. government agency securities and municipal tax exempt securities, were $617,790,000 at March 31, 2009 (approximately 34% of total assets) compared to $252,080,000 at December 31, 2008 (approximately 19% of total assets), an increase of $365,710,000 or 145%. We use our available-for-sale securities portfolio, as well as federal funds sold 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." The significant increase in our securities available-for-sale during the current period was due to the acquisition of the Ocala branches and the related deposits from the FDIC, the increase in correspondent bank deposits (i.e. federal funds purchased) and internally generated deposit growth. Over time, our loan growth will eventually catch up to the rapid deposit growth we experienced this quarter, and future cash flows generated from our securities portfolio will be reallocated to our loan portfolio. 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, as discussed above.

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, 2009, were $894,676,000, or 55% of average earning assets, as compared to $834,971,000, or 68% of average earning assets, for the quarter ending March 31, 2008. Total loans, net of unearned fees and cost, at March 31, 2009 and December 31, 2008 were $902,252,000 and $892,001,000, respectively, an increase of $10,251,000, or 1.1%. This represents a loan to total asset ratio of 50% and 67% and a loan to deposit ratio of 69% and 90%, at March 31, 2009 and December 31, 2008, respectively.

Our residential real estate loans totaled $240,184,000 or 27% of our total loans as of March 31, 2009. As with all of our loans, these are originated in our geographical market area in central Florida.

We do not engage in sub-prime lending. As of this same date, our commercial real estate loans totaled $423,930,000, or 47% of our total loans. Construction, development, and land loans totaled $93,186,000, or 10% of our loans. As a group, all of our real estate collateralized loans represent approximately 84% of our total loans at March 31, 2009. The remaining 16% is comprised of commercial loans (10%) and consumer loans (6%).

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.

The following table sets forth information concerning the loan portfolio by collateral types as of the dates indicated (dollars are in thousands).

                                                                   March 31,         Dec 31,
                                                                      2009            2008
Real estate loans
Residential                                                        $  240,184       $ 223,290
Commercial                                                            423,930         434,488
Construction, development, land                                        93,186          92,475

Total real estate                                                     757,300         750,253

Commercial                                                             91,403          80,523
Consumer and other                                                     54,248          61,939

Gross loans before                                                    902,951         892,715

Unearned fees/costs                                                      (699 )          (714 )

Total loans net of unearned fees                                      902,252         892,001

Allowance for loan losses                                             (13,472 )       (13,335 )


Total loans net of unearned fees and allowance for loan losses     $  888,780       $ 878,666

Credit quality and allowance for loan losses

We maintain an allowance for loan losses that we believe is adequate to absorb probable losses inherent in our loan portfolio. 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 Statement of Financial Accounting Standard No. 114. Impaired loans are those loans that management has estimated will not repay as agreed upon. 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 repay 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.

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, 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, 2009 and December 31, 2008.

                                                    Mar 31,         Dec 31,         Increase
(amounts are in thousands of dollars)                2009            2008          (decrease)
Impaired loans                                     $  22,865       $  24,191       $    (1,326 )
Component 1 (specific allowance)                       1,302           1,799              (497 )
Specific allowance as percentage of impaired
loans                                                   5.69 %          7.44 %        (175 bps )

Total loans other than impaired loans                879,387         867,810            11,577
Component 2 (general allowance)                       12,170          11,536               634
General allowance as percentage of non
impaired loans                                          1.38 %          1.33 %           5 bps

Total loans                                          902,252         892,001            10,251
Total allowance for loan losses                       13,472          13,335               137
Allowance for loan losses as percentage of
total loans                                             1.49 %          1.49 %         --- bps

As shown in the table above, our allowance for loan losses ("ALLL") as a percentage of total loans outstanding was 1.49% at March 31, 2009 and at December 31, 2008. Our ALLL increased by a net amount $137,000 during this three month period. Component 2 (general allowance) increased by $634,000 during the period. This increase is primarily due to changes in this component's environmental risk factors as well as an increase in our loan portfolio. Component 1 (specific allowance) decreased by $497,000. This Component is the result of specific allowance analyses prepared for each of our impaired loans. The table below sets forth the activity in the allowance for loan losses for the periods presented, in thousands of dollars.

         For the three month period ending March 31,     2009         2008
         Allowance at beginning of period              $ 13,335     $ 10,828
         Charge-offs
         Real estate loans
         Residential                                       (313 )       (226 )
         Commercial                                        (417 )         -
         Construction, development, land                   (622 )         -

         Total real estate loans                         (1,352 )       (226 )
         Commercial                                        (184 )         -
         Consumer and other                                 (61 )        (72 )

         Total charge-offs                               (1,597 )       (298 )

         Recoveries
         Real estate loans
         Residential                                          4           78
         Commercial                                           5           -
         Construction, development, land                     -            -

         Total real estate loans                              9           78
         Commercial                                          11            6
         Consumer and other                                  11           40

         Total recoveries                                    31          124

         Net charge-offs                                 (1,566 )       (174 )
         Provision for loan losses                        1,703          604

         Allowance at end of period                    $ 13,472     $ 11,258

Nonperforming loans and nonperforming assets

Non-performing loans consist of non-accrual loans and loans past due 90 days or more and still accruing interest. Non-performing assets consist of non-performing loans plus repossessed real estate owned ("OREO") and repossessed assets other than real estate. We place loans on nonaccrual status when the loan becomes 90 days past due as to interest or principal, or when the full timely collection of interest or principal becomes uncertain, unless the loan is both well secured and in the process of collection. All interest accrued but not received for loans placed on nonaccrual, is reversed against interest 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 as a percentage of total loans were 2.45% at March 31, 2009, compared to 2.23% at December 31, 2008.

Non performing assets (which we define as non performing loans, as defined above, plus (a) OREO (i.e. real estate acquired through foreclosure or deed in lieu of foreclosure); and (b) other repossessed assets that are not real estate), were $34,442,000 at March 31, 2009, compared to $24,835,000 at December 31, 2008. Non performing assets as a percentage of total assets was 1.91% at March 31, 2009, compared to 1.86% at December 31, 2008.

As shown in the table below, the largest component of non performing loans is non accrual loans, which as of March 31, 2009 management had identified a total of $20,819,000 (77 loans). Of this amount approximately $3,437,000 or 17% are residential real estate loans (25 loans); approximately $8,945,000 or 43% are commercial real estate loans (17 loans); approximately $6,974,000 or 33% are construction, acquisition and development, and land loans (15 loans); approximately $1,238,000 or 6% are commercial loans (10 loans); and $225,000 or 1% are consumer and all other loans (10 loans).

We have no construction or development loans with national builders. We do business with local builders and developers that have typically been long time customers. As indicated above, non accrual construction, acquisition and development, and land loans totaled $6,974,000 at March 31, 2009. The second largest loan in this category is for $1,034,000 and is collateralized by five newly completed townhouses. We also have one single family construction loan for $566,000. The remaining 14 loans ($5,374,000) in this category are all either developed lots or other land related loans. The largest loan is for $2,250,000 and is collateralized by four river front building lots plus 38 building lots in a residential subdivision. Two of these fifteen loans have a specific allowance which in the aggregate totals $75,000.

OREO at March 31, 2009 was $11,903,000, which represents 24 single family homes ($2,205,000), seven mobile homes with land ($492,000), eleven commercial real estate properties ($4,430,000) and various parcels of land including residential building lots, land acquisition, development and construction ($4,776,000).

The following table sets forth information regarding the components of nonperforming assets at the dates indicated (in thousands of dollars).

                                                                Mar. 31         Dec. 31
                                                                  2009            2008
Non-accrual loans                                               $ 20,819        $ 19,863
Past due loans 90 days or more and still accruing interest         1,304              50

Total non-performing loans                                        22,123          19,913

Other real estate owned                                           11,903           4,494
Repossessed assets other than real estate                            416             428

Total non-performing assets                                     $ 34,442        $ 24,835


Total non-performing loans as a percentage of total loans           2.45 %          2.23 %
Total non-performing assets as a percentage of total
assets                                                              1.91 %          1.86 %
Allowance for loan losses                                       $ 13,472        $ 13,335
Allowance for loan losses as a percentage of
non-performing loans                                                  61 %            67 %

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, 2009, 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.

Bank premises and equipment

Bank premises and equipment was $62,401,000 at March 31, 2009 compared to $61,343,000 at December 31, 2008, an increase of $1,058,000 or 2%. This amount is the result of purchases totaling $1,809,000 less $751,000 of depreciation expense. Our purchases during the quarter included a parcel of land acquired for a future branch site in Polk County (approximately $1,000,000), continued construction cost on a branch office building in Lake County (approximately $500,000), and the remaining amount (approximately $309,000) was spent on furniture, fixtures and equipment purchases.

Deposits

Total deposits were $1,311,684,000 at March 31, 2009, compared to $993,800,000 at December 31, 2008, an increase of $317,884,000 or 32%. Most of this increase is due to our acquisition of the Ocala branches from the FDIC, whereby we acquired approximately $178,000,000 of deposits. The rest of the growth was internally generated and included several large deposits from several local municipalities.

The table below sets forth our deposits by type and as a percentage to total deposits at March 31, 2009 and December 31, 2008 (amounts shown in the table are in thousands of dollars).

                                                       % of                       % of
                                       Mar 31, 2009    total      Dec 31, 2008    total
  Demand - non-interest bearing       $      209,906      16 %   $      141,229      14 %
  Demand - interest bearing                  160,227      12 %          143,510      14 %
  Savings and money market accounts          261,930      20 %          222,367      23 %
  Time deposits                              679,621      52 %          486,694      49 %

  Total deposits                      $    1,311,684     100 %   $      993,800     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 $26,856,000 at March 31, 2009 compared to $26,457,000 at December 31, 2008.

Federal funds purchased

Federal funds purchased are overnight deposits from correspondent banks. We commenced accepting correspondent bank deposits during September 2008. 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. At March 31, 2009 we had $209,973,000 of correspondent bank deposits or federal funds purchased, compared to $88,976,000 at December 31, 2008. This growth along with the Ocala deposit acquisition and the deposit growth internally generated were the primary reasons for the asset growth we experienced during the current quarter.

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, 2009 and December 31, 2008, advances from the Federal Home Loan Bank were as follows (amounts are in thousands of dollars).

                                                         Mar 31, 2009        Dec 31, 2008
Daily overnight advances, at March 31, 2009 the
interest rate is 0.62%                                  $        3,000      $           -
Daily overnight advances, at December 31, 2008 the
interest rate is 0.46%                                              -                6,750
Matures February 2, 2009, interest rate is fixed
at 2.72%                                                            -               10,000
Matures June 29, 2009, interest rate is fixed at
1.18%                                                            3,000               3,000
Matures January 7, 2011, interest rate is fixed at
3.63%                                                            3,000               3,000
Matures June 27, 2011, interest rate is fixed at
3.93%                                                            3,000               3,000
Matures January 11, 2010, interest rate is fixed
at 1.04%                                                         3,000                  -
Matures January 12, 2010, interest rate is fixed
at 1.04%                                                         3,000                  -
Matures July 12, 2010, interest rate is fixed at
1.50%                                                            3,000                  -
Matures January 10, 2011, interest rate is fixed
at 1.84%                                                         3,000                  -
Matures January 21, 2011, interest rate is fixed
at 1.97%                                                         3,000                  -
Matures December 30, 2011, interest rate is fixed
at 2.30%                                                         3,000                  -
Matures January 21, 2012, interest rate is fixed
at 2.30%                                                         3,000                  -

Total                                                   $       33,000      $       25,750

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 $10,000,000. 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 after five years, and sooner in specific events, 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 $2,500,000. 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 after five years, and sooner in specific events, 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.

Stockholders' equity

Stockholders' equity at March 31, 2009, was $180,024,000, or 10.0% of total assets, compared to $179,165,000, or 13.4% of total assets at December 31, 2008. The increase in stockholders' equity was due to the following items:

$179,165,000     Total stockholders' equity at December 31, 2008
     772,000     Net income during the period
   (998,000)     Dividends paid and/or accrued, common and preferred
   1,686,000     Net increase in market value of securities available for sale, net
                 of deferred taxes
      57,000     Employee stock options exercised
     104,000     Employee stock option expense consistent with SFAS #123(R)
     (5,000)     Other

$180,781,000     Total stockholders' equity at March 31, 2009

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, 2009, each of our four 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, 2009 and December 31, 2008 are presented in the table below.

                                                      Actual            Well capitalized        Excess
                                                  Amount     Ratio       Amount      Ratio      Amount
March 31, 2009
Total capital (to risk weighted assets)          $ 165,819    15.3 %   $   108,491    > 10 %   $ 57,328
Tier 1 capital (to risk weighted assets)           152,347    14.0 %        65,095     > 6 %     87,252
Tier 1 capital (to average assets)                 152,347     9.5 %        79,908     > 5 %     72,439

December 31, 2008
Total capital (to risk weighted assets)          $ 170,164    17.4 %   $    97,648    > 10 %   $ 72,516
Tier 1 capital (to risk weighted assets)           157,944    16.2 %        58,589     > 6 %     99,355
Tier 1 capital (to average assets)                 157,944    12.6 %        62,751     > 5 %     95,193

COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2009 AND 2008

Overview

Net income for the three months ended March 31, 2009 was $772,000 or $0.03 per share basic and diluted, compared to $1,111,000 or $0.09 per share basic and diluted for the same period in 2008. Our average earning assets increased by . . .