On April 1, 2019, the Company completed its acquisition of NCOM whereby NCOM merged with and into the Company. Pursuant to and simultaneously with the merger of NCOM with and into the Company, NCOM’s wholly owned subsidiary bank, National Bank of Commerce, merged with and into the Company’s subsidiary bank, CenterState Bank, N.A. As a result of that merger, the Bank acquired a controlling 70% interest in CBI, and its factoring subsidiary, Corporate Billing. Effective September 30, 2019, the Company purchased the 30% noncontrolling interest of CBI for $11,400.

The Company’s primary reasons for the transaction were to further expand its franchise into Georgia and Alabama, further solidify its market share in the Florida market and expand its customer base to enhance deposit fee income and leverage operating cost through economies of scale. The acquisition increased the Company’s total assets and total deposits by approximately 36% and 37% as compared with the balances at December 31, 2018 and is expected to positively affect the Company’s operating results to the extent the Company earns more from interest earning assets than it pays in interest on its interest bearing liabilities. During the three-month periods ending March 31, 2020 and 2019, the Company incurred approximately ($25) and $1,264, respectively, of acquisition costs related to this transaction. These acquisition costs are reported in merger and acquisition related expenses on the Company’s Condensed Consolidated Statements of Income and Comprehensive Income.

The acquisition was accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. The Company recognized goodwill on this acquisition of $401,537 which is nondeductible for tax purposes as this acquisition is a nontaxable transaction. The goodwill is calculated based on the fair values of the assets acquired and liabilities assumed as of the acquisition date. 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.

The Company acquired 100% of the outstanding common stock of NCOM. The purchase price consisted of stock plus cash in lieu of fractional shares. Each share of NCOM common stock was exchanged for 1.65 shares of the Company’s common stock. Based on the closing price of the Company’s common stock on March 29, 2019, the resulting purchase price was $831,696.

Number of shares of NCOM common stock outstanding at March 29, 2019		21,011,352
Per share exchange ratio		1.650
Number of shares of CenterState common stock less 763 of fractional shares		34,667,968
CenterState common stock price per share on March 29, 2019		$23.81
Fair value of CenterState common stock issued		$825,444

Cash Consideration for 763 of fractional shares		$20

Total Stock Consideration		$825,444
Total Cash Consideration		20
Total consideration to be paid to NCOM common shareholders		$825,464
Fair value of NCOM stock options converted to CenterState stock options		5,848
Fair value of NCOM warrants converted to CenterState warrants		384
Total Purchase Price for NCOM		$831,696

The list below summarizes the fair value of the assets purchased, including goodwill, and liabilities assumed as of the April 1, 2019 purchase date.

		April 1, 2019
Assets:
Cash and cash equivalents		$268,524
Loans, held for investment		3,309,234
Purchased credit impaired loans		18,616
Loans held for sale		14,588
Investments		178,488
Accrued interest receivable		11,006
Branch real estate		61,295
Furniture and fixtures		7,204
Bank property held for sale		12,436
FHLB, FRB and other stock		17,076
Bank owned life insurance		55,474
Other real estate owned		875
Servicing asset		1,581
Core deposit intangible		39,900
Goodwill		401,537
Deferred tax asset		16,285
Other assets		23,663
Total assets acquired		$4,437,782
Liabilities:
Deposits		$3,486,732
Securities sold under agreement to repurchase		18,833
Subordinated debt		38,802
Accrued interest payable		2,095
Other liabilities		47,622
Noncontrolling interest		12,002
Total liabilities assumed and noncontrolling interest		$3,606,086

In the acquisition, the Company acquired $3,327,850 of loans at fair value, net of $61,384, or 1.8%, estimated discount to the outstanding principal balance, representing 39.9% of the Company’s total loans at December 31, 2018. Of the total loans acquired, management identified $18,616 with credit deficiencies. All loans that were on non-accrual status including accruing loans that are 90 days or more past due that should be recognized as non-accrual, all substandard loans or all loans with impaired collateral value including TDRs and all loans under litigation were considered by management to be credit impaired and are accounted for pursuant to ASC Topic 310-30. No TDRs were acquired from the NCOM transaction.

The table below summarizes the total contractually required principal and interest cash payments, management’s estimate of expected total cash payments and fair value of the loans as of April 1, 2019 for purchased credit impaired loans. Contractually required principal and interest payments have been adjusted for estimated prepayments.

The table below presents information with respect to the fair value of acquired loans, as well as their Book Balance at acquisition date.

	Book	Fair
	Balance	Value
Loans:
Single family residential real estate	$615,296	$608,705
Commercial real estate	1,762,480	1,736,653
Construction/development/land	363,005	358,643
Commercial loans	539,698	536,262
Consumer and other loans	70,058	68,971
Purchased credit-impaired	38,697	18,616
Total earning assets	$3,389,234	$3,327,850

In its assumption of the deposit liabilities, the Company believed the deposits assumed from the acquisition 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 $39,900, 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.

Pro-forma data for the three-month period ending March 31, 2019 listed in the table below presents pro-forma information as if the NCOM acquisitions occurred at the beginning of 2019.

		Three-month ended March 31,
		2019
Net interest income		$163,968
Net income available to common shareholders		$65,178
EPS - basic		$0.50
EPS - diluted		$0.50

The disclosures regarding the results of operations for NCOM subsequent to its respective acquisition date are omitted as this information is not practical to obtain. Although the Company did not convert NCOM’s core system until the third quarter of 2019, the majority of the fixed costs and purchase accounting entries were booked on the Company’s core system making it impractical to determine NCOM’s results of operation on a stand-alone basis.

Announcement of Merger of Equals between CenterState and South State Corporation

On January 27, 2020, the Company and South State Corporation (“South State”) announced the execution of an Agreement and Plan of Merger, dated as of January 25, 2020 (the “Merger Agreement”), providing for the merger of the Company and South State, subject to the terms and conditions set forth therein. Under the terms of the Merger Agreement, which was unanimously approved by the Boards of Directors of both companies, the Company’s shareholders will receive 0.3001 shares of South State

common stock for each share of CenterState common stock they own. The transaction is expected to close in the third quarter of 2020 subject to customary closing conditions, including receipt of all applicable regulatory approvals and shareholder approval of each company. The Company’s primary reason for the transaction is to create a leading Southeastern-based regional bank, which diversifies each company’s geographies into a contiguous six-state footprint, spanning from Florida to Virginia. The transaction will also expand both companies’ customer base which will enhance deposit fee income and leverage operating cost through economies of scale. The combined company will operate under the South State Bank name and will trade under the South State ticker symbol SSB on the Nasdaq stock market. The company will be headquartered in Winter Haven, Florida and will maintain a significant presence in Columbia and Charleston, South Carolina; Charlotte, North Carolina; and Atlanta, Georgia. South State is a bank holding company headquartered in Columbia, South Carolina. South State’s bank subsidiary South State Bank operates 157 banking locations. South State reported total assets of $16,642,911, total loans of $11,506,890 and total deposits of $12,344,547 as of March 31, 2020.