TABLE OF CONTENTS

SUNSHINE BANCORP, INC.

SUNSHINE STATE BANK

Plant City, Florida

TABLE OF CONTENTS

SUNSHINE BANCORP, INC.

SUNSHINE STATE BANK

Plant City, Florida

(continued)

LIST OF TABLES

SUNSHINE BANCORP, INC.

SUNSHINE STATE BANK

Plant City, Florida

I. OVERVIEW AND FINANCIAL ANALYSIS

Introduction

Sunshine State Federal Savings and Loan Association is a federally chartered mutual savings and loan association organized in 1954 under the name First Federal Savings and Loan Association, and has operated continuously in Plant City, Florida, and other nearby contiguous areas of Hillsborough County, Florida, since its founding. In 1975, First Federal Savings and Loan Association opened a branch office in Zephyrhills, expanding its footprint into Pasco County, Florida and it concurrently changed its name to Sunshine State Federal Savings and Loan Association. In connection with the completion of the conversion, the Association intends to change its name to Sunshine State Bank (hereinafter referred to as “Sunshine State” or the “Bank”). The Bank conducts business from its main office in Plant City, and a total of 4 branch offices, with the main office and 3 branches located in Hillsborough County and one branch located in Pasco County of Florida.

Plant City, Florida, is located in Hillsborough County in southwest Florida, approximately 30 miles east of Tampa in the I-4 corridor. The Bank’s branch banking locations are located in Hillsborough and Pasco Counties, in areas east and northeast of the downtown Tampa area. Lending operations have been focused over broader area but have generally been in Hillsborough and Pasco Counties. In January 2010, the Bank relocated its Zephyrhills office to a newly owned building complete with ATM and drive-in facilities. In addition, the Bank delivers its banking products and services and related information services through alternative delivery channels including the Internet, remote deposit capture and ATMs.

Pursuant to the conversion transaction (the “Conversion”), a new holding company will be formed called Sunshine Bancorp, Inc. (the “Company”), which will own all of the outstanding shares of common stock of the Bank. Hereinafter, unless otherwise noted, the discussion contained herein reflects the assets and liabilities of the Bank Sunshine Federal Savings and Loan Association, which will be consolidated into the Company as part of the standard mutual-to-stock conversion transaction, and the consolidated entity will be referred to as Sunshine State or the Bank, unless specifically indicated otherwise.

Sunshine State is a member of the Federal Home Loan Bank (“FHLB”) system and its deposits are insured up to the regulatory maximums by the Deposit Insurance Fund of the Federal Deposit Insurance Corporation (“FDIC”). The Bank operates as a community-oriented financial institution offering traditional financial services to consumers and businesses in the regional market area, thereby attracting retail deposits from the general public and primarily using those funds to originate 1-4 family, commercial real estate, and commercial business loans to their customers, and invest in securities such as U.S. Government and agency securities. At December 31, 2013, the Bank had $194.4 million of total assets, $111.3 million in loans, $164.9 million of total deposits, and retained earnings of $26.6 million, equal to 13.7% of total assets. The Bank does not have any intangible assets. For the year ended December 31, 2013, the Bank reported net income equal to $141,000, or 0.07% of average assets. The Bank’s audited financial statements are included by reference as Exhibit I-1 and key operating ratios are shown in Exhibit I-2.

Plan of Conversion

On December 18, 2013, the Board of Directors of the Bank adopted a plan of conversion, incorporated herein by reference, in which the Bank will convert from a federally-chartered mutual savings association to a federally-chartered stock savings bank and become a wholly-owned subsidiary of Sunshine Bancorp, Inc. (“Bancorp” or the “Company”), a newly formed Maryland corporation. Bancorp will offer 100% of its common stock to qualifying depositors of Sunshine State in a subscription offering and, if necessary, to members of the general public through a community offering and/or a syndicated community offering. Going forward, Bancorp will own 100% of the Bank’s stock, and the Bank will initially be Bancorp’s sole subsidiary. A portion of the net proceeds received from the sale of common stock will be used to purchase all of the then to be issued and outstanding capital stock of the Bank and the balance of the net proceeds will be retained by the Bank.

At this time, no other activities are contemplated for the Company other than the ownership of the Bank, extending a loan to the newly-formed employee stock ownership plan (the “ESOP”) and reinvestment of the proceeds that are retained by the Bank. In the future, the Bank may acquire or organize other operating subsidiaries, diversify into other banking-related activities, pay dividends or repurchase its stock, although there are no specific plans to undertake such activities at the present time.

Use of Conversion Proceeds

Management has indicated that both the increased capital from the Conversion as well as being in the stock form of organization will facilitate the Bank’s compliance with its capital requirements as required by regulations. Over the longer term, the capital will facilitate the Bank’s ability to expand the balance sheet and achieve other key corporate objectives. The projected uses of proceeds from the Conversion are highlighted below.

Initially, a substantial portion of the net proceeds at both the Bank and Bancorp levels will be invested in securities issued by U.S. Government agencies, U.S. treasuries and obligations issued by U.S. Government agencies and U.S. Government-sponsored enterprises generally consistent with the Bank’s historical investment securities portfolio composition. Over the longer term, the Bank will seek to undertake loan and deposit growth and other strategies to leverage the newly-raised capital and enhance Sunshine State’s long term earnings potential and shareholder returns.

Strategic Overview

Throughout much of the Bank’s corporate history, Sunshine State’s strategic focus has been that of a community-oriented financial institution with a primary focus on meeting the borrowing, savings, and other financial needs of its local customers in Hillsborough and Pasco Counties, where the Bank maintains branch offices. The Bank has historically pursued a traditional thrift business model pursuant to which Sunshine State has emphasized the origination of 1-4 family first mortgage loans for portfolio, as well as commercial real estate and commercial business loans, for portfolio investment. The Bank has funded its investment activities principally by retail deposits generated through the branch network. The Bank has sought to emphasize high quality and flexible service, capitalizing on its local orientation, competitive rates, and safety and soundness.

For the 30 year period from its chartering into the early 1980s, the Bank pursued a portfolio residential lending strategy typical of a thrift institution, with a moderate level of diversification into commercial real estate and commercial business lending. However, beginning in the early 1980s, the Bank commenced a gradual evolution of its strategy designed to stabilize its earnings through a variety of interest rate and economic environments, while simultaneously enhancing Sunshine State’s earnings potential. From a funding perspective, the Bank focused on increasing the balance of low-cost interest-bearing and non-interest bearing checking accounts through a variety of marketing initiatives. From a lending perspective, the Bank sought to expand the commercial loan portfolio both through mortgage and non-mortgage lending.

Importantly, the emphasis on commercial lending coupled with various market factors have resulted in a gradual shift in the loan portfolio mix, particularly since fiscal 2009. In this regard, residential mortgage loans have been diminishing, both in terms of the outstanding dollar balance and in proportion to the total loan portfolio. While historically low market interest rates have fostered demand for long term fixed rate loan, the Bank has been unwilling to originate longer term fixed rate loans at the prevailing market rate owing to interest rate risk considerations. While the commercial loan balances have also declined since 2009, the reduction reflects the limited demand for commercial loans by commercial borrowers with strong credit characteristics that the Bank seeks to serve.

The financial crisis and subsequent national recession, which significantly affected the Bank’s market, also impacted Sunshine State’s loan portfolio in several ways. First, demand for Sunshine State’s commercial loan products was significantly curtailed and the Bank became more vigilant in its commercial loan underwriting. Moreover, a portion of the Bank’s 1-4 family mortgages were “underwater” as the underlying collateral values of the homes were depressed to levels below the outstanding loan balance. This latter factor coupled with local job losses and increasing rates of unemployment resulted in increasing loan delinquency rates, foreclosures and loan chargeoffs. As a result, while the Bank has historically maintained strong credit quality ratios, the level of non-performing assets (“NPAs”) have increased from 0.60% of assets as of the end of fiscal 2007, to a fiscal year end peak level of 3.14% of assets as of December 31, 2012, excluding performing troubled debt restructurings (“TDRs”). The adverse asset quality

trends have also impacted the Bank’s operating condition as a result of increasing levels of loan loss provisions. Moreover, diminishing loan balances have led to spread compression for Sunshine State. These factors together have limited Sunshine State’s profitability and the Bank reported net losses in fiscal 2009, 2010 and 2012, while modest positive earnings were reported in fiscal 2011 and 2013.

Going forward, following a comprehensive evaluation of the 1-4 family mortgage product line, including an evaluation of the interest rate risk inherent in fixed rate residential mortgage lending for portfolio, as well as other considerations related to the local market and asset quality, the Bank has substantially ceased originating 1-4 family residential mortgage loans for portfolio, electing to focus on increasing the originations of commercial real estate and commercial business loans. In lieu of the prior portfolio lending strategy, beginning in the fourth quarter of 2013, Sunshine State commenced utilizing the services of an unaffiliated mortgage banking company to underwrite and fund one- to four-family residential mortgage loans. Through this third party relationship, which will be more fully described in a section to follow, the Bank is able to offer a full line of competitively priced residential mortgage products to its customers while simultaneously generating non-interest fee income and also limiting the interest rate risk exposure of holding long term fixed rate mortgage loans.

While retrenching from fixed rate residential mortgage lending, the Bank has simultaneously determined to gradually restructure the loan portfolio to include a greater proportion of commercial loans. Sunshine State’s objective is to provide a more diverse array of loan products to facilitate growth and the Bank’s ability to compete, especially in view of the apparent credit and interest rate risk of fixed rate residential mortgage lending in comparison to the yields available on such loans. Moreover, commercial mortgage and business loans frequently have larger balances, as well as shorter repricing terms, in comparison to the fixed rate mortgage loans that comprise the majority of the loan portfolio.

The Bank began its commercial lending practice in the early 1980s, and Sunshine State has continued to emphasize commercial loan originations in recent years though the portfolio balances have been diminishing as weak market demand has limited the overall origination volume. In the future, the Bank’s intent will be to expand the commercial loan portfolio, including both the commercial mortgage and non-mortgage portfolios. The Bank’s expectation will be to generate growth on an organic basis from existing customers, and potentially new customers, as the Bank’s loan officers and staff intensify their efforts to build broad-based

commercial loan and deposit relationships. Management has indicated that its success in this regard may likely be contingent upon continued improvements in the local economy which would be supportive of increasing commercial loan demand.

The Bank focuses its commercial lending on small business located in the local market area, such as farming and agricultural businesses, schools and church services, while targeting owner occupied business, such as professional and medical service providers. Commercial business loans also include equipment financing, automobile term loans, and working capital lines of credit. The Bank believes it has the experience and expertise to expand the commercial loan portfolio, and is expected to employ additional commercial lending expertise in the near future, to increase market penetration within existing markets and expand lending presence into new adjacent markets. Important from a valuation perspective, the Bank’s business plan to expand the commercial loan portfolio may enhance Sunshine State’s earnings over the long term, but management has indicated that realization of its commercial lending goals will be dependent upon improving market conditions to support loan demand, as well as management’s ability to attract and retain skilled and motivated loan originators. At the same time, the expanded commercial lending may increase Sunshine State’s credit risk exposure

The Bank’s cash, liquidity and securities portfolios consist of interest-earning time deposits with other banks, as well as intermediate-to long-term investment securities. All of the Bank’s investment securities are currently classified as held to maturity (“HTM”), in order to avoid the impact on capital of the erratic swings related to changing market values. The investment portfolio includes securities issued by U.S. Government agencies, U.S. treasuries and obligations issued by U.S. Government agencies and U.S. Government-sponsored enterprises.

Retail deposits have consistently served as the primary interest-bearing funding source. The Bank began offering deposit checking accounts in the early 1980s, and has continuously sought to increase the deposit base through competitive pricing and periodic promotions. Due to their lower cost of funds, core deposits have always been the focus of the Company. Low-cost transaction deposit accounts are generally less sensitive to withdrawal during interest rate fluctuations, and also provide the opportunity for deposit-related fee income generation. Going forward, the Bank’s strategy is to attract and retain core deposits, including growing demand and checking accounts, primarily by offering competitive rates, implementing marketing programs, and providing a high level of service. The Bank’s strategy also focuses on increasing

penetration of the Bank’s deposits further into its existing markets, with an emphasis on growing the Zephyrhills branch market in Pasco County. In addition, the Bank intends to expand its commercial deposit base in the future, through further development of broad-based banking relationships and cross-selling of products, especially as it expands its commercial real estate and commercial business lending activities.

Although the Bank has access to Federal Home Loan Bank advances as well as lines of credit at two financial institutions, the Bank does not utilize borrowings as a supplemental funding source, and has no quantified intention to undertake borrowings or debt in the near future.

The post-Offering business plan of the Bank reflects the intent to continue to offer the products and services which have been the Bank’s emphasis in recent years. In addition, Sunshine State expects to eliminate residential mortgage loans as a portfolio investment product, while expanding commercial mortgage and commercial business lending over time. The increased capital from the Offering is expected to facilitate additional balance sheet growth and enhanced profitability, as well as increase the Bank’s competitive posture and financial strength. In terms of specific strategies, the Bank plans to undertake the following key elements of its business plan on a post-Offering basis:

Balance Sheet Growth Trends

Table 1.1 shows the Bank’s historical balance sheet data for the most recent five fiscal years ended December 31, 2013. Over this period, assets fluctuated in a narrow range from a low of $194.0 million as of December 31, 2012 to a high of $198.1 million as of December 31, 2010, and equaled $194.4 million as of the fiscal 2013 year end. The limited growth is the result of several factors including slack demand for commercial loans in the Bank’s local market, and the Bank’s reluctance to offer highly competitive rates on 1-4 family residential mortgage loans at a point in time when long term interest rates were diminishing to historically low levels. As a result of the limited investment opportunities, Sunshine State sought to restrain deposit growth since fiscal 2009, through less competitive deposit pricing.

Since December 31, 2009, the Bank’s 1-4 family mortgages have decreased from $84.3 million to $60.0 million, as of December 31, 2013, or at a 8.5% annual pace. The commercial (both mortgage and non-mortgage) and multi-family mortgage loan portfolios have diminished from $65.4 million to $44.6 million, over the corresponding timeframe, equivalent to a 9.1% annual pace. Overall, the loan portfolio has declined from $161.0 million as of December 31, 2009, to $111.3 million as of December 31, 2013, which reflects an 8.8% annual reduction.

The Bank’s cash and cash equivalents balances fluctuated based on changing liquidity balances including loan repayments. In view of the loan portfolio shrinkage experienced throughout the past five years, the Bank redeployed excess liquidity and investable funds into time deposits with banks and investment securities, which primarily included government and agency securities. Commencing in fiscal 2011, the Bank invested in CDs issued by other financial institutions, which increased to $9.5 million (4.9% of assets) as of December 31, 2013. However, the largest component of growth was in the investment securities portfolio, which increased at a 62.0% annual rate since the end of 2009, to equal $48.4 million as of December 31, 2013. All securities are held to maturity, in order to avoid the impact on GAAP capital of the erratic swings in market valuations of bonds.

The Bank’s assets are funded through deposits and retained earnings. Deposits have historically comprised the majority of funding liabilities, and have decreased at an annual rate of 0.4% since the end of fiscal 2009, reflecting the limited need for funds in view of the shrinkage realized in the loan portfolio. Consistent with the Bank’s strategy to focus on building core deposits, the Bank’s deposit mix has shifted as higher costing certificates of deposit have decreased at an annual rate of 7.8% from 2009 to 2013. Comparatively, core deposit accounts including savings and transaction accounts have realized modest growth over the past five fiscal years. Sunshine State’s equity balance is substantially unchanged since the end of fiscal 2009, reflecting the near breakeven level of earnings since fiscal 2010. More specifically, while equity decreased 2009 and 2010, due to the net losses experienced by the Bank, such losses have been offset by Sunshine State’s profitable operations in subsequent periods. As of December 31, 2013, Sunshine State’s capital base equaled $26.6 million, or 13.7% of total assets. Going forward, equity will be increased with the completion of the Conversion. The post-offering equity growth rate will largely be a function of the Bank’s ability to continue to improve asset quality and realize growth in the loan portfolio reversing the shrinking trend for loans in place since fiscal 2009.

Table 1.1

Sunshine State Federal Savings & Loan Association

Historical Balance Sheet Data

Sources: Sunshine State’s audited financial reports.

Loans Receivable

Loans receivable totaled $111.3 million, or 57.2% of total assets, as of December 31, 2013, and reflects an 8.8% annual decrease since the end of fiscal 2009. Over this period, the Bank’s loan portfolio declined from a high of $161.0 million in fiscal 2009 to a low of $111.3 million as of December 31, 2013. As noted previously, the Bank experienced a declining loan balance over the past five years, as commercial loan demand has been suppressed in the recessionary economic environment, while Sunshine State was not competitive in 1-4 family mortgage lending from an interest rate perspective owing to the interest rate risk management considerations.

Sunshine State’s lending strategy has historically reflected a high concentration of 1-4 family first mortgage loans, the majority of which have been fixed-rate loans. The ratio of 1-4 family first mortgage loans to total loans has consistently been above 50% of total loans. The Bank has also traditionally been a portfolio mortgage lender and has not been active in the secondary market.

As described in the Strategic Discussion, the Bank has largely ceased originating 1-4 family residential mortgage loans for portfolio and expects the remaining legacy portfolio to diminish over time. In order to maintain a full product line, Sunshine State continues to offer 1-4 family mortgage loans through a correspondent relationship it has developed with an unaffiliated mortgage banking company. Accordingly, Sunshine State will seek to increase its focus on commercial real estate and commercial business loans, which are generally secured by small businesses in the local market.

At December 31, 2013, 1-4 family mortgages equaled $59.2 million, or 52.2% of total loans. At the same time, commercial real estate loans and commercial business loans equaled $23.9 million and $17.4 million respectively, or 21.1% and 15.3% of total loans. Since fiscal year end 2009, the Bank has experienced shrinkage in all segments of its loan portfolio, especially in 1-4 family and commercial real estate loans, which declined at annual rates of 8.5% and 11.7%, respectively. Comparatively, multi-family and commercial business loans have exhibited comparatively smaller declines over the last five years, decreasing at 4.2% and 5.8% annual rates, respectively. Overall, the Bank’s mortgage lending emphasis is evidenced by the fact that 82.7% of the loan portfolio is secured by mortgage loans (including construction loans) as of December 31, 2013. Conversely, non-mortgage consumer loans and commercial business loans only comprised 17.3% of the loan portfolio.

Cash and Investments

The intent of the Bank’s investment policy is to provide adequate liquidity, to generate a favorable return on excess investable funds, and to support the established credit and interest rate risk objectives. The ratio of cash and investments (including time deposits with banks) has increased significantly from 11.5% of assets at the end of fiscal 2009 to 35.6% as of December 31, 2013. The increase in the cash and investment portfolio in proportion to total assets is primarily attributable to the redeployment of funds into investment securities during the period of loan portfolio shrinkage.

Cash and cash equivalents, which consisted of cash and due from banks, interest-bearing deposits with banks, and federal funds sold, equaled $11.1 million, or 5.7% of total assets, as of December 31, 2013. At the same date, investment securities, including U.S. Treasury securities, FHLB bonds, and U.S. government enterprise and agency bonds, equaled $48.4 million, or 24.9% of total assets (see Exhibit I-3 for the investment portfolio composition). All of the Bank’s investment securities are classified as held-to-maturity (“HTM”), and are recorded at amortized cost, and have maturities less than five years, as Sunshine State has sought to minimize its interest rate risk exposure. Additionally, the Bank has time deposits with banks and an investment in FHLB of Atlanta stock, which equaled $9.5 million and $0.2 million, or 4.9% and 0.1% of assets, respectively, as of December 31, 2013.

No major changes to the composition and practices with respect to the management of the investment portfolio are anticipated over the near term, except that the level of cash and investments is anticipated to increase initially following the Conversion. As mentioned previously, the Bank intends to invest a substantial portion of the net proceeds of the Conversion in securities that are consistent with the current investment policy. Over the longer term, the Bank will seek to redeploy funds from investments into higher yielding whole loans.

Bank-Owned Life Insurance

As of December 31, 2013, bank-owned life insurance (“BOLI”) totaled $4.1 million, or 2.1% of assets. BOLI has increased at an annual rate of 14.1% since the end of fiscal 2009, owing to the Bank’s additional purchases of BOLI and the increases in the cash surrender value of the policies.

Funding Structure

Since fiscal year end 2009, deposits have declined at a 0.4% annual rate, which was consistent with the asset shrinkage over the past five years. While the total deposit balance remained somewhat stable despite year-to-year fluctuations, the composition has changed modestly as the Bank strived to increase savings and transaction accounts and reduce reliance on time deposits. The decrease in CDs resulted primarily from management’s decision to not match competitors’ higher rates in order to reduce interest expense, as well as customers’ preference of short-term flexibility of non-certificate accounts in the current low interest rate environment. The Bank’s current strategy has been to emphasize low-cost transaction account deposits, which include NOW, savings and money market accounts.

As a result of the foregoing, the proportion of CDs to total deposits has gradually decreased from 36.6% to 26.8% from December 31, 2009 through December 31, 2013, reflecting a declining balance from $61.3 million to $44.2 million. At the same time, the balances of checking, savings and money market accounts experienced growth from 2009 to 2013, with non-interest-bearing and savings accounts reporting the largest annual growth rates of 14.1% and 6.1%, respectively. As of December 31, 2013, the Bank’s core deposits consisted of non-interest-bearing accounts (17.7% of total deposits compared to 10.3% in 2009), NOW accounts (18.3% of deposits compared to 20.5% in 2009), money market accounts (21.6% of deposits compared to 20.5% in 2009), and savings accounts (15.6% of deposits compared to 12.1% in 2009). Over the last twelve months, the Bank’s core deposits increased by $5.0 million, or 4.4%, both as a result of typical variations in customer liquidity and their related deposit balances and the gradually improving economic conditions for businesses in its market area.

In the future, the Bank’s strategy is to continue to attract transaction account deposits, as they provide a lower cost source of funds in comparison to CDs, and also provide the opportunity for generation of deposit-related fee income. In addition, the Bank intends to increase its commercial deposits, such as farming and agriculture related money market business accounts, by broadening its banking relationships with lending customers, as it expands it commercial real estate and commercial business lending activities.

Although the Bank has access to Federal Home Loan Bank of Atlanta advances as well as lines of credit at two financial institutions, it has not utilized borrowed funds over the last five fiscal years.

Equity

Retained earnings totaled $26.6 million, equal to 13.7% of assets, as of December 31, 2013. As noted previously, Sunshine State’s capital base has realized little change reflecting the near breakeven level of operating returns on average over the last five fiscal years. The offering proceeds from the conversion will substantially enhance Sunshine State’s already strong level of capitalization on a pre-conversion basis.

At December 31, 2013, the Bank’s core capital equaled $25.4 million, or 13.1% of adjusted total assets, which is above the level of 5.0% which is the statutorily defined minimum level to be well-capitalized. The disparity between the Bank’s reported GAAP capital balance and the Tier 1 capital level is attributable to disallowed deferred tax assets equal to $1.2 million.

Income and Expense Trends

Table 1.2 shows the Bank’s historical income statements for the past five fiscal years ended December 31, 2013. Over this timeframe, the Bank has reported operating losses in the aggregate and posted modest earnings in only fiscal 2011 and 2013. In this regard, losses in fiscal 2009 and 2010 were primarily the result of high loan loss provisions attributable to an increase in NPAs experienced from 2008 to 2011. Notwithstanding subsequent improvement in Sunshine State’s asset quality, the Bank has operated with weak earnings over the fiscal 2011 to fiscal 2013 timeframe as the Bank realized spread compression as the loan portfolio shrank and the cost of deposits have bottomed out, which has adversely affected Sunshine State’s core earnings capacity.

Overall, net income ranged from a high of $0.5 million (0.27% of average assets) in fiscal 2011 to a low of a loss of $1.5 million (-0.78% of average assets) in fiscal 2009. Net income equaled $141,000 (0.07% of average assets) for the year ended December 31, 2013. Sunshine State’s core earnings, i.e., net income excluding net non-operating items on a tax effected basis, reflects a similar trend, as non-operating income and expenses have represented a limited factor in Sunshine State’s operations.

Table 1.2

Sunshine State Federal Savings & Loan Association

Historical Income Statements

Sources: Sunshine State’s audited financial reports.

Net Interest Income

Over the period from fiscal 2009 to fiscal 2013, net interest income trended downward, decreasing both in terms of the dollar amount and as a percentage of average assets. Specifically, net interest income diminished from a high of $7.2 million, or 3.73% of average assets in 2009, to a low of $5.7 million, or 2.84% of average assets, during fiscal 2013. As noted above, Sunshine State’s net interest income has been declining owing in part to spread compression, as asset yields have diminished more rapidly than funding costs. In this regard, interest income has reduced over the last five fiscal years reflecting the impact of declining asset yields, which resulted from lower loan yields and declining loan balances. Additionally, while Sunshine State has benefited from declining funding costs, the reduction in funding costs has recently slowed as the overall cost of funds reached near zero levels (i.e., 0.28% in the most recent fiscal year). The Bank’s decreasing yield-cost spread was a significant factor leading to the decrease in net interest income, as Sunshine State’s spreads decreased from 3.58% in fiscal 2012 to 3.11% in fiscal 2013 (see Exhibit I-4).

Several factors may impact the Bank’s future spreads and net interest income. First, the benefit of declining funding costs appears to have ceased as the overall cost of funds equaled 0.28% for the year ended December 31, 2013, and the potential for further improvement is limited. At the same time, Sunshine State’s intensified focus on expanding the commercial real estate and business loan portfolios may result in enhanced yields and overall earnings although the earnings benefit, to the extent targeted growth in those loan portfolios can be achieved will necessarily be gradual. Lastly, the completion of the Conversion will have a dual benefit of providing Sunshine State with additional interest-free funds to reinvest, while over the longer term, the Bank has indicated the intent to use the additional capital to support balance sheet and loan growth, including expansion of interest-earning assets at a positive spread.

Loan Loss Provisions

Over the past five years, loan loss provisions have decreased from a high of $3.5 million, or 1.79% of average assets in 2009, to a zero level in fiscal 2012 and 2013. The reduction in loan loss provisions has been the result of diminishing NPAs and loan chargeoffs, as well as the shrinking loan portfolio and modest level of loan originations which has diminished the need for allowances for loan and lease losses (“ALLL”) pursuant to the Bank’s policies and procedures.

Going forward, the Bank will continue to evaluate the adequacy of the level of allowance for loan losses on a regular basis, and establish additional loan loss provisions in accordance with the Bank’s asset classification and loss reserve policies. Exhibit I-5 sets forth the Bank’s loan loss allowance activity during the review period.

Non-Interest Income

Over the period shown in Table 1.2, non-interest operating income has diminished modestly, from $1.2 million (0.60% of average assets) in fiscal 2009, to $927,000 (0.46% of average assets) for the fiscal year ended December 31, 2013. Sources of non-interest operating income consist substantially of fees and service charges generated from deposit accounts, income from BOLI investments, and fees and charges on loans. Going forward, the Bank will be seeking to increase the level of non-interest income by taking residential mortgage loan applications and having such loans originated and sold by a third party mortgage banking company. Given the Bank’s limited track record with the program, it is uncertain as to the amount and timing of revenues which may be generated from this new line of business.

Operating Expenses

The Bank’s operating expenses have fluctuated in a relatively narrow range from fiscal 2009 through fiscal 2012, but diminished modestly in the most recent fiscal year as other real estate owned (“OREO”) expenses declined and as cost cutting initiatives took effect in fiscal 2013. Specifically, operating expenses decreased, from $7.4 million, or 3.82% of average assets, in fiscal 2009 to equal $6.4 million, or 3.18% of average assets, during the year ended December 31, 2013.

The Bank’s operating costs over the last five fiscal years have been impacted by Sunshine State’s relatively high level of NPAs and the related workout costs. Importantly, such costs have been diminishing in recent periods concurrent with the Bank’s improving asset quality. Additionally, in view of the earnings pressures resulting in part from the diminishing loan balances and subsequent spread compression, the Bank has undertaken several cost cutting initiatives including the reduction of salaries and employee benefits, education expenses for officers and directors, office occupancy and equipment expenses, as well as advertising and public relations expenses. As a result of both these factors, Sunshine State’s operating expenses declined by $596,000 in fiscal 2013 relative to the levels reported in fiscal 2012.

Operating expenses are expected to increase on a post-Offering basis, as a result of the additional expenses of the stock-related benefit plans and increased salary and benefits from the additional lending staff. At the same time, Sunshine State will seek to offset anticipated growth in expenses from a profitability standpoint through balance sheet growth, and by reinvestment of the Offering proceeds into investment securities over the near term and into loans over the longer term.

Non-Operating Income/Expense

Non-operating income and expenses have typically had a minimal impact on earnings since fiscal 2009. The Bank reported minimal non-operating income resulting from net gains on the sale of OREO, equaled $3,000, or 0.00% of average assets, for the year ended December 31, 2013. Likewise, net non-operating income and expense were at modest levels in the fiscal 2009 to the fiscal 2013 period.

Taxes

Due to the Bank’s pre-tax net losses experienced in fiscal years 2009, 2010 and 2012, the Bank reported income tax benefits. After its return to profitability during fiscal 2013, the Bank’s effective tax rate equaled to 42.7% for the year ended December 31, 2013. The Bank is fully taxable with regard to state and federal corporate income taxes, pursuant to its GAAP financial reporting.

As of December 31, 2013, the Bank’s deferred tax asset totaled $2.0 million, with deferred tax liabilities of $0.7 million, resulting in a net deferred tax asset equal to $1.3 million. For regulatory capital purposes, the net deferred tax asset balance is excluded from Tier 1 capital. As of December 31, 2013, the Bank has net operating loss carryforwards (“NOLs”) of approximately $323,000 available to offset future Florida taxable income but no NOLs for federal corporate tax purposes.

Efficiency Ratio

The Bank’s efficiency ratio decreased over the last year, largely owing to the reduction of operating expenses, as well as a slight increase in non-interest income, and was realized notwithstanding the ongoing erosion of the net interest margin. Specifically, the efficiency ratio diminished from 88.5% in fiscal 2009 to 86.8% in fiscal 2011, and subsequently increased to 100.9% in 2012, before decreasing to 96.3% for the year ended December 31,

2013. On a post-offering basis, the efficiency ratio may show some improvement from the benefit of reinvesting the proceeds from the Offering. However, a portion of the benefit is expected to be offset by the increased expense of the stock benefit plans.

Interest Rate Risk Management

The primary aspects of the Bank’s interest rate risk management include:

The rate shock analysis as of December 31, 2013 (see Exhibit I-6) reflects that in the event of an increase in interest rates from the current low levels, Sunshine State’s net interest income would diminish. A 100 basis point and 200 basis point increase in interest rates would decrease net interest income by 2.48% and 5.30%, respectively, reflecting that notwithstanding the Bank’s recent efforts to minimize its exposure to rising interest rates, Sunshine State continues to maintain a liability sensitive repricing structure over the short to intermediate term. Conversely, decreasing interest rates are estimated to have a favorable impact on Sunshine State’s net interest income with a 100 basis point increase in interest rates would increase net interest income by 0.23%. Similarly, the interest rate risk shock analysis as of December 31, 2013, reflects that the Company’s economic value of equity (“EVE”) would decline by 9.50% pursuant to a 200 basis point increase in interest rates, and increase by 2.01% pursuant to a 100 basis point decrease in interest rates. Overall, the projected impact to the Company’s net interest income and EVE suggests that the Bank would be adversely impacted by rising interest rates. At the same time, the Bank’s interest rate risk exposure is mitigated to an extent by Sunshine State’s high capital ratio, on both a pre- and post-conversion basis.

Lending Activities and Strategy

Historically, the Bank’s lending activities have been focused on residential mortgage lending, and commercial real estate and commercial business loans, and to a lesser extent, multi-family, land and construction, and consumer loans. It is management’s intent to further diversify the loan portfolio in the coming years by increasing commercial real estate and commercial business lending through the existing lending staff, while reducing the focus on residential mortgage lending. Details regarding the Bank’s loan portfolio composition and characteristics are included in Exhibits I-7 and I-8. As of December 31, 2013, the components of the loan portfolio were as follows:

Residential Lending

The Bank has historically been active in the origination of 1-4 family residential real estate loans for portfolio. As of December 31, 2013, the majority of the residential mortgage loans were fixed rate mortgages, with typical original maturities terms of 15 to 30 years. The Bank primarily originated fixed-rate residential mortgage loans, but also offered adjustable-rate residential mortgage loans and home equity loans, to a smaller extent. Substantially all of the Bank’s 1-4 family residential mortgage loans are secured by properties in the local market area. As of December 31, 2013, the majority of the 1-4 family residential mortgage loans held in the Bank’s portfolio were comprised of fixed rate loans (76%) while adjustable rate loans comprised only 24% of residential mortgage loans. The majority of the 1-4 family residential loans in the Bank’s loan portfolio were underwritten pursuant to Freddie Mac guidelines.

As previously described, the Bank’s residential loan portfolio has been diminishing over the last five fiscal years, as loan demand has been focused on long term fixed rate loans but Sunshine State has been reluctant to originate such loans for portfolio at a time when market interest rates have approached their historical lows. As a result, new originations of 1-4 family

mortgage loans have been well below the level of amortization and prepayments realized in the portfolio. Moreover, Sunshine State anticipates that the portfolio balance of 1-4 family mortgage loans will continue to diminish as the Bank has largely ceased originated such loans for portfolio and instead, has instituted a program to refer residential loan applicants to a third party mortgage banking company earning a fee in the range 2% to 3% of the loan balance on all loans closed.

As a complement to 1-4 family permanent mortgage lending, the Bank also has offered a small amount of home equity loans, including fixed rate amortizing term loans and variable rate lines of credit tied to the prime rate. Home equity loans are primarily adjustable with repricing characteristics similar to portfolio ARM loans, but with a shorter amortization period and higher interest yield. As of December 31, 2013, home equity loans totaled $0.8 million, equal to 0.7% of total loans.

Multi-Family and Commercial Real Estate Lending

Commercial real estate loans totaled $23.9 million, equal to 21.1% of total loans, while multi-family mortgage loans totaled $3.4 million, equal to 3.0% of total loans. Commercial real estate and multi-family loans originated by Sunshine State are extended up to a LTV ratio between 75% (80% for multi-family mortgage loans). Sunshine State originates both fixed and adjustable rate commercial real estate loans, with the majority of the portfolio in adjustable rate loans. Commercial real estate and multi-family loans have amortization terms of up to 20 years, with the majority of the portfolio with maturities of more than 15 years. Adjustable rate loans generally have a fixed rate for the first five years, with the rate repriced annually thereafter, relative to a margin above the prime rate. The initial fixed rate is also set as the floor, while the rate adjustments are limited to 2% each year, with a 6% overall lifetime limit.

Sunshine State’s commercial real estate loans are typically secured by retail, industrial, warehouse, agricultural, schools, churches, service, medical or other commercial properties. The Bank specifically targets small businesses located in its market area, and owner occupied businesses, such as professional service providers. The Bank also originates a significant portion of its commercial real estate portfolio to churches, temples and other religious organizations. The Bank’s multi-family loans are typically secured by mobile home parks, with land and infrastructure included. The typical commercial or multi-family loans that the Bank seeks to originate or purchase has a principal balance of up to 2.0 million, but may be larger, particularly if the loan is well-collateralized or extended to a very credit-worthy borrower. At

December 31, 2013, the largest commercial real estate loan in the Bank’s portfolio had an outstanding balance of $3.5 million loan, which was an accruing troubled debt restructuring, secured by a mini-warehouse in its market area.

Pursuant to its loan underwriting standards, the Bank considers a number of factors in originating commercial real estate and multi-family loans, such as the financial condition of the borrower, the borrower’s experience in managing similar property, and the net operating income of the mortgaged property. The Bank requires a debt service ratio of at least 1.25x, and generally require personal guarantees from the principals.

Construction and Land Loans

Construction and land development lending is a modest component of the mortgage loan portfolio, totaled $6.5 million, or 5.7% of the loan portfolio as of December 31, 2013. Of these, $2.3 million were loans where land serves as collateral for agricultural use, $2.3 million were loans for raw land and home construction and $1.9 million were loans for land for speculative and commercial use.

The Bank makes land loans on a limited basis, most typically to farmers within its market area. These loans generally have terms of less than five years, and maximum LTV of 65%. The Bank’s residential construction loans generally have initial interest-only terms of 12 months, and these loans convert to conventional amortizing mortgage loans upon completion of construction. Residential construction loans have rates and terms comparable to the Bank’s 1-4 family residential mortgage loans, with maximum LTV of 80%. Also, the Bank’s commercial construction loans have terms up to 18 months with a maximum LTV of 80%.

For adjustable rate loans, the interest rate is generally fixed for the first five years, and is adjusted annually thereafter based on an index such as the prime rate. There is also a rate floor, in addition to rate adjustment limits of 2% per year and 6% in the loan’s lifetime.

Commercial Business Loans

Commercial business loans totaled $17.4 million, or 15.3% of total loans, as of December 31, 2013. Commercial business loans consist of regular and revolving lines of credit for working capital, as well as term loans for equipment financing, vehicles, furniture and other fixtures. Commercial lines of credit generally have a short one year maturity, with an adjustable rate priced on a floating rate basis utilizing the prime rate. Due to its conservative underwriting

policy, Sunshine State also seeks for personal guarantees in originating lines of credit, which may be unsecured in nature. Commercial term loans are primarily fixed rate, with a short maturity as well. Overall, 71.2% of the loans have maturities of one year or less in the Bank’s commercial business loan portfolio.

Consumer Lending

To a much lesser extent, the Bank offers a variety of consumer loans to individuals who reside or work in the market area. Consumer and other loans totaled $2.3 million, or 2.0% of total loans as of December 31, 2013. Consumer loans generally have a fixed rate of interest, with terms of up to 5 years. Secured consumer loans, which totaled $2.0 million, are secured by deposits, automobiles, boats, motorcycles or recreational vehicles, while the remaining balance of the portfolio ($0.3 million) were unsecured term loans.

Origination, Purchasing, and Servicing of Loans

The Bank’s loan originations are typically generated by its loan personnel operating at its main office and other banking office locations. While the Bank originates both fixed-rate and adjustable-rate loans, its ability to generate each type of loan depends upon relative borrower demand and the pricing levels as set in the local marketplace by competing banks, thrifts, credit unions, and mortgage banking companies. The volume of loan originations is influenced significantly by market interest rates, market demand as well as the level of competition provided by competing lenders and, accordingly, the volume of loan originations can vary from period to period.

The Bank holds all of the loans originated in its portfolio, and has not sold any loans that it has originated since 2010. Similarly, the Bank has not purchased any loans or entered into any participations with other banks.

In the future, Sunshine State intends to continue to expand commercial lending building on its historical experience in such lending and its local orientation and longstanding customer relationships. The Bank began its commercial lending practice in the early 1980s, and Sunshine State has continued to emphasize commercial loan originations in recent years, though the portfolio balances have been diminishing as weak market demand has limited the overall origination volume. However, in the future, the Bank’s expectation will be to generate growth on an organic basis from existing customers, and potentially new customers as the Bank’s loan officers intensify efforts to build broad-based commercial loan and deposit

relationships. Management has indicated that it expects that its success in this regard may likely be contingent upon continued improvements in the local economy which would be supportive of increasing loan demand. In support of its business strategy to focus on commercial lending, the Bank also intends to hire additional commercial lending expertise in the next few years.

Asset Quality

Historically, the Bank’s credit quality measures have implied limited credit risk exposure, given the focus on 1-4 family residential mortgage loans and the nature of Sunshine State’s commercial lending. However, Sunshine State realized an increase in the level of non-performing assets (“NPAs”) in 2008 to 2011 period, which was largely the result of the erosion of real estate values which impacted the collateral value of the Bank’s loans, as well as the overall economic recession, which has resulted in job losses and lower personal income levels, both of which have adversely impacted borrower’s ability to repay their loans with the Company. However, since fiscal 2011, a gradually improving economy coupled with management’s efforts to achieve problem asset resolutions, the balance of NPAs have diminished.

As reflected in Exhibit I-9, total NPAs, which consisted of non-accruing loans and OREO, decreased from $6.1 million, or 3.14% of assets, in fiscal 2012, to $5.2 million, or 2.70% of assets, as of December 31, 2013. The ratio of allowances to total loans decreased over the last fiscal year, from 1.95% at the end of 2012, to 1.52% as of December 31, 2013, reflecting the impact of loan chargeoffs in the absence of offsetting loan loss provisions. However, reserve coverage in relation to non-performing loans was substantially unchanged over the last fiscal year and equaled 44.95% as of December 31, 2013.

The Bank also maintains a significant balance of performing restructured loans (“Troubled Debt Restructures” or “TDRs”), which equaled $4.6 million as of December 31, 2013. As a result, the ratio of NPAs including performing TDRs equaled 5.06% as of December 31, 2013. The reserve coverage ratio in relation to NPAs including performing TDRs equaled 20.39%, as of December 31, 2013.

The Bank’s management reviews and classifies loans on a regular basis and establishes loan loss provisions based on the overall quality, size, and composition of the loan portfolio, as well as other factors such as historical loss experience, industry trends, and local real estate market and economic conditions. In addition, as mentioned previously, the Bank has continued to emphasize a disciplined credit culture based on intimate market knowledge, close ties to its

customers, sound underwriting standards and experienced loan officers. Management is committed to actively monitoring and managing all segments of its loan portfolio, and to proactively identify and mitigate credit risk.

Funding Composition and Strategy

Deposits have consistently served as the Bank’s primary funding source, and are generated primarily form residents and businesses in its primary market area. As of December 31, 2013, deposits totaled $164.9 million (see Exhibit I-10). In contrast to the Bank’s overall loan portfolio shrinkage over the past five years, deposits have remained relatively stable, with a slight annual rate of decrease of 0.38%. The Bank’s prior efforts in increasing the balances of savings and transaction accounts are apparent. As of December 31, 2013, the balance of the Bank’s savings and transaction accounts was $120.7 million, or 73.2% of total deposits. Comparatively, the balance of savings and transaction accounts was $106.2 million, or 63.4% of total deposits, for fiscal year 2009. All segments of the Bank’s core deposits, including checking, money market and savings accounts, experienced growth, both with respect to the balance and as a percentage of total deposits, over the last five fiscal years. Money market accounts comprise the largest segment of Sunshine State’s core deposit base totaling $35.7 million or 21.7% of total deposits. Checking accounts including non-interest bearing and interest bearing accounts together totaled $59.3 million or 35.9% of total deposits. Within checking accounts, the balance of non-interest bearing checking accounts increased by 14.13% annually from fiscal 2009 to 2013, while NOW deposits decreased slightly by 3.27%.

As noted previously, while the Bank’s core deposits have generally been increasing, the CD portfolio has been shrinking, with the balance of CDs decreasing from $61.3 million, or 36.6% of total deposits as of fiscal 2009, to $44.2 million, or 26.8% of deposits, at December 31, 2013. The majority of CDs have remaining maturities of one year or less, and jumbo CDs (balances of $100,000 or more) equaled $14.8 million, or 33.4% of total CDs. The Bank does not hold any brokered CDs.

Going forward, the Bank intends to continue to emphasize on offering transaction and savings account deposits, which are lower cost sources of funds than CDs. In relation to management’s goal to expand commercial lending, the Bank also expects to increase its deposit relationships with more commercial deposit customers, especially through commercial money market accounts. In addition, the Bank also intends to further increase its deposit penetration into its existing markets, with an emphasis on growing the Zephyrhills branch market in Pasco County, where the Bank currently holds a much smaller deposit market share compared to Hillsborough County.

Borrowings have not been employed as a source of funds for the Company over the last five fiscal years. However, the Bank may also use borrowings, primarily Federal Home Loan Bank of Atlanta advances, to supplement cash flow needs, as necessary. At December 31, 2013, based on available collateral and its ownership of FHLB stock, the Bank had access to additional FHLB advances of up to $35.6 million. The Bank also has lines of credit at two financial institutions that would allow it to borrow up to $8.7 million and $6.0 million, respectively, at December 31, 2013.

Legal Proceedings

As of December 31, 2013, the Bank is not currently involved in any litigation which is expected to have a material impact on the Bank’s financial condition or operations.

II. MARKET AREA ANALYSIS

Introduction

Sunshine State is headquartered in Plant City, Florida, and serves areas within the Tampa Metropolitan area through a headquarters office and four full-serve branch offices. The main offices and three branch offices are located in Hillsborough County, in the cities of Plant City, Brandon and Riverview. The Bank also serves nearby Pasco County through a branch office is located in Zephyrhills. Details regarding the Bank’s offices are set forth in Exhibit II-1.

The Bank’s primary market area of Hillsborough County is located in western Florida, and is the largest county within the metropolitan Tampa Bay Area. Hillsborough County encompasses the City of Tampa, and is the fourth most populous county in Florida. Agriculture has traditionally been a significant element of the Hillsborough County which continues to this day as Hillsborough County had the second largest agricultural output in of any county in Florida in 2012. But with its evolution into a major metropolitan area, the local economy has expanded to include such elements as finance, health care, government, tourism, etc.

Plant City, where the Bank is headquartered, is located approximately 30 miles east of Tampa on the I-4 corridor, is close enough to Tampa for commuters to reside in the local market but agriculture remains important. The area’s semi-tropical Gulf Coast climate has facilitated the development of many nurseries and production of a variety of fruits and vegetables on a seasonal basis. In this regard, Hillsborough County is one of the world’s largest strawberry producers and there are numerous farmers in the Plant City area actively involved in the cultivation of strawberries. In addition, given the proximity to Tampa, there are numerous employers in a variety of sectors as referenced above, and the close proximity of Brandon and Riverview to MacDill Air Force Base provides for a significant military presence to the employment base.

Pasco County, where the Zehyrhills branch is located, is also part of the Tampa Bay Metropolitan Area in western Florida, situated to the north of Hillsborough County. Zephyrhills has a significant retired population with the presence of two large retirement communities.

The regional economy has a strong agricultural history that is still prominent in the area’s economy, but services, health care and finance/insurance/real estate sectors, as well as tourism and the government sector also play leading roles in the regional economy. The regional banking environment is highly competitive, and includes a wide range of thrifts, commercial banks, credit unions and other financial services companies, some of which have a national presence.

Future business and growth opportunities will be partially influenced by economic and demographic characteristics of the markets served by the Bank, particularly the future growth and stability of the regional economy, demographic growth trends, and the nature and intensity of the competitive environment for financial institutions. These factors have been examined to help determine the growth potential that exists for the Bank, the relative economic health of the Bank’s market area, and the impact on market value.

National Economic Factors

The business potential of a financial institution is partially dependent on the future operating environment and growth opportunities for the financial services industry and the economy as a whole. The national economy experienced a severe downturn during 2008 and 2009, as the fallout of the housing crisis caused the wider economy to falter, with most significant indicators of economic activity declining by substantial amounts. The overall economic recession was the worst since the great depression of the 1930s. Approximately 8 million jobs were lost during the recession, as consumers cut back on spending, causing a reduction in the need for many products and services. Total personal wealth declined notably due to the housing crisis and the drop in real estate values. As measured by the nation’s gross domestic product (“GDP”), the recession officially ended in the fourth quarter of 2009, after the national GDP expanded for two consecutive quarters. The economic expansion has continued since that date, with GDP growth of 2.2% for calendar year 2012, 1.1% for the first quarter of 2013, 2.5% for the second quarter, and higher at 4.1% and 3.2% for the third and fourth quarter of 2013, respectively. Notably, a large portion of GDP growth during 2009 through 2012 was generated through federal stimulus programs, bringing into question the sustainability of the recovery without government support.

For 2012, the national inflation rate averaged a lower annual rate of 2.07% which diminished to 1.48%. The national unemployment rate equaled 6.7% as of December 2013, a moderate decline from 7.8% as of December 2012, but still high compared to the long term historical averages. Notwithstanding the improvement, there remains uncertainty about the near term future, particularly in terms of the speed at which the economy will recover, the impact of the housing crisis on longer term economic growth, and the near-term future performance of the real estate industry, including both residential and commercial real estate prices, all of which have the potential to impact future economic growth. The current and projected size of government spending and deficits also has the ability to impact the longer-term economic performance of the country.

The major stock exchange indices have reflected strong appreciation over the last 12 months albeit with significant period-to-period volatility. As an indication of the changes in the nation’s stock markets over the last 12 months, as of December 31, 2013, the Dow Jones Industrial Average closed at 16,577, an increase of 26.5% from December 31, 2012, while the NASDAQ Composite Index stood at 4,177, an increase of 38.3% over the same time period. The Standard & Poor’s 500 Index totaled 1,848 as of December 31, 2013, an increase of 29.6% from December 31, 2012.

Based on the consensus outlook of 51 economists surveyed by The Wall Street Journal in December 2013, economic growth is expected to improve from an annualized growth rate of 2.1% in 2013 to 2.8% and 2.9% in 2014 and 2015, respectively. The economists projected that the unemployment rate will decrease to 6.5% in 2014 and to 6.0% at the end of 2015 with the improving pace of job growth will serve to bring the unemployment rate down steadily. On average, the economists expect that the unemployment rate will be 6.5% by the end of 2014, with the economy adding around 2.4 million jobs from December 2013 to December 2014. On average, the economists did not expect the Federal Reserve to begin raising its target rate until late 2014 at the earliest, and the yield on the 10-year Treasury would increase to 3.9% by the end of 2015. The Federal Housing Finance Agency Index was projected to rise by 5.1% in 2014, and projections for housing starts were mostly steady.

The December 2013 mortgage finance forecast from the Mortgage Bankers Association (the “MBA”) was for existing home sales to increase in 2014 by approximately 4.7% from 2013 levels, and new home sales were expected to increase by 9.9% in 2014 from levels in 2013. The MBA forecast showed overall increases in the median sale price for new and existing homes in 2013. Total mortgage production is forecasted to be down in 2014 to $1.2 trillion, compared to $1.8 trillion in 2013. The reduction in 2014 originations is largely due to a 58% reduction in refinancing volume, with refinancing volume forecasted to total $463 billion in 2014. Comparatively, house purchase mortgage originations are predicted to increase by 9.0% in 2014, with purchase lending forecasted to total $711 billion in 2014.

Interest Rate Environment

Beginning in August 2007 and through December 2008, the Federal Reserve decreased market interest rates a total of 12 times in an effort to stimulate the economy which fell into a deep recession. As of January 2009, the Discount Rate had been lowered to 0.50%, and the Federal Funds rate target was 0.25%. These historically low rates were intended to facilitate a recovery of the housing industry, while at the same time lower business borrowing costs, and such rates remained in effect through early 2010. The effect of the targeted short term rate reductions in benchmark interest rates has been part of a strategy to stimulate the economy by keeping both personal and business borrowing costs as low as possible. As of December 31, 2013, one- and ten-year U.S. government bonds were yielding 0.13% and 3.04%, respectively, compared to 0.16% and 1.78%, as of December 31, 2012. The impact on many financial institutions of the reduction in short term rates was favorable early on in the process. However, many community-based financial institutions such as Sunshine State have experienced spread compression as high yielding loans have refinanced or matured and the funds have necessarily been invested at lower market rates while funding costs have bottomed out at many institutions. Data on historical interest rate trends is presented in Exhibit II-2.

Market Area Demographic and Economic Characteristics

Table 2.1 presents information regarding the demographic and economic trends for the Bank’s market area from 2010 to 2013 and projected through 2018. Data for the nation and the state of Florida is included for comparative purposes.

As shown in Table 2.1, the Bank’s primary market area of Hillsborough County contains a large population base of 1.27 million, and is ranked as the fourth most populous county in Florida. In addition, the county has grown at a relatively high annualized rate of 1.2% over the last three years, compared to the comparable growth rates of the nation and the state, and is expected to further increase over the next five years through 2018. The number of households in Hillsborough County has likewise exhibited favorable growth trends.

In the future, the Tampa Bay Area is expected to be a leading region of population growth in Florida facilitated by both the proximity to water, and influx of new residents and businesses attracted by the relatively mild climate and the relatively low cost of living in comparison to other major metropolitan areas on the east and west coasts of the U.S. Pasco County, which is less urbanized in nature and which has a more limited economic base, has exhibited more limited growth trends, with population and household growth rates falling below the state and national averages.

Income figures for the Bank’s market area show that the median household income and per capita income of Hillsborough County are slightly above the comparable state averages, but below the national aggregates, indicative of the county’s mixed urban and suburban nature. However, income measures for Pasco County indicate lower income levels compared to the state and nation, which is reflective of its comparatively rural environment. Over the next five years, the median household income levels for both counties are expected to increase strongly, exceeding the national growth rate, while the per capita income levels are forecast to increase at rates below the national growth rate.

In addition, Hillsborough County maintains a relatively higher percentage of younger residents (under 34 years old) and a lower percentage of residents over 55 years old, as compared to the state and nation. This is indicative of the young and urban demographics of Tampa; however, the agricultural and suburban communities of Plant City, Brandon and Riverview consist of relatively older populations. Pasco County, and especially Zephyrhills, also consists of larger population portions of older age, due to its retirement community.

Table 2.1

Sunshine State Federal Savings & Loans Association

Summary Demographic Data

Source: SNL Financial

Regional/Local Economy

Table 2.2 presents a list of the largest employers in the primary market area of Hillsborough County. The Bank’s market area contains a cross section of employment sectors, with a mix of services, agriculture, wholesale/retail trade, federal and local government, health care facilities and finance related employment.

Table 2.2

Sunshine State Federal Savings & Loans Association

Hillsborough County Largest Employers

Source: Tampa Hillsborough Economic Development Corporation

According to various demographic research reports such as projections from Florida’s Office of Economic and Demographic Research and the University of Florida, Hillsborough County consists of one of the fastest growing populations and economies of the country. The Tampa Bay metropolitan area is home to 19 corporate headquarters, four of which are Fortune 500 companies. Hillsborough County also has a large military presence, such as the MacDill Air Force Base, which serves as the global headquarters of the U.S. Central Command and the U.S. Special Operations Command. Furthermore, the historically robust industries of manufacturing and agriculture still play a significant role in the county’s economy, as Hillsborough County hosts a number of modern manufacturing and technology companies, including various commercial and construction machinery, as well as defense and security contractors.

As previously noted, agriculture remains an important component of the Hillsborough county economy as Hillsborough County agriculture productions ranks second in the state with significant outputs in various crops such as strawberries, vegetables, fruits and ornamental plants. As mentioned previously, strawberries are a significant crop produce in the Plant City market, and Plant City is thus home to a number of farmers, wholesalers and distributers of strawberries, such as Wishnatzki Farms, the largest single strawberry producer in Florida. Plant City also hosts the annual Florida Strawberry Festival in the late winter which has become a regional attraction. Activity such as fruit and vegetable production is frequently seasonal in nature with planting; harvesting and packaging take place from fall to spring, which takes advantage of the region’s mild climate and high prices for fresh produce in the winter and spring.

Market Area Employment Sectors

As noted previously, the Bank’s market area economy is based on a variety of employment sectors. Employment data presented in Table 2.3 indicates that similar to many areas of the country, services are the most prominent sector for the State of Florida, as well as Hillsborough and Pasco Counties. Wholesale/retail trade and health care provide the second and third largest sources of employment in the market area counties and the state. Compared to the state of Florida and Pasco County, Hillsborough County displayed higher levels of employment in services, finance/insurance/real estate and manufacturing. Compared to the state and Hillsborough County, Pasco County displayed higher concentrations of jobs in health care, wholesale/retail trade, construction and agriculture.

Table 2.3

Sunshine State Federal Savings & Loans Association

Primary Market Area Employment Sectors

(Percent of Labor Force)

Source: SNL Financial

Unemployment Trends

Comparative unemployment rates for Hillsborough and Pasco Counties, as well as for the U.S. and Florida are shown in Table 2.4. As of December 2013, Hillsborough County exhibited a favorable unemployment rate of 5.7%, as compared to both the nation and state aggregate. The unemployment rate of Pasco County at 6.7% was higher than that of Florida, and approximated the national rate. However, consistent with nationwide and statewide trends, the market area counties showed evidence of economic recovery as unemployment rates were below the rate reported a year ago. Coupled with the higher population growth of Hillsborough County, the Hillsborough County economy appears to be creating new jobs at a relatively strong rate.

Table 2.4

Sunshine State Federal Savings & Loans Association

Unemployment Trends

Source: U.S. Bureau of Labor Statistics.

Real Estate Trends

1. Home Sales

Home sales activity across Florida during the third quarter of 2013 surpassed the mark posted during the same period in 2012, a positive indicator for an industry that has been impacted by the recession that commenced in 2008. According to statistics provided by the Florida Association of Realtors, closed sales of single-family homes during the quarter ended September 2013 totaled 60,661, a 17.3% increase from the same period posted in 2012 (when the market recorded 51,735 sales). The median sales price also increased notably, by 18.6% to $175,000 for the third quarter of 2013, from the level for the third quarter of 2012 ($147,500).

Similarly, home sales in the Bank’s market area reflected an improving trend, as characterized by the favorable real estate trends of the Tampa-St. Petersburg-Clearwater MSA, which includes the market area counties of Hillsborough and Pasco Counties, in addition to the neighboring Hernando and Pinellas Counties. In the Tampa-St. Petersburg-Clearwater MSA, closed single family home sales in the third quarter of 2013 totaled 10,106, up 16.6% from the homes sold during the same quarter a year prior. Home prices mirrored the statewide trend, reflecting a strong increasing trend in the Bank’s market area over the third quarter of 2013, as the median sales price for single-family homes in the MSA was $159,900, up 23.0% from the median sales price for the third quarter of 2012. The overall favorable increasing trends in home sales and sales prices reflect the strong growth and recovery of the local economy and real estate market of the market area.

In addition, management of the Bank indicated their observation of fast housing development in the local area of Plant City. Housing prices have experienced overall growth in Plant City and the surrounding areas, with the most significant increases shown in housing in the waterfront area, Southern Tampa, and school districts. According to RealtyTrac, the median home sales price in Plant City was $120,000 in November 2013, which represented a 22.5% year-over-year increase. Similarly, the cities of Brandon and Riverview also experienced increases in median home sales prices, at 8.8% and 15.9% respectively, from November 2012 to November 2013.

2. Foreclosure Trends

As reported by RealtyTrac, during November 2013, foreclosure filings fell 37% from a year earlier to the lowest level in over six years across the nation, as one in every 1,155 housing units in the U.S. reported a foreclosure filing. However, Florida ranked as the top state in the country with the highest level of foreclosure filing, with one in every 392 housing units with a foreclosure filing as of November 2013. Nevertheless, foreclosures in Florida have exhibited an overall decreasing trend, as the number of foreclosure filings in November 2013 was 23% lower than the same time last year.

Locally, foreclosures trended downward during the eleven months ended November 2013. In Hillsborough County, the number of properties that received a foreclosure filing in November 2013 was 22% lower than the same time last year. Hillsborough County reported one in every 390 housing units with a foreclosure filing, which represented a slightly higher foreclosure percentage than the state. However, in Plant City, the number of foreclosure filings in November 2013 was 15% higher than the same time last year, and Plant City also reported one in every 363 housing units with a foreclosure filing, which is a significantly higher percentage than the state and the nation. Furthermore, Pasco County reported one in every 323 housing units with a foreclosure filing, and an 11% increase in filings in November 2013 compared to last year. This presents an unfavorable trend of the high number of foreclosures in the Bank’s local market area counties as well as the state, despite the increasing home sales and housing prices in the area.

Market Area Deposit Characteristics

The Bank’s retail deposit base is closely tied to the economic fortunes of Hillsborough and Pasco Counties, and, in particular, the areas that are nearby to each of the office facilities. Table 2.5 displays deposit market trends from June 30, 2009 through June 30, 2013 for Hillsborough and Pasco Counties, as well as the State of Florida. Florida bank and thrift deposits increased at a 2.4% annual rate during the four year period, with savings institutions

declining by 13.8% annually and commercial banks reporting annual deposit growth of 4.0%. Overall, savings institutions held a small market share of 5.7% of total deposits statewide as of June 30, 2013.

Similar to the statewide trends, Hillsborough County experienced an overall increase in total county deposits at an annual rate of 4.9% over the four year period. However, deposits at savings institutions declined significantly at 14.4% annually, while commercial banks reported annual deposit growth of 5.5%. Similar to statewide patterns, commercial banks held dominating deposit market shares in the market area counties. Pasco County reported overall deposit decreases from 2009 to 2013, with both commercial bank and savings institutions reporting declines in deposit balances.

Table 2.5

Sunshine State Federal Savings & Loans Association

Deposit Summary

Source: FDIC.

Due to the large size of the region and the presence of the Tampa metropolitan area, the Bank maintains a modest market share in terms of market area deposits. The Bank’s deposit market share in Hillsborough County of $160.9 million of deposits represented a 0.6% market share of bank and thrift deposits at June 30, 2013. The Bank’s deposit market share in Pasco County of $13.3 million of deposits represented a 0.3% market share. Over the four year period shown in Table 2.5, the Bank experienced annual deposit growth of 1.7% in Hillsborough County, but reported annual deposit decline of 4.3% in Pasco County. At the same time, the

Bank reported overall losses in deposit market share in both market area counties with the reduction largely the result of Sunshine’s conscious decision to limit growth in view of ongoing shrinkage of the loan portfolio over the period.

Deposit Competition

The competitive environment for financial institution products and services on a national, regional and local level can be expected to become even more competitive in the future. Consolidation in the banking and thrift industries provides economies of scale to the larger institutions, while the increased presence of investment options provides consumers with attractive investment alternatives to financial institutions. The Bank faces notable competition in both deposit gathering and lending activities, including direct competition with financial institutions that primarily have a local, regional or national presence. Securities firms and mutual funds also represent major sources of competition in raising deposits. In many cases, these competitors are also seeking to provide some or all of the community-oriented services as the Bank. With regard to lending competition, the Bank encounters the most significant competition from the same institutions providing deposit services. In addition, the Bank competes with mortgage companies, independent mortgage brokers, and credit unions. Management has also indicated that the presence of credit unions in the Bank’s market area contributes to a formidable level of deposit competition, as a number of them also have long histories of operation in the region and have developed loyal customer relationships. There are 15 credit unions that are headquartered in Hillsborough County, with an average asset size of $706.6 million, and hold an average balance of $623.6 million of shares and deposits, as of December 31, 2013.

From a competitive standpoint, the Bank benefits from its status of a locally owned financial institution, longstanding customer relationships, and continued efforts to offer competitive products and services. However, competitive pressures will also likely continue to build as the financial services industry continues to consolidate and as additional non-bank investment options for consumers become available. Table 2.6 below lists the Bank’s largest competitors in Hillsborough and Pasco Counties. Among the Bank’s competitors are much larger and more diversified institutions, which have greater resources than maintained by the Bank, including the three largest deposit holding institutions in both market area counties, Wells Fargo & Co., Bank of America Corp. and SunTrust Banks Inc. In Hillsborough County, Sunshine State is ranked 19th in deposit market share, maintaining a modest 0.6% market share. In Pasco County, the Bank is ranked 21st in deposit market share, maintaining a minimal 0.3% market share.

Table 2.6

Sunshine State Federal Savings & Loans Association

Market Area Deposit Competitors

Source: SNL

III. PEER GROUP ANALYSIS

This section presents an analysis of Sunshine State’s operations versus a group of comparable savings institutions (the “Peer Group”) selected from the universe of all publicly-traded savings institutions in a manner consistent with the regulatory valuation guidelines. The basis of the pro forma market valuation of Sunshine State is derived from the pricing ratios of the Peer Group institutions, incorporating valuation adjustments to account for key differences in relation to the Peer Group. Since no Peer Group can be exactly comparable to Sunshine State, individually or as a whole, key areas examined for differences to determine if valuation adjustments are appropriate were in the following areas: financial condition; profitability, growth and viability of earnings; asset growth; primary market area; dividends; liquidity of the shares; marketing of the issue; management; and, effect of government regulations and regulatory reform.

Peer Group Selection

The Peer Group selection process is governed by the general parameters set forth in the regulatory valuation guidelines. Accordingly, the Peer Group is comprised of only those publicly-traded thrifts whose common stock is either listed on a national exchange (NYSE or AMEX) or is NASDAQ listed, since their stock trading activity is regularly reported and generally more frequent than “non-listed thrifts” i.e., those listed on the Over-the-Counter Bulletin Board or Pink Sheets, as well as those that are non-publicly traded and closely-held. Institutions that are not listed on the NYSE or NASDAQ are inappropriate, since the trading activity for thinly-traded or closely-held stocks is typically highly irregular in terms of frequency and price and thus may not be a reliable indicator of market value. We have also excluded from the Peer Group those companies under acquisition or subject to rumored acquisition, MHCs, and recent conversions, since their pricing ratios are subject to unusual distortion and/or have limited trading history. We also excluded those companies that were converted less than one year ago, as their financial results do not reflect a full year of reinvestment benefit and since the stock trading activity is not seasoned. A recent listing of the universe of all publicly-traded savings institutions is included as Exhibit III-1.

Ideally, the Peer Group should be comprised of regionally-based institutions with relatively comparable resources, strategies and financial characteristics. There are 119 publicly-traded thrift institutions nationally, which includes 15 publicly-traded MHCs. Given the limited number of public full stock thrifts, it is typically the case that the Peer Group will be

comprised of institutions which are not directly comparable, but the overall group will still be the “best fit” peer group. To the extent that key differences exist between the converting institution and the Peer Group, valuation adjustments will be applied to account for such key differences. Since Sunshine State will be a full stock public company upon completion of the Conversion, we considered only full stock companies to be viable candidates for inclusion in the Peer Group, excluding those in MHC form.

Based on the foregoing, from the universe of publicly-traded thrifts, we selected ten institutions with characteristics similar to those of Sunshine State. The Peer Group selection process focused on companies with similar assets sizes, similar geographic region characteristics, and relatively high tangible equity/assets ratios. We believe these characteristics are given significant weight by investors in evaluating Sunshine State and similarly situated institutions. In the selection process, we applied two “screens” to the universe of all public companies that were eligible for consideration:

Table 3.1 shows the general characteristics of each of the ten Peer Group companies and Exhibit III-4 provides summary demographic and deposit market share data for the primary market areas served by each of the Peer Group companies. While there are expectedly some differences between the Peer Group companies and Sunshine State, we believe that the Peer Group companies, on average, provide a good basis for the valuation subject to valuation adjustments. The following sections present a comparison of Sunshine State’s financial condition, income and expense trends, loan composition, interest rate risk, and credit risk versus the Peer Group, as of the most recent publicly available date.

In addition to the selection criteria used to identify the Peer Group companies, a summary description of the key comparable characteristics of each of the Peer Group companies is detailed in the following pages.

Table 3.1

Peer Group of Publicly-Traded Thrifts

As of December 31, 2013

Source: SNL Financial, LC.

In aggregate, the Peer Group companies maintained a higher tangible equity level, in comparison to the industry median (14.40% of assets versus 11.75% for all non-MHC public companies), and generated a slightly higher level of core profitability (0.62% of assets versus 0.59% for all non-MHC public companies). The Peer Group’s higher tangible equity translated into a lower median core ROE ratio (3.49% for the Peer Group versus 4.31% for all non-MHC public companies), notwithstanding the lower ROA. Overall, the Peer Group’s pricing ratios were relatively similar to all full stock publicly-traded thrifts, as the median price/tangible book (“P/TB”) ratio was at a modest discount to the industry median, while the Peer Group’s price/core earnings (“P/Core”) ratio was at a slight premium to the industry median. The Peer Group’s price/assets (“P/A”) ratio was also at a modest premium to the industry median.

The thrifts selected for the Peer Group were relatively comparable to Sunshine State in terms of all of the selection criteria and are considered the “best fit” group. While there are many similarities between Sunshine State and the Peer Group on average, there are some notable differences that lead to the valuation adjustments discussed herein. The following comparative analysis highlights key similarities and differences between Sunshine State and the Peer Group.

Financial Condition

Table 3.2 shows comparative balance sheet measures for Sunshine State and the Peer Group, reflecting balances as of December 31, 2013, or the most recent date available. On a reported basis, Sunshine State’s equity-to-assets ratio of 13.7% was below the Peer Group’s median and average equity-to-assets ratios of 15.4% and 16.3%, respectively. The Bank did not have any intangible assets while intangibles for the Peer Group were modest, resulting in median and average tangible equity ratios of 14.7% and 16.1%, respectively.

The Bank’s pro forma capital position will increase with the addition of stock proceeds, providing the Bank with an equity and tangible equity-to-assets ratio that is expected to increase to levels in excess of the Peer Group’s median and average ratios. As a result of the Conversion, the increase in Sunshine State’s pro forma equity position will be favorable from a risk perspective and in terms of future earnings potential that could be realized through leverage and lower funding costs. At the same time, the Bank’s higher pro forma capitalization will initially depress the Bank’s potential return on equity. Both Sunshine State’s and the Peer Group’s capital ratios reflected capital surpluses with respect to the regulatory capital requirements. On a pro forma basis, the Bank’s regulatory surpluses will become more significant. Additionally, the ability to leverage the increased equity and improve the ROE will be dependent upon the ability of the Bank to execute a business plan focused on loan and earnings growth.

Table 3.2

Balance Sheet Composition and Growth Rates

Comparable Institution Analysis

As of December 31, 2013 or most recent available