UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549


FORM 10-K

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
S	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2011
	For the fiscal year ended December 31, 2012
	OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
£	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________	~~For the transition period from ____________ to ____________~~

FLORIDIAN FINANCIAL GROUP, INC.

(Exact name of Registrant as specified in its charter)

Florida	000-53589	20-4539279
(State of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)
175 Timacuan Boulevard, Lake Mary, Florida		32746
(Address of principal executive offices)		(Zip Code)

175 Timacuan Boulevard, Lake Mary, Florida		32746
(Address of principal executive offices)		(Zip Code)

	(407) 321-3233
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: ~~Common Stock, $5.00 par value~~ None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o £ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o £ No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x£ No ~~Noo~~x

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

Indicate by check mark if disclosure of of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ox

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o£ Accelerated filer o£ Non-accelerated filer o£ Smaller reporting company xS

There is no market for the Registrant’s common stock; therefore, the aggregate market value of the Registrant’s common stock held by non-affiliates is not calculable.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o £ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at March 2014, ~~2012~~2013
Common Stock, $5.00 par value per share		6,~~180~~178,~~151~~158 shares

~~DOCUMENTS~~FLORIDIAN ~~INCORPORATED~~FINANCIAL BYGROUP, ~~REFERENCE~~INC. ANNUAL REPORT FOR 2012 ON FORM 10-K

Portions of our Proxy Statement for the Annual Meeting of Shareholders to be held on April 19, 2012, are incorporated by reference in Part III.

FLORIDIAN FINANCIAL GROUP, INC. ANNUAL REPORT FOR 2011 ON FORM 10-K

TABLE OF CONTENTS

		Page
PART I		1
Item 1.	Business	23
Item 1A.	Risk Factors	18
Item 1B.	Unresolved Staff Comments	27
Item 2.	Properties	2827
Item 3.	Legal Proceedings	2827
Item 4.	Mine Safety Disclosure	2827
PART II		2827
Item 5.	Market for the Registrant’s Common Equity, Related Shareowner Matters, and Issuer Purchases of Equity Securities	2827
Item 6.	Selected Financial Data	29
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 7A.	Quantitative and Qualitative Disclosure About Market Risk	45
Item 8.	Financial Statements and Supplementary Data	45
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	80
Item 9A.	Controls and Procedures	80
Item 9B.	Other Information	80
PART III		81
Item 10.	Directors, Executive Officers, and Corporate Governance	81
Item 11.	Executive Compensation	8185
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareowner Matters	8189
Item 13.	Certain Relationships and Related Transactions, and Director Independence	8290
Item 14.	Principal Accountant Fees and Services	8291
PART IV		8292
Item 15.	Exhibits and Financial Statement Schedules	8292
Signatures		8594

PART I.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

The SEC encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Report contains “forward-looking statements.” These forward-looking statements include, among others, statements about our beliefs, plans, objectives, goals, expectations, estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors, many of which are beyond our control. The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “target,” “goal,” and similar expressions are intended to identify forward-looking statements.

All forward-looking statements, by their nature, are subject to risks and uncertainties. Our actual future results may differ materially from those set forth in the forward-looking statements. Our ability to achieve our financial objectives could be adversely affected by the factors discussed in detail in the section captioned “Risk Factors” as well as the following factors:

§ Our ability to ~~lower~~comply ~~our~~with ~~expenses, including~~ the ~~ability~~board toresolution ~~obtain approval from our regulators to consolidate our bank charters; § our need~~ and ~~our~~memorandum ~~ability to incur additional debt or equity financing; § the accuracy~~ of ~~our~~understanding ~~financial~~as ~~statement~~required ~~estimates and assumptions, including our allowance for loan losses; § our ability~~ to ~~comply~~be ~~with~~adopted ~~increased capital requirements imposed~~ by our regulators~~; § the loss of our key personnel; § the effects of our lack of a diversified loan portfolio~~, including the ~~risk~~heightened of geographic concentration; § legislative or regulatory changes, including the Dodd-Frank Wall Street Reform and Consumer Protection Act; § the strength of the United States economy in general and the strength of the local economies in which we conduct operations; § the frequency and magnitude of foreclosure of our loans; § our ability to successfully manage liquidity risk; § the effects of the health and soundness of other financial institutions, including the FDIC’s need to increase Deposit Insurance Fund assessments; § our ability to comply with the extensive laws and regulations to which we are subject; § inflation, interest rate, market and monetary fluctuations; § our customers’ willingness and ability to make timely payments on their loans; § increased competition and its effect on pricing, including the effect of the repeal of the prohibition on paying interest on demand deposits, on our net interest margin; § fluctuations in collateral values; § effect of changes in the stock market and other capital ~~markets~~ratios; § the effects of harsh weather conditions, including hurricanes; § the effects of man-made disasters; § our ability to support our overhead expenses; § changes in the securities and real estate markets; § technological changes; § changes in monetary and fiscal policies of the U.S. Government; § the effects of security breaches and computer viruses that may affect our computer systems; § changes in consumer spending and saving habits; § changes in accounting principles, policies, practices or guidelines; § anti-takeover provisions under Federal and state law as well as our Articles of Incorporation and our bylaws; § other risks described from time to time in our filings with the SEC; and § our ability to manage the risks involved in the foregoing.

~~However,~~§ ~~other factors besides those listed above and in the section captioned “Risk Factors” or discussed elsewhere in this Report also could adversely affect~~ our ~~results,~~ability ~~and you should not consider any such list of factors~~ to belower ~~a complete set of all potential risks or uncertainties. These forward-looking statements are not guarantees of future performance, but reflect the present expectations of future events by~~ our management and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Any forward-looking statements made by us speak only as of the date they are made. We do not undertake to update any forward-looking statement, except as required by applicable law.expenses;

the effects of our decision to deregister our common stock from the Securities Exchange Act of 1934, as amended, and “go dark”;

our need and our ability to incur additional debt or equity financing;

the accuracy of our financial statement estimates and assumptions, including our allowance for loan losses;

our ability to comply with increased capital requirements imposed by our regulators, including the effects of Basel III;

the loss of our key personnel;

the effects of our lack of a diversified loan portfolio, including the risk of geographic concentration;

legislative or regulatory changes, including the Dodd-Frank Wall Street Reform and Consumer Protection Act;

the strength of the United States economy in general and the strength of the local economies in which we conduct operations;

the frequency and magnitude of foreclosure of our loans;

our ability to successfully manage liquidity risk;

the effects of the health and soundness of other financial institutions, including the FDIC’s need to increase Deposit Insurance Fund assessments;

our ability to comply with the extensive laws and regulations to which we are subject;

inflation, interest rate, market and monetary fluctuations;

our customers’ willingness and ability to make timely payments on their loans;

increased competition and its effect on pricing, including the effect of the repeal of the prohibition on paying interest on demand deposits, on our net interest margin;

fluctuations in collateral values;

effect of changes in the stock market and other capital markets;

the effects of harsh weather conditions, including hurricanes;

the effects of man-made disasters;

our ability to support our overhead expenses;

changes in the securities and real estate markets;

technological changes;

changes in monetary and fiscal policies of the U.S. Government;

the effects of security breaches and computer viruses that may affect our computer systems;

changes in consumer spending and saving habits;

changes in accounting principles, policies, practices or guidelines;

anti-takeover provisions under federal and state law as well as our Articles of Incorporation and our bylaws;

other risks described from time to time in our filings with the SEC; and

our ability to manage the risks involved in the foregoing.

~~ITEM~~However, 1other factors besides those listed above and in the section captioned “Risk Factors” or discussed elsewhere in this Report also could adversely affect our results, and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties. These ~~BUSINESS~~forward-looking statements are not guarantees of future performance, but reflect the present expectations of future events by our management and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Any forward-looking statements made by us speak only as of the date they are made. We do not undertake to update any forward-looking statement, except as required by applicable law.

ABOUT US

General

We are a multi-bank holding company under the Bank Holding Company Act of 1956, as amended, headquartered in Lake Mary, Florida, a community situated between Orlando and Daytona Beach, Florida. We were incorporated on September 8, 2005 as the bank holding company of Floridian Bank, a Florida chartered commercial bank. Both Floridian Bank and the Company commenced operations on March 20, 2006.

On March 31, 2008, we closed a merger transaction in which Orange Bank of Florida, a Florida chartered commercial bank, became a wholly-owned subsidiary of the Company. The transaction was treated as a merger of equals where each shareholder of Orange Bank received 1.04 shares of the Company’s common stock. At the time of the merger, Orange Bank had approximately $196 million in assets, including approximately $121 million in net loans, and approximately $176 million in deposits.

In October 2008, we entered into a joint venture with FBC Mortgage, LLC, (“FBC Mortgage”) a licensed correspondent mortgage lender, located in Orlando, Florida. The joint venture, Floridian Financial Mortgage, LLC, (“Floridian Financial Mortgage”) facilitated the origination of jumbo, conventional and FHA residential mortgages selling most loans into the secondary market. On December 31, 2010, FBC Mortgage and the Company entered into an Agreement for Sale of Business where FBC Mortgage purchased the Company’s 49% equity interest in FBC Financial.

Both Floridian Bank and Orange Bank are full service commercial banks, providing a wide range of business and consumer financial services in our target marketplace, which is comprised primarily of Orange, Seminole, Citrus, Lake, Flagler, and Volusia Counties in Florida. Floridian Bank is headquartered in Daytona Beach, Florida, and Orange Bank of Florida is headquartered in Orlando, Florida. Collectively, our Banks operated 10 banking offices.

The Banks’ deposits are insured by the FDIC up to applicable limits. The operations of the Banks are subject to the supervision and regulation of the FDIC and the OFR. As a bank holding company, we are also subject to regulation by the Federal Reserve.

Unless otherwise indicated, the terms “us”, “we”, “our”, “ours”, and “the Company” refer to Floridian Financial Group, Inc., together with its consolidated subsidiaries. Unless the context otherwise indicates or requires, the term “Orange Bank” means our Florida chartered commercial banking subsidiary, Orange Bank of Florida, and the term “Floridian Bank” means our Florida chartered commercial banking subsidiary, Floridian Bank. Any references to the “Banks” refer to Orange Bank and Floridian Bank, collectively.

Business Strategy

Our business strategy is to operate as a profitable, diversified financial services company providing a variety of banking and other financial services, with an emphasis on commercial business loans to small- and medium-sized businesses, particularly in the medical industry, and consumer and residential mortgage lending. We emphasize comprehensive retail and business products and responsive, decentralized decision-making which reflects our knowledge of our local markets and customers. We offer a wide range of commercial and retail banking and financial services to businesses and individuals.

To achieve asset growth and profitability, our business strategy is targeted to:

§ Capitalize on our personal relationship approach that we believe differentiates us from our larger competitors; § Provide customers with access to our local executives who make key credit and other decisions; § Pursue commercial lending opportunities with small- to mid-sized businesses that are underserved by our larger competitors; and § Cross-sell our products and services to our existing customers to leverage our relationships and enhance profitability.

~~Our~~ITEM ~~Business~~1. BUSINESS

~~Historically, the~~ABOUT Banks’ market areas have been served both by large banks headquartered out of state as well as a number of community banks offering a high level of personal attention, recognition and service. The large banks have generally applied a transactional business approach, based upon volume considerations, to the market while community banks have traditionally offered a more service relationship approach. The poor economic climate is leading to increased industry consolidation, which is creating an opportunity for the Banks. The Banks’ strategic focus is to exploit this opportunity by catering to the “displaced bank customer” in this marketplace.US

The Banks provide a range of consumer and commercial banking services to individuals, businesses and industries. The basic services offered by the Banks include: demand interest bearing and noninterest bearing accounts, money market deposit accounts, NOW accounts, time deposits, safe deposit services, business credit cards, debit cards, direct deposits, night depository, travelers’ checks, cashier’s checks, domestic collections, bank drafts, automated teller services, drive-in tellers, banking by mail and the full range of consumer loans, both collateralized and uncollateralized. In addition, the Banks make secured and unsecured commercial and real estate loans and issue standby letters of credit. The Banks provide automated teller machine (ATM) cards and are members of several ATM networks, which permit our customers to use the convenience of the Banks’ ATM networks and other ATMs throughout the world. The Banks do not have trust powers and, accordingly, no trust services are provided.General

~~The~~We ~~Banks’ target~~are ~~market~~a ismulti-bank holding ~~consumers,~~company ~~professionals,~~under ~~small~~the ~~businesses,~~Bank ~~real~~Holding ~~estate developers~~Company ~~and~~Act ~~commercial~~of ~~real~~1956, ~~estate~~as ~~investors.~~amended, ~~The~~headquartered ~~small~~in ~~business~~Lake ~~customer (typically~~Mary, Florida, a ~~commercial~~community ~~entity~~situated between ~~with~~Orlando ~~sales~~and ofDaytona upBeach, toFlorida. ~~$25~~We ~~million)~~were ~~has~~incorporated ~~the opportunity~~on toSeptember ~~generate~~8, ~~significant~~2005 ~~revenue~~as ~~for~~the ~~banks~~bank ~~yet~~holding iscompany ~~generally~~of Floridian ~~underserved~~Bank, bya ~~large~~Florida ~~bank~~chartered ~~competitors~~commercial bank. WeBoth ~~believe~~Floridian ~~that~~Bank ~~commercial~~and ~~customers generally~~the ~~can~~Company ~~afford~~commenced ~~more~~operations ~~profitability~~on ~~opportunities~~March ~~than~~20, ~~the average retail customer~~2006.

~~The~~On ~~Banks~~March 31, ~~have~~2008, ~~actively~~we ~~pursued~~closed ~~their~~a ~~targeted~~merger ~~markets~~transaction ~~for~~in ~~deposits,~~which ~~particularly~~Orange ~~small businesses~~Bank ~~and~~of ~~professionals.~~Florida, ~~Through~~a ~~the~~Florida ~~use~~chartered ofcommercial ~~technology~~bank, webecame ~~believe~~a ~~the~~wholly-owned ~~Banks~~subsidiary ~~have~~of ~~been~~the ~~able~~Company. toThe ~~compete~~transaction ~~effectively~~was ~~with~~treated ~~the~~as ~~larger~~a ~~banks~~merger inof ~~our~~equals ~~market~~where each shareholder of Orange Bank received 1.04 ~~area~~shares of the Company’s common stock. ~~Such~~At ~~technology~~the ~~includes~~time ~~remote~~of ~~deposit~~the ~~capture~~merger, ~~online~~Orange ~~banking~~Bank ~~and~~had ~~bill payment,~~approximately ~~cash~~$196 ~~management~~million ~~sweep~~in ~~accounts~~assets, ~~positive~~including approximately ~~pay,~~$121 ~~ACH~~million ~~origination~~in net loans, and ~~various~~ ~~other~~approximately ~~competitive~~$176 ~~services~~million in deposits.

~~The~~In October ~~revenues~~2008, ofwe ~~the~~entered ~~Banks~~into ~~are~~a ~~primarily~~joint ~~derived~~venture ~~from~~with ~~interest~~FBC onMortgage, ~~and fees received in connection with~~LLC, ~~real~~(“FBC ~~estate~~Mortgage”) ~~and~~a ~~other~~licensed ~~loans,~~correspondent ~~from~~mortgage ~~interest and dividends~~lender, ~~from~~located ~~investment~~in ~~securities~~Orlando, ~~service~~Florida. ~~charge~~The ~~income~~joint ~~generated from demand accounts~~venture, ~~gains~~Floridian onFinancial ~~sales of residential loans~~Mortgage, ~~ATM fees~~LLC, ~~and~~(“Floridian ~~other~~Financial ~~services.~~Mortgage”) ~~The~~facilitated ~~principal~~the ~~sources~~origination of ~~funds~~jumbo, ~~for~~conventional ~~the~~and ~~Banks’~~FHA ~~lending~~residential ~~activities~~mortgages ~~are~~selling ~~their deposits,~~most ~~loan~~loans ~~repayments,~~into ~~and~~the ~~proceeds~~secondary ~~from investment securities~~market. On ~~The~~December ~~principal expenses~~31, of2010, ~~the~~FBC ~~Banks~~Mortgage ~~are~~and the ~~interest~~Company ~~paid~~entered oninto ~~deposits,~~an ~~and~~Agreement ~~operating~~for ~~and general~~Sale ~~administrative~~of ~~expenses.~~Business Wewhere doFBC ~~not~~Mortgage ~~believe~~purchased the ~~our~~Company’s ~~business~~49% toequity beinterest ~~cyclical or seasonal~~ in ~~nature~~FBC Financial.

AsBoth ~~is the~~Floridian ~~case~~Bank ~~with~~and ~~banking~~Orange ~~institutions~~Bank ~~generally, the Banks’ operations~~ are ~~materially and~~full ~~significantly~~service ~~influenced~~commercial bybanks, ~~general~~providing ~~economic~~a ~~conditions~~wide ~~and~~range byof ~~related monetary~~business and ~~fiscal~~consumer ~~policies of~~ financial ~~institution~~services ~~regulatory~~in ~~agencies,~~our ~~including~~target ~~the~~marketplace, ~~Federal~~which ~~Reserve~~is ~~and~~comprised ~~the~~primarily ~~FDIC. Deposit flows and costs~~ of ~~funds~~Orange, ~~are influenced~~Seminole, byLake, ~~interest~~Flagler, ~~rates on competing investments~~ and ~~general~~Volusia ~~market~~Counties ~~rates of~~in ~~interest~~Florida. ~~Lending~~Floridian Bank ~~activities~~is ~~are~~headquartered ~~affected~~in byDaytona ~~the~~Beach, ~~demand~~Florida, ~~for financing of real estate~~ and ~~other~~Orange ~~types~~Bank of ~~loans,~~Florida ~~which in turn~~ is ~~affected~~headquartered byin ~~the~~Orlando, ~~interest rates~~Florida. ~~at which such financing may be offered and other factors affecting local~~Collectively, ~~demand~~as ~~and~~of ~~availability~~December of31, ~~funds.~~2012, ~~The~~our Banks ~~face~~operated ~~strong~~10 ~~competition~~banking inoffices. ~~the attraction~~However, ofon ~~deposits~~January ~~(the~~25, ~~primary~~2013, ~~source~~Orange ofBank ~~lendable~~sold ~~funds)~~their ~~and~~Crystal ~~in the~~River ~~origination of loans~~branch. ~~See the section entitled “Competition” for further discussion.~~

~~Regulatory~~The Banks’ ~~Matter~~deposits are insured by the FDIC up to applicable limits. The operations of the Banks are subject to the supervision and regulation of the FDIC and the Florida Office of Financial Regulation (“OFR”). As a bank holding company, we are also subject to regulation by the Federal Reserve.

~~The~~Unless otherwise indicated, the terms “us”, “we”, “our”, “ours”, and “the Company” refer to Floridian Financial Group, Inc., together with its consolidated subsidiaries. Unless the context otherwise indicates or requires, the term “Orange Bank” means our Florida chartered commercial banking subsidiary, Orange Bank of Florida, and the term “Floridian Bank” means our Florida chartered commercial banking subsidiary, Floridian Bank. Any references to the “Banks” refer to Orange Bank and Floridian Bank, collectively.

InBusiness October 2011, the Board of Directors of the Company agreed to approve certain board resolutions requested by the Federal Reserve (the “FRB Resolutions”), which remain in effect. From a regulatory perspective, the FRB Resolutions are an informal, nonpublic agreement that is used to correct problems or to request periodic reports addressing certain aspects of a member bank’s operations. In the interest of full disclosure, we are summarizing the main obligations of the FRB Resolutions. The FRB Resolutions require the Company to take actions to address concerns identified during a recent examination conducted by the Federal Reserve and to provide periodic reports to the Federal Reserve. Strategy

3Our business strategy is to operate as a profitable, diversified financial services company providing a variety of banking and other financial services, with an emphasis on commercial business loans to small-and medium-sized businesses, particularly in the medical industry, and consumer and residential mortgage lending. We emphasize comprehensive retail and business products and responsive, decentralized decision-making which reflects our knowledge of our local markets and customers. We offer a wide range of commercial and retail banking and financial services to businesses and individuals.

~~The~~To ~~Federal~~achieve ~~Reserve~~asset ~~cited~~growth ~~the Company’s financial deterioration as the reason it requested the Company adopt the FRB Resolutions. Accordingly, the Company adopted the FRB Resolutions~~ and ~~agreed to take the following actions: Without the prior approval of the Federal Reserve~~profitability, ~~the~~our ~~Company~~business ~~agreed~~strategy tois ~~not~~targeted (i) incur any new debt or refinance existing debt; (ii) declare any dividends on any class of stock or; (iii) reduce its capital position by redeeming shares of stock. The FRB Resolutions do not contain any capital directives. No other actions were necessary other than to ~~submit Company-only financial data on a quarterly basis and to submit written confirmation of compliance with the FRB Resolutions.~~:

~~The~~▪ ~~FRB Resolutions~~Capitalize ~~approved~~on byour ~~the~~personal ~~Company~~relationship ~~and~~approach ~~the~~that ~~restrictions~~we ~~imposed~~believe ~~thereby~~differentiates ~~will remain~~us infrom ~~effect~~our ~~until~~larger ~~terminated by the Federal Reserve. We intend to take the actions necessary to comply with the requirements of the FRB Resolutions.~~competitors;

~~The Banks~~▪ Provide customers with access to our local executives who make key credit and other decisions;

In▪ ~~July~~Pursue ~~2011, the~~commercial ~~Boards~~lending ofopportunities ~~Directors~~with ofsmall- ~~the Banks agreed~~ to ~~approve~~mid-sized ~~certain~~businesses ~~board resolutions~~that ~~requested~~are byunderserved ~~the FDIC and OFR (the “Bank Resolutions”). The Bank Resolutions require the Banks to take actions to address concerns identified during examinations conducted~~ by ~~the~~our ~~FDIC~~larger ~~and~~competitors; ~~OFR~~ and ~~to provide periodic reports.~~

~~Pursuant~~▪ ~~to the~~Cross-sell ~~Bank~~our ~~Resolutions,~~products Orange Bank agreed to: (i) establish a compliance committee to oversee the corrective measures with respect to the Bank Resolutions; (ii) provide notice to its regulators prior to adding any individual to the Board of Directors or as an executive officer; (iii) increase the Board of Director’s participation in the affairs of Orange Bank; (iv) develop written plans to improve loan relationships classified as “substandard” and ~~greater~~services ~~than $300,000; (v) charge-off assets classified as “Loss”; (vi) not extend credit~~ to ~~borrowers~~our ~~who~~existing ~~have~~customers ~~had loans charged-off or loans classified as “Loss” or “Doubtful”; (vii) not pay any cash dividend without prior approval; (viii) develop and submit a revised business plan~~ to ~~the FDIC and OFR; (ix) increase Tier 1~~ leverage ~~capital~~our torelationships ~~8% or greater~~ and ~~total risk-based~~enhance capital to 12% or greater; (x) review concentrations of credit and develop a plan to reduce and monitor the level of concentration risk; (xi) improve risk management issues identified during the examination; and (xii) furnish periodic reports detailing the actions taken and progress made with respect to the Bank Resolutionsprofitability.

Pursuant to the Bank Resolutions, Floridian Bank agreed to: (i) submit its budget and earnings forecast to the FDIC and OFR; (ii) maintain a Tier 1 leverage capital ratio of 8% or greater and a total risk-based capital ratio of 12% or greater; (iii) submit a capital contingency plan to the FDIC and OFR that describes how Floridian Bank will maintain the foregoing capital levels; (iv) not pay any cash dividends without the prior consent of the FDIC and OFR; (v) develop written plans to improve loan relationships with adverse classification and greater than $300,000; (vi) not extend credit to borrowers who have had loans charged-off or loans classified as “Loss” or “Doubtful”;(vii) not extend credit to borrowers with loans classified as “substandard” without prior approval of the Board of Directors; (viii) develop and implement a plan to reduce and monitor exposure to commercial real estate lending; (ix) address deficiencies identified in the recent examination with regard to compliance with regulatory guidance and other policies and procedures; (x) maintain an adequate allowance for loan and lease losses level methodology; and furnish periodic reports detailing the actions taken and progress made with respect to the Bank Resolutions.3

~~Status of~~Our ~~Board Resolutions~~Business

~~The Bank~~Historically, ~~Resolutions adopted by each Bank and~~ the ~~restrictions imposed thereby on each Bank will remain in effect unless modified or terminated by the~~ Banks’ ~~regulators.~~ ~~Since~~market ~~entering~~areas ~~into the Bank Resolutions, we~~ have been ~~actively pursuing~~served ~~the~~both ~~corrective~~by ~~actions.~~large Webanks ~~intend~~headquartered toout ~~continue~~of tostate ~~take~~as ~~the~~well ~~actions necessary~~as toa ~~comply~~number ~~with the requirements~~ of ~~the~~community banks ~~Bank~~offering ~~Resolutions~~a ~~and~~high ~~implement the~~level ~~submitted~~of ~~plans~~personal ~~successfully~~attention, ~~although~~recognition weand ~~may~~service. beThe ~~unable~~large tobanks dohave ~~so.~~generally Asapplied ofa transactional ~~December~~business 31approach, ~~2011,~~based ~~Floridian~~upon ~~Bank’s~~volume ~~Tier~~considerations, 1to ~~leverage~~the ~~capital~~market ~~ratio~~while ~~and~~community ~~total risk-based~~banks ~~capital~~have ~~ratio~~traditionally ~~were~~offered ~~approximately~~a ~~9.0%~~more ~~and~~service relationship 12approach.~~5%,~~ ~~respectively.~~The Aspoor ~~of December~~economic ~~31,~~climate ~~2011,~~is ~~Orange~~leading ~~Bank’s~~to ~~Tier~~increased 1industry ~~leverage~~consolidation, ~~capital~~which ~~ratio~~is ~~and~~creating ~~total~~an opportunity ~~risk-based~~for ~~capital~~the ~~ratio were approximately 6~~Banks.9% ~~and~~The ~~10.7%,~~Banks’ ~~respectively.~~strategic ~~We have~~focus ~~received~~is anto ~~extension~~exploit ~~from~~this ~~our~~opportunity ~~regulators~~by ~~for~~catering ~~Orange Bank~~ to ~~comply with~~ the ~~increased~~“displaced ~~capital~~bank ~~ratios required under the Bank Resolutions until the date~~customer” ~~the~~in ~~anticipated~~this ~~charter consolidation of the Banks is completed~~marketplace.

OnThe Banks provide ~~March~~a ~~21,~~range ~~2012,~~of ~~the~~consumer ~~Company~~and ~~withdrew~~commercial ~~its~~banking ~~applications~~services ~~with~~to ~~the FDIC~~individuals, businesses and ~~OFR~~industries. ~~for~~The ~~the~~basic ~~merger~~services ofoffered ~~its~~by ~~subsidiary~~ the Banks. ~~The~~include: ~~Company~~demand isinterest ~~reviewing its~~bearing ~~alternatives~~and ~~for~~noninterest ~~increasing~~bearing ~~the~~accounts, ~~capital~~money ofmarket ~~Orange~~deposit ~~Bank~~accounts, toNOW ~~meet~~accounts, ~~applicable~~time deposits, ~~regulatory~~safe ~~requirements.~~deposit Onservices, ~~July~~business 21credit cards, ~~2011~~debit cards, ~~the~~direct ~~Orange~~deposits, ~~Bank~~night ~~Board~~depository, ~~resolved~~travelers’ ~~that~~checks, cashier’s ~~the~~checks, ~~Bank~~domestic ~~would~~collections, ~~maintain~~bank adrafts, ~~Tier~~automated 1teller ~~leverage~~services, ~~capital~~drive-in ~~ratio~~tellers, ofbanking atby ~~least~~mail 8% and ~~a total~~the ~~risk-based~~full ~~capital~~range ~~ratio~~ of atconsumer loans, ~~least~~both ~~12%~~collateralized and uncollateralized. ~~During~~In addition, the ~~pendency~~Banks ofmake ~~the subsidiary~~secured ~~bank~~and ~~merger~~unsecured ~~transaction~~commercial ~~the~~and ~~Bank~~real ~~had~~estate ~~received~~loans and aissue ~~waiver~~standby ~~from~~letters ~~the~~of ~~FDIC and~~credit. ~~OFR~~The toBanks ~~the~~provide ~~requirements~~automated toteller ~~meet~~machine ~~such~~(ATM) ~~capital~~cards ~~requirements.~~and Asare members of ~~December 31,~~several ~~2011~~ATM networks, which ~~Orange~~permit ~~Bank’s~~our ~~Tier~~customers 1to ~~leverage~~use ~~capital~~the ~~ratio~~convenience of the Banks’ ATM networks and ~~total~~other ~~risk-based~~ATMs throughout the world. The Banks ~~capital~~do ~~ratio~~not ~~were~~have ~~approximately~~trust ~~6.9%~~powers and, ~~10.7%~~accordingly, ~~respectively~~no trust services are provided.

4The Banks’ target market is consumers, professionals, small businesses, real estate developers and commercial real estate investors. The small business customer (typically a commercial entity with sales of up to $25 million) has the opportunity to generate significant revenue for banks yet is generally underserved by large bank competitors. We believe that commercial customers generally can afford more profitability opportunities than the average retail customer.

~~Market~~The ~~Area~~Banks have actively pursued their targeted markets for deposits, particularly small businesses and professionals. Through the use of technology, we believe the Banks have been able to compete effectively with the larger banks in our market area. Such technology includes remote deposit capture, online banking and bill payment, cash management sweep accounts, positive pay, ACH origination, and various other competitive services.

~~Our~~The ~~current~~revenues ~~primary~~of ~~market~~the ~~area~~Banks ~~consists~~are ofprimarily aderived ~~six-county~~from ~~area~~interest on, and fees received in ~~Central~~connection ~~Florida:~~with, ~~Citrus~~real estate and other loans, from interest ~~Flagler~~and dividends from investment securities, ~~Lake~~service charge income generated from demand accounts, ~~Orange~~gains on sales of residential loans, ATM ~~Seminole~~fees, and ~~Volusia~~other ~~counties~~services. The principal sources of funds for the Banks’ lending activities are their deposits, loan repayments, and proceeds from investment securities. The principal expenses of the Banks are the interest paid on deposits, and operating and general administrative expenses. We do not believe our business to be cyclical or seasonal in nature.

~~Floridian~~As is the case with banking institutions ~~Bank~~generally, the Banks’ operations are materially and significantly influenced by general economic conditions and by related monetary and fiscal policies of financial institution regulatory agencies, including the Federal Reserve and the FDIC. Deposit flows and costs of funds are influenced by interest rates on competing investments and general market rates of interest. Lending activities are affected by the demand for financing of real estate and other types of loans, which in turn is affected by the interest rates at which such financing may be offered and other factors affecting local demand and availability of funds. The Banks face strong competition in the attraction of deposits (the primary source of lendable funds) and in the origination of loans. See the section entitled “Competition” for further discussion.

~~Floridian Bank’s~~Regulatory primary service area is in Flagler and Volusia Counties. Floridian Bank has focused primarily on Volusia County, including Ormond Beach, Daytona Beach, and Port Orange. According to the United States Census Bureau (“US Census”), Volusia County’s growth from 2000 to 2010, at 11.6%, was slower than most of Central Florida, and we have seen that the redevelopment efforts have been adversely affected by the current economic slowdown. Based on our management’s experience, Palm Coast, which is in Flagler County, has been a fast growing retirement community. According to the US Census, Flagler County saw population growth of 92% from 2000 to 2010, with 24.5% of its residents in 2010 being 65 years and over. Floridian Bank has focused on the commercial and professional segment of the market, primarily with a customer base associated with the local health care industry. Matter

~~Orange~~The ~~Bank of Florida.~~ Company

~~Orange Bank~~In ~~competes~~October ~~primarily~~2011, inthe aBoard ~~four~~of ~~county~~Directors ~~area:~~of ~~Orange,~~the ~~Seminole,~~Company ~~Lake~~agreed ~~and~~to ~~Citrus. The~~approve ~~majority~~certain ofboard ~~Orange~~resolutions ~~Bank’s~~requested ~~assets~~by ~~are~~the ~~located in Orange County, which,~~Federal ~~according~~Reserve to (the US“FRB ~~Census~~Resolutions”), ~~has~~which ~~seen~~remain ~~its population grow by over 249,000 or~~in 27effect.~~8%,~~ ~~between~~From ~~2000~~a ~~and~~regulatory ~~2010.~~perspective, ~~Based~~the onFRB ~~data~~Resolutions ~~from~~are ~~the~~an ~~US Census~~informal, ~~Lake~~nonpublic ~~and~~agreement that ~~Seminole~~is ~~Counties~~used ~~are also considered~~ to becorrect ~~high~~problems ~~growth~~or ~~population~~to ~~areas~~request ~~with~~periodic ~~41.1% and~~reports ~~15.8%~~addressing ~~growth,~~certain ~~respectively,~~aspects ~~over~~of ~~the~~a ~~same~~member ~~time period~~bank’s operations. WeIn ~~believe~~the ~~Seminole to~~interest beof afull ~~fairly~~disclosure, ~~affluent~~we ~~market~~are ~~with~~summarizing ~~median~~the ~~household~~main ~~income~~obligations inof ~~2009~~the ofFRB ~~$56,201~~Resolutions. The WeFRB ~~have~~Resolutions ~~also~~require ~~focused~~the onCompany ~~Citrus~~to ~~County,~~take ~~which~~actions ~~management~~to ~~believes~~address ~~has~~concerns ~~a sizable~~identified ~~retirement~~during ~~community.~~a ~~Citrus~~recent ~~County’s~~examination ~~population~~conducted ofby 65the ~~years~~Federal Reserve and ~~over represented~~to ~~31.9%~~provide inperiodic ~~2010~~reports ~~compared~~ to the ~~state of Florida at 17~~Federal Reserve.~~3%.~~

~~Banking Services~~ 4

~~Commercial~~The ~~Banking~~Federal Reserve cited the Company’s financial deterioration as the reason it requested the Company adopt the FRB Resolutions. Accordingly, the Company adopted the FRB Resolutions and agreed to take the following actions: Without the prior approval of the Federal Reserve, the Company agreed to not (i) incur any new debt or refinance existing debt;(ii) declare any dividends on any class of stock or;(iii) reduce its capital position by redeeming shares of stock. The FRB granted us permission to pay dividends on the shares of our Series A Noncumulative Preferred Stock in the form of additional shares of Preferred Stock for a period of two years. The FRB Resolutions do not contain any capital directives. No other actions were necessary other than to submit Company-only financial data on a quarterly basis and to submit written confirmation of compliance with the FRB Resolutions.

The ~~Banks~~FRB Resolutions ~~focus~~approved ~~their~~by ~~commercial~~the ~~loan~~Company ~~originations on small-~~ and ~~mid-sized~~the ~~businesses (generally~~restrictions upimposed tothereby ~~$25~~will ~~million~~remain in ~~annual~~effect ~~sales)~~until ~~and~~terminated ~~such loans are usually accompanied~~ by ~~significant~~the ~~related~~Federal ~~deposits~~Reserve. ~~Commercial underwriting is driven~~We byintend ~~cash~~to ~~flow~~take ~~analysis~~the ~~supported~~actions bynecessary ~~collateral~~to ~~analysis~~comply ~~and~~with ~~review.~~the ~~Commercial loan~~requirements ~~products include commercial real estate construction and term loans; working capital loans and lines~~ of ~~credit;~~the ~~demand,~~FRB ~~term, and time loans; and equipment, inventory and accounts receivable financing~~Resolutions. ~~The Banks offer a range of cash management services and deposit products to commercial customers. Computerized banking is available to commercial customers.~~

~~Retail~~The ~~Banking.~~ Banks

~~The~~On ~~Banks’~~July 21, ~~retail~~2011, ~~banking~~the ~~activities~~board ~~emphasize~~of ~~consumer~~directors ~~deposit~~of ~~and~~Floridian ~~checking~~Bank ~~accounts.~~agreed ~~An extensive~~to ~~range~~approve ofa ~~these~~board ~~services~~resolution isin ~~offered~~consultation bywith ~~the~~their ~~Banks~~banking toregulators. On ~~meet~~September ~~the~~11, ~~varied needs~~2012, ofthe ~~their~~regulatory ~~customers~~board ~~from~~resolution ~~young~~for ~~persons~~Floridian toBank ~~senior~~was ~~citizens~~terminated. InOn ~~addition~~July to21, 2011, the board of directors ~~traditional~~of ~~products~~Orange ~~and~~Bank ~~services,~~agreed ~~the~~to ~~Banks~~approve ~~offer~~a ~~contemporary~~board ~~products~~resolution and ~~services,~~ ~~such~~subsequently ason ~~debit~~July ~~cards~~19, ~~Internet banking~~2012, ~~and~~the ~~electronic~~board ~~bill~~of ~~payment~~directors of Orange Bank agreed ~~services.~~to ~~Consumer~~adopt ~~loan~~a ~~products~~memorandum ~~offered~~of understanding (“MOU”) issued by ~~the~~its ~~Banks~~banking ~~include~~regulator. ~~home~~From ~~equity~~a ~~lines of~~regulatory ~~credit~~perspective, ~~second~~a ~~mortgages~~MOU is a nonpublic agreement; however, ~~new~~in ~~and~~the ~~used~~interest ~~auto~~of ~~loans~~full disclosure, ~~new~~we ~~and~~are ~~used~~summarizing ~~boat~~the ~~loans,~~main obligations of Orange Bank’s ~~overdraft~~MOU. ~~protection,~~The ~~and~~FDIC ~~unsecured~~issues ~~personal~~an ~~credit~~MOU ~~lines.~~when it believes a board resolution would not adequately address its concerns.

~~Mortgage~~Pursuant ~~Banking~~to the MOU, Orange Bank agreed to:(i) seek approval from the FDIC and OFR prior to appointing new directors and executive officers; (ii) enhance the board of director’s participation in the affairs of Orange Bank; (iii) develop plans to reduce and improve certain loan relationships with adverse classification; (iv) chargeoff remaining assets classified as “Loss”; (v) prohibit extensions of credit to certain high-risk borrowers; (vi) submit of a new business plan and annual budgets and earnings forecasts; (vii) achieve and maintain, by September 30, 2012, a Tier 1 leverage capital ratio and total risk-based capital ratio of at least 8% and 12%, respectively; and (viii) provide quarterly reports to the FDIC and OFR regarding the steps taken to address the foregoing. Orange Bank must also receive approval from the FDIC and OFR prior to declaring or paying dividends.

The ~~Banks~~MOU adopted ~~have~~by aOrange ~~joint~~Bank ~~marketing~~and ~~agreement~~the ~~with~~restrictions ~~FBC~~imposed ~~Mortgage~~thereby, ~~LLC~~will ~~which~~remain ~~provides~~in useffect ~~with~~unless modified or terminated by the Bank’s regulators. Since entering into the ~~ability~~MOU, towe ~~refer~~have ~~our~~been ~~retail~~actively ~~banking~~pursuing ~~customers~~the corrective actions. We intend to ~~FBC~~continue ~~Mortgage~~to ~~LLC~~take ~~for~~the actions necessary ~~conventional~~to ~~and~~comply ~~nonconforming~~with ~~mortgages~~the requirements of the MOU and ~~construction~~implement the submitted plan successfully, although we may be unable to do so. As of December 31, 2012, Orange Bank’s Tier 1 leverage capital ratio and ~~permanent~~total risk-based capital ratio were approximately 9.1% ~~financing~~and 13.6%, respectively, exceeding the minimum requirements of the MOU.

5Market Area

~~Lending~~With ~~Services~~the sale of our Crystal River branch, located in Citrus County, in January 2013, our current primary market area consists of a five-county area in Central Florida: Flagler, Lake, Orange, Seminole, and Volusia counties.

~~Loan~~Floridian ~~Portfolio Composition~~Bank.

AtFloridian Bank’s ~~December~~primary service area is in Flagler and Volusia Counties. Floridian Bank has focused primarily on Volusia 31County, ~~2011~~including Ormond Beach, Daytona Beach, and Port Orange. Based on data from the ~~Banks~~Bureau of Economic and Business Research (“the Bureau”), Volusia County’s ~~loan~~growth ~~portfolios~~between ~~totaled~~2010 ~~$311~~and April 2012 has been slower than most of Central Florida at 0.85%. ~~million~~Population growth in our branch cities, ~~representing~~which are located in the largest cities in Volusia County, ~~approximately~~based 69on population, after Deltona, however, have outpaced the county with Daytona Beach reporting a 1.4% growth rate. The city of ~~our~~Palm ~~total~~Coast ~~assets~~experienced ofa ~~$449~~1.67% ~~million~~growth rate for the same period, which was above Flagler County’s growth rate of 1.5%. Floridian Bank has focused on the commercial and professional segment of the market, primarily with a customer base associated with the local health care industry.

~~The composition~~Orange Bank of ~~the Banks’ loan portfolios at December 31, 2011 is indicated below~~Florida.

(Dollars in Thousands)		Amount		% of Total
Commercial	$	44,833		14.4	%
Commercial real estate		241,648		77.5
Residential real estate		8,542		2.7
Consumer and home equity		16,745		5.4
Total loans		311,768		100.0	%
Less: Allowance for loan losses		(6,566	)
Less: Net deferred fees		(114	)
Loans, net	$	305,088

Orange Bank competes primarily in a three county area: Orange, Seminole and Lake. The majority of Orange Bank’s assets are located in Orange County. According to the US Census, population in Orange County grew by over 249,000 or 27.8%, between 2000 and 2010. The Bureau reported that Orange County had a 2.6% growth rate from 2010 to 2012 with Orlando growing by almost 3%. Based on data from the Bureau, Lake and Seminole Counties saw 0.9% and 1.3% growth, respectively, over the same time period, which are both below the state average of 1.5%. Growth in Clermont, where our Lake County branch is located, however, experienced a 3.8% growth rate.

~~There were approximately $8.4 million in nonperforming loans at December 31, 2011.~~ 5

~~Commercial~~Banking ~~Loans.~~ Services

~~At December~~Commercial ~~31, 2011, our commercial loan portfolio totaled $44~~Banking.8 million. All corporate and business purpose loans and lines of credit that are not real estate related are classified as commercial loans. Loans are made for acquisition, expansion, and working capital purposes and are generally secured by business assets including accounts receivable, inventory, and equipment and may incorporate a personal guarantee. Terms on commercial loans are generally for five years or less with most lines of credit written on an on-demand-basis. The majority of commercial loans have a floating interest rate tied to a published index. The financial condition and cash flow of commercial borrowers are closely monitored by the submission of corporate financial statements, personal financial statements and income tax returns. The frequency of submissions of required financial information depends on the size and complexity of the credit and the collateral that secures the loan. As of December 31, 2011, commercial loans represented 14% of the portfolio.

~~Commercial~~The ~~Real~~Banks ~~Estate~~focus their commercial loan originations on small- and mid-sized businesses (~~“CRE”~~generally up to $25 million in annual sales)~~Loans~~ and such loans are usually accompanied by significant related deposits. Commercial underwriting is driven by cash flow analysis supported by collateral analysis and review. Commercial loan products include commercial real estate construction and term loans; working capital loans and lines of credit; demand, term, and time loans; and equipment, inventory and accounts receivable financing. The Banks offer a range of cash management services and deposit products to commercial customers. Computerized banking is available to commercial customers.

~~At December~~Retail ~~31, 2011, our CRE portfolio totaled $241~~Banking.6 million. CRE represents business purpose loans that are real estate related and secured by real estate. CRE loans are reviewed primarily as cash flow loans and secondarily as loans secured by real estate. Such loans are primarily secured by retail office buildings, speculative residential and multi-family construction projects, land, and general purpose business space. Although terms may vary, the Banks’ commercial mortgages generally are long term in nature, owner-occupied, and variable-rate loans. The Banks seek to reduce the risks associated with commercial mortgage lending by generally lending in their market area and obtaining periodic financial statements and tax returns from borrowers. CRE loans are generally originated in amounts up to 80% of the appraised value of the property securing the loan. Maximum loan to value limits are slightly lower for raw land and land development loans.

~~For~~The Banks’ ~~construction~~retail ~~loans,~~banking weactivities ~~only~~emphasize ~~lend~~consumer todeposit ~~experienced~~and ~~local~~checking ~~builders~~accounts. ~~who~~An ~~have~~extensive arange of these services is offered by ~~successful~~the ~~track~~Banks ~~record~~to ~~with~~meet usthe orvaried ~~one~~needs of ~~our~~their ~~competitors.~~customers Iffrom ~~the~~young ~~construction loan~~persons isto ~~for~~senior acitizens. ~~speculative~~In ~~residential~~addition orto ~~multi-family~~traditional ~~residential~~products and ~~project~~services, the ~~construction~~ ~~must~~Banks ~~occur~~offer incontemporary ~~our~~products ~~market~~and ~~area.~~services, ~~Before~~such ~~becoming~~as ~~involved~~debit incards, Internet banking, and electronic bill payment ~~discussions~~services. ~~with~~Consumer aloan ~~borrower~~products ~~for~~offered aby ~~commercial~~the ~~real~~Banks ~~estate~~include ~~loan~~home equity lines of credit, wesecond ~~physically~~mortgages, new and used auto ~~inspect~~loans, ~~the~~new ~~property.~~and used boat loans, overdraft protection, and unsecured personal credit lines.

~~Appraisals~~Mortgage ~~on properties securing commercial real estate loans originated by us are performed by an independent appraiser at the time the loan is made~~Banking. In addition, our underwriting procedures generally require verification of the borrower’s credit history, income and financial condition, banking relationships, references and income projections for the property. We generally obtain personal guarantees for our commercial real estate loans.

~~Residential~~The ~~Real~~Banks during ~~Estate~~2012 had a joint marketing agreement with FBC Mortgage LLC (~~“RRE”~~FBC) ~~Loans~~which provided us the ability to refer our retail banking customers to FBC for conventional and nonconforming mortgages and construction and permanent financing. In December 2012, the Company signed a Correspondent Agreement with FBC; whereby, the Banks will originate mortgage loans and sell them to FBC.

AtLending December 31, 2011, our RRE portfolio totaled $8.5 million. RRE loans represent all consumer purpose loans collateralized by one to four family dwellings. We typically do not lend on primary residences. Our residential real estate loans are mainly secured by first mortgages on investment properties as well as select loans originated by Floridian Financial Mortgage. Services

~~We embrace~~Loan ~~written,~~Portfolio ~~non-discriminatory underwriting standards for use in the underwriting and review of every loan considered~~Composition. Each Bank’s board of directors reviews and approves these underwriting standards annually. Our underwriters obtain or review each loan application to determine the borrower’s ability to repay, and confirm the significant information through the use of credit reports, financial statements, employment and other verifications.

6At December 31, 2012, the Banks’ loan portfolios totaled $273.8 million, representing approximately 71.5% of our total assets of $383.1 million.

~~When originating~~The ~~a real estate mortgage loan, we obtain a new appraisal of the~~composition ~~property from an independent third party to determine the adequacy~~ of the ~~collateral,~~ ~~and~~Banks’ ~~the appraisal will be independently reviewed by our~~ loan ~~administrators.~~ ~~Borrowers~~portfolios ~~are~~at ~~required~~December ~~to obtain casualty insurance and~~31, ~~if applicable,~~2012 ~~flood~~is ~~insurance~~indicated ~~in amounts at least equal to the outstanding loan balance or the maximum amount allowed by law~~below.

We require that a survey be conducted and title insurance be obtained, insuring the priority of our mortgage lien. The maximum loan to value limit for lending on residential real estate is 80% of the lesser of the acquisition cost or the estimate of fair market value.


(Dollars in Thousands)	Amount			% of Total
Commercial	$	37,166			13.6	%
Commercial real estate		212,846			77.7
Residential real estate		7,371			2.7
Consumer and home equity		16,382			6.0
Total loans		273,765			100.0	%
Less: Allowance for loan losses		(8,017	)
Less: Net deferred fees		(112	)
Loans, net	$	265,636

~~The~~There ~~Banks’ loan~~were ~~portfolios contain no adjustable rate, subprime, or option (“pick a~~approximately ~~payment”)~~$10.7 ~~residential~~million ~~mortgage~~in ~~loans.~~nonperforming ~~The~~ loans ~~generally~~at ~~have~~December ~~terms~~31, ~~of less than five years and are written on a fixed rate basis~~2012.

~~Consumer~~ Commercial Loans.

At December 31, ~~2011~~2012, our ~~installment~~commercial ~~and consumer~~ loan portfolio totaled $1637.72 million. ~~The~~ ~~Banks~~All ~~offer~~corporate aand ~~variety~~business ofpurpose ~~installment~~loans and ~~consumer~~lines ~~loans consisting~~ of ~~home~~credit that ~~equity~~are ~~lines~~not ofreal ~~credit,~~estate ~~overdraft~~related ~~loans,~~are classified as commercial loans. ~~secured~~Loans byare ~~deposits~~made ~~and securities~~for acquisition, expansion, and ~~unsecured~~working ~~personal~~capital purposes ~~loans.~~and ~~These loans~~ are ~~typically~~generally secured by ~~residential~~ ~~real~~business ~~estate~~assets orincluding ~~personal~~accounts ~~property~~receivable, ~~including~~inventory, ~~automobiles~~and equipment and ~~boats.~~may incorporate ~~Home~~a ~~equity~~personal ~~loans~~guarantee. ~~(closed-end~~Terms ~~and~~on ~~lines~~commercial ofloans ~~credit)~~ are ~~typically~~generally ~~made~~for upfive toyears ~~85% of~~or ~~the~~less ~~appraised~~with ~~value~~most lines of ~~the~~credit ~~property~~written ~~securing~~on ~~the~~an ~~loan,~~on-demand-basis. The inmajority ~~each~~of ~~case,~~commercial ~~less the~~loans ~~amount~~have ofa ~~any~~floating ~~existing~~interest ~~liens~~rate ontied ~~the~~to ~~property~~a published index. ~~Closed-end~~The ~~loans~~financial ~~have~~condition ~~terms~~and cash flow of upcommercial toborrowers 15are ~~years.~~closely ~~Lines~~monitored by the submission of ~~credit~~corporate ~~have~~financial anstatements, ~~original~~personal ~~maturity~~financial ofstatements and 5income ~~years~~tax returns. The ~~interest rates~~frequency onof ~~closed-end~~submissions ~~home~~of ~~equity~~required ~~loans~~financial ~~are~~information ~~fixed,~~depends ~~while~~on ~~interest~~the ~~rates~~size onand ~~home~~complexity of the ~~equity~~credit ~~lines~~and the collateral that secures the loan. As of ~~credit~~December ~~are~~31, ~~variable~~2012, commercial loans represented 13.6% of the portfolio.

~~Credit Administration~~ 6

~~The~~Commercial ~~Company’s~~Real ~~Credit~~Estate ~~Administration~~(“CRE”) is managed on a corporate-wide basis under the close direction of the President of Floridian Bank who has extensive experience in that role. The Banks’ lending activities are subject to written policies approved by the Banks’ Boards of Directors to ensure proper management of credit risk. Loans are subject to a defined credit process that includes credit evaluation of borrowers, risk-rating of credit, establishment of lending limits and application of lending procedures, including the holding of adequate collateral and the maintenance of compensating balances, as well as procedures for on-going identification and management of credit deterioration. Regular portfolio reviews are performed to identify potential underperforming credits, estimate loss exposure, and to ascertain compliance with the Banks’ policies. Management review consists of evaluation of the financial strengths of the borrower and the guarantor, the related collateral and the effects of economic conditions.

~~Within each~~At ~~segment~~December 31, ~~the~~2012, ~~Company~~our ~~monitors~~CRE ~~and~~portfolio ~~assesses~~totaled ~~the~~$212.8 ~~credit~~million ~~risk~~or in77.7% ~~the~~of ~~following classes, based on~~ the ~~risk~~total ~~characteristic of each~~ loan ~~segment:~~portfolio. ~~Pass,~~CRE ~~Special~~represents ~~Mention,~~business ~~Substandard,~~purpose ~~Doubtful,~~loans ~~and~~that ~~Loss.~~are ~~Within~~real ~~the~~estate ~~Commercial~~related and ~~CRE~~secured ~~portfolios~~by ~~risk grades~~real ~~are~~estate. ~~assigned~~CRE ~~based~~loans onare anreviewed ~~assessment~~primarily ofas ~~conditions~~cash ~~that~~flow ~~affect each~~loans ~~borrower’s~~and ~~ability~~secondarily ~~to meet obligations~~ as ~~outlined~~loans insecured ~~the~~by ~~loan~~real ~~agreement~~estate. ~~This process~~Such ~~includes~~loans anare ~~in-depth~~primarily ~~review~~secured ~~prior~~by toretail ~~loan~~office ~~approval~~buildings, ~~and throughout the~~speculative ~~life~~residential ofand ~~the~~multi-family ~~loan.~~construction ~~The~~projects, ~~analysis~~land, ofand ~~the~~general ~~borrower~~purpose ~~includes~~business aspace. ~~review~~Although ofterms ~~financial information,~~may ~~credit documentation~~vary, ~~public information, past experience with~~ the ~~borrower,~~Banks’ ~~and~~commercial ~~other~~mortgages ~~information~~generally ~~that~~are ~~may~~long beterm ~~available~~in ~~specific~~nature, toowner-occupied, ~~each borrower~~and variable-rate loans. The ~~review~~Banks ~~also~~seek to ~~includes~~reduce ~~debt~~the ~~service~~risks ~~capabilities,~~associated ~~actual~~with ~~and projected~~commercial ~~cash~~mortgage ~~flows,~~lending ~~and~~by ~~industry~~generally ~~and~~lending ~~economic~~in ~~risks.~~their ~~Underwriting~~market ofarea ~~RRE, consumer,~~ and ~~home~~obtaining periodic ~~equity~~financial ~~loans~~statements and ~~lines~~tax ofreturns ~~credit~~from ~~include~~borrowers. anCRE ~~assessment~~loans ~~of the~~are ~~borrower’s~~generally ~~credit~~originated ~~history~~in ~~and~~amounts ~~the~~up ~~ability~~ to ~~meet~~80% ~~existing~~of ~~debt~~the ~~obligations,~~appraised asvalue ~~well as payments~~ of ~~principal~~the ~~and~~property ~~interest~~securing on the ~~proposed~~ loan. ~~Risk~~Maximum ~~grades~~loan ~~are~~to ~~reviewed~~value ~~annually~~limits onare ~~all~~slightly ~~large~~lower ~~credit~~for ~~relationships~~raw orland ~~on any~~and ~~credit where management becomes aware of information that may affect the~~land ~~borrower’s~~development ~~ability to fulfill contractual obligations~~loans.

~~The~~For ~~Banks~~construction ~~generally~~loans, dowe ~~not~~only ~~make~~lend ~~commercial~~to orexperienced ~~consumer~~local ~~loans~~builders ~~outside~~who ~~their~~have ~~market~~a ~~area unless~~successful ~~the~~track ~~borrower~~record ~~has~~with anus ~~established~~or ~~relationship with~~ one of our ~~Banks~~competitors. ~~and~~If the ~~conducts~~construction ~~its~~loan ~~principal~~is ~~business~~for ~~operations~~a ~~within~~speculative residential or multi-family residential project, the construction must occur in our market area. ~~Consequently,~~ ~~the~~Before ~~Banks~~becoming ~~and~~involved ~~their~~in ~~borrowers~~discussions ~~are~~with ~~affected~~a byborrower ~~the~~for ~~economic conditions~~a ~~prevailing~~commercial inreal ~~their~~estate ~~market~~loan, ~~area.~~we physically inspect the property.

~~The Banks~~Appraisals ~~will~~on ~~purchase~~properties orsecuring ~~sell~~commercial ~~participations~~real inestate loans ~~from~~originated ~~time~~by tous ~~time, typically on a nonrecourse basis, unless the Bank’s Board of Directors approves a recourse arrangement. Usually, participations~~ are ~~necessary~~performed ~~when~~by ~~the~~an ~~loan~~independent inappraiser ~~its entirety~~at ~~would exceed~~ the ~~selling~~time ~~bank’s legal lending limit or when booking~~ the ~~entire~~ loan ~~would~~is ~~cause the selling bank to exceed a pre-determined loan to deposit ratio or create a credit concentration in a particular type of loan~~made. ~~Sound underwriting~~In ~~justification~~addition, ~~including~~our anunderwriting ~~independent~~procedures ~~analysis~~generally ofrequire ~~credit~~verification ~~quality~~ of the borrower’s credit history, income and ~~evidence~~financial ofcondition, ~~proper~~banking ~~loan~~relationships, ~~documentation~~references ~~are~~and ~~required~~income ~~prior to~~projections for the ~~Banks committing to purchase a loan participation~~property. ~~The~~We ~~Banks~~generally ~~maintain~~obtain personal ~~complete~~guarantees ~~and~~for ~~current~~our ~~credit~~commercial ~~information~~real onestate ~~the borrower during the term of the loan~~loans.

7Residential Real Estate (“RRE”) Loans.

~~Investment~~At December ~~Activity~~31, 2012, our RRE portfolio totaled $7.4 million or 2.7% of the total loan portfolio. RRE loans represent all consumer purpose loans collateralized by one to four family dwellings. In 2012, we typically did not lend on primary residences. Our residential real estate loans are mainly secured by first mortgages on investment properties as well as select loans originated by Floridian Financial Mortgage.

~~The~~We ~~primary~~embrace ~~objectives~~written, ofnon-discriminatory ~~our~~underwriting ~~investment~~standards ~~portfolio~~for ~~are~~use toin ~~maximize~~ the ~~rate~~underwriting ofand ~~return through~~review ~~permissible~~of ~~fixed~~every ~~income~~loan ~~investments~~considered. ~~with~~Each aBank’s board ~~mixture~~ of ~~maturities~~directors ~~and compositions,~~reviews ~~meet liquidity requirements,~~ and ~~mitigate~~approves ~~interest~~these ~~rate sensitivity~~underwriting ofstandards ~~the~~annually. ~~overall~~Our ~~balance~~underwriters ~~sheet.~~obtain Weor ~~attempt~~review toeach ~~accomplish~~loan ~~this by~~application ~~evaluating~~to determine the ~~overall balance sheets~~borrower’s ~~interest~~ability ~~rate~~to ~~sensitivity~~repay, and ~~the potential~~confirm ~~impact on~~ the ~~Company’s~~significant ~~earnings~~information ~~over~~through athe ~~series~~use of ~~possible~~credit ~~future~~reports, ~~interest~~financial ~~rate~~statements, ~~scenarios;~~employment ~~for~~and ~~current~~other ~~periods as well as over future horizon periods~~verifications.

WeWhen ~~invest~~originating ~~primarily~~a inreal ~~U.S.~~estate ~~government~~mortgage ~~agency~~loan, ~~obligations~~we ~~and~~obtain ~~U.S.~~a ~~government~~new ~~agency mortgage-backed~~appraisal ~~securities~~of ~~including~~the ~~collateralized~~property ~~mortgage~~from ~~obligations~~an ~~which are~~independent ~~explicitly~~third orparty ~~implicitly~~to ~~guaranteed~~determine asthe toadequacy of ~~principal~~the collateral, and ~~interest~~the appraisal will be independently reviewed by ~~the government~~our loan administrators. WeBorrowers ~~enter~~are ~~into~~required ~~federal~~to ~~funds~~obtain casualty ~~transactions~~insurance ~~with~~and, ~~our~~if ~~principal correspondent~~applicable, ~~banks~~flood ~~directly~~insurance in amounts at least equal to the outstanding loan balance or asthe anmaximum amount ~~agent.~~allowed by law.

~~Competition~~We require that a survey be conducted and title insurance be obtained, insuring the priority of our mortgage lien. The maximum loan to value limit for lending on residential real estate is 80% of the lesser of the acquisition cost or the estimate of fair market value.

~~We operate~~The inBanks’ aloan ~~highly~~portfolios ~~competitive~~do ~~environment~~not ~~competing~~contain ~~for~~any ~~deposits~~adjustable ~~and loans with other commercial banks~~rate, ~~thrifts and other financial institutions~~subprime, ~~many~~or ofoption ~~which~~(“pick ~~have greater~~a ~~financial resources than us. Many large financial institutions compete~~payment”) ~~for~~residential ~~business~~mortgage ~~in our service area~~loans. ~~Certain~~The ofloans ~~these~~generally ~~institutions~~ have ~~significantly~~ ~~higher~~terms ~~lending~~of ~~limits~~less than wefive doyears and ~~provide~~are ~~services~~written toon ~~their customers~~a ~~which~~fixed werate ~~do not offer~~basis.

~~We believe~~Consumer ~~we are able to compete favorably with our competitors because we provide responsive, personalized services through our knowledge and awareness of our service area, customers and business~~Loans.

~~The~~At December ~~following~~31, ~~table~~2012, ~~displays~~our ~~data~~installment ~~provided~~and byconsumer loan portfolio totaled $16.4 million or 6.0% of the ~~FDIC~~total ~~regarding~~loan ~~our~~portfolio. ~~competition~~The inBanks ~~Citrus,~~offer ~~Flagler~~a variety of installment and consumer loans consisting of home equity lines of credit, ~~Lake~~overdraft loans, ~~Orange~~loans secured by deposits and securities, ~~Seminole~~and unsecured personal loans. These loans are typically secured by residential real estate or personal property, including automobiles and ~~Volusia~~boats. ~~counties~~Home equity loans (~~our~~closed-end ~~primary market~~and ~~area~~lines of credit), asare typically made up to 85% of ~~June~~the 30appraised value of the property securing the loan, ~~2011~~in each case, less the ~~latest~~amount ~~date~~of ~~for~~any ~~which~~existing ~~data~~liens ~~was~~on the ~~available:~~property. Closed-end loans have terms of up to 15 years. Lines of credit have an original maturity of 5 years. The interest rates on closed-end home equity loans are fixed, while interest rates on home equity lines of credit are variable.

County	Number of Insured Financial Institutions	Number of Retail Branches	Banks’ Market Share
Citrus	14	49	2.6%
Flagler	12	25	0.6%
Lake	25	106	0.3%
Orange	40	294	0.5%
Seminole	34	143	2.0%
Volusia	27	157	1.6%

~~Interest rates,~~Credit both on loans and deposits, and prices of fee-based services are significant competitive factors among financial institutions generally. Other important competitive factors include office location, office hours, the quality of customer service, community reputation, continuity of personnel and services, and, in the case of larger commercial customers, relative lending limits and the ability to offer sophisticated cash management and other commercial banking services. Many of our larger competitors have greater resources, broader geographic markets, more extensive branch networks, and higher lending limits than we do. They also can offer more products and services and can better afford and make more effective use of media advertising, support services and electronic technology than we can. Administration

The ~~largest~~Company’s ~~competitors~~Credit inAdministration ~~our~~is ~~market~~managed ~~include:~~on ~~Bank~~a ofcorporate-wide ~~America,~~basis ~~Wells~~under ~~Fargo,~~the ~~SunTrust, BB&T,~~close ~~Regions,~~direction ~~and~~of ~~PNC,~~the ~~and~~President ~~these~~of ~~institutions~~Floridian ~~capture~~Bank ~~the~~who ~~majority of the~~has ~~deposits.~~extensive ~~Our~~experience ~~significant~~in ~~community~~that ~~bank~~role. ~~competitors~~The ~~include:~~Banks’ ~~Centennial~~lending ~~Bank, Florida~~activities ~~Bank~~are ofsubject ~~Commerce,~~to ~~First~~written ~~Southern~~policies ~~Bank,~~approved ~~Florida~~by ~~Capital~~the ~~Bank,~~Banks’ Boards ~~East~~of ~~Coast Community~~Directors ~~Bank,~~to ~~and~~ensure ~~Gateway~~proper ~~Bank~~management of ~~Florida~~credit risk. WeLoans ~~believe~~are ~~community~~subject ~~banks~~to ~~can compete~~a ~~successfully~~defined ~~with~~credit ~~larger~~process ~~institutions~~that byincludes ~~providing personalized service~~credit ~~and~~evaluation ~~making~~of ~~timely~~borrowers, ~~local~~risk-rating ~~decisions~~of ~~and~~credit, ~~thereby~~establishment ~~drawing~~of ~~business~~lending ~~away~~limits ~~from larger~~and ~~institutions~~application inof ~~the~~lending ~~market.~~procedures, Weincluding the ~~also~~holding ~~believe~~of ~~further~~adequate ~~consolidation~~collateral inand the ~~banking~~ ~~industry~~maintenance isof ~~likely~~compensating tobalances, ~~create~~as ~~additional~~well ~~opportunities~~as procedures for ~~community~~on-going identification ~~banks~~and tomanagement ~~capture~~of ~~deposits~~credit ~~from~~deterioration. ~~affected~~Regular ~~customers~~portfolio ~~who~~reviews ~~may~~are ~~become~~performed ~~dissatisfied as~~to ~~their~~identify ~~financial~~potential ~~institutions~~underperforming ~~grow~~credits, estimate ~~larger.~~loss ~~In addition~~exposure, weand ~~believe~~to ~~that~~ascertain ~~once~~ compliance with the ~~Florida~~Banks’ ~~economy~~policies. ~~experiences~~Management ~~new~~review ~~job~~consists ~~growth,~~of evaluation of the ~~growth~~financial strengths of ~~our~~the ~~banking markets~~borrower ~~from~~and ~~new~~the ~~residents~~guarantor, ~~affords~~the usrelated ancollateral ~~opportunity~~and tothe ~~capture~~effects ~~new~~of ~~deposits.~~economic conditions.

~~Marketing~~Within each segment, the Company monitors and ~~Distribution~~assesses the credit risk in the following classes, based on the risk characteristic of each loan segment: Pass, Special Mention, Substandard, Doubtful, and Loss. Within the Commercial and CRE portfolios risk grades are assigned based on an assessment of conditions that affect each borrower’s ability to meet obligations as outlined in the loan agreement. This process includes an in-depth review prior to loan approval and throughout the life of the loan. The analysis of the borrower includes a review of financial information, credit documentation, public information, past experience with the borrower, and other information that may be available specific to each borrower. The review also includes debt service capabilities, actual and projected cash flows, and industry and economic risks. Underwriting of RRE, consumer, and home equity loans and lines of credit include an assessment of the borrower’s credit history and the ability to meet existing debt obligations, as well as payments of principal and interest on the proposed loan. Risk grades are reviewed annually on all large credit relationships or on any credit where management becomes aware of information that may affect the borrower’s ability to fulfill contractual obligations.

InThe ~~order~~Banks togenerally ~~market~~do ~~our~~not ~~deposit~~make ~~and~~commercial ~~loan~~or ~~products,~~consumer weloans ~~rely~~outside ~~heavily~~their onmarket ~~referrals~~area ~~from~~unless ~~existing customers~~the ~~and~~borrower ~~direct~~has ~~customer~~an ~~contact~~established ~~calling~~relationship ~~efforts.~~with Inone of ~~addition,~~ our ~~Board~~Banks ~~of Directors~~ and ~~management~~conducts ~~team~~its ~~realize~~principal ~~the~~business ~~importance~~operations ~~of forging partnerships~~ within ~~the community as a method of expanding~~ our ~~customer~~market ~~base and serving the needs of our community~~area. ~~In this regard~~Consequently, wethe ~~are~~Banks ~~an active participant in various community activities~~ and ~~organizations.~~their ~~Participation in such events and~~borrowers ~~organizations allows management to determine what additional products and services~~ are ~~needed~~affected inby ~~our~~the ~~community~~economic asconditions ~~well~~prevailing ~~as assisting~~ in ~~our~~their ~~efforts~~market ~~to determine credit needs in accordance with the Community Reinvestment Act~~area.

8The Banks will purchase or sell participations in loans from time to time, typically on a nonrecourse basis, unless the Bank’s Board of Directors approves a recourse arrangement. Usually, participations are necessary when the loan in its entirety would exceed the selling bank’s legal lending limit or when booking the entire loan would cause the selling bank to exceed a pre-determined loan to deposit ratio or create a credit concentration in a particular type of loan. Sound underwriting justification, including an independent analysis of credit quality of the borrower, and evidence of proper loan documentation are required prior to the Banks committing to purchase a loan participation. The Banks maintain complete and current credit information on the borrower during the term of the loan.

InInvestment ~~addition to our direct contact marketing methods, we use limited local print advertising, product brochures, and direct mail to build our customer base.~~ Activity

~~Employees~~The primary objectives of our investment portfolio are to maximize the rate of return through permissible fixed income investments with a mixture of maturities and compositions, meet liquidity requirements, and mitigate interest rate sensitivity of the overall balance sheet. We attempt to accomplish this by evaluating the overall balance sheets’ interest rate sensitivity and the potential impact on the Company’s earnings over a series of possible future interest rate scenarios; for current periods as well as over future horizon periods.

AsWe ofinvest primarily ~~December~~in ~~31,~~U.S. ~~2011,~~government weagency ~~employed 71 full~~mortgage-~~time~~backed ~~employees~~securities ~~and~~including ~~six~~collateralized ~~part-time employees.~~mortgage ~~The~~obligations ~~employees~~which are ~~not~~explicitly ~~represented~~or byimplicitly guaranteed aas ~~collective~~to ~~bargaining~~principal ~~unit~~and interest by the government. We ~~consider~~enter ~~relations~~into federal funds transactions with our ~~employees~~principal tocorrespondent banks bedirectly ~~good.~~or as an agent.

~~REGULATORY CONSIDERATIONS~~Competition

We ~~must~~operate ~~comply~~in ~~with~~a ~~state~~highly ~~and~~competitive ~~federal~~environment ~~banking~~competing ~~laws~~for deposits and ~~regulations~~loans ~~that~~with ~~control virtually~~other ~~all~~commercial ~~aspects~~banks, ofthrifts ~~our operations. These laws~~ and ~~regulations~~other ~~generally~~financial institutions, ~~aim~~many toof ~~protect~~which ~~our~~have ~~depositors,~~greater ~~not~~financial ~~necessarily~~resources ~~our~~than ~~shareholders or our creditors~~us. ~~Any~~Many ~~changes~~large infinancial ~~applicable~~institutions ~~laws~~compete orfor ~~regulations~~business ~~may~~in ~~materially affect~~ our ~~business~~service ~~and prospects~~area. ~~Proposed legislative or regulatory changes may also~~ ~~affect~~Certain ~~our operations. The following description summarizes some~~ of ~~the~~these ~~laws and~~institutions ~~regulations~~have tosignificantly ~~which~~higher ~~the~~lending ~~Banks~~limits ~~and~~than we ~~are~~do ~~subject. References to applicable statutes~~ and ~~regulations~~provide ~~are~~services ~~brief summaries, do not purport~~ to ~~be complete, and are qualified in~~ their ~~entirety~~customers bywhich we ~~reference~~do tonot ~~such statutes and regulations~~offer.

~~The~~We ~~Dodd-Frank~~believe we ~~Wall~~are ~~Street~~able ~~Reform~~to ~~and Consumer~~compete ~~Protection~~favorably ~~Act~~with our competitors because we provide responsive, personalized services through our knowledge and awareness of ~~2010~~our service area, customers and business.

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ( the “Dodd-Frank Act”) with major sections of the Dodd-Frank Act being implemented in 2011. The Dodd-Frank Act has had a broad impact on the financial services industry, including significant regulatory and compliance changes including, among other things, (i) enhanced resolution authority of troubled and failing banks and their holding companies; (ii) increased capital and liquidity requirements; (iii) increased regulatory examination fees; (iv) changes to assessments to be paid to the FDIC for federal deposit insurance; and (v) numerous other provisions designed to improve supervision and oversight of, and strengthening safety and soundness for, the financial services sector. The Dodd-Frank Act also established a new financial industry regulator, the Consumer Financial Protection Bureau (“CFPB”) and authorizes state officials to enforce regulations issued by the CFPB for the general prohibition against unfair, deceptive or abusive practices. 8

AThe ~~summary of~~following ~~certain~~table ~~provisions~~displays ofdata provided by the ~~Dodd-Frank~~FDIC ~~Act~~regarding ~~that~~our ~~became~~competition ~~effective~~ in ~~2011~~Flagler, ~~is set~~Lake, ~~forth~~Orange, ~~below~~Seminole, ~~along~~and ~~with~~Volusia ~~information~~counties ~~set~~(our ~~forth~~primary inmarket ~~applicable~~area), as ~~sections~~ of ~~this~~ ~~“Regulatory~~June ~~Considerations”~~30, ~~section~~2012, the latest date for which data was available. Citrus County is also included because the branch was not sold until January 2013.

• Interest on Demand Deposit Accounts (“DDA”). Effective July 21, 2011, Regulation Q, the prohibition of paying interest on DDAs, was repealed. Prior to the effective date only Negotiable Orders of Withdrawal or NOW accounts could pay interest. These accounts reserved the right to require at least seven days’ written notice prior to withdrawal or transfer of funds with only individuals, nonprofit organizations and governmental units having the right to own the accounts. For profit entities were prohibited from holding NOW accounts. Banks can now offer interest bearing DDAs, which do not have the right to require seven days written notice of the intent to withdraw, to any depositor. • Transactions with Affiliates. The Dodd-Frank Act enhances the requirements for certain transactions with affiliates under Section 23A and 23B of the Federal Reserve Act, including an expansion of the definition of “covered transactions” and increasing the amount of time for which collateral requirements regarding covered transactions must be maintained. • Transactions with Insiders. Insider transaction limitations are expanded through the strengthening of loan restrictions to insiders and the expansion of the types of transactions subject to the various limits, including derivative transactions, repurchase agreements, reverse repurchase agreements and securities lending or borrowing transactions. Restrictions are also placed on certain asset sales to and from an insider to an institution, including requirements that such sales be on market terms and, in certain circumstances, approved by the institution’s board of directors.

County	Number of Insured Financial Institutions	Number of Retail Branches	Banks’ Market Share
Citrus	14	48	2.1%
Flagler	9	22	0.6%
Lake	22	105	0.3%
Orange	39	295	0.4%
Seminole	35	145	1.4%
Volusia	27	155	1.4%

9Interest rates, both on loans and deposits, and prices of fee-based services are significant competitive factors among financial institutions generally. Other important competitive factors include office location, office hours, the quality of customer service, community reputation, continuity of personnel and services, and, in the case of larger commercial customers, relative lending limits and the ability to offer sophisticated cash management and other commercial banking services. Many of our larger competitors have greater resources, broader geographic markets, more extensive branch networks, and higher lending limits than we do. They also can offer more products and services and can better afford and make more effective use of media advertising, support services and electronic technology than we can.

~~Other~~The ~~requirements~~largest ~~called~~competitors ~~for~~ in ~~the~~our ~~Dodd-Frank~~market ~~Act~~include: ~~will~~Bank beof ~~implemented~~America, ~~over~~Wells ~~time~~Fargo, ~~and~~ ~~most~~SunTrust, ~~will~~BB&T, beRegions, ~~subject~~and toPNC, ~~implementing~~and ~~regulations~~these institutions ~~over~~capture the ~~course~~majority of ~~several years. Given~~ the ~~uncertainty~~deposits. ~~associated~~Our ~~with~~significant ~~the~~community ~~manner~~bank incompetitors ~~which~~include: ~~the~~Old ~~provisions~~Florida National, ofFlorida ~~the~~Community ~~Dodd-Frank~~Bank, ~~Act~~First ~~will~~Southern beBank, ~~implemented~~New byTraditions, ~~the~~and ~~various~~Gateway ~~regulatory~~Bank ~~agencies and~~of ~~through~~Florida. ~~regulations,~~We ~~the~~believe ~~full~~community ~~extent~~banks ofcan compete ~~the~~successfully ~~impact~~with ~~such~~larger ~~requirements~~institutions ~~will have~~by onproviding ~~financial~~personalized ~~institutions’~~service ~~operations~~and ismaking ~~unclear.~~timely, ~~The~~local ~~changes~~decisions ~~resulting~~and thereby drawing business away from larger institutions in the ~~Dodd-Frank~~market. ~~Act~~We ~~may~~also ~~impact~~believe ~~the~~further ~~profitability~~consolidation ofin ~~our~~the ~~business~~banking ~~activities,~~industry ~~require~~is ~~changes~~likely to ~~certain~~create ofadditional ~~our~~opportunities ~~business~~for ~~practices,~~community ~~impose~~banks ~~upon us~~to ~~more~~capture ~~stringent~~deposits ~~capital,~~from ~~liquidity~~affected ~~and~~customers ~~leverage~~who ~~ratio~~may become ~~requirements~~dissatisfied ~~or otherwise~~as ~~adversely~~their ~~affect~~financial ~~our~~institutions ~~business~~grow larger. ~~These~~In ~~changes~~addition, ~~may~~we ~~also~~believe ~~require~~that usonce tothe Florida economy ~~invest~~experiences ~~significant~~new ~~management~~job ~~attention~~growth, ~~and~~the ~~resources~~growth toof ~~evaluate~~our ~~and~~banking ~~make necessary~~markets ~~changes~~from innew ~~order~~residents toaffords ~~comply~~us ~~with~~an ~~new~~opportunity ~~statutory~~to ~~and~~capture ~~regulatory~~new ~~requirements~~deposits.

~~The~~Marketing ~~Consumer~~and ~~Financial~~Distribution ~~Protection Bureau~~

In ~~July~~order to ~~2011~~market our deposit and loan products, ~~many~~we ~~consumer~~rely ~~financial~~heavily ~~protection~~on ~~functions~~referrals ~~formerly~~from ~~assigned~~existing tocustomers ~~the~~and direct customer contact calling ~~federal~~efforts. ~~banking~~In ~~and~~addition, ~~other~~our ~~agencies~~Board ~~transferred~~of toDirectors and management team realize the ~~CFPB.~~importance ~~The~~of ~~CFPB~~forging ~~has~~partnerships within the community ~~authority~~as toa ~~write~~method ~~regulations~~of ~~under~~expanding ~~federal~~our ~~consumer~~customer ~~financial~~base ~~protections laws~~and serving the needs of our community. In this regard, ~~and~~we ~~enforce~~are ~~those~~an ~~laws~~active participant in various community activities and organizations. ItParticipation ~~has~~in ~~the~~such ~~authority~~events toand ~~prevent~~organizations ~~“unfair,~~allows management to determine ~~deceptive~~what oradditional ~~abusive”~~products ~~practices~~and byservices ~~issuing~~are ~~regulations~~needed orin byour ~~using~~community ~~its~~as well as assisting in our efforts to determine credit needs ~~enforcement~~in ~~authority~~accordance ~~without~~with ~~first~~the ~~establishing~~Community ~~regulatory~~Reinvestment ~~guidance~~Act.

~~With~~In ~~the~~addition ~~CFPB~~to ~~being~~our ~~recently~~direct ~~established~~contact ~~and~~marketing ~~its Director recently appointed~~methods, ~~there~~we ~~is significant~~use ~~uncertainty~~limited aslocal toprint ~~how~~advertising, ~~the~~product ~~CFPB will exercise and implement its regulatory~~brochures, ~~supervisory, examination~~ and ~~enforcement~~direct ~~authority.~~mail ~~Implemented changes~~to ~~could~~build ~~result in increased compliance costs and litigation exposure.~~our ~~Additionally,~~customer ~~changes in regulatory expectations, interpretations or practices could increase the risk of regulatory enforcement actions, fines and penalties~~base.

~~The~~Employees ~~Company~~

WeAs ~~are registered with the Board~~ of ~~Governors of the Federal Reserve System (the~~December ~~“Federal~~31, ~~Reserve”) as a multi-bank holding company under the Bank Holding Company Act of 1956. As a result~~2012, we ~~are~~employed ~~subject~~75 tofull-time ~~supervisory~~employees ~~regulation~~ and ~~examination~~ by5 ~~the~~part-time ~~Federal Reserve~~employees. The ~~Gramm-Leach-Bliley~~employees ~~Act,~~are ~~the~~not ~~Bank Holding~~represented ~~Company~~by ~~Act,~~a ~~and~~collective ~~other federal laws subject bank holding companies to~~bargaining ~~particular~~unit. ~~restrictions~~We onconsider ~~the~~relations ~~types~~with ofour ~~activities~~employees ~~in which they may engage, and~~ to abe ~~range of supervisory requirements and activities, including regulatory enforcement actions for violations of laws and regulations~~good.

~~Permitted Activities.~~ 9

~~The Gramm-Leach-Bliley~~REGULATORY Act altered the U.S. banking system by: (i) allowing bank holding companies that qualify as “financial holding companies” to engage in a broad range of financial and related activities; (ii) allowing insurers and other financial service companies to acquire banks; (iii) removing restrictions that applied to bank holding company ownership of securities firms and mutual fund advisory companies; and (iv) establishing the overall regulatory scheme applicable to bank holding companies that also engage in insurance and securities operations. The general effect of the law was to establish a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms, and other financial service providers. Activities that are financial in nature are broadly defined to include not only banking, insurance, and securities activities, but also merchant banking and additional activities that the Federal Reserve, in consultation with the Secretary of the Treasury, determines to be financial in nature, incidental to such financial activities, or complementary activities that do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally. CONSIDERATIONS

InWe ~~contrast to~~must ~~financial~~comply ~~holding~~with state ~~companies,~~and ~~bank~~federal ~~holding~~banking ~~companies~~laws ~~are~~and ~~limited~~regulations tothat ~~managing or~~control ~~controlling~~virtually ~~banks,~~all ~~furnishing~~aspects ~~services~~of toour oroperations. ~~performing~~These ~~services~~laws ~~for its subsidiaries,~~ and ~~engaging in other activities that the Federal Reserve~~regulations ~~determines~~generally byaim ~~regulation or order~~ to beprotect soour ~~closely~~depositors, ~~related~~not tonecessarily ~~banking~~our ~~or managing~~shareholders or ~~controlling~~our ~~banks~~creditors. AsAny achanges ~~bank~~in ~~holding~~applicable ~~company~~laws ~~that has not elected~~or toregulations bemay amaterially ~~financial~~affect ~~holding~~our ~~company,~~business ~~these~~and ~~restrictions apply to us~~prospects. ~~In determining~~Proposed ~~whether~~legislative aor ~~particular~~regulatory ~~activity~~changes ismay ~~permissible,~~also ~~the~~affect ~~Federal~~our ~~Reserve~~operations. ~~must~~The ~~consider~~following ~~whether~~description ~~the~~summarizes ~~performance~~some of ~~such~~the anlaws ~~activity~~and ~~reasonably~~regulations ~~can be expected~~ to ~~produce~~which ~~benefits to~~ the ~~public~~Banks ~~that outweigh possible adverse effects. Possible benefits include greater convenience, increased competition,~~ and ~~gains~~we inare ~~efficiency~~subject. ~~Possible~~References ~~adverse~~to ~~effects include undue concentration~~applicable ofstatutes ~~resources, decreased or unfair competition, conflicts of interest,~~ and ~~unsound~~ ~~banking~~regulations ~~practices.~~are ~~Despite~~brief ~~prior approval~~summaries, ~~the~~do ~~Federal~~not ~~Reserve~~purport ~~may order a bank holding company or its subsidiaries~~ to ~~terminate~~be ~~any~~complete, ~~activity~~and ~~or to~~are ~~terminate~~qualified ~~ownership~~in ortheir ~~control~~entirety ofby ~~any subsidiary when the Federal Reserve~~reference ~~has reasonable cause~~ to ~~believe that a serious risk to the financial safety, soundness or stability of any bank subsidiary of that bank holding company may result from~~ such anstatutes ~~activity.~~and regulations.

10Proposed Changes to Regulatory Capital Requirements

~~Changes~~In June 2012, the federal banking agencies issued a series of proposed rules to conform U.S. regulatory capital rules with the international regulatory standards agreed to by the Basel Committee on Banking Supervision in ~~Control~~the accord referred to as “Basel III”. The proposed revisions, if adopted, would establish new higher capital ratio requirements, narrow the definitions of capital, impose new operating restrictions on banking organizations with insufficient capital buffers and increase the risk weighting of certain assets. The proposed new capital requirements would apply to all banks, savings associations, bank holding companies with more than $500 million in assets and all savings and loan holding companies regardless of asset size. A summary of the proposed regulatory changes is set forth below.

~~Subject~~§ ~~to certain~~New ~~exceptions,~~and ~~the~~Increased ~~Bank~~Capital ~~Holding~~Requirements. ~~Company~~The ~~Act~~proposed ~~and~~rules ~~the~~would ~~Change~~establish ina ~~Bank~~new ~~Control Act,~~capital ~~together~~measure ~~with~~called ~~the~~“Common ~~applicable~~Equity ~~regulations,~~Tier ~~require~~I ~~Federal~~Capital” ~~Reserve~~consisting ~~approval (or,~~of ~~depending~~common onstock ~~the~~and ~~circumstances~~related surplus, noretained ~~notice~~earnings, ofaccumulated ~~disapproval)~~other ~~prior~~comprehensive income and, subject to ~~any person~~certain oradjustments, ~~company~~minority ~~acquiring~~common ~~“control”~~equity ofinterests ain ~~bank~~subsidiaries. orUnlike ~~bank~~the ~~holding~~current ~~company.~~rules ~~A conclusive~~which ~~presumption~~exclude ofunrealized ~~control~~gains ~~exists~~and iflosses anon ~~individual~~available-for-sale ordebt ~~company~~securities ~~acquires the~~from ~~power~~regulatory capital, ~~directly~~the orproposed ~~indirectly,~~rules would generally require accumulated other comprehensive income to ~~direct~~flow ~~the~~through ~~management~~to orregulatory ~~policies~~capital. ofDepository ~~an insured~~institutions ~~depository~~and ~~institution~~their orholding companies would be required to ~~vote~~maintain ~~25%~~Common orEquity ~~more~~Tier ofI ~~any~~Capital ~~class~~equal ofto ~~voting securities~~4.5% of ~~any~~risk-weighted ~~insured~~assets ~~depository~~by ~~institution~~2015. AAdditionally, ~~rebuttable~~the ~~presumption~~proposed regulations would increase the required ratio of ~~control~~ ~~exists~~Tier ifI aCapital ~~person~~to orrisk-weighted ~~company~~assets ~~acquires~~from 10the current 4% orto ~~more~~6% ~~but~~by ~~less~~2015. ~~than~~Tier ~~25%~~I ~~of any~~Capital ~~class~~would consist of ~~voting~~Common ~~securities~~Equity ofTier anI ~~insured~~Capital ~~depository~~plus ~~institution~~Additional ~~and~~Tier ~~either the~~I ~~institution~~Capital ~~has~~which ~~registered~~would ~~securities~~include ~~under~~non-cumulative ~~Section~~perpetual 12preferred ofstock. ~~the~~Neither ~~Securities Exchange~~cumulative ~~Act~~preferred ofstock ~~1934~~(other orthan ascertain wepreferred ~~will~~stock ~~refer~~issued to as the ~~Exchange~~U.S. ~~Act,~~Treasury) ornor notrust ~~other person~~preferred ~~will~~securities ~~own~~would aqualify ~~greater~~as ~~percentage~~Additional ofTier ~~that~~I ~~class~~Capital ofbut ~~voting~~could ~~securities immediately~~be ~~after~~included ~~the~~in ~~acquisition~~Tier II Capital along with qualifying subordinated debt. ~~Our~~The ~~common~~proposed ~~stock~~regulations iswould ~~registered~~also ~~under~~require ~~Section 12~~a minimum Tier I leverage ratio of ~~the~~4% ~~Exchange~~for ~~Act~~all institutions. The minimum required ratio of total capital to risk-weighted assets would remain at 8%.

~~The~~§ ~~Federal Reserve~~Capital ~~Board~~Buffer ~~maintains~~Requirement. aIn ~~policy~~addition ~~statement~~to onincreased ~~minority~~capital ~~equity~~requirements, ~~investments~~depository ~~in banks~~institutions and ~~bank~~their holding companies, ~~that~~would ~~generally~~be ~~permits~~required ~~investors~~ to ~~(1) acquire~~maintain upa tocapital 33buffer ~~percent~~ of ~~the~~at ~~total~~least ~~equity~~2.5% of arisk-weighted ~~target~~assets ~~bank~~over orand ~~bank~~above ~~holding company,~~the ~~subject~~minimum torisk-based ~~certain~~capital ~~conditions,~~requirements. ~~including~~Institutions ~~(but~~that do not ~~limited~~maintain the required capital buffer would be subject to) ~~that~~progressively more stringent limitations on the ~~investing~~ ~~firm~~percentage ~~does~~of ~~not~~earnings ~~acquire~~that 15can ~~percent~~be paid out in dividends or ~~more~~used offor ~~any~~stock ~~class~~repurchases and on the payment of ~~voting securities,~~discretionary ~~and~~bonuses ~~(2)~~to ~~designate~~senior atexecutive ~~least~~management. ~~one~~The ~~director,~~capital ~~without~~buffer ~~triggering~~requirement would be phased in over a four-year period beginning in 2016. The capital buffer requirement effectively raises the ~~various~~ ~~regulatory~~minimum ~~requirements~~required ~~associated~~risk-based ~~with~~capital ~~control~~ratios to 7% Common Equity Tier I Capital, 8.5% Tier I Capital and 10.5% Total Capital on a fully phased-in basis.

As§ aChanges ~~bank holding~~to ~~company,~~Prompt weCorrective ~~are~~Action ~~required~~Capital toCategories. ~~obtain~~The ~~prior~~Prompt ~~approval~~Corrective ~~from~~Action ~~the~~rules ~~Federal Reserve~~would ~~before~~be ~~(i)~~amended ~~acquiring~~to ~~all~~incorporate ora ~~substantially~~Common ~~all~~Equity ofTier ~~the~~I ~~assets~~Capital ofrequirement aand ~~bank or~~to ~~bank~~raise ~~holding~~the ~~company,~~capital ~~(ii)~~requirements ~~acquiring~~for ~~direct~~certain orcapital ~~indirect~~categories. ~~ownership~~To orbe ~~control of~~adequately ~~more~~capitalized ~~than~~for 5%purposes of the ~~outstanding~~prompt ~~voting~~corrective ~~stock~~action ofrules, ~~any bank or bank holding company (unless we own~~ a ~~majority~~banking oforganization ~~such~~would ~~bank’s~~be ~~voting~~required ~~shares),~~to orhave ~~(iii) merging~~at orleast ~~consolidating~~an ~~with~~8% ~~any~~Total ~~other~~Risk-Based ~~bank~~Capital orRatio, ~~bank~~a ~~holding~~6% ~~company.~~Tier ~~In determining~~I ~~whether~~Risk-Based toCapital ~~approve~~Ratio, a ~~proposed~~4.5% ~~bank~~Common ~~acquisition,~~Equity ~~federal~~Tier ~~bank regulators~~I ~~will~~Risk ~~consider,~~Based ~~among~~Capital ~~other~~Ratio ~~factors,~~and ~~the~~a ~~effect~~4% ofTier ~~the~~I ~~acquisition~~Leverage ~~on competition,~~Ratio. ~~the~~To ~~public benefits expected to~~ be ~~received~~well ~~from the acquisition~~capitalized, ~~the~~ ~~projected capital ratios and levels on~~ a ~~post-acquisition~~banking ~~basis,~~organization ~~and~~would ~~the acquiring~~be ~~institution’s~~required ~~record~~to ofhave ~~addressing~~at ~~the~~least ~~credit~~a ~~needs~~10% ofTotal ~~the communities~~Risk-Based itCapital ~~serves~~Ratio, ~~including~~an ~~the~~8% ~~needs~~Tier ofI ~~low~~Risk-Based ~~and~~Capital ~~moderate income neighborhoods~~Ratio, ~~consistent~~a ~~with~~6.5% ~~the~~Common ~~safe~~Equity ~~and~~Tier ~~sound~~I ~~operation~~Risk-Based ofCapital ~~the~~Ratio ~~bank,~~and ~~under the~~a ~~Community~~5% ~~Reinvestment~~Tier ~~Act~~I ofLeverage ~~1977~~Ratio.

~~Under Florida~~§ ~~law,~~Additional aDeductions ~~person~~from orCapital. ~~entity~~Banking ~~proposing~~organizations would be required to ~~directly~~deduct orgoodwill ~~indirectly~~and ~~acquire control~~certain ofother aintangible ~~Florida~~assets, ~~bank~~net ~~must~~of ~~also~~associated ~~obtain~~deferred ~~permission~~tax liabilities, from ~~the~~Common ~~OFR~~Equity Tier I Capital. ~~Florida statutes~~Deferred ~~define~~tax ~~“control”~~assets asarising ~~either~~from temporary timing differences that could not be realized through net operating loss (a“NOL”) ~~indirectly~~carrybacks orwould ~~directly~~continue ~~owning,~~to ~~controlling or~~be ~~having~~deducted ~~power~~but todeferred ~~vote~~tax 25assets that could be realized through NOL carrybacks would not be deducted but would be subject to 100% orrisk ~~more~~weighting. ofDefined ~~the~~benefit ~~voting~~pension ~~securities~~fund assets, net of aany ~~bank;~~associated ~~(b) controlling~~deferred tax liability, would be deducted from Common Equity Tier I Capital unless the ~~election~~banking oforganization ahas ~~majority~~unrestricted ofand ~~directors~~unfettered access to such assets. Reciprocal cross-holdings of acapital ~~bank;~~instruments ~~(c)~~in ~~owning~~any other financial institutions would now be deducted from capital, ~~controlling~~ not just holdings in other depository institutions. For this purpose, orfinancial ~~having~~institutions ~~power~~are broadly defined to ~~vote~~include securities and commodities firms, hedge and private equity funds and non-depository lenders. Banking organizations would also be required to deduct non-significant investments (less than 10% orof ~~more~~outstanding ofstock) ~~the~~in ~~voting~~other ~~securities~~financial ~~as well~~institutions asto ~~directly~~the orextent ~~indirectly~~these ~~exercising~~exceed a10% ~~controlling~~of ~~influence~~Common ~~over management~~Equity orTier ~~policies~~I ofCapital subject to a ~~bank;~~15% orof ~~(d)~~Common asEquity ~~determined~~Tier byI ~~the~~Capital ~~OFR~~cap. ~~These requirements~~Greater ~~will~~than ~~affect~~10% usinvestments ~~because~~must ~~the~~be ~~Banks~~deducted ~~are~~if ~~chartered~~they ~~under~~exceed ~~Florida~~10% ~~law and~~of ~~changes~~Common inEquity ~~control~~Tier I Capital. If the aggregate amount of uscertain ~~are~~items ~~indirect~~excluded ~~changes~~from incapital ~~control~~deduction due to a 10% threshold exceeds 17.65% of Common Equity Tier I Capital, the ~~Bank.~~excess must be deducted.

~~Tying.~~ 10

~~Bank holding~~§ ~~companies~~Changes in Risk-Weightings. The proposed rules would apply a 250% risk-weighting to mortgage servicing rights, deferred tax assets that cannot be realized through NOL carrybacks and ~~their~~significant ~~affiliates~~(greater ~~are~~than ~~prohibited~~10%) ~~from~~investments ~~tying~~in other financial institutions. The proposal also would also change the ~~provision of~~risk-weighting ~~certain~~for ~~services,~~residential ~~such~~mortgages asand ~~extending~~would create a new 150% risk-weighting category for “high volatility commercial real estate loans” which are credit, tofacilities ~~other~~for ~~services~~the acquisition, construction or ~~products (~~development of real property other than ~~traditional~~one- ~~banking~~to ~~products~~four-family residential properties or commercial real projects where: (i) ~~offered~~the byloan-to-value ratio is not in excess of interagency real estate lending standards; and (ii) the ~~holding~~borrower ~~company~~has orcontributed ~~its affiliates,~~capital ~~such~~equal to not less than 15% of the real estate’s “as ~~deposit~~completed” ~~products.~~value before the loan was made.

~~Capital;~~The ~~Dividends;~~Dodd-Frank ~~Source~~Wall ofStreet ~~Strength.~~Reform and Consumer Protection Act of 2010

~~The~~On ~~Federal~~July 21, 2010, President ~~Reserve~~Obama ~~imposes~~signed ~~certain~~into ~~capital~~law ~~requirements~~the onDodd-Frank ~~bank~~Wall ~~holding~~Street ~~companies~~Reform ~~under~~and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) with major sections of the ~~Bank~~Dodd-Frank ~~Holding~~Act ~~Company~~being implemented in 2011. The Dodd-Frank Act, ~~including~~has had a ~~minimum~~broad ~~leverage~~impact ~~ratio~~on the financial services industry, including significant regulatory and acompliance ~~minimum~~changes including, among other things, (i) enhanced resolution ~~ratio~~authority of ~~“qualifying”~~troubled ~~capital~~and tofailing ~~risk-weighted~~banks ~~assets.~~and ~~These~~their holding companies; (ii) increased capital and liquidity requirements; ~~are~~(iii) increased ~~described~~regulatory ~~below~~examination ~~under~~fees; ~~“Capital~~(iv) ~~Regulations.”~~changes ~~Subject~~to assessments to ~~its~~be ~~capital requirements~~paid to the FDIC for federal deposit insurance; and ~~certain~~(v) numerous other ~~restrictions~~provisions designed to improve supervision and oversight of, weand ~~are~~strengthening ~~able~~safety toand ~~borrow~~soundness ~~money~~for, tothe financial services ~~make~~sector. The Dodd-Frank Act also established a ~~capital~~new ~~contribution~~financial toindustry regulator, the ~~Banks,~~Consumer Financial Protection Bureau (“CFPB”) and ~~such~~authorizes ~~loans~~state ~~may~~officials beto ~~repaid~~enforce ~~from dividends~~regulations ~~paid~~issued ~~from~~by the ~~Banks~~CFPB tofor ~~us.~~the general prohibition against unfair, deceptive or abusive practices.

~~The~~A ~~ability~~summary of certain provisions of the ~~Banks~~Dodd-Frank toAct ~~pay dividends, however, will be subject to regulatory restrictions~~ that ~~are~~became ~~described~~effective ~~below~~in ~~under~~2011 ~~“Dividends.”~~is Weset ~~are~~forth ~~also able to raise capital for contributions to the Banks by issuing securities without having to receive regulatory approval~~below, ~~subject~~along ~~to compliance~~ with ~~federal~~information ~~and state~~set ~~securities~~forth ~~laws.~~in ~~Further,~~applicable ~~the Company and the Banks agreed to adopt the~~sections ~~FRB~~of ~~Resolutions~~this ~~and the Bank Resolutions, respectively, which require that we seek prior approval from our regulators before declaring or paying any dividends. See~~ “~~Item 1. Business –~~ Regulatory ~~Matter~~Considerations” ~~for a further discussion~~section.

~~In accordance~~§ ~~with~~Interest ~~Federal~~on ~~Reserve~~Demand ~~policy,~~Deposit ~~which~~Accounts ~~has~~(“DDA”). ~~been~~Effective ~~codified~~July by21, ~~the Dodd-Frank Act~~2011, wethe ~~are~~prohibition ~~expected~~of topaying ~~act~~interest ason aDDAs, ~~source~~was ofrepealed. ~~financial~~Prior ~~strength~~ to the ~~Banks~~ ~~and~~effective todate, ~~commit~~only ~~resources~~Negotiable toOrders ~~support~~of ~~the~~Withdrawal ~~Banks~~or inNOW ~~circumstances~~accounts incould ~~which~~pay ~~we might not otherwise do so~~interest. InThese ~~furtherance~~accounts ofreserved ~~this policy,~~ the ~~Federal~~right ~~Reserve may~~to require aat ~~bank~~least ~~holding~~seven ~~company~~days’ towritten ~~terminate~~notice ~~any~~prior ~~activity~~to withdrawal or ~~relinquish control~~transfer of afunds ~~nonbank~~with ~~subsidiary~~only ~~(other~~individuals, ~~than~~nonprofit aorganizations ~~nonbank~~and ~~subsidiary~~governmental ofunits ahaving ~~bank) upon~~ the ~~Federal~~right ~~Reserve’s determination that such activity or control constitutes a serious risk~~ to own the ~~financial~~accounts. ~~soundness~~For orprofit ~~stability~~entities ofwere ~~any subsidiary~~prohibited ~~depository~~from ~~institution~~holding ofNOW ~~the~~accounts. ~~bank~~Banks ~~holding~~can ~~company.~~now ~~Further,~~offer ~~federal bank~~interest ~~regulatory~~bearing ~~authorities~~DDAs ~~have~~which ~~additional~~do ~~discretion~~not to require aseven ~~bank~~days ~~holding company~~written tonotice ~~divest itself~~ of ~~any bank or nonbank subsidiary if~~ the ~~agency determines~~intent ~~that~~to ~~divestiture may aid the depository institution’s financial condition~~withdraw.

11§ Transactions with Affiliates. The Dodd-Frank Act enhances the requirements for certain transactions with affiliates under Sections 23A and 23B of the Federal Reserve Act, including an expansion of the definition of “covered transactions” and increasing the amount of time for which collateral requirements regarding covered transactions must be maintained.

~~The~~§ ~~Banks~~Transactions with Insiders. Insider transaction limitations are expanded through the strengthening of loan restrictions to insiders and the expansion of the types of transactions subject to the various limits, including derivative transactions, repurchase agreements, reverse repurchase agreements and securities lending or borrowing transactions. Restrictions are also placed on certain asset sales to and from an insider to an institution, including requirements that such sales be on market terms and, in certain circumstances, approved by the institution’s board of directors.

~~The~~Other ~~Banks~~requirements called ~~are~~for ~~banking~~in ~~institutions~~the ~~that~~Dodd-Frank ~~are~~Act ~~chartered~~will bybe ~~and~~implemented ~~headquartered~~over ~~in the State of Florida~~time, and ~~they~~most ~~are~~will be subject to ~~supervision~~implementing ~~and~~regulations ~~regulation~~over by the ~~OFR~~course ~~and~~of several years. Given the ~~FDIC,~~uncertainty ~~and~~associated ~~are~~with ~~subject~~the tomanner ~~other~~in ~~laws~~which ~~and~~the ~~regulations~~provisions ~~applicable~~of tothe ~~banks. The~~Dodd-Frank ~~OFR~~Act ~~and~~will be implemented by the ~~FDIC~~various ~~supervise~~regulatory agencies and ~~regulate~~through ~~all~~regulations, ~~areas~~the full extent of the ~~Banks~~impact such requirements will have on financial institutions’ operations ~~including, without~~is ~~limitation,~~unclear. ~~the~~The ~~making~~changes ofresulting ~~loans,~~from the ~~issuance~~Dodd-Frank ofAct ~~securities,~~may impact the ~~conduct~~ profitability of ~~the~~our ~~Banks’~~business activities, ~~corporate~~require ~~affairs,~~changes ~~the~~to ~~satisfaction~~certain of ~~capital~~our ~~adequacy requirements~~business practices, ~~the~~impose ~~payment~~upon ofus ~~dividends~~more stringent capital, liquidity and ~~the~~leverage ratio ~~establishment~~requirements or ~~closing~~otherwise ~~of banking~~adversely ~~centers~~affect our business. These changes may also require us to invest significant management attention and resources to evaluate and make necessary changes in order to comply with new statutory and regulatory requirements.

AsThe ~~state chartered~~Consumer ~~banking~~Financial ~~institutions~~Protection in the State of Florida, the Banks are empowered by statute, subject to the limitations contained in those statutes, to take and pay interest on, savings and time deposits, to accept demand deposits, to make loans on residential and other real estate, to make consumer and commercial loans, to invest, with certain limitations, in equity securities and in debt obligations of banks and corporations and to provide various other banking services for the benefit of the Banks’ customers. Various consumer laws and regulations also affect the operations of the Banks, including state usury laws, laws relating to fiduciaries, consumer credit and equal credit opportunity laws, and fair credit reporting. In addition, the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) prohibits insured state chartered institutions from conducting activities as principal that are not permitted for national banks. A bank, however, may engage in an otherwise prohibited activity if it meets its minimum capital requirements and the FDIC determines that the activity does not present a significant risk to the Deposit Insurance Fund. Bureau

~~Reserves~~In July 2011, many consumer financial protection functions formerly assigned to the federal banking and other agencies transferred to the CFPB. The CFPB has the authority to write regulations under federal consumer financial protections laws, and enforce those laws. It has the authority to prevent “unfair, deceptive or abusive” practices by issuing regulations or by using its enforcement authority without first establishing regulatory guidance. Because this is an entirely new agency, the impact on us is largely uncertain. However, any new regulatory requirements, or modified interpretations of existing regulations, will affect our consumer business and operations, potentially resulting in increased compliance costs.

The Federal Reserve requires all depository institutions to maintain reserves against some transaction accounts (primarily NOW and Super NOW checking accounts). The balances maintained to meet the reserve requirements imposed by the Federal Reserve may be used to satisfy liquidity requirements. An institution may borrow from the Federal Reserve Bank “discount window” as a secondary source of funds, provided that the institution meets the Federal Reserve Bank’s credit standards. Company

~~Dividends~~We are registered with the Board of Governors of the Federal Reserve System (the “Federal Reserve”) as a multi-bank holding company under the Bank Holding Company Act of 1956. As a result, we are subject to supervisory regulation and examination by the Federal Reserve. The Gramm-Leach-Bliley Act, the Bank Holding Company Act, and other federal laws subject bank holding companies to particular restrictions on the types of activities in which they may engage, and to a range of supervisory requirements and activities, including regulatory enforcement actions for violations of laws and regulations.

The Banks are subject to legal limitations on the frequency and amount of dividends that can be paid to us. The FDIC may restrict the ability of the Banks to pay dividends if those payments would constitute an unsafe or unsound banking practice. These regulations and restrictions may limit our ability to obtain funds from the Banks for our cash needs, including funds for acquisitions and the payment of dividends, interest, and operating expenses. As discussed above, the Bank Resolutions restrict the payment of dividends to us. See “Item 1. Business – Regulatory Matter” for a further discussion. 11

~~In addition,~~Permitted Florida law also places restrictions on the declaration of dividends from state chartered banks to their holding companies. Pursuant to the Florida Financial Institutions Code, the board of directors of state chartered banks, after charging off bad debts, depreciation and other worthless assets, if any, and making provisions for reasonably anticipated future losses on loans and other assets, may quarterly, semi-annually or annually declare a dividend of up to the aggregate net profits of that period combined with the bank’s retained net profits for the preceding two years and, with the approval of the OFR and FDIC, declare a dividend from retained net profits which accrued prior to the preceding two years. Before declaring such dividends, 20% of the net profits for the preceding period as is covered by the dividend must be transferred to the surplus fund of the bank until this fund becomes equal to the amount of the bank’s common stock then issued and outstanding. A state chartered bank may not declare any dividend if (i) its net income (loss) from the current year combined with the retained net income (loss) for the preceding two years aggregates a loss or (ii) the payment of such dividend would cause the capital account of the bank to fall below the minimum amount required by law, regulation, order or any written agreement with the OFR or a federal regulatory agency. Activities

~~Insurance~~The Gramm-Leach-Bliley Act altered the U.S. banking system by: (i) allowing bank holding companies that qualify as “financial holding companies” to engage in a broad range of ~~Accounts~~financial and ~~Other~~related ~~Assessments~~activities; (ii) allowing insurers and other financial service companies to acquire banks; (iii) removing restrictions that applied to bank holding company ownership of securities firms and mutual fund advisory companies; and (iv) establishing the overall regulatory scheme applicable to bank holding companies that also engage in insurance and securities operations. The general effect of the law was to establish a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms, and other financial service providers. Activities that are financial in nature are broadly defined to include not only banking, insurance, and securities activities, but also merchant banking and additional activities that the Federal Reserve, in consultation with the Secretary of the Treasury, determines to be financial in nature, incidental to such financial activities, or complementary activities that do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally.

WeIn ~~pay~~contrast ~~our~~to financial ~~deposit~~holding ~~insurance~~companies, ~~assessments~~bank holding companies are limited to managing or controlling banks, furnishing services to or performing services for its subsidiaries, and engaging in other activities that the ~~Deposit~~Federal ~~Insurance~~Reserve ~~Fund~~determines by regulation or order to be so closely related to banking or managing or controlling banks. As a bank holding company that has not elected to be a financial holding company, these ~~which~~restrictions apply to us. In determining whether a particular activity is permissible, the Federal Reserve must consider ~~determined~~whether ~~through~~the aperformance ~~risk-based~~of ~~assessment~~such ~~system~~an activity reasonably can be expected to produce benefits to the public that outweigh possible adverse effects. ~~Our~~Possible ~~deposit~~benefits ~~accounts~~include ~~are~~greater convenience, increased competition, and gains in efficiency. Possible adverse ~~currently~~effects ~~insured~~include byundue concentration of resources, decreased or unfair competition, conflicts of interest, and unsound banking practices. Despite prior approval, the ~~Deposit~~Federal ~~Insurance~~Reserve ~~Fund~~may ~~generally~~order upa bank holding company or its subsidiaries to aterminate ~~maximum~~any activity or to terminate ownership or control of any subsidiary when the Federal Reserve has reasonable cause to believe that a serious risk to ~~$250~~the financial safety,~~000~~ ~~per~~soundness ~~separately~~or ~~insured~~stability ~~depositor.~~of any bank subsidiary of that bank holding company may result from such an activity.

12Changes in Control

~~In addition~~Subject to certain exceptions, the Bank Holding Company Act and the Change in ~~November~~Bank ~~2008~~Control Act, together with the ~~FDIC~~applicable ~~issued~~regulations, arequire ~~final~~Federal ~~rule~~Reserve approval ~~under~~(or, ~~its~~depending ~~Transaction Account~~on ~~Guarantee~~the ~~Program~~circumstances, ~~(“TAGP”~~no notice of disapproval), ~~pursuant~~prior to ~~which~~any ~~the~~person ~~FDIC~~or ~~fully~~company acquiring “control” ~~guaranteed~~of ~~all~~a ~~noninterest~~bank ~~bearing~~or ~~transaction~~bank ~~deposit~~holding ~~accounts,~~company. ~~including~~A ~~all personal~~conclusive ~~and~~presumption ~~business~~of ~~checking~~control ~~deposit~~exists ~~accounts~~if ~~that~~an doindividual ~~not~~or ~~earn~~company ~~interest~~acquires the power, directly ~~lawyer~~or ~~trust~~indirectly, ~~accounts~~to ~~where~~direct ~~interest~~the ~~does~~management ~~not~~or ~~accrue~~policies of an insured depository institution or to ~~the~~vote ~~account~~25% ~~owner (IOLTA),~~or ~~and~~more ~~NOW~~of ~~accounts~~any ~~with~~class ~~interest~~of voting ~~rates~~securities noof ~~higher~~any ~~than~~insured 0depository institution.~~50%~~ ~~until~~A ~~June~~rebuttable presumption of control exists if a person or company acquires ~~30,~~10% ~~2010,~~or 0.more but less than 25% ~~thereafter.~~of Onany ~~December~~class ~~31,~~of ~~2010,~~voting ~~the~~securities ~~Dodd-Frank~~of ~~Deposit Insurance~~an ~~Provision~~insured ~~(“DIP”)~~depository ~~became~~institution ~~effective~~ and ~~replaced~~either the ~~TAGP~~institution ~~that~~has ~~expired~~registered onsecurities under Section 12 of the ~~same~~Securities ~~date.~~Exchange ~~Under~~Act of 1934 or as we will refer to as the ~~DIP~~Exchange Act, ~~all~~or no ~~money~~other inperson will own a greater percentage of that class of voting securities immediately after the ~~accounts~~acquisition. ~~are~~However, following ~~fully~~the ~~insured~~enactment byof the ~~FDIC~~Jumpstart ~~regardless~~Our ofBusiness ~~dollar~~Startups ~~amount~~Act ~~until~~in ~~December~~2012 31which, ~~2012.~~among other things, changed the requirements for banks ~~The~~and ~~primary~~bank ~~differences~~holding ~~between~~companies to register their common stock, we filed a Form 15 with the ~~two~~SEC ~~programs~~and ~~are~~as ~~that~~a result, our common stock is no longer registered under Section 12 of the ~~DIP:~~Exchange Act.

•The Federal ~~Applies~~Reserve Board maintains a policy statement on minority equity investments in banks and bank holding companies, that generally permits investors to ~~all~~(1) ~~FDIC-insured~~acquire ~~depository~~up ~~institutions;~~to •33% ~~Does~~of ~~not~~the ~~include~~total ~~low-interest~~equity ~~NOW~~of ~~accounts;~~a ~~and~~target •bank ~~FDIC~~or bank holding company, subject to certain conditions, including (but not limited to) that the investing firm does not ~~charge~~acquire aor ~~separate~~hold ~~assessment~~15% or more of any class of voting securities, and (~~premium~~2) ~~for~~designate at least one director, without triggering the ~~insurance~~various ofregulatory ~~noninterest-bearing~~requirements ~~accounts~~associated with control.

~~Under the~~As ~~TAGP~~a bank holding company, ~~the~~we ~~FDIC~~are ~~imposed~~required ato ~~special~~obtain ~~assessment~~prior ofapproval ~~five~~from ~~basis~~the ~~points~~Federal onReserve ~~each~~before (i) acquiring all or substantially ~~FDIC-insured~~all ~~depository~~of ~~institution’s~~the assets, ~~minus~~of ~~its~~a ~~Tier~~bank 1or ~~capital~~bank holding company, ~~effective~~ as(ii) ofacquiring ~~June~~direct ~~30,~~or ~~2009.~~indirect ~~This~~ownership ~~special~~or ~~assessment~~control ~~was~~of ~~collected~~more onthan ~~September~~5% of ~~30,~~the ~~2009.~~outstanding ~~Finally,~~voting onstock ~~November~~of ~~12,~~any ~~2009,~~bank ~~the~~or ~~FDIC~~bank ~~adopted~~holding company (unless we own a ~~new~~majority ~~rule~~of ~~requiring~~such bank’s voting shares), ~~insured~~or ~~institutions~~(iii) tomerging ~~prepay~~or onconsolidating ~~December~~with ~~30,~~any ~~2009,~~other ~~estimated~~bank ~~quarterly~~or bank holding company. In determining whether to approve a proposed bank ~~risk-based~~acquisition, ~~assessments~~federal ~~for~~bank ~~the~~regulators ~~fourth~~will ~~quarter~~consider, ofamong ~~2009~~other ~~and~~factors, ~~for~~the ~~all~~effect of ~~2010~~the acquisition on competition, the public ~~2011,~~benefits ~~and~~expected ~~2012.~~to ~~The~~be ~~new~~received ~~assessment~~from ~~system,~~the ~~DIP~~acquisition, ~~was~~the ~~implemented~~projected ~~April~~capital 1,ratios ~~2011~~ and ~~became~~levels ~~effective~~on ~~with~~a ~~assessments~~post-acquisition ~~due~~basis, ~~September~~and the ~~31,~~acquiring ~~2011.~~institution’s ~~With~~record of addressing the ~~new assessment,~~credit needs of the ~~FDIC~~communities ~~reduced~~it serves, including the ~~rates~~needs ~~charged~~of low and ~~added~~moderate aincome ~~new~~neighborhoods, ~~category~~consistent ~~for Large~~with the safe and ~~Highly~~sound ~~Complex~~operation ~~Institutions.~~of the bank, under the Community Reinvestment Act of 1977.

~~The FDIC~~Under ~~assigns~~Florida anlaw, ~~institution~~a person or entity proposing to ~~one~~directly or indirectly acquire control of ~~four~~a ~~risk~~Florida ~~categories,~~bank ~~designed~~must toalso ~~measure~~obtain permission ~~risk.~~from ~~Total~~the ~~base~~OFR. ~~assessment~~Florida ~~rates~~statutes ~~currently~~define ~~range~~“control” ~~from~~as ~~0.025%~~either of(a) ~~deposits~~indirectly ~~for an~~or ~~institution~~directly inowning, ~~the~~controlling ~~highest~~or ~~sub-category~~having power to ~~0.45~~vote 25% or more of ~~deposits~~the ~~for~~voting ~~an institution~~securities inof a bank; (b) controlling the ~~lowest~~election ~~category.~~of ~~Rates~~a ~~from~~majority ~~April~~of 1,directors ~~2009~~of ~~through~~a ~~March~~bank; (c) 31owning, ~~2011~~ ~~were~~controlling, ~~from~~or ~~0.07%~~having power to ~~0.775~~vote 10%. ~~With~~or more of the ~~implementation~~voting securities as well as directly or indirectly exercising a controlling influence over management or policies of a bank; or (d) as determined by the ~~new~~OFR. ~~assessment~~These requirements will affect us because the Banks’ ~~were~~are ~~able~~chartered tounder ~~reduce~~Florida ~~their~~law ~~monthly~~and ~~accruals~~changes ~~resulting~~ in acontrol ~~credit~~ of ~~FDIC~~ ~~premiums~~us ~~paid~~are indirect changes in ~~2011.~~control of the Bank.

In addition, all FDIC insured institutions are required to pay assessments to the FDIC at an annual rate of approximately one basis point of insured deposits to fund interest payments on bonds issued by the Financing Corporation, an agency of the federal government established to recapitalize the predecessor to the Savings Association Insurance Fund. These assessments will continue until the Financing Corporation bonds mature in 2017 through 2019. Tying

~~Under~~Bank ~~the~~holding companies and ~~Federal~~their ~~Deposit~~affiliates ~~Insurance~~are ~~Act,~~prohibited orfrom ~~FDIA,~~tying the ~~FDIC~~provision ~~may~~of ~~terminate~~certain ~~deposit insurance~~services, ~~upon~~such aas ~~finding~~extending ~~that~~credit, ~~the~~to ~~institution~~other ~~has~~services ~~engaged~~or ~~in unsafe and unsound~~products ~~practices,~~(other isthan intraditional anbanking ~~unsafe~~products) oroffered ~~unsound~~by ~~condition~~the toholding ~~continue~~company ~~operations,~~ or ~~has violated~~its ~~any applicable law~~affiliates, ~~regulation,~~such ~~rule,~~as ~~order~~deposit ~~or condition imposed by the FDIC~~products.

~~Transactions With Affiliates.~~ 12

~~Pursuant~~Capital; ~~to Sections~~Dividends; ~~23A and 23B of the Federal Reserve Act and Regulation W, the authority~~Source of the Banks to engage in transactions with related parties or “affiliates” or to make loans to insiders is limited. Loan transactions with an “affiliate” generally must be collateralized and certain transactions between the Banks and their “affiliates”, including the sale of assets, the payment of money or the provision of services, must be on terms and conditions that are substantially the same, or at least as favorable to the Banks, as those prevailing for comparable nonaffiliated transactions. In addition, the Banks generally may not purchase securities issued or underwritten by affiliates. Strength

~~Loans~~The ~~to executive~~Federal ~~officers,~~Reserve ~~directors or to any person who directly or indirectly, or~~imposes ~~acting~~certain ~~through~~capital orrequirements inon ~~concert with one or more persons, owns, controls or has the power to vote more than 10% of any class of voting securities of a~~ bank~~, which~~ weholding ~~refer~~companies tounder ~~as 10% Shareholders, or to any political or campaign committee~~ the ~~funds~~Bank orHolding ~~services~~Company ~~of which will benefit those executive officers~~Act, ~~directors,~~ orincluding ~~10%~~a ~~Shareholders~~minimum orleverage ~~which~~ratio ~~is controlled by those executive officers, directors or 10% Shareholders, are subject to Sections 22(g)~~ and ~~22(h)~~a ofminimum ~~the~~ratio ~~Federal Reserve Act and their corresponding regulations (Regulation O) and Section 13(k)~~ of ~~the~~“qualifying” ~~Exchange~~capital ~~Act relating~~ to ~~the prohibition~~risk-weighted onassets. ~~personal~~These ~~loans~~requirements toare ~~executives~~described ~~(which~~below ~~exempts~~under ~~financial~~“Capital ~~institutions~~Regulations.” inSubject ~~compliance~~to ~~with~~its ~~the~~capital ~~insider~~requirements ~~lending~~and ~~restrictions~~certain ~~of Section 22(h) of the Federal Reserve Act). Among~~ other ~~things~~restrictions, ~~these~~we ~~loans~~are ~~must~~able ~~be made on terms substantially the same as those prevailing on transactions made~~ to ~~unaffiliated~~ ~~individuals~~borrow ~~and~~money ~~certain extensions of credit~~ to ~~those~~make ~~persons must first be approved in advance by~~ a ~~disinterested majority of the entire board of~~capital ~~directors.~~contribution ~~Section 22(h) of the Federal Reserve Act prohibits loans~~ to ~~any of those individuals where~~ the ~~aggregate~~Banks, ~~amount exceeds an amount equal to 15% of an institution’s unimpaired capital~~ and ~~surplus~~such ~~plus an additional 10% of unimpaired capital and surplus in the case of~~ loans ~~that~~may ~~are~~be ~~fully~~repaid ~~secured~~from ~~by readily~~dividends ~~marketable~~paid ~~collateral,~~from ~~or when~~ the ~~aggregate~~Banks ~~amount on all of the extensions of credit outstanding~~ to ~~all of these persons would exceed the Bank’s unimpaired capital and unimpaired surplus~~us. ~~Section 22(g) identifies limited circumstances in which the Bank are permitted to extend credit to executive officers.~~

13The ability of the Banks to pay dividends, however, will be subject to regulatory restrictions that are described below under “Dividends.” We are also able to raise capital for contributions to the Banks by issuing securities without having to receive regulatory approval, subject to compliance with federal and state securities laws. Further, the Company and Orange Bank agreed to adopt the FRB Resolutions and the MOU, respectively, which require that we seek prior approval from our regulators before declaring or paying any dividends. See “Item 1. Business – Regulatory Matter” for a further discussion.

~~Community~~In accordance ~~Reinvestment~~with Federal Reserve policy, which has been codified by the Dodd-Frank Act, we are expected to act as a source of financial strength to the Banks and to commit resources to support the Banks in circumstances in which we might not otherwise do so. In furtherance of this policy, the Federal Reserve may require a bank holding company to terminate any activity or relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the Federal Reserve’s determination that such activity or control constitutes a serious risk to the financial soundness or stability of any subsidiary depository institution of the bank holding company. Further, federal bank regulatory authorities have additional discretion to require a bank holding company to divest itself of any bank or nonbank subsidiary if the agency determines that divestiture may aid the depository institution’s financial condition.

The ~~Community~~ Reinvestment Act and its corresponding regulations are intended to encourage banks to help meet the credit needs of their service area, including low and moderate income neighborhoods, consistent with the safe and sound operations of the banks. These regulations provide for regulatory assessment of a bank’s record in meeting the credit needs of its service area. Federal banking agencies are required to make public a rating of a bank’s performance under the Community Reinvestment Act. The FDIC considers a bank’s Community Reinvestment Act rating when the bank submits an application to establish branches, merge, or acquire the assets and assume the liabilities of another bank. In the case of a bank holding company, the Community Reinvestment Act performance record of all banks involved in the merger or acquisition are reviewed in connection with the filing of an application to acquire ownership or control of shares or assets of a bank or to merge with any other bank holding company. An unsatisfactory record can substantially delay or block the transaction. The Banks ~~received “satisfactory” ratings on their most recent Community Reinvestment Act assessment.~~

~~Capital~~The ~~Regulations~~Banks are banking institutions that are chartered by and headquartered in the State of Florida, and they are subject to supervision and regulation by the OFR and the FDIC, and are subject to other laws and regulations applicable to banks. The OFR and the FDIC supervise and regulate all areas of the Banks’ operations including, without limitation, the making of loans, the issuance of securities, the conduct of the Banks’ corporate affairs, the satisfaction of capital adequacy requirements, the payment of dividends, and the establishment or closing of banking centers.

~~The~~As ~~federal~~ state chartered banking institutions ~~regulators~~in ~~have~~the ~~adopted~~State ~~risk-based~~of Florida, ~~capital~~the ~~adequacy~~Banks ~~guidelines~~are ~~for bank~~empowered ~~holding~~by ~~companies~~statute, ~~and~~subject ~~their~~to ~~subsidiary~~the ~~state-chartered~~limitations ~~banks.~~contained ~~The~~in those statutes, ~~risk-based~~to ~~capital~~take ~~guidelines~~and ~~are~~pay ~~designed~~interest on, savings and time deposits, to accept demand deposits, to make ~~regulatory~~loans ~~capital~~on residential and other real ~~requirements~~estate, ~~more~~to ~~sensitive~~make consumer and commercial loans, to ~~differences~~invest, with certain limitations, in ~~risk~~equity ~~profiles~~securities ~~among~~and in debt obligations of banks and ~~bank~~ ~~holding~~corporations ~~companies,~~and to ~~account~~provide various other banking services for ~~off-balance~~the ~~sheet~~benefit ~~exposure~~of the Banks’ customers. Various consumer laws and regulations also affect the operations of the Banks, including state usury laws, laws relating to ~~minimize~~fiduciaries, ~~disincentives~~consumer ~~for~~credit ~~holding~~and ~~liquid~~equal ~~assets~~credit opportunity laws, and tofair ~~achieve~~credit ~~greater~~reporting. ~~consistency~~In ~~in evaluating~~addition, the ~~capital~~Federal ~~adequacy~~Deposit Insurance Corporation Improvement Act of ~~major~~1991 ~~banks~~(“FDICIA”) ~~throughout~~prohibits ~~the~~insured ~~world.~~state ~~Under these~~chartered ~~guidelines,~~institutions ~~assets~~from ~~and~~conducting ~~off-balance~~activities ~~sheet~~as ~~items~~principal that are ~~assigned~~not topermitted ~~broad~~for ~~risk categories~~national ~~each~~banks. ~~with~~A ~~designated~~bank, ~~weights.~~however, ~~The~~may ~~resulting~~engage ~~capital~~in ~~ratios~~an ~~represent~~otherwise prohibited activity if it meets its minimum capital asrequirements aand ~~percentage~~the ofFDIC ~~total~~determines that the activity does not present a significant risk~~-weighted~~ ~~assets~~to ~~and~~the ~~off-balance~~Deposit ~~sheet items.~~Insurance Fund.

~~The~~Reserves current guidelines require all bank holding companies and federally regulated banks to maintain a minimum risk-based total capital ratio equal to 8%, of which at least 4% must be Tier I Capital. Tier I Capital, which includes common shareholders’ equity, noncumulative perpetual preferred stock, and a limited amount of cumulative perpetual preferred stock and trust preferred securities, less certain goodwill items and other intangible assets, is required to equal at least 4% of risk-weighted assets. The remainder (“Tier II Capital”) may consist of (i) an allowance for loan losses of up to 1.25% of risk-weighted assets, (ii) excess of qualifying perpetual preferred stock, (iii) hybrid capital instruments, (iv) perpetual debt, (v) mandatory convertible securities, and (vi) subordinated debt and intermediate-term preferred stock up to 50% of Tier I Capital. Total capital is the sum of Tier I and Tier II Capital less reciprocal holdings of other banking organizations’ capital instruments, investments in unconsolidated subsidiaries and any other deductions as determined by the appropriate regulator (determined on a case by case basis or as a matter of policy after formal rule making).

~~In computing~~The ~~total~~Federal ~~risk-weighted~~Reserve ~~assets, bank holding company assets are given~~requires ~~risk-weights~~all ofdepository ~~0%,~~institutions ~~20%, 50% and 100%. In addition, certain off-balance sheet items are given similar credit conversion factors~~ to ~~convert~~maintain ~~them~~reserves toagainst ~~asset equivalent~~some ~~amounts~~transaction toaccounts ~~which~~(primarily anNOW ~~appropriate risk-weight will apply. Most loans will be assigned to the 100% risk category, except for performing first mortgage loans fully secured by 1- to 4-family~~ and ~~certain~~Super ~~multi-family residential~~NOW ~~property,~~checking ~~which carry a 50% risk rating~~accounts). ~~Most investment securities~~ ~~(including,~~The ~~primarily,~~balances ~~general~~maintained ~~obligation claims on states or other political subdivisions of the United States) will be assigned~~ to ~~the~~meet ~~20% category, except for municipal or state revenue bonds, which have a 50% risk-weight, and direct obligations of~~ the ~~U.S.~~reserve ~~Treasury~~requirements orimposed ~~obligations backed~~ by the ~~full~~Federal ~~faith~~Reserve ~~and credit~~may ofbe ~~the~~used ~~U.S.~~to ~~Government,~~satisfy ~~which~~liquidity ~~have a 0% risk-weight~~requirements. ~~In covering~~ ~~off-balance~~An ~~sheet~~institution ~~items,~~may ~~direct~~borrow ~~credit~~from ~~substitutes,~~the ~~including~~Federal ~~general guarantees~~Reserve ~~and~~Bank ~~standby~~“discount ~~letters~~window” ofas ~~credit backing financial obligations, are given~~ a ~~100%~~secondary ~~conversion~~source ~~factor. Transaction-related contingencies such as bid bonds, standby letters~~ of ~~credit backing non-financial obligations~~funds, ~~and undrawn~~provided ~~commitments~~that ~~(including~~the ~~commercial~~institution ~~credit~~meets ~~lines~~the ~~with~~Federal anReserve ~~initial~~Bank’s ~~maturity of more than one year) have a 50% conversion factor. Short-term commercial letters of~~ credit ~~are converted at 20% and certain short-term unconditionally cancelable commitments have a 0% factor~~standards.

The federal bank regulatory authorities have also adopted regulations that supplement the risk-based guidelines. These regulations generally require banks and bank holding companies to maintain a minimum level of Tier I Capital to total assets less goodwill of 4% (the “leverage ratio”). The FDIC permits a bank to maintain a minimum 3% leverage ratio if the bank achieves a 1 rating under the CAMELS rating system in its most recent examination, as long as the bank is not experiencing or anticipating significant growth. The CAMELS rating is a non-public system used by bank regulators to rate the strength and weaknesses of financial institutions. The CAMELS rating is comprised of six categories: capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk. Dividends

~~Banking~~The Banks are subject to ~~organizations~~legal ~~experiencing~~limitations oron ~~anticipating~~the ~~significant~~frequency ~~growth,~~and asamount ~~well~~of asdividends ~~those organizations~~that ~~which~~can dobe ~~not~~paid ~~satisfy~~to us. The FDIC may restrict the ~~criteria~~ability ~~described~~of ~~above,~~the ~~will~~Banks to bepay dividends if those payments would constitute an unsafe or unsound banking practice. These regulations and restrictions may ~~required~~limit our ability to ~~maintain~~obtain afunds ~~minimum~~from ~~leverage~~the ~~ratio~~Banks ~~ranging~~for ~~generally~~our ~~from~~cash 4%needs, toincluding ~~5%.~~funds for acquisitions and the payment of dividends, ~~The~~interest, ~~bank~~and ~~regulators~~operating ~~also~~expenses. ~~continue~~As discussed above, the MOU restricts the payment of dividends to ~~consider~~us afrom ~~“tangible~~Orange ~~Tier~~Bank. ISee ~~leverage~~“Item ~~ratio”~~1. inBusiness ~~evaluating~~– ~~proposals~~Regulatory Matter” for ~~expansion~~a orfurther ~~new activities~~discussion.

14In addition, Florida law and Federal regulation also places restrictions on the declaration of dividends from state chartered banks to their holding companies. Pursuant to the Florida Financial Institutions Code, the board of directors of state chartered banks, after charging off bad debts, depreciation and other worthless assets, if any, and making provisions for reasonably anticipated future losses on loans and other assets, may quarterly, semi-annually or annually declare a dividend of up to the aggregate net profits of that period combined with the bank’s retained net profits for the preceding two years and, with the approval of the OFR and FDIC, declare a dividend from retained net profits which accrued prior to the preceding two years. Before declaring such dividends, 20% of the net profits for the preceding period as is covered by the dividend must be transferred to the surplus fund of the bank until this fund becomes equal to the amount of the bank’s common stock then issued and outstanding. A state chartered bank may not declare any dividend if (i) its net income (loss) from the current year combined with the retained net income (loss) for the preceding two years aggregates a loss or (ii) the payment of such dividend would cause the capital account of the bank to fall below the minimum amount required by law, regulation, order or any written agreement with the OFR or a federal regulatory agency.

~~The tangible Tier I leverage ratio is the ratio of a banking organization’s Tier I Capital, less deductions for intangibles otherwise includable in Tier I Capital, to total tangible assets.~~ 13

~~Federal~~Insurance ~~law and regulations establish a capital-based regulatory scheme designed to promote early intervention for troubled banks and require the FDIC to choose the least expensive resolution~~ of ~~bank~~Accounts failures. The capital-based regulatory framework contains five categories of compliance with regulatory capital requirements, including “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and ~~“critically undercapitalized.” To qualify~~ asOther a “well-capitalized” institution, a bank must have a leverage ratio of no less than 5%, a Tier I Capital ratio of no less than 6%, and a total risk-based capital ratio of no less than 10%, and the bank must not be under any order or directive from the appropriate regulatory agency to meet and maintain a specific capital level. Generally, a financial institution must be “well capitalized” before the Federal Reserve will approve an application by a bank holding company to acquire or merge with a bank or bank holding company. Assessments

~~Under~~We ~~the regulations,~~pay ~~the~~our ~~applicable~~deposit ~~agency can treat an institution as if it were in~~insurance ~~the~~assessments ~~next~~to ~~lower category if~~ the ~~agency~~Deposit ~~determines~~Insurance ~~(after~~Fund, ~~notice~~which ~~and an opportunity for hearing) that the institution~~ is indetermined anthrough ~~unsafe~~a orrisk-based ~~unsound condition~~assessment ~~or is engaging in an unsafe or unsound practice~~system. ~~The~~Our ~~degree~~deposit ~~of regulatory~~accounts ~~scrutiny of a financial institution will increase, and the~~are ~~permissible~~currently ~~activities~~insured ofby the ~~institution~~Deposit ~~will~~Insurance ~~decrease,~~Fund asgenerally itup ~~moves downward through the capital categories. Institutions that fall into one of the three undercapitalized categories may be required~~ to ~~(i) submit~~ a ~~capital~~maximum ~~restoration plan;~~of ~~(ii) raise additional capital; (iii) restrict their growth~~$250,000 ~~deposit interest~~per ~~rates,~~separately ~~and~~insured ~~other activities; (iv) improve their management; (v) eliminate management fees; or (vi) divest themselves of all or a part of their operations~~depositor. Bank holding companies controlling financial institutions can be called upon to boost the institutions’ capital and to partially guarantee the institutions’ performance under their capital restoration plans.

ItBeginning ~~should~~in November 2008, bethe ~~noted~~FDIC ~~that~~issued ~~the~~a ~~minimum~~final ~~ratios~~rule ~~referred~~under its Transaction Account Guarantee Program (“TAGP”), pursuant to ~~above~~which ~~are~~the ~~merely~~FDIC ~~guidelines~~fully guaranteed all non-interest bearing transaction deposit accounts, including all personal and business checking deposit accounts ~~the~~that ~~bank~~do ~~regulators~~not ~~possess~~earn ~~the~~interest, ~~discretionary~~lawyer ~~authority~~trust accounts where interest does not accrue to ~~require~~the account owner (IOLTA), and NOW accounts with interest rates no higher than 0.25%. Thus, under TAGP, all money in these accounts was fully insured by the FDIC regardless ~~capital~~of ~~ratios~~dollar amount. This increase to coverage was originally in effect through December 31, 2009, but was extended several times until it expired on December 31, 2012.

AsUnder ~~of December~~the ~~31,~~current ~~2011~~assessment system, wethe ~~exceeded~~FDIC ~~the~~assigns ~~requirements~~an ~~contained~~institution into one of four risk categories, with the ~~applicable~~first category having two sub-categories based ~~regulations,~~on ~~policies~~the institution’s most recent supervisory and ~~directives~~capital ~~pertaining~~evaluations, designed to ~~capital~~measure ~~adequacy~~risk. ofTotal ~~“well~~base assessment rates ~~capitalized”~~currently range from 0.025% ~~However,~~of ~~pursuant~~deposits tofor an institution in the ~~regulatory~~highest ~~resolutions~~sub-category asof ~~described~~the inhighest category to 0.45% of deposits ~~“Item~~for 1an institution in the lowest category. ~~Business~~On –May ~~Regulatory~~22, ~~Matter”~~2009, the ~~Banks~~FDIC ~~are~~imposed ~~required~~a tospecial ~~maintain~~assessment ~~a minimum~~of ~~Tier~~five 1basis ~~leverage~~points ~~capital~~on toeach FDIC-insured ~~average~~depository institution’s assets, ~~ratio~~minus ofits ~~8.0%~~Tier ~~and~~I ~~total~~ capital, toas ~~risk-weighted~~of ~~assets~~June of30, 122009.~~0%.~~ ~~Floridian~~This ~~Bank~~special ~~met~~assessment ~~the requirements~~was atcollected ~~December~~on 31September 30, ~~2011~~2009. ~~Orange~~Finally, ~~Bank~~on ~~has~~November ~~received~~12, an2009, ~~extension~~the ~~from~~FDIC ~~their regulators~~adopted a new rule requiring insured institutions to ~~comply~~prepay on ~~with~~December ~~the~~30, ~~increased~~2009, ~~capital~~estimated ~~ratios~~quarterly ~~until~~risk-based ~~the~~assessments ~~date~~for the fourth quarter of 2009 and for all of 2010, 2011, and ~~anticipated~~2012. ~~charter~~We ~~consolidation~~prepaid an assessment of ~~the~~$2.8 ~~Banks~~million, iswhich ~~completed~~incorporated a uniform 3.00 basis point increase effective January 1, 2011 and assumed 5% deposit growth.

OnIn ~~March 21~~addition, ~~2012,~~all ~~the Company withdrew its applications with the~~ FDIC ~~and OFR for the merger of its subsidiary Banks. The Company is reviewing~~insured ~~its~~institutions ~~alternatives~~are ~~for~~required ~~increasing~~to ~~the~~pay ~~capital~~assessments ~~of Orange Bank~~ to ~~meet~~the ~~applicable regulatory~~FDIC ~~requirements.~~at Onan ~~July~~annual ~~21,~~rate ~~2011,~~of ~~the~~approximately ~~Orange~~six ~~Bank~~tenths ~~Board~~of ~~resolved that the Bank would maintain~~ a ~~Tier~~basis 1point ~~leverage capital ratio~~ of ~~at least 8% and a~~insured ~~total~~deposits ~~risk-based~~to ~~capital~~fund ~~ratio~~interest ofpayments aton ~~least~~bonds ~~12%.~~issued ~~During~~by the ~~pendency~~Financing ofCorporation, ~~the subsidiary~~an ~~bank~~agency ~~merger~~of ~~transaction~~ the ~~Bank~~federal ~~had~~government ~~received~~established to arecapitalize ~~waiver from~~ the ~~FDIC and~~predecessor ~~OFR~~ to the ~~requirements~~Savings toAssociation ~~meet~~Insurance ~~such capital requirements~~Fund. AsThese ofassessments ~~December 31,~~will ~~2011,~~continue ~~Orange~~until ~~Bank’s~~the ~~Tier 1 leverage capital ratio and total risk-based~~Financing ~~capital~~Corporation ~~ratio~~bonds ~~were~~mature ~~approximately~~in ~~6.9%~~2017 ~~and~~through 102019.~~7%, respectively.~~

~~Prompt~~Under ~~Corrective~~the ~~Action.~~Federal Deposit Insurance Act, or FDIA, the FDIC may terminate deposit insurance upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.

~~Immediately upon~~Transactions ~~becoming~~With undercapitalized, which is described as having a total risk-based capital ratio of less than 8.0 percent or a Tier 1 risk-based capital ratio of less than 4.0 percent, or a Tier 1 leverage capital ratio less than 4.0 percent, a depository institution becomes subject to the provisions of Section 38 of the FDIA, which: (a) restrict payment of capital distributions and management fees; (b) require that the appropriate federal banking agency monitor the condition of the institution and its efforts to restore its capital; (c) require submission of a capital restoration plan; (d) restrict the growth of the institution’s assets; and (e) require prior approval of certain expansion proposals. The appropriate federal banking agency for an undercapitalized institution also may take any number of discretionary supervisory actions if the agency determines that any of these actions is necessary to resolve the problems of the institution at the least possible long-term cost to the deposit insurance fund, subject in certain cases to specified procedures. These discretionary supervisory actions include: (a) requiring the institution to raise additional capital; (b) restricting transactions with affiliates; (c) requiring divestiture of the institution or the sale of the institution to a willing purchaser; and (d) any other supervisory action that the agency deems appropriate. These and additional mandatory and permissive supervisory actions may be taken with respect to significantly undercapitalized, which is described as having a total risk-based capital ratio of less than 6.0 percent or a Tier 1 risk-based capital ratio of less than 3.0 percent, or a Tier 1 leverage capital ratio less than 3.0 percent, and critically undercapitalized institutions, which is described as institutions with a ratio of tangible equity to total assets that is equal to or less than 2.0 percent. The Banks, individually and consolidated, exceed all ratios for banks described as undercapitalized. Affiliates

~~Basel~~Pursuant ~~III~~to Sections 23A and 23B of the Federal Reserve Act and Regulation W, the authority of the Banks to engage in transactions with related parties or “affiliates” or to make loans to insiders is limited. Loan transactions with an “affiliate” generally must be collateralized and certain transactions between the Banks and their “affiliates”, including the sale of assets, the payment of money or the provision of services, must be on terms and conditions that are substantially the same, or at least as favorable to the Banks, as those prevailing for comparable nonaffiliated transactions. In addition, the Banks generally may not purchase securities issued or underwritten by affiliates.

OnLoans ~~December~~to executive officers, 16directors or to any person who directly or indirectly, ~~2010~~or acting through or in concert with one or more persons, owns, controls or has the ~~Basel~~power ~~Committee~~to ~~issued~~vote ~~details~~10% onor ~~standards~~more ~~for~~of ~~bank~~any ~~capital adequacy~~class ~~and~~of ~~liquidity~~voting ~~regulation~~securities of a bank, ~~including~~which ~~revisions~~we refer to as “10% Shareholders”, or to any political or campaign committee the ~~definitions~~funds or services of which will benefit those executive officers, directors, or 10% ~~Tier~~Shareholders Ior ~~Capital~~which ~~and~~is ~~Tier~~controlled IIby ~~Capital~~those ~~applicable~~executive officers, directors or 10% Shareholders, are subject to ~~Basel~~Sections ~~III.~~22(g) Inand 22(h) ~~June~~of ~~2011,~~the Federal Reserve Act and their corresponding regulations (Regulation O) and Section 13(k) of the Exchange Act relating ~~Basel~~to ~~Committee~~the ~~updated~~prohibition ~~its~~on ~~standards~~personal loans to ~~include~~executives ~~minor~~(which ~~modifications~~exempts tofinancial institutions in compliance with the insider lending ~~credit~~restrictions ~~valuation~~of ~~adjustment~~Section 22(~~CVA~~h) of the Federal Reserve Act). Among other things, ~~which~~these isloans must be made on terms substantially the ~~risk~~same as those prevailing on transactions made to unaffiliated individuals and certain extensions of ~~loss~~credit ~~caused~~to bythose ~~changes~~persons must first be approved in advance by a disinterested majority of the ~~credit~~entire ~~spread~~board of adirectors. ~~counter~~Section ~~party~~22(h) ~~due~~of the Federal Reserve Act prohibits loans to ~~changes~~any of those individuals where the aggregate amount exceeds an amount equal to 15% of an institution’s unimpaired capital and surplus plus an additional 10% of unimpaired capital and surplus in ~~its~~the case of loans that are fully secured by readily marketable collateral, or when the aggregate amount on all of the extensions of credit ~~quality~~outstanding to all of these persons would exceed the Banks’ unimpaired capital and unimpaired surplus. Section 22(~~also~~g) ~~known~~identifies aslimited ~~mark-~~circumstances in which the Banks are permitted to~~-market~~ ~~losses).~~extend credit to executive officers.

15Community Reinvestment Act

~~Many~~The ofCommunity ~~the~~Reinvestment ~~revised~~Act ~~capital~~and ~~standards~~its corresponding regulations are ~~already~~intended ~~being~~to ~~implemented~~encourage ~~through~~banks ~~Dodd-Frank~~to help meet the credit needs of their service area, including ~~which~~low ~~has~~and ~~capital~~moderate income neighborhoods, consistent with the safe and ~~liquidity~~sound ~~implications~~operations of the banks. ~~The~~These ~~short-term~~regulations ~~and~~provide ~~long-term~~for ~~impact~~regulatory assessment of a bank’s record in meeting the ~~new~~credit ~~Basel~~needs ~~III~~of ~~capital~~its ~~standards~~service ~~and~~area. ~~the~~Federal ~~forthcoming~~banking ~~new~~agencies ~~capital rules~~are required to bemake ~~proposed~~public ~~for~~a ~~non-Basel~~rating ~~III~~of ~~U.S.~~a ~~banks~~bank’s isperformance ~~uncertain.~~under ~~U.S. interagency~~the ~~(FED,~~Community ~~OCC,~~Reinvestment Act. The FDIC) ~~guidance~~considers ona ~~Basel~~bank’s ~~III~~Community Reinvestment isAct ~~expected~~rating inwhen the ~~first quarter~~bank ofsubmits ~~2012.~~an Itapplication isto ~~unclear~~establish ~~what~~branches, ~~impact~~merge, or acquire the ~~implementation~~assets and assume the liabilities of ~~Basel~~another ~~III~~bank. ~~may be~~In orthe ~~what~~case ~~impact~~of a ~~pending~~bank ~~alternative~~holding ~~standardized~~company, ~~approach~~the toCommunity ~~Basel~~Reinvestment ~~III option~~Act ~~for~~performance ~~non-Basel~~record ~~III~~of ~~U.S.~~all banks involved ~~(such~~in as the ~~Banks)~~merger ~~may~~or ~~have~~acquisition onare ~~the~~reviewed ~~cost and~~in ~~availability~~connection ofwith ~~different~~the ~~types~~filing of ~~credit~~an ~~and~~application ~~the~~to ~~potential~~acquire ~~compliance~~ownership or control ~~costs~~of shares or assets of ~~implementing~~a ~~the~~bank ~~new~~or ~~capital~~to ~~standards~~merge with any other bank holding company. AtAn ~~the~~unsatisfactory ~~present~~record ~~time,~~can ~~however,~~substantially delay ~~only~~or ~~banks~~block ~~$10~~the ~~billion~~transaction. ~~and~~The ~~over~~Banks ~~will~~received ~~have~~“satisfactory” ~~additional~~ratings ~~stress~~on ~~testing requirements~~their tomost ~~assure~~recent ~~capital~~Community ~~adequacy.~~Reinvestment Act assessment.

~~Interstate Banking and Branching.~~ 14

~~The~~Capital Bank Holding Company Act was amended by the Interstate Banking Act in 1994 to permit adequately capitalized and managed financial and bank holding companies to acquire banks in any state. State laws prohibiting interstate banking or discriminating against out-of-state banks were preempted. States were not permitted to enact laws opting out of this provision; however, states were allowed to adopt a minimum age restriction requiring that target banks located within the state be in existence for a period of years, up to a maximum of five years, before a bank would be subject to the Interstate Banking Act. The Interstate Banking Act, as amended by the Dodd-Frank Act, establishes deposit caps which prohibit acquisitions that result in the acquiring company controlling 30% or more of the deposits of insured banks and thrift institutions held in the state in which the target maintains a branch or 10% or more of the deposits nationwide. States have the authority to waive the 30% deposit cap. State-level deposit caps are not preempted as long as they do not discriminate against out-of-state companies, and the federal deposit caps apply only to initial entry acquisitions.Regulations

~~Under~~The ~~the~~federal banking regulators ~~Dodd~~have adopted risk-~~Frank~~based ~~Act,~~capital ~~national~~adequacy ~~banks~~guidelines for bank holding companies and their subsidiary state-chartered banks. ~~are~~As ~~able~~described above, tothe ~~establish~~federal ~~branches in~~banking ~~any~~regulators ~~state~~have ifissued proposed rules that, ~~state~~if adopted, would ~~permit~~change ~~the~~these ~~establishment~~capital ofrequirements to substantially conform with the ~~branch~~Basel byIII ainternational standards. However, final rules have not yet been adopted and, therefore, the new heightened ~~state~~Basel ~~bank~~III ~~chartered~~capital inrequirements ~~that~~are ~~state~~not yet applicable. ~~Florida~~The ~~law~~risk-based ~~permits~~capital aguidelines ~~state~~are ~~bank~~designed to make regulatory capital ~~establish~~requirements amore ~~branch~~sensitive ofto ~~the~~differences in risk profiles among banks and bank ~~anywhere~~holding companies, to account for off-balance sheet exposure, to minimize disincentives for holding liquid assets, and to achieve greater consistency in evaluating the ~~state~~capital adequacy of major banks throughout the world. ~~Accordingly~~Under these guidelines, ~~under~~assets ~~the Dodd~~and off-~~Frank~~balance ~~Act,~~sheet aitems ~~bank~~are assigned to broad risk categories each with ~~its~~designated ~~headquarters~~weights. ~~outside~~The ~~the~~resulting ~~State~~capital ratios represent capital as a percentage of ~~Florida~~total ~~may~~risk-weighted ~~establish~~assets ~~branches~~and ~~anywhere~~off-balance ~~within~~sheet ~~Florida~~items.

~~Anti~~The current guidelines require all bank holding companies and federally regulated banks to maintain a minimum risk-~~money~~based ~~Laundering~~total capital ratio equal to 8%, of which at least 4% must be Tier I Capital. Tier I Capital, which includes common shareholders’ equity, noncumulative perpetual preferred stock, and a limited amount of cumulative perpetual preferred stock and certain trust preferred securities, less certain goodwill items and other intangible assets, is required to equal at least 4% of risk-weighted assets. The remainder (“Tier II Capital”) may consist of (i) an allowance for loan losses of up to 1.25% of risk-weighted assets, (ii) excess of qualifying perpetual preferred stock, (iii) hybrid capital instruments, (iv) perpetual debt, (v) mandatory convertible securities, and (vi) subordinated debt and intermediate-term preferred stock up to 50% of Tier I Capital. Total capital is the sum of Tier I and Tier II Capital less reciprocal holdings of other banking organizations’ capital instruments, investments in unconsolidated subsidiaries and any other deductions as determined by the appropriate regulator (determined on a case by case basis or as a matter of policy after formal rule making).

~~The~~In ~~Uniting and~~computing ~~Strengthening~~total ~~America~~risk-weighted assets, bybank ~~Providing~~holding ~~Appropriate~~company ~~Tools~~assets ~~Required~~are togiven ~~Intercept and~~risk-weights ~~Obstruct~~of ~~Terrorism~~0%, ~~Act~~20%, of50% ~~2001~~and ~~(“USA~~100%. ~~PATRIOT~~In ~~Act”)~~addition, ~~provides~~certain ~~the~~off-balance ~~federal~~sheet items ~~government~~are ~~with~~given ~~additional~~similar ~~powers~~credit conversion factors to ~~address~~convert ~~terrorist~~them ~~threats~~to ~~through~~asset ~~enhanced~~equivalent amounts to which an appropriate risk-weight will ~~domestic~~apply. ~~security~~Most ~~measures,~~loans ~~expanded~~will ~~surveillance~~be ~~powers~~assigned to the 100% risk category, ~~increased~~except ~~information~~for performing first mortgage loans fully secured by 1- to ~~sharing~~4-family and ~~broadened~~certain ~~anti~~multi-~~money~~family ~~laundering~~residential ~~requirements.~~property, Bywhich ~~way~~carry ofa ~~amendments to~~50% ~~the~~risk ~~Bank~~rating. ~~Secrecy~~Most ~~Act~~investment securities (~~“BSA”)~~including, primarily, general obligation claims on states or other political subdivisions of the ~~USA~~United ~~PATRIOT~~States) ~~Act~~will ~~puts~~be inassigned ~~place~~to ~~measures~~the 20% category, ~~intended~~except tofor ~~encourage~~municipal ~~information~~or ~~sharing~~state ~~among~~revenue ~~bank~~bonds, ~~regulatory~~which have a 50% risk-weight, and ~~law~~direct obligations of the U.S. Treasury or obligations ~~enforcement~~backed ~~agencies~~by the full faith and credit of the U.S. Government, which have a 0% risk-weight. In ~~addition~~covering off-balance sheet items, ~~certain~~direct credit ~~provisions~~substitutes, including general guarantees and standby letters of ~~the~~credit ~~USA~~backing ~~PATRIOT~~financial ~~Act~~obligations, are given a 100% ~~impose~~conversion ~~affirmative~~factor. Transaction-related contingencies such as bid bonds, standby letters of credit backing non-financial obligations, and onundrawn commitments (including commercial credit lines with an initial maturity of more than one year) have a ~~broad~~50% ~~range~~conversion factor. Short-term commercial letters of ~~financial~~credit ~~institutions~~are converted at 20% and certain short-term unconditionally cancelable commitments have a 0% factor.

~~Among~~The ~~other~~federal bank regulatory ~~requirements,~~authorities ~~the~~have ~~USA~~also ~~PATRIOT~~adopted ~~Act~~regulations ~~and~~that supplement the ~~related~~risk-based ~~Federal~~guidelines. ~~Reserve~~These regulations generally require banks and bank holding companies to ~~establish~~maintain ~~anti-money~~a ~~laundering~~minimum ~~programs~~level ~~that~~of ~~include~~Tier I Capital to total assets less goodwill of 4% (the “leverage ratio”). The FDIC permits a bank to maintain a minimum 3% leverage ratio if the bank achieves a 1 rating under the CAMELS rating system in its most recent examination, atas long as the bank is not experiencing or anticipating significant growth. The CAMELS rating is a non-public system used by bank regulators to rate the strength and weaknesses of financial institutions. The CAMELS ~~minimum~~rating is comprised of six categories: capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk.

•Banking ~~internal~~organizations ~~policies,~~experiencing or ~~procedures~~anticipating ~~and~~significant ~~controls~~growth, ~~designed~~as towell ~~implement~~as ~~and~~those ~~maintain~~organizations ~~the~~which ~~savings~~do ~~association’s~~not ~~compliance~~satisfy ~~with all of~~ the ~~requirements~~criteria ofdescribed ~~the USA PATRIOT Act~~above, ~~the~~will ~~BSA~~be ~~and~~required to ~~related~~maintain ~~laws and regulations; • systems and procedures for monitoring and reporting of suspicious transactions and activities; •~~ a ~~designated~~minimum ~~compliance~~leverage ~~officer;~~ratio •ranging ~~employee~~generally ~~training;~~from •4% ~~an independent audit function~~ to ~~test~~5%. ~~the~~The ~~anti-money~~bank ~~laundering~~regulators ~~program;~~also •continue ~~procedures~~ to ~~verify~~consider ~~the~~a ~~identity~~“tangible Tier ofI ~~each~~leverage ~~customer~~ratio” ~~upon~~in ~~the~~evaluating ~~opening~~proposals offor ~~accounts;~~expansion ~~and~~or •new ~~heightened due diligence policies, procedures and controls applicable to certain foreign accounts and relationships~~activities.

~~Additionally, the USA PATRIOT Act requires each financial institution to develop a customer identification program (“CIP”) as part of our anti-money laundering program.~~ The ~~key~~tangible ~~components~~Tier ofI ~~the CIP are identification, verification,~~leverage ~~government~~ratio ~~list comparison, notice and record retention. The purpose of the CIP~~ is ~~to enable~~ the ~~financial~~ratio ~~institution to determine the true identity and anticipated account activity~~ of each customer. To make this determination, among other things, the financial institution must collect certain information from customers at the time they enter into the customer relationship with the financial institution. This information must be verified within a ~~reasonable time~~banking ~~through~~organization’s ~~documentary~~Tier ~~and~~I ~~non-documentary methods. Furthermore~~Capital, ~~all~~less ~~customers must~~deductions befor ~~screened~~intangibles ~~against~~otherwise ~~any~~includable ~~CIP-related~~in ~~government lists of known or suspected~~Tier ~~terrorists.~~I ~~We and our affiliates have adopted policies~~Capital, ~~procedures and controls~~ to ~~comply~~total ~~with~~tangible ~~the BSA and the USA PATRIOT Act, and we engage in very few transactions with foreign persons and no transactions with foreign financial institutions~~assets.

16Federal law and regulations establish a capital-based regulatory scheme designed to promote early intervention for troubled banks and require the FDIC to choose the least expensive resolution of bank failures. The capital-based regulatory framework contains five categories of compliance with regulatory capital requirements, including “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” To qualify as a “well-capitalized” institution, a bank must have a leverage ratio of no less than 5%, a Tier I Capital ratio of no less than 6%, and a total risk-based capital ratio of no less than 10%, and the bank must not be under any order or directive from the appropriate regulatory agency to meet and maintain a specific capital level. Generally, a financial institution must be “well capitalized” before the Federal Reserve will approve an application by a bank holding company to acquire or merge with a bank or bank holding company.

~~Regulatory~~Under ~~Enforcement~~the ~~Authority~~regulations, the applicable agency can treat an institution as if it were in the next lower category if the agency determines (after notice and an opportunity for hearing) that the institution is in an unsafe or unsound condition or is engaging in an unsafe or unsound practice. The degree of regulatory scrutiny of a financial institution will increase, and the permissible activities of the institution will decrease, as it moves downward through the capital categories. Institutions that fall into one of the three undercapitalized categories may be required to (i) submit a capital restoration plan; (ii) raise additional capital; (iii) restrict their growth, deposit interest rates, and other activities; (iv) improve their management; (v) eliminate management fees; or (vi) divest themselves of all or a part of their operations. Bank holding companies controlling financial institutions can be called upon to boost the institutions’ capital and to partially guarantee the institutions’ performance under their capital restoration plans.

Federal and state banking laws grant substantial enforcement powers to federal and state banking regulators. This enforcement authority includes, among other things, the ability to assess civil money penalties, to issue cease and desist or removal orders and to initiate injunctive actions against banking organizations and institution-affiliated parties. In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices. Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed with regulatory authorities. 15

~~Privacy~~It should be noted that the minimum ratios referred to above are merely guidelines and the bank regulators possess the discretionary authority to require higher capital ratios. As of December 31, 2012, we exceeded the requirements contained in the applicable regulations, policies and directives pertaining to capital adequacy of “well capitalized”. However, pursuant to the regulatory resolutions as described in “Item 1. Business – Regulatory Matter”, Orange Bank is required to maintain a minimum Tier I leverage capital to average assets ratio of 8.0% and total capital to risk-weighted assets of 12.0%. As of December 31, 2012, Orange Bank exceeded these heightened capital levels.

~~Under~~Prompt ~~the Gramm-Leach-Bliley~~Corrective Act, federal banking regulators adopted rules limiting the ability of banks and other financial institutions to disclose nonpublic information about consumers to nonaffiliated third parties. The rules require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to nonaffiliated third parties.Action

~~Consumer~~Immediately ~~Laws~~upon becoming undercapitalized, which is described as having a total risk-based capital ratio of less than 8.0% or a Tier I risk-based capital ratio of less than 4.0%, or a Tier I leverage capital ratio less than 4.0%, a depository institution becomes subject to the provisions of Section 38 of the FDIA, which: (a) restrict payment of capital distributions and ~~Regulations~~management fees; (b) require that the appropriate federal banking agency monitor the condition of the institution and its efforts to restore its capital; (c) require submission of a capital restoration plan; (d) restrict the growth of the institution’s assets; and (e) require prior approval of certain expansion proposals. The appropriate federal banking agency for an undercapitalized institution also may take any number of discretionary supervisory actions if the agency determines that any of these actions is necessary to resolve the problems of the institution at the least possible long-term cost to the deposit insurance fund, subject in certain cases to specified procedures. These discretionary supervisory actions include: (a) requiring the institution to raise additional capital; (b) restricting transactions with affiliates; (c) requiring divestiture of the institution or the sale of the institution to a willing purchaser; and (d) any other supervisory action that the agency deems appropriate. These and additional mandatory and permissive supervisory actions may be taken with respect to significantly undercapitalized, which is described as having a total risk-based capital ratio of less than 6.0% or a Tier I risk-based capital ratio of less than 3.0%, or a Tier I leverage capital ratio less than 3.0%, and critically undercapitalized institutions, which is described as institutions with a ratio of tangible equity to total assets that is equal to or less than 2.0%. The Banks, individually and consolidated, exceed all ratios for banks described as undercapitalized.

~~The~~Interstate ~~Banks are~~Banking ~~also subject to other federal~~ and state consumer laws and regulations that are designed to protect consumers in transactions with banks. While the list set forth below is not exhaustive, these laws and regulations include the Truth in Lending Act, the Truth in Savings Act, the Electronic Funds Transfer Act, the Expedited Funds Availability Act, the Check Clearing for the 21st Century Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Home Mortgage Disclosure Act, the Fair and Accurate Transactions Act, the Mortgage Disclosure Improvement Act, and the Real Estate Settlement Procedures Act, among others. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with customers when taking deposits or making loans to such customers. The Banks must comply with the applicable provisions of these consumer protection laws and regulations as part of their ongoing customer relations. Branching

~~Future~~The Bank Holding Company ~~Legislative~~Act ~~Developments~~was amended by the Interstate Banking Act in 1994 to permit adequately capitalized and managed financial and bank holding companies to acquire banks in any state. State laws prohibiting interstate banking or discriminating against out-of-state banks were preempted. States were not permitted to enact laws opting out of this provision; however, states were allowed to adopt a minimum age restriction requiring that target banks located within the state be in existence for a period of years, up to a maximum of five years, before a bank would be subject to the Interstate Banking Act. The Interstate Banking Act, as amended by the Dodd-Frank Act, establishes deposit caps which prohibit acquisitions that result in the acquiring company controlling 30% or more of the deposits of insured banks and thrift institutions held in the state in which the target maintains a branch or 10% or more of the deposits nationwide. States have the authority to waive the 30% deposit cap. State-level deposit caps are not preempted as long as they do not discriminate against out-of-state companies, and the federal deposit caps apply only to initial entry acquisitions.

~~Various~~Under the Dodd-Frank Act, ~~legislative~~national ~~acts~~banks ~~are~~and ~~from~~state ~~time~~banks are able to ~~time~~establish ~~introduced~~branches in ~~Congress~~any ~~and~~state ~~the~~if ~~Florida legislature.~~that ~~This~~state ~~legislation~~would ~~may~~permit ~~change~~the ~~banking~~establishment ~~statutes~~of ~~and~~ the ~~environment~~ inbranch ~~which~~by wea ~~and~~state ~~the~~bank ~~Banks~~chartered ~~operate~~ in ~~substantial~~that ~~and~~state. ~~unpredictable~~Florida ~~ways.~~law ~~We cannot~~permits ~~determine~~a ~~the~~state ~~ultimate~~bank ~~effect~~to ~~that~~establish ~~potential~~a ~~legislation,~~branch ifof ~~enacted,~~the orbank anywhere in ~~implementing~~the ~~regulations~~state. ~~with~~Accordingly, ~~respect~~under ~~thereto~~the Dodd-Frank Act, ~~would~~a ~~have~~bank ~~upon~~with ~~our~~its ~~financial condition~~headquarters oroutside ~~results~~the State of ~~operations~~Florida ormay ~~that~~establish ofbranches anywhere ~~the~~within ~~Banks~~Florida.

~~Effect~~Anti-money ~~of Governmental Monetary Policies.~~ Laundering

The ~~commercial~~ ~~banking~~Uniting ~~business~~and ~~in which the Banks engage is affected not only by~~Strengthening ~~general~~America ~~economic conditions, but also~~ by ~~the~~Providing ~~monetary~~Appropriate ~~policies~~Tools ofRequired ~~the~~to ~~Federal Reserve.~~Intercept ~~Changes~~and inObstruct ~~the~~Terrorism ~~discount~~Act ~~rate on member bank borrowing, availability~~ of ~~borrowing~~ at2001 ~~the~~ (“~~discount~~USA ~~window,”~~PATRIOT ~~open market operations~~Act”), ~~the imposition of~~ ~~changes~~provides ~~in reserve requirements against member banks’ deposits and assets of foreign branches and~~ the ~~imposition~~federal ofgovernment ~~and~~with ~~changes~~additional inpowers ~~reserve requirements against certain borrowings by banks and their affiliates are some of the instruments of monetary policy available~~ to ~~the~~address ~~Federal~~terrorist ~~Reserve.~~threats ~~These~~through ~~monetary policies~~enhanced ~~are~~domestic ~~used~~security ~~in varying combinations to influence overall growth and~~measures, ~~distributions~~expanded ofsurveillance ~~bank loans~~powers, ~~investments~~increased ~~and~~information ~~deposits,~~sharing and ~~this~~broadened ~~use~~anti-money ~~may~~laundering ~~affect interest rates charged on loans or paid on deposits~~requirements. ~~The~~By ~~monetary~~way ~~policies~~ of ~~the~~ ~~Federal Reserve have had a significant effect on the operating results of commercial~~amendments ~~banks and are expected~~ to ~~continue~~the toBank doSecrecy soAct in(“BSA”), the ~~future.~~USA ~~The~~PATRIOT ~~monetary policies~~Act ofputs ~~the~~in ~~Federal~~place ~~Reserve~~measures ~~are~~intended ~~influenced~~to byencourage ~~various~~information ~~factors, including~~sharing ~~inflation,~~among ~~unemployment,~~bank ~~and~~regulatory ~~short-term~~ and ~~long-term~~law ~~changes~~enforcement inagencies. ~~the international~~In ~~trade~~addition, ~~balance~~certain ~~and~~provisions ~~in the fiscal policies~~ of the ~~U.S.~~USA ~~Government. Future~~PATRIOT ~~monetary~~Act ~~policies~~impose ~~and~~affirmative ~~the effect of such policies~~ obligations on ~~the~~a ~~future~~broad ~~business and~~range ~~earnings~~ of ~~the~~financial ~~Banks cannot be predicted~~institutions.

~~Income~~Among other requirements, ~~Taxes.~~the USA PATRIOT Act and the related Federal Reserve regulations require banks to establish anti-money laundering programs that include, at a minimum:

We§ ~~are subject~~internal topolicies, ~~income~~procedures ~~taxes~~and atcontrols ~~the~~designed ~~federal~~to ~~level~~implement and ~~subject~~maintain tothe ~~state~~savings ~~taxation~~association’s ~~in Florida.~~compliance Wewith ~~file~~all aof ~~consolidated~~the ~~federal~~requirements ~~income~~of ~~tax~~the ~~return~~USA ~~with~~PATRIOT aAct, ~~fiscal~~the ~~year ending~~BSA onand ~~December~~related ~~31.~~laws and regulations;

17§ systems and procedures for monitoring and reporting of suspicious transactions and activities;

~~Website Access~~§ toa ~~Company’s~~designated ~~Reports~~compliance officer;

Our Internet website is www.floridianfinancialgroup.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, including any amendments to those reports filed or furnished pursuant to section 13(a) or 15(d), and reports filed pursuant to Section 16, 13(d), and 13(g) of the Exchange Act are available free of charge through our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission. The information on our website is not incorporated by reference into this report.

~~ITEM~~§ ~~1A.~~employee ~~RISK FACTORS~~training;

An§ ~~investment~~an inindependent ~~our~~audit ~~common~~function ~~stock contains a high degree of risk. In addition~~ to ~~the~~test ~~other information contained in, or incorporated by reference into, this Form 10-K, including~~ the ~~matters addressed under the caption “Cautionary Statement Regarding Forward~~anti-~~Looking~~money ~~Information,” you~~laundering should carefully consider the risks described below before deciding whether to invest in our common stock. If any of the events highlighted in the following risks actually occurs, or if additional risks and uncertainties not presently known to us or that we do not currently believe to be important to you, materialize, our business, results of operations or financial condition would likely suffer. In such an event, the trading price of our common stock could decline and you could lose all or part of your investment. In assessing these risks, you should also refer to the other information contained in our filings with the SEC, including our financial statements and related notes.program;

~~Risks~~§ ~~Related~~procedures to ~~our~~verify ~~Business~~the identity of each customer upon the opening of accounts; and

We§ ~~will pursue~~heightened ~~additional~~due ~~capital~~diligence ~~resources~~policies, inprocedures ~~the future~~ and ~~these~~controls ~~capital~~applicable ~~resources may~~to ~~not~~certain beforeign ~~available~~accounts onand ~~acceptable terms or at all~~relationships.

~~The~~Additionally, the USA PATRIOT ~~Bank~~Act ~~Resolutions~~requires ~~entered~~each ~~into~~financial byinstitution to develop a customer identification program (“CIP”) as part of our ~~subsidiary~~anti-money laundering ~~Banks~~program. The key components of the CIP are identification, ~~among~~verification, ~~other~~government ~~things~~list comparison, notice and record ~~contain~~retention. ~~capital~~The ~~directives~~purpose ~~that~~of ~~impose~~the ~~heightened~~CIP ~~capital~~is ~~requirements~~to onenable ~~both~~the financial institution to determine the true identity and anticipated account activity of ~~our~~each ~~subsidiary Banks~~customer. ~~Failure~~To tomake ~~comply~~this ~~with~~determination, ~~the~~among ~~terms~~other ofthings, the ~~Bank Resolutions~~financial ~~could~~institution ~~result~~must incollect ~~significant~~certain ~~enforcement~~information from ~~actions~~customers ~~against~~at usthe ~~of increasing~~time ~~severity.~~they ~~Under~~enter into the ~~terms~~customer ofrelationship with the ~~Bank~~financial ~~Resolutions,~~institution. ~~Floridian~~This ~~Bank~~information ~~is required~~must tobe ~~maintain~~verified within a ~~Tier~~reasonable Itime ~~leverage~~through ~~capital~~documentary ~~ratio~~and ofnon-documentary atmethods. ~~least~~Furthermore, 8%all ~~and~~customers amust ~~total~~be screened against any ~~risk~~CIP-~~based~~related ~~capital~~government ~~ratio~~lists of atknown ~~least~~or ~~12%~~suspected terrorists. AsWe ofand ~~December~~our ~~31,~~affiliates ~~2011~~have adopted policies, ~~Floridian~~procedures and controls ~~Bank~~to ~~maintained~~comply awith ~~Tier~~the IBSA ~~leverage~~and ~~capital~~the ~~ratio~~USA ofPATRIOT ~~9.0%~~Act, and awe ~~total~~engage ~~risk-based~~in very few transactions with foreign persons and no transactions ~~capital~~with ~~ratio~~foreign offinancial 12institutions.~~5%.~~

~~Orange~~Regulatory ~~Bank~~Enforcement is required to maintain a Tier I leverage capital ratio and total risk based capital ratio of at least 8% and 12%, respectively, not later than March 19, 2012. However, Orange Bank received an extension from their Regulators to comply with the increased capital ratios until the date the anticipated charter consolidation of the Banks is completed. On March 21, 2012, the Company withdrew its applications with the FDIC and OFR for the merger of its subsidiary Banks. The Company is reviewing its alternatives for increasing the capital of Orange Bank to meet applicable regulatory requirements. During the pendency of the subsidiary bank merger transaction the Bank had received a waiver from the FDIC and OFR to the requirements to meet such capital requirements. As of December 31, 2011, Orange Bank maintained a Tier I leverage capital ratio of 6.9% and a total risk-based capital ratio of 10.7%.Authority

WeFederal ~~intend~~and state banking tolaws ~~incur~~grant ~~additional~~substantial ~~debt~~enforcement orpowers ~~equity~~to ~~financing~~federal inand ~~the~~state ~~future~~banking ~~for~~regulators. ~~future~~This ~~growth, to~~enforcement ~~fund~~authority ~~losses~~includes, oramong ~~additional~~other things, ~~provisions~~the ~~for~~ability ~~loan~~to ~~losses~~assess incivil ~~the~~money ~~future~~penalties, or to ~~maintain~~ issue cease and desist or ~~increase~~removal ~~capital~~orders ~~levels~~and into ~~accordance~~initiate ~~with~~injunctive actions against banking ~~regulations~~organizations and ~~the~~ ~~Bank~~institution-affiliated ~~Resolutions~~parties. ~~Such~~In ~~financing~~general, ~~may~~these ~~not~~enforcement beactions ~~available~~may tobe usinitiated onfor ~~acceptable~~violations ~~terms~~of orlaws atand ~~all.~~regulations ~~Depending~~and onunsafe ~~the~~or ~~amount~~unsound ~~offered~~practices. ~~and~~Other ~~the~~actions ~~levels~~or atinactions ~~which~~may ~~we offer~~provide the ~~stock,~~basis ~~issuances~~for ofenforcement ~~common~~action, including misleading or ~~preferred~~untimely ~~stock~~reports ~~could~~filed bewith ~~substantially dilutive~~regulatory ~~to shareholders of our Common Stock~~authorities.

If we are not able to maintain the capital levels of our subsidiary Banks above the levels required by the Bank Resolutions, we could become subject to enforcement actions by our banking regulators, which could have an adverse impact on our business, financial condition, results of operations, and cash flows, as well as the value of our common stock. Moreover, capital directives imposed by the Bank Resolutions on our subsidiary Banks further restrain asset growth by requiring that asset growth be funded by a greater amount of additional capital. We may be required to reduce assets or limit asset growth to manage our regulatory capital position. Restraining asset growth could reduce our profitability.Privacy

WeUnder ~~incurred~~the ~~cumulative~~Gramm-Leach-Bliley Act, ~~net~~federal ~~losses~~banking regulators adopted rules limiting the ability of ~~$30.0~~banks and other financial institutions to disclose nonpublic ~~million~~information ~~since~~about ~~inception~~consumers to nonaffiliated third parties. The rules require disclosure of privacy policies to consumers and, in ~~may~~some ~~incur~~circumstances, ~~further~~allow ~~losses.~~consumers to prevent disclosure of certain personal information to nonaffiliated third parties.

WeConsumer ~~incurred net~~Laws ~~losses of $2.1 million~~ and $9.7 million for the years ended December 31, 2011 and December 31, 2010, respectively and a cumulative net loss of $30.0 million since inception. In light of economic conditions that continue to adversely affect our borrowers and us, we may incur further losses. Regulations

AnThe ~~inadequate~~Banks ~~allowance~~are also subject to other federal and state consumer laws and regulations that are designed to protect consumers in transactions with banks. While the list set forth below is not exhaustive, these laws and regulations include the Truth in Lending Act, the Truth in Savings Act, the Electronic Funds Transfer Act, the Expedited Funds Availability Act, the Check Clearing for ~~loan~~the ~~losses~~21st ~~would~~Century Act, the Fair ~~overstate~~Credit ~~our~~Reporting ~~current~~Act, ~~period~~the ~~earnings~~Equal Credit Opportunity Act, the Fair Housing Act, the Home Mortgage Disclosure Act, the Fair and Accurate Transactions Act, the Mortgage Disclosure Improvement Act, and the Real Estate Settlement Procedures Act, among others. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with customers when taking deposits or making loans to such customers. The Banks must comply with the applicable provisions of these consumer protection laws and regulations as part of their ongoing customer relations.

~~Our~~Future ~~success depends~~Legislative ~~to a significant extent upon the quality of our assets, particularly loans~~Developments. In originating loans, there is a substantial likelihood that credit losses will be experienced. The risk of loss will vary with, among other things, general economic conditions, the type of loan being made, the creditworthiness of the borrower over the term of the loan and, in the case of a collateralized loan, the quality of the collateral for the loan. Management maintains an allowance for loan losses based on, among other things, experience, an evaluation of economic conditions, and regular reviews of delinquencies and loan portfolio quality. Based upon such factors, management makes various assumptions and judgments about the ultimate collectability of the loan portfolio and provides an allowance for probable loan losses based upon a percentage of the outstanding balances and for specific loans when their ultimate collectability is considered questionable.

18Various legislative acts are from time to time introduced in Congress and the Florida legislature. This legislation may change banking statutes and the environment in which we and the Banks operate in substantial and unpredictable ways. We cannot determine the ultimate effect that potential legislation, if enacted, or implementing regulations with respect thereto, would have upon our financial condition or results of operations or that of the Banks.

AsEffect of ~~December~~ ~~31,~~Governmental ~~2011,~~Monetary the Banks’ combined allowance for loan losses was $6.6 million, which represented approximately 2.1% of their total amount of loans. At December 31, 2010 allowance for loan losses was $8.0 million, which represented 2.5% of total loans. The Banks had a combined $8.4 million in nonperforming loans as of December 31, 2011. At December 31, 2010 the Banks had $17.1 million in nonperforming loans. The allowance may not prove sufficient to cover future loan losses. Future adjustments may be necessary if economic conditions differ substantially from the assumptions used or adverse developments arise with respect to the Banks’ nonperforming or performing loans. In addition, regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans. Such agencies may require us to recognize additional losses based on their judgments about information available to them at the time of their examination. Accordingly, the allowance for loan losses may not be adequate to cover loan losses or significant increases to the allowance may be required in the future if economic conditions should worsen. Material additions to the Banks’ allowances for loan losses would adversely impact our net income and capital in future periods while having the effect of overstating our current period earnings.Policies

IfThe ~~our~~commercial ~~nonperforming~~banking business in which the Banks engage is affected not only by general economic conditions, but also by the monetary policies of the Federal Reserve. Changes in the discount rate on member bank borrowing, availability of borrowing at the “discount window,” open market operations, the imposition of changes in reserve requirements against member banks’ deposits and assets ~~increase~~of foreign branches and the imposition of and changes in reserve requirements against certain borrowings by banks and their affiliates are some of the instruments of monetary policy available to the Federal Reserve. These monetary policies are used in varying combinations to influence overall growth and distributions of bank loans, ~~our~~investments and deposits, and this use may affect interest rates charged on loans or paid on deposits. The monetary policies of the Federal Reserve have had a significant effect on the operating results of commercial banks and are expected to continue to do so in the future. The monetary policies of the Federal Reserve are influenced by various factors, including inflation, unemployment, and short-term and long-term changes in the international trade balance and in the fiscal policies of the U.S. Government. Future monetary policies and the effect of such policies on the future business and earnings ~~will~~of ~~suffer~~the Banks cannot be predicted.

At December 31, 2011, our nonperforming assets (which consist of non-accruing loans, loans 90 days or greater delinquent, nonperforming restructured loans, foreclosed real estate assets, and repossessed personal property) totaled $13.5 million, or 3.0% of total assets, which is a decrease of $7.5 million or 35.7% over nonperforming assets at December 31, 2010. At December 31, 2010, our nonperforming assets were $21.0 million, or 4.5 % of total assets. Our nonperforming assets adversely affect our net income in various ways. We do not record interest income on nonaccrual loans or real estate owned. We must reserve for probable losses, which is established through a current period charge to the provision for loan losses as well as from time to time, as appropriate, write down the value of properties in our other real estate owned portfolio to reflect changing market values. Additionally, there are legal fees associated with the resolution of problem assets as well as carrying costs such as taxes, insurance and maintenance related to our other real estate owned. Further, the resolution of nonperforming assets requires the active involvement of management, which can distract them from more profitable activity. Finally, if our estimate for the recorded allowance for loan losses proves to be incorrect and our allowance is inadequate, we will have to increase the allowance accordingly. 17

~~Our regulatory~~Income capital levels have declined and may continue to do so, which may cause our regulators to take formal enforcement action, including requiring us to raise capital. At December 31, 2011, our consolidated Tier I leverage capital ratio was 8.1%, our consolidated total risk based capital ratio was 12.1% and our consolidated Tier I risk based capital ratio was 10.9%. While we remain well capitalized at December 31, 2011, these ratios have declined significantly over the past three years because of the Banks’ significant losses. If we continue to experience losses or if our assets increase, our capital levels will fall below the levels required to be well capitalized. Lower capital ratios will impair our ability to compete for loans and deposits, due to regulatory restrictions and public perception. In July 2011, the Banks’ Boards approved Bank Resolutions in consultation with their banking regulators. The Bank Resolutions included a commitment to maintain capital levels in excess of well capitalized levels. Specifically, we must maintain a Tier 1 leverage capital of at least 8% and a total risk-based capital ratio of at least 12%. See “Item 1. Business – Regulatory Matter” for a further discussion.Taxes

~~You~~We ~~may~~are ~~not~~subject ~~agree~~to ~~with~~income taxes ~~our~~at ~~decisions~~the onfederal ~~how~~level and subject to state taxation in Florida. We file a consolidated federal income tax return with a fiscal weyear ~~increase~~ending ~~our~~on ~~capital~~December ~~levels~~31.

~~We are~~Website ~~exploring~~Access ~~all opportunities~~ to ~~reduce~~Company’s our losses and increase our capital levels. We may make further expense reductions, which may reduce our losses. These expense reductions while helpful in reducing short-term losses may be harmful to us in the long-term as the expense reductions may adversely affect our ability to execute our business strategy. We may also seek additional equity or debt financing at terms that may not be acceptable to you.Reports

~~Operating~~Our asInternet awebsite is ~~multi~~www.floridianfinancialgroup.com. Our annual reports on Form 10-~~bank~~K, ~~holding~~quarterly ~~company~~reports ~~can~~on beForm ~~inefficient~~10-Q, current reports on Form 8-K, including any amendments to those reports filed or furnished pursuant to section 13(a) or 15(d), and ~~more~~reports ~~costly~~filed pursuant to Section ~~operate~~16, 13(d), and 13(g) of the Exchange Act are available free of charge through our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission. The information on our website is not incorporated by reference into this Report.

~~We provide~~Item ~~our products and services to our customers through a decentralized network of banks (currently, Orange Bank and Floridian Bank) that operate autonomously within their respective communities~~1A. Risk While our operating model provides us with a competitive advantage in maintaining a community focus and in providing customer service, our model is, in many respects, less efficient to operate. Moreover, there is increasing pressure to provide products and services at lower prices, which is more difficult to do as a multi-bank holding company. This can reduce our overall net interest margin and revenues from our fee-based products and services. To achieve greater economies of scale, we submitted an application in September 2011 to the OFR and FDIC to merge the two Banks. On March 21, 2012, the Company withdrew its applications with the FDIC and OFR for the merger of its subsidiary Banks. The Company is reviewing its alternatives for increasing the capital of Orange Bank to meet applicable regulatory requirements. On July 21, 2011, the Orange Bank Board resolved that the Bank would maintain a Tier 1 leverage capital ratio of at least 8% and a total risk-based capital ratio of at least 12%. During the pendency of the subsidiary bank merger transaction the Bank had received a waiver from the FDIC and OFR to the requirements to meet such capital requirements. As of December 31, 2011, Orange Bank’s Tier 1 leverage capital ratio and total risk-based capital ratio were approximately 6.9% and 10.7%, respectively.Factors

19An investment in our common stock contains a high degree of risk. In addition to the other information contained in, or incorporated by reference into, this Form 10-K, including the matters addressed under the caption “Cautionary Statement Regarding Forward-Looking Information,” you should carefully consider the risks described below before deciding whether to invest in our common stock. If any of the events highlighted in the following risks actually occurs, or if additional risks and uncertainties not presently known to us or that we do not currently believe to be important to you, materialize, our business, results of operations or financial condition would likely suffer. In such an event, the trading price of our common stock could decline and you could lose all or part of your investment. In assessing these risks, you should also refer to the other information contained in our filings with the SEC, including our financial statements and related notes.

~~The~~Risks ~~loss~~Related ~~of key personnel may adversely~~to ~~affect~~our ~~us.~~ Business

~~Our~~Although ~~success is,~~we ~~and~~raised isadditional ~~expected~~capital ~~to remain, highly dependent on our senior management team.~~through Asthe asale ~~bank holding company~~ of ~~community~~preferred ~~banks,~~stock ~~it is our management’s extensive knowledge of and relationships~~ in ~~the~~2012, ~~community~~we ~~that~~may ~~generate~~need ~~business for us. Successful execution of our growth strategy will continue~~ to ~~place~~pursue ~~significant demands~~additional oncapital ~~our~~resources ~~management~~in ~~and~~ the ~~loss~~future ~~of any such person’s services may adversely affect our growth~~ and ~~profitability.~~these Oncapital ~~August 25, 2011, Charlie W.~~resources ~~Brinkley,~~may ~~Jr.,~~not ~~announced~~be ~~his~~available ~~resignation~~on asacceptable ~~our~~terms ~~Chairman~~or ~~and~~at ~~Chief Executive Officer and as President of Orange Bank~~all. Thomas H. Dargan, Jr. was appointed as our Chief Executive Officer and interim Chairman as well as President of Orange Bank. Since December 31, 2010, three of our directors and one of our executive officers in addition to Mr. Brinkley have resigned from their positions.

~~Although~~The ~~we have~~MOU entered into by Orange Bank, among other things, contains a ~~restrictive~~capital ~~covenant~~directive ~~agreement~~that ~~and~~imposes anheightened ~~employment~~capital ~~agreement~~requirements on Orange Bank. Failure to comply with ~~Thomas~~the H.terms ~~Dargan,~~of ~~Jr.,~~the ~~and~~MOU ~~Keith~~could Aresult in significant enforcement actions against us of increasing severity. ~~Bulko,~~Under wethe terms ~~may~~of ~~not~~the beMOU, ~~able~~Orange Bank is required to ~~retain them~~maintain ora ~~other~~Tier ~~key~~I ~~employees.~~leverage ~~The~~capital ~~loss~~ratio of ~~such~~at ~~employees~~least ~~could~~8% ~~adversely~~and ~~affect~~a total risk-based capital ~~our~~ratio ~~ability~~of toat ~~successfully~~least ~~conduct~~12%. ~~our~~As ~~business~~of December 31, ~~which~~2012, ~~could~~Orange ~~have~~Bank anmaintained ~~adverse effect~~a onTier ~~our~~I ~~financial~~leverage ~~results~~capital ratio of 9.1% and ~~the~~a ~~value~~total ofrisk-based capital ~~our~~ratio ~~common~~of ~~stock~~13. 6%

~~Our~~During ~~loan~~2012, the ~~portfolio~~Company ~~includes~~reviewed ~~loans~~its ~~with~~alternatives for increasing the capital of the Banks to maintain their capital levels sufficiently above applicable regulatory requirements. In November, the Company commenced a private offering of up to $10 million of ~~higher~~the ~~risk~~Company’s Series A Noncumulative Preferred Stock. A total of ~~loss~~$675 thousand of additional capital was raised through this private offering. However, ~~particularly~~we ~~because~~may ~~our~~need ~~loan~~to ~~portfolio~~incur isadditional ~~heavily~~debt or equity financing in the future for future growth, to ~~concentrated~~fund losses or additional provisions for loan losses in ~~commercial~~the ~~and~~future, ~~residential~~or ~~mortgage~~to ~~loans~~maintain ~~secured~~or byincrease ~~properties~~ capital levels in ~~Central~~accordance with ~~Florida~~banking regulations and the MOU. Such financing may not be available to us on acceptable terms or at all. Depending on the amount offered and the levels at which we offer the stock, issuances of common or preferred stock could be substantially dilutive to shareholders of our Common Stock.

WeIf we are not able to maintain ~~originate~~the ~~commercial~~capital ~~real~~levels ~~estate~~of ~~loans,~~our ~~commercial~~subsidiary ~~loans,~~Banks ~~construction~~above ~~loans, consumer~~the ~~loans~~levels required by the MOU, ~~and~~we ~~residential~~could ~~mortgage~~become ~~loans~~subject ~~primarily~~to ~~within~~enforcement actions by our ~~market area.~~banking Weregulators, ~~believe~~which ~~that~~could have an adverse impact on our ~~commercial~~business, ~~real~~financial ~~estate~~condition, ~~including~~results ~~construction~~of ~~loans~~ operations, and cash ~~commercial~~flows, ~~loans~~as ~~provide~~well as the ~~largest~~value ~~risk~~of to our ~~loan~~common ~~portfolio~~stock. ~~Commercial real estate~~Moreover, ~~including~~capital ~~construction,~~directives ~~and~~imposed ~~commercial~~by ~~loans~~the ~~tend~~MOU toon ~~involve~~our subsidiary Banks further ~~larger~~restrain ~~loan~~asset ~~balances~~growth toby arequiring ~~single~~that ~~borrower~~asset orgrowth ~~groups~~be offunded ~~related~~by ~~borrowers~~a ~~and are~~greater ~~more~~amount ~~susceptible~~of toadditional acapital. ~~risk~~We ofmay ~~loss~~be ~~during~~required ato reduce ~~downturn~~assets inor ~~the~~limit ~~business~~asset ~~cycle. These~~growth ~~loans~~to ~~also~~manage ~~have~~our ~~greater~~regulatory ~~credit~~capital ~~risk~~position. ~~for~~Restraining ~~the~~asset ~~following~~growth ~~reasons:~~could reduce our profitability.

•We ~~Commercial~~incurred ~~Real~~cumulative ~~Estate~~net ~~Loans.~~losses Repayment is dependent on income being generated in amounts sufficient to cover operating expenses and debt service. These loans also involve greater risk because they are generally not fully amortizing over a loan period, but rather have a balloon payment due at maturity. A borrower’s ability to make a balloon payment typically will depend on being able to either refinance the loan or timely sell the underlying property. • Commercial Loans. Repayment is generally dependent upon the successful operation of $29 ~~the~~million ~~borrower’s~~since ~~business.~~inception In addition, the collateral securing the loans may depreciate over time, be difficult to appraise, illiquid, or fluctuate in value based on the success of the business. • Construction Loans. The risk of loss is largely dependent on our initial estimate of whether the property’s value at completion equals or exceeds the cost of property construction and the availability of permanent financing following completion of construction. During the construction phase, a number of factors can result in delays or cost overruns. If our estimate is inaccurate, which is acutely possible as real estate prices continue to decrease, or if actual construction costs exceed estimates, the value of the property securing our loan may beincur ~~insufficient~~further ~~to ensure full repayment when completed through a permanent loan or by seizure of collateral~~losses.

~~These~~We ~~risks inherent~~earned ina ~~our~~net profit ~~loan~~of ~~portfolio~~$927 ~~are~~thousand ~~exacerbated~~and bya ~~the~~net ~~geographic~~loss ~~concentration~~ of ~~our loan portfolio~~$2.1 ~~Our~~million ~~interest-earning~~for ~~assets~~the ~~are~~years ~~heavily~~ended ~~concentrated~~December ~~in commercial and residential mortgage loans secured by real estate~~31, ~~particularly real~~2012 ~~estate~~and ~~located in Central Florida. As of~~ December 31, 2011, ~~approximately~~ ~~78%~~respectively ofand ~~the~~a ~~Banks’~~cumulative ~~loans~~net ~~were~~loss ~~secured by commercial real estate. As~~ of ~~December 31,~~$29 ~~2010~~million ~~approximately~~since ~~76% of the Banks’ loans were secured by commercial real estate~~inception. ~~The~~In ~~real~~light ~~estate collateral in each case provides an alternate source~~ of ~~repayment~~ ineconomic ~~the~~conditions ~~event~~that ofcontinue ~~default by the borrower; however, the value of the~~to ~~collateral~~adversely ~~may~~affect ~~decline~~our ~~during~~borrowers ~~the~~and ~~time the credit is outstanding~~us, ~~and, therefore,~~we ~~the collateral~~ may ~~become~~incur ~~insufficient to protect us from substantial~~ losses. ~~If we are required to liquidate the collateral securing a loan during a period of reduced real estate values, such as~~ in ~~today’s market, to satisfy~~ the ~~debt, our earnings and capital could be adversely affected~~future.

~~Additionally, as~~An ofinadequate ~~December~~allowance ~~31,~~for 2011, substantially all of our loans secured by real estate are secured by commercial and residential properties located in Citrus, Flagler, Lake, Orange, Seminole, and Volusia Counties, Florida. The concentration of our loans in this area subjects us to the risk that a downturn in the economy or recession in that area, such as the downturn the area is currently experiencing, could result in a decrease in loan ~~originations~~losses ~~and increases in delinquencies and foreclosures, which~~ would ~~more greatly affect us than if our lending were~~ ~~more~~overstate ~~geographically diversified. In addition, since a large portion of~~ our ~~portfolio~~ iscurrent ~~secured~~period by properties located in Central Florida, the occurrence of a natural disaster, such as a hurricane, could result in a decline in loan originations, a decline in the value or destruction of mortgaged properties and an increase in the risk of delinquencies, foreclosures or loss on loans originated by usearnings. ~~We may suffer further losses due to the decline in the value of the properties underlying our mortgage loans, which would have an adverse impact on our operations.~~

20Our success depends to a significant extent upon the quality of our assets, particularly loans. In originating loans, there is a substantial likelihood that credit losses will be experienced. The risk of loss will vary with, among other things, general economic conditions, the type of loan being made, the creditworthiness of the borrower over the term of the loan and, in the case of a collateralized loan, the quality of the collateral for the loan. Management maintains an allowance for loan losses based on, among other things, experience, an evaluation of economic conditions, and regular reviews of delinquencies and loan portfolio quality. Based upon such factors, management makes various assumptions and judgments about the ultimate collectability of the loan portfolio and provides an allowance for probable loan losses based upon a percentage of the outstanding balances and for specific loans when their ultimate collectability is considered questionable.

~~We may incur losses if we are unable to successfully manage interest rate risk.~~18

~~Our~~As of December 31, 2012, ~~profitability~~the ~~depends~~Banks’ tocombined aallowance ~~large~~for ~~extent~~loan onlosses was $8.0 million, which represented approximately 2.9% of their total amount of loans. At December 31, 2011, the Banks’ ~~net~~combined ~~interest~~allowance ~~income~~for loan losses was $6.6 million, which isrepresented ~~the~~2.1% ~~difference~~of combined ~~between~~total ~~income~~loans. onThe ~~interest-earning~~Banks ~~assets~~had ~~such~~a ascombined $10.7 million in nonperforming loans ~~and~~ ~~investment~~as ~~securities~~of December 31, ~~and~~2012. ~~expense~~At onDecember ~~interest-bearing~~31, 2011 ~~liabilities~~the ~~such~~Banks ~~as deposits~~had ~~and~~$8.4 ~~borrowings~~million in nonperforming loans. WeThe ~~are~~allowance ~~unable~~may not prove sufficient to ~~predict~~cover ~~changes~~future inloan ~~market~~losses. ~~interest~~Future ~~rates,~~adjustments ~~which~~may ~~are~~be ~~affected~~necessary byif ~~many~~economic ~~factors~~conditions ~~beyond~~differ ~~our~~substantially ~~control,~~from ~~including~~the ~~inflation,~~assumptions used or adverse developments arise ~~recession,~~with ~~unemployment~~respect to the Banks’ nonperforming or performing loans. In addition, ~~money~~regulatory ~~supply~~agencies, ~~domestic~~as ~~and~~an ~~international~~integral ~~events~~part ~~and~~of their ~~changes~~examination inprocess, periodically review the ~~United~~estimated ~~States~~losses ~~and~~on ~~other~~loans. ~~financial~~Such ~~markets~~agencies may require us to recognize additional losses based on their judgments about information available to them at the time of their examination. ~~Our~~Accordingly, ~~net~~the ~~interest~~allowance for loan ~~income~~losses may not be ~~reduced~~adequate ~~if:~~to ~~(i)~~cover ~~more~~loan ~~interest-earning~~losses ~~assets~~or ~~than interest-bearing~~significant ~~liabilities~~increases ~~re-price~~to orthe ~~mature~~allowance ~~during~~may abe ~~time~~required ~~when~~in ~~interest~~the future if economic ~~rates~~conditions ~~are~~should ~~declining~~worsen. orMaterial ~~(ii)~~additions ~~more~~to ~~interest-bearing~~the ~~liabilities~~Banks’ ~~than~~allowances for loan losses would adversely impact our net income ~~interest-earning~~and ~~assets~~capital ~~re-price~~in orfuture ~~mature~~periods ~~during~~while ahaving ~~time~~the ~~when~~effect ~~interest~~of ~~rates are~~overstating ~~rising.~~our current period earnings.

~~Changes~~If ~~in the difference between short- and long-term interest rates may also harm~~ our ~~business.~~ ~~For~~nonperforming ~~example,~~assets ~~short-term deposits may be used to fund longer-term loans. When differences between short-term and long-term interest rates shrink or disappear~~increase, ~~as is likely in the current zero interest rate policy environment~~our ~~the~~earnings ~~spread~~will ~~between rates paid on deposits and received on loans could narrow significantly, decreasing our net interest income~~suffer.

IfAt ~~market~~December 31, 2012, our ~~interest~~nonperforming ~~rates~~assets ~~rise~~(which ~~rapidly~~consist of non-accruing loans, loans 90 days or greater delinquent, nonperforming restructured loans, foreclosed real estate assets, and repossessed personal property) totaled $12.1 million, or 3.2% of total assets, which is a decrease of $1.4 million or 10.4% over nonperforming assets at December 31, 2011. At December 31, 2011, our nonperforming assets were $13.5 million, or 3.0% of total assets. Our nonperforming assets adversely affect our net income in various ways. We do not record interest income ~~rate~~on ~~adjustment~~nonaccrual ~~caps~~loans ~~may~~or ~~limit~~real ~~increases~~estate owned. We must reserve for probable losses, which is established through a current period charge to the provision for loan losses as well as from time to time, as appropriate, write down the value of properties in our other real estate owned portfolio to reflect changing market values. Additionally, there are legal fees associated with the ~~interest~~resolution of ~~rates~~problem onassets ~~adjustable~~as ~~rate~~well ~~loans~~as carrying costs such as taxes, ~~thereby~~insurance ~~reducing~~and maintenance related to our ~~net~~other real estate owned. Further, ~~interest~~the ~~income~~resolution of nonperforming assets requires the active involvement of management, which can distract them from more profitable activity. Finally, if our estimate for the recorded allowance for loan losses proves to be incorrect and our allowance is inadequate, we will have to increase the allowance accordingly.

~~Since~~At weDecember ~~engage~~31, 2012, our consolidated Tier I leverage capital ratio was 10.0%, our consolidated total risk based capital ratio was 14.7% and our consolidated Tier I risk based capital ratio was 13.5%, all of which showed improvement in ~~lending~~2012. ~~secured~~While bywe ~~real~~are well capitalized at December 31, ~~estate~~2012, and ~~may~~have bealways ~~forced~~been tosince ~~foreclose~~inception, onthese ~~the~~ratios ~~collateral~~had ~~property~~been ~~and~~declining ~~own~~in previous years due to the losses incurred. If future ~~underlying~~losses ~~real~~are ~~estate~~incurred or if our assets increase, weour ~~may~~capital levels could fall below the levels required to be ~~subject~~well capitalized. Lower capital ratios would impair our ability to ~~the~~compete ~~increased~~for ~~costs~~loans ~~associated~~and deposits, due to regulatory restrictions and public perception. ~~with~~In July 2012, the ~~ownership~~Orange Bank Board approved an MOU in consultation with its banking regulators. The MOU included a commitment to maintain capital levels in excess of ~~real~~well ~~property~~capitalized levels. Specifically, ~~which~~we ~~could~~must ~~result~~maintain ina ~~reduced~~Tier ~~net~~I ~~income~~leverage capital of at least 8% and a total risk based capital ratio of at least 12%. See Item 1. Business – Regulatory Matter” for further discussion.

~~Since~~You ~~we originate loans secured by real estate, we~~ may ~~have~~not toagree ~~foreclose~~with ~~on the collateral property to protect~~ our ~~investment~~decisions ~~and~~on ~~may thereafter own and~~how ~~operate such property, in which case~~ we ~~are~~increase ~~exposed~~our tocapital ~~the risks inherent in the ownership of real estate~~levels.

~~The~~We ~~amount~~are exploring all opportunities ~~that~~to ~~we,~~reduce asour alosses ~~mortgagee~~and increase our capital levels. We may make further expense reductions, which may ~~realize~~reduce ~~after~~our alosses. ~~default~~These expense isreductions ~~dependent~~while ~~upon~~helpful ~~factors~~in reducing short-term losses may be harmful to us in the long-term as the expense reductions ~~outside~~may ofadversely affect our ~~control,~~ability ~~including,~~to ~~but~~execute our business strategy. We may also seek additional equity or debt financing at terms that may not ~~limited~~be acceptable to: you.

•Operating ~~general~~as ora ~~local~~multi-bank ~~economic~~holding ~~conditions;~~company can •be ~~environmental~~inefficient ~~cleanup liability; • neighborhood values; • interest rates; • real estate tax rates; • operating expenses of the mortgaged properties; • supply of~~ and ~~demand~~more ~~for~~costly ~~rental units or properties; • ability~~ to ~~obtain and maintain adequate occupancy of the properties; • zoning laws; • governmental rules, regulations and fiscal policies; and • acts of God~~operate.

~~Certain~~We provide our products ~~expenditures~~and ~~associated~~services ~~with~~to ~~the~~our ~~ownership~~customers through a decentralized network of ~~real~~banks ~~estate~~(currently, ~~principally~~Orange ~~real~~Bank and Floridian Bank) that operate ~~estate~~autonomously ~~taxes~~within their respective communities. While our operating model provides us with a competitive advantage in maintaining a community focus and ~~maintenance~~in ~~costs~~providing customer service, ~~may~~our ~~adversely~~model ~~affect~~is, ~~the~~in ~~income~~many ~~from~~respects, ~~the real~~less ~~estate~~efficient to operate. ~~Therefore~~Moreover, ~~the~~there is ~~cost~~increasing ofpressure ~~operating~~to ~~real~~provide ~~property~~products ~~may~~and ~~exceed~~services ~~the~~at lower prices, which is more difficult to do as a multi-bank holding ~~rental~~company. ~~income~~This ~~earned~~can reduce our overall net interest margin and revenues from ~~such~~our ~~property,~~fee-based products and services. To achieve greater economies of scale, we ~~may~~submitted ~~have~~an application in September 2011 to ~~advance~~the ~~funds~~OFR ~~in order~~and FDIC to ~~protect~~merge ~~our~~the ~~investment~~two orBanks. weOn ~~may~~March 21, 2012, the Company withdrew its applications with the FDIC and OFR for the merger of its subsidiary Banks because Orange Bank did not meet the minimum capital requirements under the board resolutions required to be adopted by its banking regulators, which required the Bank to, ~~dispose~~among other things, maintain a Tier I leverage capital ratio of ~~the~~at ~~real~~least 8% and a total risk-based capital ratio ~~property~~of at least 12%. In July 2012, Orange Bank entered into a ~~loss~~MOU that contained the same minimum capital requirements. As of December 31, 2012, Orange Bank’s Tier I leverage capital ratio and total risk-based capital ratio were approximately 9.1% and 13.6%, respectively. We may be unable to merge the two Banks to gain efficiencies.

2119

~~Liquidity~~The ~~risk~~loss ~~could~~of ~~impair~~key ~~our~~personnel ~~ability~~may ~~to fund~~adversely ~~operations and jeopardize our financial condition~~affect us.

~~Liquidity~~Our success is, and is ~~essential~~expected to ~~our~~remain, ~~business.~~highly Andependent ~~inability~~on toour ~~raise~~senior ~~funds~~management ~~through~~team. ~~deposits, borrowings,~~As ~~and~~a ~~other~~bank ~~sources,~~holding ~~could~~company ~~have~~of acommunity ~~substantial~~banks, ~~negative~~it ~~effect~~is on our ~~liquidity.~~management’s ~~Our~~extensive ~~access~~knowledge toof ~~funding~~and ~~sources~~relationships in ~~amounts~~the ~~adequate~~community ~~to finance our activities on terms~~ that ~~are~~generate ~~acceptable~~business tofor us. ~~could~~Successful ~~be impaired by factors that~~execution ~~affect~~of usour ~~specifically~~growth orstrategy ~~the~~will ~~financial~~continue ~~services~~to ~~industry~~place orsignificant ~~economy~~demands ~~in general.~~on ~~Factors~~our ~~that~~management ~~could~~and ~~negatively~~the ~~impact~~loss ~~our~~of ~~access~~any tosuch ~~liquidity~~person’s ~~sources~~services ~~include~~may aadversely ~~decrease~~affect inour ~~the~~growth ~~level~~and ofprofitability. ~~our~~Although ~~business~~we ~~activity~~have asentered into a ~~result~~restrictive ofcovenant ~~an economic~~agreement ~~downturn~~and inan ~~the~~employment agreement ~~markets~~with inThomas ~~which~~H. ~~our~~Dargan, ~~loans are concentrated~~Jr., ~~adverse regulatory~~our ~~action~~Chief ~~against~~Executive ~~us,~~Officer orand ~~our~~President ~~inability~~of toOrange ~~attract~~Bank, and ~~retain~~Keith ~~deposits~~A. ~~Our~~ ~~ability~~Bulko, toPresident ~~borrow~~of Floridian ~~could~~Bank, bewe ~~impaired~~may bynot ~~factors~~be ~~that~~able ~~are~~to ~~not~~retain ~~specific~~them ~~to us~~ or ~~our~~other ~~region,~~key ~~such~~employees. asThe aloss ~~disruption~~of insuch ~~the~~employees ~~financial~~could ~~markets~~adversely oraffect ~~negative views~~our ~~and~~ability ~~expectations~~to ~~about~~successfully ~~the~~conduct ~~prospects~~our ~~for~~business, ~~the~~which ~~financial~~could ~~services~~have ~~industry~~an ~~in light~~adverse ofeffect ~~recent~~on ~~turmoil~~our ~~faced~~financial byresults ~~banking organizations~~ and the ~~unstable~~value ~~credit~~of ~~markets~~our common stock.

~~The~~Our ~~banking~~loan ~~industry~~portfolio includes loans with a higher risk of loss, particularly because our loan portfolio is ~~very~~heavily ~~competitive.~~concentrated in commercial and residential mortgage loans secured by properties in Central Florida.

~~The~~We ~~banking~~originate commercial ~~industry~~real isestate ~~highly~~loans, ~~competitive~~commercial ~~and~~loans, ~~the~~construction ~~Banks~~loans, ~~compete~~consumer ~~directly~~loans, ~~with~~and ~~financial institutions~~residential ~~that~~mortgage ~~are~~loans ~~more~~primarily ~~established~~within ~~and~~our ~~have significantly greater resources~~market ~~and lending limits~~area. AsWe abelieve ~~result~~that ofour ~~those~~commercial ~~greater~~real ~~resources~~estate, ~~the~~including ~~larger financial~~construction ~~institutions~~loans ~~may~~and becommercial ~~able~~loans to provide athe ~~broader~~largest ~~range~~risk ofto our ~~products~~loan ~~and services~~portfolio. toCommercial ~~their~~real ~~customers~~estate, ~~than~~including usconstruction, and ~~may~~commercial beloans ~~able~~tend to ~~afford~~involve ~~newer~~larger ~~and~~loan ~~more~~balances to ~~sophisticated~~a ~~technology~~single ~~than~~borrower ~~us.~~or ~~Our~~groups ~~long-term~~of ~~success~~related ~~will~~borrowers beand ~~dependent~~are ~~on the~~more ~~ability~~susceptible to a risk of ~~the~~loss ~~Banks~~during toa ~~compete~~downturn ~~successfully~~in ~~with~~the ~~other~~business ~~financial~~cycle. ~~institutions~~These inloans ~~their~~also ~~service~~have ~~areas.~~greater credit risk for the following reasons:

~~Confidential~~§ ~~customer information~~Commercial ~~transmitted~~Real ~~through~~Estate ~~the~~Loans. ~~Banks’~~Repayment ~~online~~is ~~banking~~dependent ~~service~~on isincome ~~vulnerable~~ being generated in amounts sufficient to ~~security~~cover ~~breaches~~operating expenses and ~~computer~~debt ~~viruses~~service. These loans also involve greater risk because they are generally not fully amortizing over a loan period, ~~which~~but ~~could~~rather ~~expose~~have usa toballoon ~~litigation and~~payment ~~adversely~~due ~~affect~~at ~~the~~maturity. ~~Banks~~A borrower’s ~~reputation~~ability ~~and~~to ~~ability~~make a balloon payment typically will depend on being able to ~~generate~~either ~~deposits~~refinance the loan or timely sell the underlying property.

~~The~~§ ~~Banks provide~~Commercial ~~their customers the ability to bank online~~Loans. ~~The~~Repayment ~~secure~~is ~~transmission~~generally ~~of confidential~~dependent ~~information~~upon ~~over~~ the ~~Internet~~successful isoperation ~~a critical element~~ of ~~online banking.~~the ~~The Banks~~borrower’s ~~networks could be vulnerable to unauthorized access, computer viruses, phishing schemes and other security problems~~business. ~~The~~In ~~Banks may be required to spend significant capital and other resources to protect against the threat of security breaches and computer viruses~~addition, ~~or to alleviate problems caused by security breaches or viruses. To~~ the ~~extent~~collateral ~~that~~securing the ~~Banks’ activities~~loans ormay ~~the~~depreciate ~~activities~~over ~~of its customers involve the storage and transmission of confidential information~~time, ~~security~~be ~~breaches~~difficult ~~and viruses could expose the Banks~~ to ~~claims~~appraise, ~~litigation~~illiquid, ~~and other possible liabilities. Any inability to prevent security breaches~~ or ~~computer~~fluctuate ~~viruses~~in ~~could~~value ~~also~~based ~~cause existing~~on ~~customers~~the tosuccess ~~lose~~of ~~confidence in~~ the ~~Banks’ systems and could adversely affect their reputation and their ability to generate deposits~~business.

~~Risks~~§ ~~Related~~Construction ~~to Regulation~~Loans. The risk of loss is largely dependent on our initial estimate of whether the property’s value at completion equals or exceeds the cost of property construction and ~~Legislation~~the availability of permanent financing following completion of construction. During the construction phase, a number of factors can result in delays or cost overruns. If our estimate is inaccurate, which is acutely possible as real estate prices continue to decrease, or if actual construction costs exceed estimates, the value of the property securing our loan may be insufficient to ensure full repayment when completed through a permanent loan or by seizure of collateral.

WeThese ~~have~~risks inherent in ~~adopted~~our ~~Board~~loan ~~Resolutions~~portfolio ~~under~~are ~~which~~exacerbated weby ~~have~~the ~~agreed~~geographic concentration of our loan portfolio. Our interest-earning assets are heavily concentrated in commercial and residential mortgage loans secured by real estate, particularly real estate located in Central Florida. As of December 31, 2012 and 2011, approximately 78% of the Banks’ loans were secured by commercial real estate. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower; however, the value of the collateral may decline during the time the credit is outstanding, and, therefore, the collateral may become insufficient to ~~take~~protect ~~certain~~us ~~actions~~from substantial losses. If we are required to liquidate the collateral securing a loan during a period of reduced real estate values, such as in today’s market, to satisfy the debt, our earnings and capital could be adversely affected.

~~On July~~Additionally, 21as of December 31, ~~2011~~2012, substantially all of our ~~subsidiary~~loans ~~Banks~~secured ~~adopted~~by ~~the~~real ~~Bank~~estate ~~Resolutions~~are ~~requested~~secured by commercial and residential properties located in ~~the~~Citrus, ~~FDIC~~Flagler, Lake, Orange, Seminole, and ~~OFR~~Volusia Counties, Florida. ~~Failure~~The concentration of our loans in this area subjects us to ~~comply~~the ~~with~~risk that a downturn in the ~~terms~~economy ofor recession in that area, such as the ~~Bank~~downturn ~~Resolutions~~the area is currently experiencing, could result in ~~significant~~a ~~enforcement~~decrease ~~actions.~~in ~~Under~~loan ~~the~~originations ~~terms~~and ofincreases ~~the~~in ~~Bank Resolutions~~delinquencies and foreclosures, ~~our~~which ~~subsidiary~~would ~~Banks~~more ~~are~~greatly ~~required~~affect us ~~to,~~than ~~among~~if ~~other~~our ~~things~~lending were more geographically diversified. In addition, ~~(i) submit~~ since a ~~capital~~large ~~plan~~portion toof ~~the~~our ~~supervisory~~portfolio ~~authorities~~is ~~for~~secured ~~increasing~~by ~~and~~properties ~~maintaining~~located ~~certain~~in ~~capital~~Central ~~ratios~~Florida, ~~above~~ the ~~minimums~~occurrence ~~imposed~~of bya ~~the~~natural ~~Bank Resolutions;~~disaster, ~~(ii) develop~~such ~~specific~~as ~~plans~~a ~~and~~hurricane, ~~proposals~~could ~~for~~result ~~the~~in ~~reduction~~a decline in ~~and~~loan ~~improvement~~originations, ofa ~~assets~~decline ~~which~~in ~~are~~the ~~subject~~value toor ~~adverse~~destruction ~~classification~~of mortgaged properties and ~~past~~an increase in the risk of delinquencies, ~~due~~foreclosures or loss on loans; ~~and~~originated ~~(iii) implement~~by ~~plans~~us. We may suffer further losses due to ~~decrease~~the decline in the ~~concentration~~value of the properties ~~commercial~~underlying ~~real~~our ~~estate~~mortgage loans, which would have an adverse impact on our operations.

We ~~timely~~ ~~submitted the requested plans to the regulators for their review. We~~ may ~~supplement~~ ~~these~~incur ~~plans~~losses ~~and~~if reports in the future in response to comments and requests from our regulators. Any material failure to comply with the terms of the Bank Resolutions could result in further enforcement action by the supervisory authorities. Since entering into the Bank Resolutions, we ~~have~~are been actively pursuing the corrective actions. We intend to continue to take the actions necessary to comply with the requirements of the Bank Resolutions and implement the submitted plans successfully, although we may be unable to dosuccessfully ~~so.~~manage Asinterest ofrate ~~December 31, 2011, Orange Bank’s Tier 1 leverage capital ratio and total~~ risk~~-based capital ratio were approximately 6~~.9% and 10.7%, respectively, which were below the minimum levels of 8% and 12.0%, respectively, set forth in the Bank Resolutions. However, Orange Bank received an extension from their regulators to comply with the increased capital ratios required until the date the anticipated charter consolidation of the Banks is completed. On March 21, 2012, the Company withdrew its applications with the FDIC and OFR for the merger of its subsidiary Banks. The Company is reviewing its alternatives for increasing the capital of Orange Bank to meet the Bank Resolutions. On July 21, 2011, the Orange Bank Board resolved that the Bank would maintain a Tier 1 leverage capital ratio of at least 8% and a total risk-based capital ratio of at least 12%. During the pendency of the subsidiary bank merger transaction Orange Bank had received a waiver from the FDIC and OFR to the requirements to meet such capital requirements. As of December 31, 2011, Orange Bank’s Tier 1 leverage capital ratio and total risk-based capital ratio were approximately 6.9% and 10.7%, respectively.

~~Minimum~~Our profitability depends ~~capital~~to ~~adequacy~~a ~~requirements~~large ~~restrain~~extent ~~asset~~on ~~growth~~the byBanks’ ~~requiring~~net ~~that~~interest ~~asset~~income, which is the difference between income on interest-earning assets such ~~growth~~as beloans ~~funded~~and byinvestment asecurities, ~~commensurate~~and ~~amount~~expense ofon ~~additional~~interest-bearing ~~capital~~liabilities such as deposits and borrowings. We ~~may~~are beunable ~~required~~ to ~~reduce~~predict ~~assets~~changes orin ~~limit~~market ~~asset~~interest ~~growth~~rates, towhich ~~manage~~are affected by many factors beyond our ~~regulatory~~control, including inflation, recession, ~~capital~~unemployment, ~~position.~~money ~~Restraining~~supply, ~~asset~~domestic ~~growth~~and ~~could~~international ~~reduce~~events ~~our~~and ~~profitability~~changes in the United States and other financial markets. Our ~~result~~net ininterest income may be reduced if: (i) more interest-earning assets than interest-bearing liabilities reprice or mature during a ~~material~~time ~~adverse~~when ~~impact~~interest onrates ~~our~~are ~~business,~~declining ~~financial~~or ~~condition,~~(ii) more interest-bearing liabilities than interest-earning assets reprice or mature ~~results~~during ofa ~~operations,~~time ~~and~~when ~~cash~~interest ~~flows~~rates are rising.

~~On October~~ 20, 2011, our board of directors agreed to adopt the FRB Resolutions in consultation with the Federal Reserve. The FRB Resolutions require the Company to take actions. These actions require, among other things, that the Company seek approval from the FRB prior to incurring any debt, declaring or paying any dividends, reducing its capital position (e.g., through the purchase of treasury shares), or making distributions on subordinated debentures or trust preferred securities. The FRB Resolutions approved by the Company and the restrictions imposed thereby will remain in effect until terminated by the Federal Reserve. We intend to take the actions necessary to comply with the requirements of the FRB Resolutions.

22Changes in the difference between short- and long-term interest rates may also harm our business. For example, short-term deposits may be used to fund longer-term loans. When differences between short-term and long-term interest rates shrink or disappear, as is likely in the current zero interest rate policy environment, the spread between rates paid on deposits and received on loans could narrow significantly, decreasing our net interest income.

~~Our regulatory~~If ~~capital~~market ~~levels~~interest ~~have~~rates rise ~~declined~~rapidly, ~~and~~interest ~~may~~rate ~~continue~~adjustment tocaps domay ~~so,~~limit ~~which~~increases ~~may have~~in athe ~~material~~interest ~~adverse~~rates ~~effect~~ on ~~our~~adjustable ~~operations~~rate loans, ~~including~~thereby ~~additional action~~reducing ~~from~~ our ~~regulators~~net interest income.

AtSince ~~December 31,~~we ~~2011,~~engage ~~our~~in ~~consolidated~~lending ~~Tier~~secured Iby ~~leverage capital ratio was 8.1%, our~~real ~~consolidated~~estate ~~total risk-based capital ratio was 12.1%~~ and ~~our~~may ~~consolidated~~be ~~Tier I~~forced ~~risk-based~~to ~~capital~~foreclose ~~ratio~~on ~~was 10.9%. While we remained well capitalized at December 31, 2011, these ratios have declined significantly over~~ the ~~past~~collateral ~~two years~~property ~~because~~and ofown the ~~Banks’~~underlying ~~significant~~real ~~losses.~~estate, If we ~~continue~~may ~~to experience losses as we have over the past two years, our capital levels will fall below the levels required to~~ be ~~well~~subject ~~capitalized. Lower capital ratios will impair our ability~~ to ~~compete for loans and deposits, due to regulatory restrictions and public perception. As a result of our lowering capital ratios, our banking regulators requested that our subsidiary Banks adopt~~ the ~~Bank Resolutions which, among other things, require Orange Bank to achieve and maintain~~ increased ~~capital~~costs ~~ratios~~associated ~~by March 19, 2012. Floridian Bank already meets increased minimum capital levels. These increased levels exceed the minimum levels otherwise necessary to be deemed well capitalized. Failure to comply~~ with the ~~terms~~ ofownership ~~the Resolutions could result in significant enforcement actions against us~~ of ~~increasing~~real ~~severity~~property, which could ~~have~~result anin ~~adverse~~reduced ~~impact~~net ~~on our business, financial condition, results of operations, and cash flows, as well as the value of our common stock~~income.

~~Recently~~Since ~~enacted~~we ~~legislation,~~originate ~~particularly~~loans ~~the~~secured ~~Dodd-Frank~~by ~~Act~~real estate, ~~could~~we ~~materially~~may ~~and~~have ~~adversely~~to ~~affect~~foreclose uson bythe ~~increasing compliance~~collateral ~~costs,~~property ~~heightening~~to protect our ~~risk~~investment ofand ~~noncompliance~~may ~~with~~thereafter ~~applicable~~own and ~~regulations~~operate such property, ~~and~~in ~~changing~~which case we are exposed to the ~~competitive~~risks ~~landscape~~inherent in the ~~banking~~ownership ~~industry~~of real estate.

~~From~~The ~~time to~~amount ~~time,~~that ~~the U.S. Congress and state legislatures consider changing laws and enact new laws to further regulate the financial services industry. On July 21~~we, ~~2010,~~ ~~President~~as ~~Obama signed the Dodd-Frank Wall Street Reform and Consumer~~a ~~Protection Act of 2010~~mortgagee, ormay ~~the~~realize ~~Dodd-Frank~~after ~~Act,~~a ~~into~~default ~~law.~~is ~~The~~dependent ~~Dodd-Frank~~upon ~~Act~~factors ~~has resulted~~outside ~~in sweeping changes in the regulation~~ of ~~financial~~our ~~institutions. As discussed in the section entitled “Business-Regulatory Considerations” in this Annual Report on Form 10-K~~control, ~~the Dodd-Frank Act contains numerous provisions that affect all banks and bank holding companies. The Dodd-Frank Act includes provisions that~~including, ~~among~~but ~~other~~not ~~things~~limited to:

•§ ~~change~~General ~~the~~or ~~assessment~~local ~~base~~economic for federal deposit insurance from the amount of insured deposits to total consolidated assets less average tangible capital, eliminate the ceiling on the size of the federal deposit insurance fund, and increase the floor of the size of the federal deposit insurance fundconditions; • repeal the federal prohibitions on the payment of interest on demand deposits, thereby generally permitting the payment of interest on all deposit accounts; • centralize responsibility for promulgating regulations under and enforcing federal consumer financial protection laws in a new bureau of consumer financial protection; • require the FDIC to seek to make its capital requirements for banks countercyclical; • implement corporate governance revisions, including with regard to executive compensation and proxy access by shareholders, that apply to all public companies, not just financial institutions; • establish new rules and restrictions regarding the origination of mortgages; and • permit the Federal Reserve to prescribe regulations regarding interchange transaction fees, and limit them to an amount reasonable and proportional to the cost incurred by the issuer for the transaction in question.

~~Many~~§ ~~of these~~Environmental ~~and~~cleanup other provisions in the Dodd-Frank Act remain subject to regulatory rule-making and implementation, the effects of which are not yet known. Although we cannot predict the specific impact and long-term effects that the Dodd-Frank Act and the regulations promulgated thereunder will have on us and our prospects, our target markets and the financial industry more generally, we believe that the Dodd-Frank Act and the regulations promulgated thereunder are likely to impose additional administrative and regulatory burdens that will obligate us to incur additional expenses and will adversely affect our margins and profitability. We will also have a heightened risk of noncompliance with the additional regulations. Finally, the impact of some of these new regulations is not known and may affect our ability to compete long-term with larger competitors.liability;

23§ Neighborhood values;

~~The~~§ ~~Federal~~Interest ~~Reserve’s repeal of the prohibition against payment of interest on demand deposits (Regulation Q) may increase competition for such deposits and ultimately increase interest expense.~~rates;

A§ ~~major portion~~Real ofestate ~~our~~tax ~~net income comes from our interest rate spread, which is the difference between the interest~~ rates paid by us on amounts used to fund assets and the interest rates and fees we receive on our interest-earning assets. Our interest-earning assets include outstanding loans extended to our customers and securities held in our investment portfolio. We fund assets using deposits and other borrowings. Our goal has been to maintain noninterest bearing deposits above 15% of total deposits. We currently maintain approximately 21% of deposits as noninterest bearing. ;

On§ ~~July~~Operating ~~14,~~expenses ~~2011, the Federal Reserve issued final rules to repeal Regulation Q, which had prohibited the payment~~ of ~~interest~~ ~~on demand deposits by institutions that are member banks of~~ the ~~Federal~~ ~~Reserve~~mortgaged System. The final rules implement Section 627 of the Dodd-Frank Act, which repealed Section 19(i) of the Federal Reserve Act in its entirety effective July 21, 2011. As a result, banks and thrifts are now permitted to offer interest-bearing demand deposit accounts to commercial customers, which were previously forbidden under Regulation Q. The repeal of Regulation Q may cause increased competition from other financial institutions for these deposits and could result in a reduction in our deposits or an increase in our interest expense.properties;

~~Our~~§ ~~future~~Supply ~~FDIC deposit~~of ~~insurance~~and ~~premiums~~demand ~~and~~for ~~assessment~~rental ~~are~~units ~~uncertain.~~or properties;

~~Recent insured~~§ ~~depository~~Our ~~institution~~ability failures, as well as deterioration in banking and economic conditions, have significantly increased the loss provisions of the FDIC, resulting in a decline in the designated reserve ratio of the Deposit Insurance Fund to ~~historical~~obtain ~~lows. The FDIC in December 2010 increased the designated reserve ratio from 1.25 to 2.00~~ and ~~in December 2011 voted to~~ maintain ~~the~~adequate ~~same~~occupancy ~~ratio~~of ~~for 2012. In addition,~~ the deposit insurance limit on FDIC deposit insurance coverage generally has increased to $250,000, which may result in even larger losses to the Deposit Insurance Fund. These developments have caused an increase to our assessments, and the FDIC may be required to make additional increases to the assessment rates and levy additional special assessments on us. Higher assessments increase our noninterest expense.properties;

~~Beginning in~~§ ~~2009,~~Zoning our assessment rates, which also included our assessment for participating in the FDIC’s Transaction Account Guarantee Program, increased from 9.9 to 17.0 basis points. Additionally, on May 22, 2009, the FDIC announced a final rule imposing a special 5.00 basis points emergency assessment as of June 30, 2009, payable September 30, 2009, based on assets minus Tier I Capital at June 30, 2009, but the amount of the assessment was capped at 10.00 basis points of domestic deposits. Finally, on November 12, 2009, the FDIC adopted a new rule requiring insured institutions to prepay on December 30, 2009, estimated quarterly risk-based assessments for the fourth quarter of 2009 and for all of 2010, 2011, and 2012. We prepaid an assessment of $2.8 million, which incorporated a uniform 3.00 basis point increase effective January 1, 2011. With implementation of DIP in April 2011, which became effective with payments due September 30, 2011, and the elimination of TAGP, the Banks saw a decrease in FDIC premiums resulting in a reduction of our accrued premiums assessed in 2009. Our assessment rate at the end of December 2011 was 14.0 and 14.55 basis points for Floridian and Orange Banks, respectively.laws;

~~These current~~§ ~~lower~~Governmental ~~FDIC assessment rates have had a positive impact on our results of operations. Our FDIC insurance related cost was $603 thousand and $787 thousand for the years ended December 31~~rules, ~~2011~~regulations and ~~December~~fiscal ~~31,~~policies; 2010, respectively, compared to $951 thousand for the year ended December 31, 2009. We are unable to predict the impact in future periods, including whether an additional special assessments will occur.and

~~Higher insurance~~§ ~~premiums~~Acts and assessments increase our costs and may limit our ability to pursue certain business opportunities. We also may be required to pay higher FDIC premiums than current levels, because financial institution failures resulting from the depressed market conditions have depleted and may continue to deplete the deposit insurance fund and reduce its ratio of ~~reserves to insured deposits~~God.

WeCertain ~~are~~expenditures ~~subject to~~associated ~~extensive~~with ~~governmental~~the ~~regulation~~ownership of real estate, principally real estate taxes and maintenance costs, may adversely affect the income from the real estate. Therefore, the cost of operating real property may exceed the rental income earned from such property, and we may have to advance funds in order to protect our investment or we may be required to dispose of the real property at a loss.

WeLiquidity ~~are subject~~risk tocould ~~extensive~~impair ~~governmental~~our regulation. The Company, as a bank holding company, is regulated primarily by the Federal Reserve. The Banks are commercial banks chartered by the State of Florida and regulated by the Federal Deposit Insurance Corporation, and the Florida Office of Financial Regulation. These federal and state bank regulators have the ability, ~~should the situation require,~~ to ~~place significant regulatory and operational restrictions upon us.~~ ~~The~~fund ~~Banks’~~operations ~~activities are also regulated under consumer protection laws applicable to our lending, deposit~~ and ~~other~~jeopardize ~~activities. In addition, the Dodd-Frank Act imposes significant additional regulation on~~ our ~~operations.~~financial condition.

24Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, and other sources, could have a substantial negative effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities on terms that are acceptable to us could be impaired by factors that affect us specifically or the financial services industry or economy in general. Factors that could negatively impact our access to liquidity sources include a decrease in the level of our business activity as a result of an economic downturn in the markets in which our loans are concentrated, adverse regulatory action against us, or our inability to attract and retain deposits. Our ability to borrow could be impaired by factors that are not specific to us or our region, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry in light of recent turmoil faced by banking organizations and the unstable credit markets.

~~Banking regulations~~The ~~are primarily intended to protect depositors, deposit insurance funds, and the~~ banking ~~system~~industry asis avery ~~whole, and not shareholders and creditors~~competitive. ~~A sufficient claim against us under these laws could have a material adverse effect on our results. Please refer to the section entitled “Regulatory Considerations” in this Form 10-K.~~

~~Florida~~The banking industry is highly competitive and the Banks compete directly with financial institutions, ~~such~~that asare ~~the~~more ~~Banks,~~established ~~face~~and ahave ~~higher~~significantly ~~risk~~greater resources and lending limits. As a result of ~~noncompliance~~those greater resources, the larger financial institutions may be able to provide a broader range of products and ~~enforcement~~services ~~action~~to ~~with~~their ~~the~~customers ~~Bank~~than ~~Secrecy~~us ~~Act~~and may be able to afford newer and ~~other~~more ~~anti~~sophisticated technology than us. Our long-~~money~~term success will be dependent on the ability of the Banks to compete successfully with other financial institutions ~~laundering~~in ~~statutes~~their ~~and~~service ~~regulations~~areas.

Since September 11, 2001, banking regulators have intensified their focus on anti-money laundering and Bank Secrecy Act compliance requirements, particularly the anti-money laundering provisions of the USA PATRIOT Act. There is also increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control (“OFAC”). Since 2004, federal banking regulators and examiners have been extremely aggressive in their supervision and examination of financial institutions located in the State of Florida with respect to the institution’s Bank Secrecy Act/Anti-Money Laundering compliance. Consequently, numerous formal enforcement actions have been issued against financial institutions.21

InConfidential ~~order~~customer ~~to comply~~information ~~with regulations, guidelines and examination procedures in this area,~~transmitted ~~the~~through ~~Banks have been required to adopt new policies and procedures and to install new systems. If~~ the Banks’ ~~policies,~~online ~~procedures~~banking ~~and~~service ~~systems~~is ~~are~~vulnerable ~~deemed deficient~~to orsecurity ~~the~~breaches ~~policies, procedures~~ and ~~systems~~computer ~~of the financial institutions that we have already acquired or may acquire in the future are deficient~~viruses, ~~the Banks~~which ~~would~~could beexpose ~~subject to liability, including fines and regulatory actions~~us ~~such as restrictions on their ability~~ to ~~pay~~litigation ~~dividends~~ and ~~the~~adversely ~~necessity~~affect ~~to obtain regulatory approvals to proceed with certain aspects of their business plan, including their acquisition plans. In addition, because~~ the Banks’ ~~operate in~~reputation ~~Florida, we expect that the Banks will face a higher risk of noncompliance~~ and ~~enforcement~~ability ~~action~~to ~~with~~generate ~~the Bank Secrecy Act and other anti-money laundering statutes and regulations~~deposits.

~~Risks~~The ~~Related~~Banks provide their customers the ability to bank online. The secure transmission of confidential information over the Internet is a critical element ~~Market~~of ~~Events~~online banking. The Banks’ networks could be vulnerable to unauthorized access, computer viruses, phishing schemes and other security problems. The Banks may be required to spend significant capital and other resources to protect against the threat of security breaches and computer viruses, or to alleviate problems caused by security breaches or viruses. To the extent that the Banks’ activities or the activities of its customers involve the storage and transmission of confidential information, security breaches and viruses could expose the Banks to claims, litigation and other possible liabilities. Any inability to prevent security breaches or computer viruses could also cause existing customers to lose confidence in the Banks’ systems and could adversely affect their reputation and their ability to generate deposits.

~~Our~~Risks ~~loan~~Related ~~portfolio is heavily concentrated in~~to ~~mortgage~~Regulation ~~loans~~and ~~secured by properties in Central Florida which heightens our risk of loss than if we had a more geographically diversified portfolio.~~Legislation

~~Our interest-earning~~We ~~assets~~have ~~are~~adopted ~~heavily~~Board ~~concentrated~~Resolutions ~~in mortgage loans secured by properties located in Central Florida. As of December 31, 2011, a significant portion of our loans secured by real estate are secured by commercial~~ and ~~residential~~ ~~properties, including properties under construction, located in Citrus, Flagler, Lake,~~ Orange~~, Seminole, and Volusia Counties, Florida. The~~ ~~concentration~~Bank ofhas ~~our~~entered ~~loans~~into ~~in this region subjects us to risk that~~ a ~~downturn in~~Memorandum ~~the area economy, such as the one the area is currently experiencing, could result in a decrease in loan originations and an increase in delinquencies and foreclosures. As a result~~ of ~~this~~Understanding ~~concentration,~~under which we may face greater risk than if our lending were more geographically diversified. In addition, since a large portion of our portfolio is secured by properties located in Central Florida, the occurrence of a natural disaster, such as a hurricane, could result in a decline in loan originations, a decline in the value or destruction of mortgaged properties, and anOrange ~~increase~~Bank inhave ~~the~~agreed ~~risk of delinquencies, foreclosures or loss on loans originated by us. We may suffer further losses due~~ to ~~the~~take ~~decline~~certain ~~in the value of the properties underlying our mortgage loans, which would have an adverse impact on our operations~~actions.

~~Our~~On ~~concentration~~July 21, 2011, the board of directors of both Floridian and Orange Bank agreed to approve the board resolutions in ~~loans~~consultation ~~secured~~with their banking regulators. On July 19, 2012, the board of directors of Orange Bank agreed to adopt a MOU issued by ~~real~~its banking regulator. From ~~estate~~a ~~may~~regulatory ~~increase~~perspective, ~~our~~a ~~credit~~MOU ~~losses~~is a nonpublic agreement; however, ~~which~~in the interest of full disclosure, we are summarizing the main obligations of Orange Bank’s MOU. The FDIC issues an MOU when it believes a board resolution would ~~negatively~~not ~~affect~~adequately ~~our~~address ~~financial~~its ~~results~~concerns. On September 11, 2012, the regulatory board resolution for Floridian Bank was terminated.

~~Due~~For toOrange ~~the~~Bank, its ~~relatively~~MOU ~~close~~includes, ~~proximity~~among ofother ~~our~~things, ~~geographic~~(i) ~~markets,~~seeking weapproval ~~have~~from ~~both~~the ~~geographic~~FDIC and OFR prior to appointing new directors and executive officers; ~~concentrations~~(ii) asenhancing ~~well~~the asboard ~~concentrations~~of director’s participation in the ~~types~~affairs of ~~loans~~Orange ~~funded. Specifically,~~Bank; ~~due~~(iii) developing plans to ~~the~~reduce ~~nature~~and improve ofcertain ~~our~~loan ~~markets,~~relationships awith ~~significant~~adverse ~~portion~~classification; of(iv) ~~the~~charging off remaining assets classified as “Loss”; ~~portfolio~~(v) ~~has~~prohibiting ~~historically~~extensions ~~been~~of ~~secured~~credit ~~with~~to ~~real~~certain ~~estate.~~high-risk Asborrowers; (vi) submitting of ~~December~~a ~~31,~~new business plan and annual budgets ~~2011,~~and ~~approximately~~earnings ~~78%~~forecasts; (vii) achieving and 3%maintaining, ofby ~~our~~September ~~$311.8~~30, ~~million~~2012, ~~loan~~a ~~portfolio~~Tier ~~was~~1 ~~secured~~leverage capital ratio and total risk-based bycapital ~~commercial~~ratio ~~real~~of ~~estate~~at least 8% and ~~residential~~12%, ~~real~~respectively; ~~estate~~and (~~including~~viii) ~~home~~providing ~~equity~~quarterly reports to the FDIC and OFR regarding the steps ~~loans),~~taken ~~respectively~~to address the foregoing. Orange Bank must also receive approval from the FDIC and OFR prior to declaring or paying dividends.

The ~~current downturn~~MOU inadopted ~~the~~by Orange ~~real~~Bank ~~estate~~and ~~market,~~ the ~~deterioration~~restrictions inimposed ~~the~~thereby ~~value~~on ~~of collateral,~~Orange ~~and~~Bank ~~the~~will ~~local~~remain ~~and~~in ~~national~~effect ~~economic~~unless ~~recessions,~~modified ~~have~~or ~~adversely affected~~terminated ~~our~~by ~~clients~~the Bank’s regulators. ~~ability~~Since toentering ~~repay~~into ~~their~~the ~~loans.~~board Ifresolution ~~these~~and ~~conditions persist~~MOU, orwe ~~get~~have ~~worse,~~been ~~our~~actively ~~clients’~~pursuing ~~ability~~the tocorrective ~~repay~~actions. ~~their~~We ~~loans will be~~intend ~~further~~to ~~eroded.~~continue Into take the ~~event~~actions wenecessary ~~are required~~ to ~~foreclose~~comply onwith athe ~~property securing~~requirements ~~one~~ of ~~our~~the ~~mortgage~~MOU ~~loans~~and orimplement ~~otherwise~~the ~~pursue~~submitted ~~our~~plan ~~remedies in order to~~successfully, ~~protect~~although ~~our investment,~~ we may be unable to ~~recover~~do funds in an amount equal to our projected return on our investment or in an amount sufficient to prevent a loss to us due to prevailing economic conditions, real estate values and other factors associated with the ownership of real propertyso. As ~~a result, the market value~~ of ~~the~~December ~~real~~31, ~~estate or other collateral underlying our loans may not~~2012, ~~at any~~Orange ~~given~~Bank’s ~~time,~~Tier be1 ~~sufficient~~leverage tocapital ~~satisfy~~ratio ~~the~~and ~~outstanding~~total ~~principal~~risk-based capital ~~amount~~ratio ~~of the~~were ~~loans,~~approximately 9.1% and ~~consequently~~13.6%, werespectively; ~~would~~meeting ~~sustain~~all ~~loan~~regulatory ~~losses~~requirements.

25On October 20, 2011, the Company’s board of directors agreed to adopt the FRB Resolutions which require, among other things, that the Company seek approval from the FRB prior to incurring any debt, declaring or paying any dividends, reducing its capital position (e.g., through the purchase of treasury shares), or making distributions on subordinated debentures or trust preferred securities. The FRB Resolution approved by the Company and the restrictions imposed thereby on the Company will remain in effect until terminated by the FRB. We intend to take the actions necessary to comply with the requirements of the FRB Resolution.

AsMinimum capital adequacy ~~discussed~~requirements ~~above,~~restrain inasset ~~July~~growth ~~2011,~~by ~~the~~requiring ~~Boards~~that ofasset ~~Directors~~growth ofbe ~~the~~funded ~~Banks~~by ~~agreed~~a ~~to approve~~commensurate ~~certain~~amount ~~Bank~~of ~~Resolutions~~additional capital. InWe may ~~October~~be ~~2011,~~required ~~the~~to ~~Board~~reduce ofassets ~~Directors~~or ~~of the~~limit ~~Company~~asset ~~agreed~~growth to ~~approve~~manage ~~certain~~our ~~FRB~~regulatory ~~Resolutions~~capital position. ~~The~~Restraining ~~Bank~~asset ~~Resolutions~~growth ~~and~~could ~~the~~reduce ~~FRB Resolutions place significant restrictions on~~ our ~~operations,~~profitability ~~including minimum~~and ~~capital~~result ~~ratios~~in ~~for~~a ~~the~~material ~~Banks,~~adverse ~~restrictions~~impact on ~~the~~our ~~payment~~business, offinancial ~~dividends~~condition, ~~prohibitions~~ onresults ~~redeeming shares~~ of ~~stock~~operations, and ~~restrictions on making payments~~ ~~that~~cash ~~would cause capital to decrease~~flows. ~~See “Item 1. Business - Regulatory Matter” for a further discussion of these important restrictions.~~

~~Future~~Failure ~~economic~~to ~~growth~~maintain our regulatory capital levels could result in ~~our~~a ~~Florida~~material ~~market area~~adverse iseffect ~~likely~~on toour beoperations, ~~slower~~including ~~compared~~additional toaction ~~previous~~from ~~years~~our regulators.

~~The~~At ~~State~~December 31, 2012, ofour ~~Florida’s~~consolidated ~~population~~Tier ~~growth~~I ~~has~~leverage ~~historically~~capital ~~exceeded~~ratio ~~national~~was ~~averages~~10. ~~Consequently~~0%, ~~the~~our ~~state~~consolidated ~~has~~total ~~experienced~~risk-based ~~substantial~~capital ~~growth~~ratio inwas ~~population,~~14.7% ~~new~~and our ~~business~~consolidated ~~formation~~Tier ~~and~~I ~~public~~risk-based ~~works~~capital ~~spending.~~ratio ~~Due~~was to13.5%. ~~the~~Lower ~~moderation~~capital ofratios ~~economic growth~~in ~~and~~prior ~~migration~~years ~~into~~resulted in our ~~market~~banking regulators ~~area~~requiring ~~and~~that ~~the~~Orange ~~downturn~~Bank inadopt the ~~real~~MOU ~~estate market~~which, ~~management~~among ~~believes~~other ~~that~~things, ~~growth~~required inOrange ~~our~~Bank ~~market~~to ~~area~~achieve ~~will~~and bemaintain increased ~~restrained~~capital ratios. Orange Bank currently meets these heightened regulatory capital requirements. These increased inlevels exceed the ~~near~~minimum ~~term.~~levels ~~The~~otherwise ~~restrained~~necessary ~~growth~~to ~~limits~~be ~~the~~deemed ~~growth~~well ofcapitalized. ~~existing businesses~~Failure ~~and~~to ~~reduces~~comply with the ~~formation~~terms of ~~new~~the MOU ~~businesses~~could result in ~~our~~significant ~~markets.~~enforcement ~~These limits~~actions ~~and~~against ~~reductions~~us ~~decrease~~of ~~lending~~increasing ~~opportunities~~severity, ~~and~~which ~~negatively~~could ~~affect~~have ~~our~~an adverse impact on ~~income.~~our ~~Commercial~~business, ~~real~~financial ~~estate~~condition, ~~valuations~~results ~~may~~of ~~also~~operations, beand ~~negatively~~cash ~~affected~~flows, as ~~business~~ ~~failures~~well ~~continue~~as ~~and~~the ~~new~~value ~~business~~of ~~formation~~our ~~remains~~common ~~weak~~stock.

~~The soundness of other financial institutions could adversely affect us.~~22

~~Our~~Recently ~~ability to~~enacted engage in routine funding and other transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial institutions are interrelated as a result of tradinglegislation, ~~clearing,~~particularly ~~counterparty, lending, or other relationships. As a result, defaults by, or even rumors or questions about, one or more financial institutions, or~~ the ~~financial~~ ~~services industry generally, have led to market~~Dodd-~~wide~~Frank ~~liquidity problems~~Act, ~~losses~~could ofmaterially ~~depositor, creditor or counterparty confidence,~~ and ~~could lead~~adversely toaffect ~~losses or defaults by~~ us or by ~~other~~increasing ~~institutions.~~compliance Wecosts, ~~could~~heightening ~~experience increases~~our inrisk ~~deposits and assets as a result~~ of ~~other~~noncompliance with ~~banks’~~applicable ~~difficulties or failures~~regulations, ~~which~~and ~~would~~changing ~~increase~~ the ~~capital~~competitive welandscape ~~need~~in tothe ~~support~~banking ~~such growth~~industry.

From time to time, the U.S. Congress and state legislatures consider changing laws and enact new laws to further regulate the financial services industry. On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, into law. The ~~fair~~Dodd-Frank ~~value~~Act has resulted in sweeping changes in the regulation of ~~our~~financial institutions. As discussed in ~~investments~~the ~~could~~section ~~decline~~entitled “Business-Regulatory Considerations” in this Annual Report on Form 10-K, the Dodd-Frank Act contains numerous provisions that affect all banks and bank holding companies. The Dodd-Frank Act includes provisions that, among other things:

~~Our investment~~§ ~~securities~~change ~~portfolio~~the asassessment ofbase ~~December~~for ~~31,~~federal ~~2011~~deposit ~~has~~insurance ~~been~~from ~~primarily designated~~the asamount ~~available-for-sale~~of ~~pursuant~~insured todeposits ~~U.S. GAAP relating~~ to ~~accounting for~~total ~~investments.~~consolidated ~~Such~~assets ~~principles~~less ~~require~~average ~~that~~tangible ~~unrealized~~capital, ~~gains~~eliminate ~~and~~the ~~losses~~ceiling in on the ~~estimated~~size ~~value~~ of the ~~available-for-sale~~federal ~~portfolio~~deposit beinsurance ~~“marked~~fund, ~~to market”~~ and ~~reflected~~increase asthe afloor ~~separate item in shareholders’ equity (net~~ of ~~tax)~~the ~~as accumulated~~size ~~other comprehensive income. At December 31, 2011, we maintained $73.1 million or 98.6%~~ of ~~our~~the ~~total~~federal ~~securities~~deposit asinsurance ~~available for sale.~~ fund;

~~Shareholders’ equity~~§ ~~will~~repeal ~~continue to reflect~~ the ~~unrealized~~federal ~~gains~~prohibitions ~~and~~on ~~losses~~the ~~(net~~payment of ~~tax)~~interest ~~of these~~on ~~investments.~~demand ~~The~~deposits, ~~fair~~thereby ~~value~~generally ofpermitting ~~our~~the ~~investment~~payment ~~portfolio~~of ~~may~~interest ~~decline, causing~~on aall ~~corresponding~~deposit ~~decline in shareholders’ equity.~~ accounts;

~~Management believes~~§ ~~that~~centralize ~~several~~responsibility ~~factors~~for ~~will~~promulgating ~~affect~~regulations ~~the~~under ~~fair~~and ~~values~~enforcing offederal ~~our~~consumer ~~investment portfolio.~~financial ~~These~~protection ~~include,~~laws ~~but are not limited to, changes~~ in interest rates or expectations of changes, the degree of volatility in the securities markets, inflation rates or expectations of inflation, and the slope of the interest rate yield curve (the yield curve refers to the differences between shorter-term and longer-term interest rates; a ~~positively~~new ~~sloped~~bureau ~~yield curve means shorter-term rates are lower than longer-term rates). These and other factors may impact specific categories~~ of ~~the~~consumer ~~portfolio~~financial ~~differently, and we cannot predict the effect these factors may have on any specific category.~~protection;

~~Risks~~§ ~~Related~~require the FDIC to ~~an Investment~~seek into ~~our~~make ~~Common~~its ~~Stock~~capital requirements for banks counter cyclical;

~~There~~§ isimplement ~~no established~~corporate ~~trading~~governance ~~market~~revisions, ~~for~~including ~~our~~with ~~common~~regard ~~stock~~to executive compensation and ~~you~~proxy ~~may~~access ~~not~~by beshareholders, ~~able~~that apply to ~~resell~~ ~~your~~all ~~shares.~~public companies, not just financial institutions;

~~The~~§ ~~shares of~~establish ~~our~~new ~~common~~rules ~~stock are not currently traded on any securities exchange~~ and ~~do not~~restrictions ~~have~~regarding ~~an established trading market. We currently have no plans to apply to list our common stock on any exchange and we do not expect our common stock to be quoted on an over-~~the~~-counter~~ ~~quotation~~origination ~~system~~of ~~such~~mortgages; ~~as the Pink Sheets.~~ and

~~Our~~§ ~~Articles~~permit ~~of Incorporation,~~the ~~Bylaws~~Federal Reserve to prescribe regulations regarding interchange transaction fees, and ~~certain~~limit ~~laws~~them to an amount reasonable and ~~regulations~~proportional ~~may~~to ~~prevent~~the orcost ~~delay transactions~~incurred ~~you~~by ~~might~~the ~~favor,~~issuer ~~including~~for ~~our~~the ~~sale~~transaction orin ~~merger~~question.

WeMany ~~are~~of these and ~~registered~~other ~~with~~provisions in the ~~Federal~~Dodd-Frank ~~Reserve~~Act asremain asubject ~~bank~~to ~~holding~~regulatory ~~company~~rule-making ~~under~~and implementation, the ~~BHCA.~~effects of which are not Asyet aknown. ~~result,~~Although we ~~are~~cannot ~~subject~~predict tothe ~~supervisory~~specific ~~regulation~~impact and ~~examination~~long-term byeffects that the Dodd-Frank Act and the regulations promulgated ~~Federal~~thereunder ~~Reserve.~~will ~~The~~have ~~BHCA~~on us and ~~other~~our ~~federal~~prospects, ~~laws~~our ~~subject~~target ~~bank~~markets ~~holding~~and ~~companies to~~the ~~particular~~financial ~~restrictions~~industry onmore generally, we believe that the Dodd-Frank ~~types~~Act ofand ~~activities~~the inregulations ~~which~~promulgated ~~they~~thereunder ~~may~~are ~~engage,~~ likely to impose additional administrative and regulatory burdens that will obligate us to aincur ~~range~~additional ofexpenses ~~supervisory~~and ~~requirements~~will adversely affect our margins and ~~activities,~~profitability. ~~including~~We ~~regulatory~~will also have a ~~enforcement~~heightened ~~actions~~risk ~~for~~of ~~violations~~noncompliance with the additional regulations. Finally, the impact of ~~laws~~some ~~and~~of these new regulations is not known and may affect our ability to compete long-term with larger competitors.

26The expiration of unlimited FDIC insurance on certain noninterest-bearing transaction accounts may increase our interest expense and reduce our liquidity.

~~Provisions of~~On ~~our~~December ~~Articles of Incorporation~~31, ~~Bylaws~~2012, unlimited ~~certain~~FDIC ~~laws~~insurance ~~and~~on ~~regulations~~certain ~~and various~~noninterest-bearing ~~other~~transaction ~~factors~~accounts ~~may~~under ~~make~~the itTransaction ~~more~~Account ~~difficult~~Guarantee ~~and~~program ~~expensive~~expired. Under ~~for~~this ~~companies~~program, ~~or persons~~prior to ~~acquire~~its ~~control~~expiration, ofall usfunds ~~without~~in ~~the~~a ~~consent~~noninterest-bearing oftransaction ~~our~~account ~~Board~~were ofinsured ~~Directors. It~~in isfull ~~possible,~~by ~~however,~~the FDIC ~~that~~from ~~you~~December ~~would~~31, ~~want~~2010, athrough ~~takeover~~December ~~attempt to succeed because~~31, ~~for~~2012. ~~example,~~This atemporary ~~potential~~unlimited ~~buyer~~coverage ~~could~~was ~~offer~~in aaddition ~~premium~~to, ~~over~~and ~~the~~separate ~~then~~from, ~~prevailing~~the ~~price~~coverage of ~~our~~at ~~common~~least ~~stock~~$250,000 ~~and~~available ~~could~~to ~~provide~~depositors ~~you~~under ~~with~~the anFDIC's ~~opportunity to~~general ~~liquidate~~deposit ~~your~~insurance ~~investment~~rules.

~~For example,~~The ~~our~~reduction ~~Articles~~in FDIC ofinsurance ~~Incorporation~~on ~~permit~~these ~~our~~noninterest-bearing ~~Board~~transaction ofaccounts ~~Directors~~ to ~~issue preferred~~the ~~stock~~standard ~~without~~$250,000 ~~shareholder~~maximum ~~action.~~may ~~The~~cause ~~ability~~depositors to ~~issue preferred~~move ~~stock~~funds ~~could~~previously ~~discourage~~held ain ~~company~~such ~~from~~noninterest-bearing ~~attempting~~accounts to ~~obtain~~interest-bearing ~~control~~accounts, ofwhich uscould ~~by means~~increase our costs of afunds and ~~tender~~negatively ~~offer,~~impact ~~merger,~~our ~~proxy~~results ~~contest~~of operations, or ~~otherwise.~~may Wecause ~~are~~depositors ~~also subject~~ to ~~certain~~withdraw ~~provisions~~their ofdeposits ~~the~~and ~~Florida~~invest ~~Business~~funds ~~Corporation~~in ~~Act~~investments perceived ~~and~~as ~~our Articles~~being ofmore ~~Incorporation~~secure, ~~that~~such ~~relate~~as tosecurities ~~business~~issued ~~combinations~~by ~~with~~the ~~interested shareholders~~United States Treasury. ~~Other~~This ~~provisions~~could inreduce our ~~Articles~~liquidity, ofor ~~Incorporation~~require us orto ~~Bylaws~~pay ~~that may~~higher ~~discourage~~interest ~~takeover~~rates ~~attempts~~to orretain ~~make~~deposits ~~them~~and ~~more~~maintain ~~difficult~~our ~~include:~~liquidity and could adversely affect our earnings.

•Our ~~Classified~~future ~~Board~~FDIC ofdeposit ~~Directors;~~insurance ~~• Requirement that only directors may fill a Board vacancy; • Requirement that a Special Meeting may be called only by a majority vote of our shareholders; • Provisions regarding the timing~~ premiums and ~~content~~assessment ofare ~~shareholder proposals and nominations; • Absence of cumulative voting; and • Inability for shareholders to take action by written consent~~uncertain.

WeRecent ~~are~~insured depository ~~subject~~institution tofailures, ~~evolving~~as ~~and~~well ~~expensive~~as ~~corporate~~deterioration ~~governance~~in ~~regulations~~banking and economic conditions, have significantly increased the loss provisions ~~requirements~~of the FDIC, resulting in a decline in the designated reserve ratio of the Deposit Insurance Fund to historical lows. ~~Our~~The ~~failure~~FDIC in December 2010 increased the designated reserve ratio from 1.25 to ~~adequately~~2.00 ~~adhere~~and in December 2011 voted to ~~these~~maintain ~~requirements~~the orsame ratio for 2012. In addition, the deposit insurance limit on FDIC deposit insurance coverage generally has increased to $250,000, which ~~failure~~may orresult ~~circumvention~~in ofeven larger losses to the Deposit Insurance Fund. These developments have caused an increase to our ~~controls~~assessments, and the FDIC may be required to make additional increases to the assessment rates and ~~procedures~~levy ~~could~~additional ~~seriously~~special ~~harm~~assessments on us. Higher assessments increase our ~~business.~~noninterest expense.

As a publicly reporting company, we are subject to certain federal, state and other rules and regulations, including applicable requirements of the Sarbanes-Oxley Act of 2002. Compliance with these evolving regulations is costly and requires a significant diversion of management time and attention, particularly with regard to disclosure controls and procedures and internal control over financial reporting. Although we have reviewed our disclosure and internal controls and procedures in order to determine whether they are effective, our controls and procedures may not be able to prevent errors or frauds in the future. Faulty judgments, simple errors or mistakes, or the failure of our personnel to adhere to established controls and procedures may make it difficult for us to ensure that the objectives of the control system are met. A failure of our controls and procedures to detect other than inconsequential errors or fraud could seriously harm our business and results of operations.23

~~We have~~Beginning ~~not~~in ~~paid~~2009, ~~cash~~our ~~dividends~~assessment rates, towhich also included our ~~shareholders~~assessment ~~and~~for ~~currently~~participating ~~have~~in nothe ~~plans~~FDIC’s Transaction Account Guarantee Program, increased from 9.9 to 17.0 basis points. Additionally, on May 22, 2009, the FDIC announced a final rule imposing a special 5.00 basis points ~~pay~~emergency ~~future~~assessment ~~cash~~as ~~dividends~~of June 30, 2009, payable September 30, 2009, based on assets minus Tier I Capital at June 30, 2009, but the amount of the assessment was capped at 10.00 ~~Our~~basis ~~ability~~points of domestic deposits. Finally, on November 12, 2009, the FDIC adopted a new rule requiring insured institutions to ~~declare~~prepay on December 30, 2009, estimated quarterly risk-based assessments for the fourth quarter of 2009 and ~~pay~~for ~~dividends~~all isof ~~subject~~2010, 2011, and 2012. We prepaid an assessment of $2.8 million, which incorporated a uniform 3.00 tobasis point increase effective January 1, 2011. With implementation of DIP in April 2011, which became effective with payments due September 30, 2011, and the elimination of TAGP, the Banks saw a decrease in FDIC premiums resulting in a reduction of our accrued ~~regulators’~~premiums ~~approval~~assessed in 2009. Our assessment rate at the end of December 2012 was 14.0 and 14.55 basis points for Floridian Bank and Orange Bank, respectively.

WeThese ~~plan to retain earnings to finance future growth and have no~~ current ~~plans~~lower ~~to pay cash~~FDIC ~~dividends~~assessment torates ~~shareholders. Because we~~ have ~~not~~had ~~paid cash dividends, holders of our securities will experience~~ a ~~gain~~positive impact on ~~their investment in~~ our ~~securities only~~results ~~in the case~~ of ~~an appreciation of value of our securities~~operations. ~~You~~Our ~~should neither~~FDIC ~~expect~~insurance torelated ~~receive~~cost ~~dividend~~was ~~income~~$581 ~~from~~thousand ~~investing~~and $603 inthousand ~~our~~for ~~common~~the ~~stock nor~~years anended ~~appreciation~~December ~~in value. Further~~31, ~~our~~2012 ~~ability~~and toDecember ~~pay~~31, ~~dividends~~2011, ~~is restricted~~respectively, ~~subject~~compared to ~~approval~~$787 ~~from~~thousand ~~our~~for ~~regulators pursuant to~~ the ~~FRB~~year ~~Resolutions~~ended ~~and~~December ~~the~~31, ~~Bank Resolutions~~2010. We ~~may~~are ~~not~~unable ~~receive~~to ~~such~~predict ~~approvals. See~~ the ~~section~~impact ~~entitled~~in ~~“Item~~future 1.periods, ~~Business~~including –whether ~~Regulatory~~an ~~Matters”~~additional ~~for~~special ~~a further~~assessments ~~discussion~~will occur.

~~Your~~Higher ~~shares~~insurance ofpremiums and ~~common~~assessments increase our costs and may limit our ability to pursue certain business opportunities. We also may be required ~~stock~~to ~~are~~pay ~~not~~higher anFDIC ~~insured~~premiums than current levels, because financial institution failures resulting from the depressed market conditions have depleted and may continue to deplete the deposit insurance fund and reduce its ratio of reserves to insured deposits.

~~The~~We ~~shares of our common stock~~ are ~~not a bank deposit and are not insured or guaranteed by the FDIC or any other government agency. Your investment is~~ subject to ~~investment~~ ~~risk,~~extensive ~~and you must be capable of affording the loss of your entire~~governmental ~~investment~~regulation.

~~ITEM~~We 1Bare subject to extensive governmental regulation. ~~UNRESOLVED~~The ~~STAFF~~Company, ~~COMMENTS~~as a bank holding company, is regulated primarily by the Federal Reserve. The Banks are commercial banks chartered by the State of Florida and regulated by the Federal Deposit Insurance Corporation, and the Florida Office of Financial Regulation. These federal and state bank regulators have the ability, should the situation require, to place significant regulatory and operational restrictions upon us. The Banks’ activities are also regulated under consumer protection laws applicable to our lending, deposit and other activities. In addition, the Dodd-Frank Act imposes significant additional regulation on our operations.

~~None~~Banking regulations are primarily intended to protect depositors, deposit insurance funds, and the banking system as a whole, and not shareholders and creditors. A sufficient claim against us under these laws could have a material adverse effect on our results. Please refer to the section entitled “Regulatory Considerations” in this Form 10-K.

27Florida financial institutions, such as the Banks, face a higher risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.

~~ITEM~~Since 2September 11, 2001, banking regulators have intensified their focus on anti-money laundering and Bank Secrecy Act compliance requirements, particularly the anti-money laundering provisions of the USA PATRIOT Act. ~~PROPERTIES~~There is also increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control (“OFAC”). Since 2004, federal banking regulators and examiners have been extremely aggressive in their supervision and examination of financial institutions located in the State of Florida with respect to the institution’s Bank Secrecy Act/Anti-Money Laundering compliance. Consequently, numerous formal enforcement actions have been issued against financial institutions.

AsIn ~~of December~~order 31to comply with regulations, ~~2011~~guidelines and examination procedures in this area, the Banks ~~operated~~have 10been ~~full~~required ~~service~~to ~~banking~~adopt ~~centers~~new inpolicies and procedures ~~Central~~and ~~Florida~~to install new systems. ~~The~~If ~~following~~the ~~table~~Banks’ ~~sets~~policies, ~~forth~~procedures ~~each~~and systems are deemed deficient or the policies, procedures and systems of ~~our~~the financial institutions that we have already acquired or may acquire in the future are deficient, the Banks’ ~~banking~~would ~~centers~~be subject to liability, including fines and ~~date~~regulatory ~~opened~~actions such as restrictions on their ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of their business plan, including their acquisition plans. In addition, because the Banks operate in Florida, we expect that the Banks will face a higher risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.

Office Name	Leased/Owned	Date Opened/Acquired
Orange Bank of Florida
Clermont	Owned	November 2009
Crystal River	Owned	October 2005
Lake Mary	Owned	February 2008
Longwood	Land Leased/Bldg. Owned	April 2007
Orlando (Main Office)	Leased	June 2005
Winter Park	Leased	November 2007
Floridian Bank
Daytona Beach (Main Office)	Owned	March 2007
Ormond	Leased	March 2006
Palm Coast	Leased	March 2007
Port Orange	Owned	June 2008

Risks Related to Market Events

~~ITEM~~Our 3.loan ~~LEGAL~~portfolio ~~PROCEEDINGS~~is heavily concentrated in mortgage loans secured by properties in Central Florida which heightens our risk of loss than if we had a more geographically diversified portfolio.

WeOur ~~are~~interest-earning assets ~~periodically~~are heavily concentrated in mortgage loans secured by properties located in Central Florida. As of December 31, 2012, a ~~party~~significant portion toof orour ~~otherwise~~loans ~~involved~~secured by real estate are secured by commercial and residential properties, including properties under construction, located in ~~legal~~Citrus, ~~proceedings~~Flagler, ~~arising~~Lake, Orange, Seminole, and Volusia Counties, Florida. The concentration of our loans in this region ~~the~~subjects ~~normal~~us ~~course~~to ofrisk ~~business~~that a downturn in the area economy, such as ~~claims~~the toone ~~enforce~~the ~~liens~~area is currently experiencing, ~~claims~~could result in a ~~involving~~decrease ~~the~~in ~~making~~loan originations and ~~servicing~~an ofincrease ~~real~~in ~~property~~delinquencies ~~loans~~and foreclosures. As a result of this concentration, ~~and~~we ~~other~~may ~~issues~~face ~~incident~~greater torisk than if our ~~business~~lending were more geographically diversified. ~~Management~~In ~~does~~addition, ~~not~~since ~~believe~~a ~~that~~large ~~there~~portion isof ~~any~~our ~~pending~~portfolio is secured orby ~~threatened~~properties ~~proceeding~~located ~~against~~in usCentral ~~which~~Florida, ifthe ~~determined~~occurrence ~~adversely~~of a natural disaster, ~~would~~such ~~have~~as a hurricane, could result in a decline in loan originations, a ~~material~~decline ~~adverse~~in ~~effect~~the onvalue ~~our~~or ~~financial~~destruction ~~position~~of mortgaged properties, ~~liquidity~~and an increase in the risk of delinquencies, foreclosures or ~~results~~loss on loans originated by us. We may suffer further losses due to the decline in the value of the properties underlying our mortgage loans, which would have an adverse impact on our operations.

~~ITEM 4. MINE SAFETY DISCLOSURES Not applicable PART II. ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.~~24

~~Absence~~Our ofconcentration ain ~~Public~~loans ~~Market~~secured ~~and~~by ~~Dividends~~real estate may increase our credit losses, which would negatively affect our financial results.

~~There~~Due isto ~~no public~~the ~~market~~relatively ~~for~~close proximity ~~shares~~ of our ~~common~~geographic ~~stock~~markets, ~~nor~~we dohave weboth ~~expect~~geographic aconcentrations ~~public~~as ~~market~~well as concentrations in the types of loans funded. toSpecifically, ~~develop~~due ~~for~~to ~~shares~~the nature of our ~~common~~markets, ~~stock~~a insignificant portion of the ~~future~~portfolio has historically been secured with real estate. ~~Holders~~As of ~~our~~December ~~common stock~~31, ~~may~~2012, ~~not~~approximately be78% ~~able~~and to8% ~~sell~~of ~~their~~our ~~shares~~$273.8 ormillion ~~may~~loan beportfolio ~~able~~was tosecured ~~sell~~by ~~them~~commercial ~~only~~real ~~for~~estate ~~less~~and ~~than~~residential ~~fair~~real ~~market~~estate ~~value.~~(including home equity loans), respectively.

WeThe ~~have~~current downturn in ~~never~~the ~~declared~~real aestate ~~cash~~market, ~~dividend~~the ondeterioration ~~our~~in ~~common~~the ~~stock~~value of collateral, and wethe ~~currently~~local and national economic recessions, have noadversely ~~plans~~affected our clients’ ability to ~~declare~~repay ortheir ~~pay~~loans. ~~any~~If ~~dividends~~these onconditions ~~the~~persist, ~~common~~or ~~stock~~get inworse, ~~the~~our ~~foreseeable~~clients’ ability ~~future.~~to Asrepay atheir ~~bank~~loans ~~holding~~will ~~company,~~be further eroded. In the event we ~~have~~are ~~restrictions~~required to foreclose on ~~our~~a ~~ability~~property tosecuring ~~pay dividends~~one ~~including~~of ~~the~~our ~~FRB~~mortgage loans ~~Resolutions~~or ~~and~~otherwise ~~the~~pursue ~~Bank~~our ~~Resolutions.~~remedies ~~Please~~in ~~see “Item~~order 1.to ~~Business-Regulatory~~protect ~~Considerations-Dividends”~~our investment, ~~See~~we ~~“Item~~may 1.be ~~Business~~unable –to recover funds in an amount equal ~~Regulatory~~to ~~Matter”,~~our ~~“Item~~projected 7.return ~~Management’s~~on ~~Discussion~~our ~~and~~investment ~~Analysis~~or ofin ~~Financial Condition~~an ~~and~~amount ~~Results~~sufficient ofto ~~Operations~~prevent –a ~~Capital~~loss ~~resources”~~to us due to prevailing economic conditions, real estate values and ~~Note~~other 16factors toassociated with the ~~Consolidated~~ ~~Financial~~ownership ~~Statements~~of ~~for~~real property. As a ~~discussion~~result, the market value of ~~these~~the ~~additional~~real ~~restrictions.~~estate Asor ofother ~~February~~collateral 28underlying our loans may not, ~~2012~~at any given time, ~~our~~be ~~common~~sufficient ~~stock~~to ~~was~~satisfy ~~held~~the byoutstanding principal ~~approximately~~amount ~~791~~of ~~shareholders~~the ofloans, ~~record.~~and consequently, we would sustain loan losses.

28As discussed above, in October 2011, the Board of Directors of the Company agreed to approve the FRB Resolutions and in July 2012, the Board of Directors of Orange Bank agreed to approve the MOU. The MOU and the FRB Resolutions place significant restrictions on our operations, including heightened minimum capital ratios for Orange Bank, restrictions on the payment of dividends, prohibitions on redeeming shares of stock, and restrictions on making payments that would cause capital to decrease. See “Item 1. Business - Regulatory Matter” for a further discussion of these important restrictions.

~~ITEM~~Future 6.economic ~~SELECTED~~growth ~~FINANCIAL~~in ~~DATA~~our Florida market area is likely to be slower compared to previous years.

The ~~following~~ ~~table~~State ~~presents~~of ~~our~~Florida’s population ~~summary~~growth ~~consolidated~~has ~~financial~~historically ~~data~~exceeded national averages. WeConsequently, ~~derived~~the state has experienced substantial growth in population, ~~our~~new ~~balance~~business ~~sheet~~formation and ~~income~~public ~~statement~~works ~~data~~spending. ~~for~~Due to the ~~years~~moderation ~~ended~~of ~~December~~economic ~~31, 2011,~~growth ~~2010,~~and ~~2009,~~migration ~~2008,~~into our market area and the ~~2007,~~downturn ~~from~~in ~~our~~the ~~audited~~real ~~financial~~estate ~~statements.~~market, ~~The summary~~management ~~consolidated~~believes ~~financial~~that ~~data~~growth ~~should~~in our market area will be ~~read~~restrained in ~~conjunction~~the ~~with,~~near ~~and are~~term. ~~qualified~~The inrestrained ~~their~~growth ~~entirety~~limits ~~by,~~the ~~our~~growth ~~financial~~of ~~statements~~existing businesses and reduces the ~~accompanying~~formation of new businesses in our markets. These ~~notes~~limits and ~~the~~reductions ~~other~~decrease ~~information~~lending ~~included~~opportunities ~~elsewhere~~and innegatively ~~this~~affect ~~Annual~~our ~~Report~~income. Commercial real estate valuations may also be negatively affected as business failures continue and new business formation remains weak.

(Dollars in thousands, except per share data)	As of and for the years ended December 31,
	2011			2010			2009			2008(1)			2007
Balance Sheet Data
Total assets	$	449,559		$	461,631		$	466,897		$	388,145		$	68,476
Total loans, net of unearned fees		311,654			317,565			336,724			288,791			52,813
Allowance for loan losses		6,566			8,010			9,038			6,051			725
Securities available for sale		73,136			42,658			81,707			43,916			5,059
Securities held to maturity		1,002			10,082			12,259			12,464			—
Intangible assets		1,201			1,893			2,085			1,855			—
Deposits		393,726			412,187			406,652			307,668			51,964
Noninterest bearing deposits		83,909			78,385			67,594			54,137			8,955
Shareholders’ equity		39,777			40,103			50,483			60,714			16,412
Income Statement Data
Interest income	$	17,064		$	19,721		$	19,294		$	13,982		$	4,277
Interest expense		4,018			5,733			6,942			5,446			1,832
Net interest income		13,046			13,988			12,352			8,536			2,445
Provision for loan losses		1,882			9,583			8,523			3,868			245
Net interest income after provision for loan losses		11,164			4,405			3,829			4,668			2,200
Noninterest income		1,114			1,211			1,285			567			214
Noninterest expense		14,150			15,318			15,931			11,459			2,980
Income tax benefit (expense)		(255	)		—			—			111			185
Net loss	$	(2,127	)	$	(9,702	)	$	(10,817	)	$	(6,113	)	$	(381	)
Per Share Data
Basic loss per share	$	(0.34	)	$	(1.56	)	$	(1.75	)	$	(1.37	)	$	(0.22	)
Book value per common share	$	6.44		$	6.47		$	8.15		$	9.86		$	9.36
Selected Operating Ratios
Return on average assets		(0.46	)%		(2.04	)%		(2.35	)%		(2.16	)%		(0.59	)%
Return on average shareholders’ equity		(5.30	)%		(19.88	)%		(18.87	)%		(13.46	)%		(0.84	)%
Net interest margin		3.08	%		3.18	%		2.94	%		3.34	%		4.19	%
Selected Asset Quality Data
Nonperforming loans/total loans		2.7	%		5.3	%		2.8	%		2.1	%		—	%
Nonperforming assets/total assets		3.0	%		4.5	%		2.7	%		1.7	%		—	%
Allowance for loan losses/total loans		2.1	%		2.5	%		2.7	%		2.1	%		1.4	%
Allowance for loan losses/nonperforming loans		78.1	%		46.9	%		94.3	%		103.1	%		—	%
Net charge-offs (recoveries)/average loans		1.07	%		3.13	%		1.73	%		0.03	%		—	%
Capital Data for the Company
Equity/assets		8.8	%		8.7	%		10.8	%		15.6	%		24	%
Leverage ratio		8.1	%		8.4	%		10.0	%		18.9	%		24.3	%
Tier 1 risk-based capital ratio		10.9	%		11.0	%		12.5	%		17.7	%		25.2	%
Total risk-based capital ratio		12.1	%		12.3	%		13.8	%		15.4	%		26.3	%
Capital Data for Floridian Bank
Leverage ratio		9.0	%		8.0	%		8.2	%		14.6	%		24.3	%
Tier 1 risk-based capital ratio		11.3	%		10.5	%		10.5	%		13.4	%		25.2	%
Total risk-based capital ratio		12.5	%		11.7	%		11.7	%		12.9	%		26.3	%
Capital Data for Orange Bank
Leverage ratio		6.9	%		7.3	%		7.4	%		7.6	%		N/A
Tier 1 risk-based capital ratio		9.5	%		9.5	%		9.0	%		8.5	%		N/A
Total risk-based capital ratio		10.7	%		10.7	%		10.3	%		9.8	%		N/A
(1) Reflects the acquisition of Orange Bank effective March 31, 2008

The soundness of other financial institutions could adversely affect us.

29Our ability to engage in routine funding and other transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial institutions are interrelated as a result of trading, clearing, counterparty, lending, or other relationships. As a result, defaults by, or even rumors or questions about, one or more financial institutions, or the financial services industry generally, have led to market-wide liquidity problems, losses of depositor, creditor or counterparty confidence, and could lead to losses or defaults by us or by other institutions. We could experience increases in deposits and assets as a result of other banks’ difficulties or failures, which would increase the capital we need to support such growth.

~~ITEM~~The 7.fair ~~MANAGEMENT’S~~value ~~DISCUSSION~~of ~~AND~~our ~~ANALYSIS~~investments OFcould ~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~decline.

~~The~~Our ~~following~~investment ~~management’s discussion and~~securities ~~analysis~~portfolio ~~provides~~as ~~supplemental~~of ~~information~~December 31, ~~which~~2012 ~~sets~~has ~~forth~~been ~~the~~primarily ~~major~~designated ~~factors that~~as ~~have~~available-for-sale ~~affected~~pursuant ~~our~~to ~~financial~~U.S. ~~condition~~GAAP ~~and~~relating ~~results~~to ~~of operations during the~~accounting ~~periods~~for ~~included~~investments. inSuch ~~the~~principles ~~accompanying~~require ~~consolidated~~that ~~financial~~unrealized ~~statements~~gains and ~~should~~ belosses ~~read~~ in ~~conjunction with~~ the ~~Consolidated~~estimated ~~Financial~~value ~~Statements and related notes. The analysis is divided into subsections entitled “Business Overview,” “Results~~ of ~~Operations,”~~the ~~“Market~~available-for-sale ~~Risk,” “Financial Condition,”~~portfolio ~~“Liquidity,”~~be “~~Capital~~marked ~~Resources,”~~to ~~“Off-Balance Sheet Arrangements~~market”, and ~~“Accounting~~ ~~Policies.”~~reflected ~~The~~as ~~following information should provide~~ a ~~better understanding~~separate ofitem ~~the~~in ~~major~~shareholders’ ~~factors~~equity ~~and~~(net ~~trends~~of ~~that~~tax) ~~affect~~as ~~our~~accumulated ~~earnings~~other ~~performance~~comprehensive ~~and financial condition, and how our performance during 2011 compares with prior years~~income. ~~Throughout~~At ~~this~~December ~~section~~31, ~~Floridian~~2012, ~~Financial~~we ~~Group, Inc~~maintained $57.,5 ~~and~~million ~~subsidiaries,~~or ~~collectively,~~100% ~~are~~of ~~referred~~our tototal securities as ~~“Company,”~~available ~~“we,”~~for ~~“us,” or “our~~sale.”

~~CAUTION~~Shareholders’ ~~CONCERNING~~equity will ~~FORWARD-LOOKING~~continue ~~STATEMENTS~~to reflect the unrealized gains and losses (net of tax) of these investments. The fair value of our investment portfolio may decline, causing a corresponding decline in shareholders’ equity.

~~This~~Management ~~Annual~~believes that ~~Report~~several onfactors ~~Form~~will ~~10-K, including~~affect ~~this~~the ~~management’s~~fair ~~discussion~~values ~~and~~of ~~analysis~~our ~~section,~~investment ~~contains “forward-looking~~portfolio. ~~statements”~~These ~~within~~include, ~~the~~but ~~meaning~~are ofnot ~~the~~limited ~~Private~~to, ~~Securities~~changes in ~~Litigation~~interest ~~Reform~~rates ~~Act~~or expectations of ~~1995.~~changes, ~~These~~the ~~forward-looking~~degree ~~statements~~of ~~include,~~volatility ~~among others,~~in ~~statements~~the ~~about~~securities ~~our beliefs~~markets, ~~plans,~~inflation ~~objectives,~~rates ~~goals,~~or expectations, ~~estimates~~of inflation, and ~~intentions~~the ~~that~~slope ~~are~~of ~~subject~~the interest rate yield curve (the yield curve refers to ~~significant~~the ~~risks~~differences between shorter-term and ~~uncertainties~~longer-term ~~and~~interest ~~are~~rates; ~~subject~~a topositively ~~change~~sloped ~~based~~yield oncurve ~~various~~means ~~factors,~~shorter-term ~~many~~rates ~~of which~~ are ~~beyond~~lower ~~our~~than ~~control~~longer-term rates). ~~The~~These ~~words~~and other “factors may,” ~~“could,”~~impact ~~“should,”~~specific ~~“would,”~~categories ~~“believe,” “anticipate,”~~of ~~“estimate,”~~the ~~“expect,”~~portfolio ~~“intend~~differently,” ~~“plan,”~~and ~~“target,”~~we ~~“goal,”~~cannot ~~and similar~~predict ~~expressions~~the ~~are~~effect ~~intended~~these tofactors ~~identify~~may ~~forward-looking~~have on ~~statements.~~any specific category.

~~All~~Risks ~~forward-looking~~Related ~~statements, by their nature, are subject~~ to ~~risks and uncertainties. Our actual future results may~~ ~~differ~~an ~~materially~~Investment ~~from those set forth~~ in our ~~forward-looking~~Common statements. Please see the Introductory Note and Item 1A, Risk Factors of this Annual Report, for discussion of factors that could cause our actual results to differ materially from those in the forward looking statements. Stock

~~However,~~There ~~other~~is ~~factors~~no ~~besides~~established ~~those listed~~trading inmarket ~~our Item 1A. Risk Factors or discussed in this Annual Report also~~for ~~could adversely affect~~ our ~~results,~~common stock and you ~~should~~may not ~~consider any such list of factors to~~ be aable ~~complete set of all potential risks or uncertainties. Any forward-looking statements made by us or on our behalf speak only as of the date they are made. We do not undertake~~ to ~~update~~resell ~~any~~your ~~forward-looking statement, except as required by applicable law~~shares.

~~Business~~The ~~Overview~~shares of our common stock are not currently traded on any securities exchange and do not have an established trading market. We currently have no plans to apply to list our common stock on any exchange and we do not expect our common stock to be quoted on an over-the-counter quotation system such as the Pink Sheets.

We are a multi-bank holding company headquartered in Lake Mary, Florida, a community situated between Orlando and Daytona Beach, Florida. We were incorporated on September 8, 2005 as the bank holding company of Floridian Bank, a Florida chartered commercial bank. We commenced operations, along with Floridian Bank, on March 20, 2006. From 2006 to 2008, we experienced periods of rapid growth. On March 31, 2008, we closed a merger transaction in which Orange Bank of Florida, a Florida chartered commercial bank, became our wholly-owned subsidiary. The transaction was treated as a merger of equals where each shareholder of Orange Bank received 1.04 shares of our common stock. At the time of the merger, Orange Bank had approximately $196 million in assets, including approximately $121 million in loans, and approximately $176 million in deposits. In 2009, we began a process of slowing our growth and preserving capital. 25

~~Both~~We ~~Floridian~~recently ~~Bank~~deregistered ~~and Orange Bank are full service commercial banks, providing a wide range of business and consumer financial services in~~ our ~~target~~Common ~~marketplace, which is comprised primarily of~~Stock ~~Orange, Seminole, Citrus, Lake, Flagler,~~ and ~~Volusia~~will ~~Counties~~no inlonger ~~Florida. Floridian~~file ~~Bank~~periodic isreports ~~headquartered in Daytona Beach, Florida,~~ with athe ~~primary service~~SEC ~~area~~which inmay ~~Flagler~~make ~~and~~it ~~Volusia~~more ~~Counties.~~difficult ~~Orange~~to ~~Bank~~resell isyour ~~headquartered in Orlando, Florida, with a primary service area in Orange, Seminole, Lake and Citrus Counties~~shares. ~~Collectively, as of December 31, 2011, our Banks operated 10 banking offices.~~

The ~~Banks~~JOBS ~~offer~~Act ~~commercial~~was signed into law on April 5, 2012 and, ~~retail~~among other things, permits banks and bank holding companies to deregister securities ~~banking~~previously ~~services~~registered with anthe ~~emphasis~~SEC onunder ~~commercial~~Section ~~and~~12 ~~commercial~~of ~~real~~the ~~estate~~Exchange Act if they have less than 1,200 shareholders of record. ~~lending~~As a result of the increased shareholder threshold, ~~particularly~~the Company was eligible to ~~the~~deregister ~~medical~~its ~~services~~common ~~industry~~stock. AsOn ofApril ~~December 31~~23, ~~2011~~2012, we ~~had~~filed ~~total~~a ~~assets~~Form of15 ~~$449.6~~to ~~million,~~deregister ~~deposits~~our ofcommon ~~$393.7~~stock ~~million~~which became effective 90 days thereafter, ~~and~~subject to certain ~~total~~additional ~~gross~~SEC ~~loans~~filings including that of ~~$311.8~~additional ~~million.~~Forms In15 ~~addition,~~under asSection 15(d) of ~~December~~the 31Exchange Act. On January 9, ~~2011~~2013, we ~~had~~filed ~~$39.8~~two ~~million~~additional Forms 15 to suspend our reporting obligations under Section 15(d) with respect to our common stock and interests in ~~total~~our ~~shareholders’~~401(k) ~~equity~~plan. AtFollowing ~~December~~the ~~31,~~filing ~~2011~~of this annual report on Form 10-K, ~~the~~we will no longer file reports with ~~Company’s~~SEC ~~capital~~unless ~~ratios~~otherwise ~~surpassed~~required ~~all~~by ~~regulatory~~the ~~“minimum~~Securities ~~well~~Act ~~capitalized measures”:~~or Exchange Act.

	As of December 31, 2011
Total risk based capital		12.1	%
Tier 1 capital		10.9	%
Leverage capital		8.1	%

Our decision to deregister was motivated by the ability of the Company to potentially realize significant annual savings by reducing accounting, legal, professional and administrative costs associated with being an SEC registrant. Management and the Company’s Board of Directors concluded the cost of compliance with general SEC reporting requirements does not provide the requisite benefit to the Company or its shareholders. However, as a result of our deregistration, certain information about the Company may not be as readily available to our shareholders as in the past which could impair the ability of our shareholders to transfer shares of our common stock or could adversely affect our stock price or the market for our shares.

30Our Articles of Incorporation, Bylaws, and certain laws and regulations may prevent or delay transactions you might favor, including our sale or merger.

~~Our lending~~We ~~operations~~ are ~~entirely~~registered ~~within~~with the Federal ~~State~~Reserve ofas ~~Florida,~~a ~~which~~bank ~~has~~holding ~~been particularly~~company ~~hard~~under ~~hit in~~ the ~~current economic recession~~BHCA. ~~Evidence~~As ofa ~~the economic~~result, ~~downturn~~we inare ~~Florida~~subject isto ~~particularly~~supervisory ~~reflected~~regulation ~~in recent unemployment statistics~~ and ~~realization of real estate devaluation. According to data from~~examination ~~the~~by ~~U.S. Department of Labor,~~ the ~~Florida~~Federal ~~unemployment rate (seasonally adjusted) at December 2011 was 9~~Reserve.9% ~~which~~The isBHCA ~~above~~and ~~the~~other ~~national~~federal ~~average~~laws ~~of 8.5%.~~subject ~~Although~~bank ~~the~~holding ~~unemployment~~companies ~~rate~~to ~~decreased~~particular ~~from~~restrictions ~~12.0%~~on at the ~~end~~ types of ~~2010 and~~activities ~~11.8%~~in atwhich ~~the~~they ~~end~~may ~~of 2009~~engage, ~~Florida~~and ~~continues~~ to ~~have~~a ~~one~~range of ~~the~~supervisory ~~highest unemployment~~requirements ~~rates~~and ~~in the United States~~activities, ~~which~~including ~~has~~regulatory ~~adversely affected our~~enforcement ~~market~~actions ~~areas~~for asviolations ~~evidenced~~of bylaws ~~layoffs~~ and ~~business closings, as well as wealth reduction due to depressed markets~~regulations.

~~Florida~~Provisions of our Articles ~~has~~of ~~also~~Incorporation, ~~experienced~~Bylaws, acertain ~~high~~laws ~~volume~~and ofregulations ~~bankruptcy~~and ~~filings~~various ~~during~~other ~~recent~~factors ~~years.~~may make it more difficult and expensive for companies ~~According~~or persons to ~~the~~acquire ~~most~~control ~~recent~~of ~~data~~us ~~available~~without ~~from~~ the Uconsent of our Board of Directors.S. ~~Federal~~It ~~Courts~~is possible, however, that you would want ~~Florida~~a ~~had~~takeover ~~the~~attempt ~~second~~to ~~highest~~succeed ~~number~~because, offor ~~bankruptcy~~example, ~~filings~~a inpotential ~~the~~buyer ~~United States~~could ~~through~~offer ~~the~~a ~~first~~premium ~~three~~over ~~quarters~~the ofthen ~~2011.~~prevailing ~~Only~~price ~~California~~of ~~experienced~~our ~~more~~common ~~bankruptcy~~stock ~~filings.~~and ~~The~~could ~~majority~~provide ofyou ~~the~~with ~~filings~~an inopportunity ~~Florida~~to ~~were non-business~~liquidate ~~bankruptcies.~~your investment.

~~Based on~~For ~~data~~example, ~~from~~our ~~the~~Articles of ~~U.S.~~Incorporation ~~Census~~permit ~~Bureau,~~our ~~from~~Board ~~2006~~of ~~through~~Directors ~~the~~to ~~end~~issue ofpreferred ~~2010,~~stock ~~median household~~without ~~income~~shareholder ~~decreased by 3~~action.1% inThe ~~Florida.~~ability ~~Additionally,~~to ~~real~~issue ~~estate~~preferred ~~property~~stock ~~valuations~~could ~~have~~discourage ~~also~~a ~~been~~company ~~depressed~~from ~~during~~attempting ~~the~~to ~~recent~~obtain ~~economic downturn~~control asof ~~evidenced~~us by ~~our~~means ~~higher level~~ of ~~problem~~a ~~assets~~tender ~~and~~offer, ~~credit-related costs. According to the Federal Housing Finance Agency~~merger, ~~Florida~~proxy ~~has~~contest ~~experienced negative~~or ~~trends in single-family home prices (as indicated by negative housing~~otherwise. ~~price~~We ~~indexes)~~are inalso ~~nearly~~subject ~~every~~to ~~quarter~~certain ~~since~~provisions ~~the beginning~~ of ~~2007 through~~ the ~~end~~ ofFlorida ~~2011.~~Business ~~High~~Corporation ~~unemployment,~~Act ~~high volumes of non-business bankruptcy filings, decreased median household income,~~ and ~~depressed~~our ~~real~~Articles ~~estate values all affect the value~~ of ~~our~~Incorporation ~~loan~~that ~~portfolio~~relate to ~~and~~business ~~the~~combinations ~~associated~~with ~~risks~~interested shareholders. ~~An extended~~Other ~~continuation~~provisions ~~of the recession~~ in ~~Florida~~our ~~would~~Articles ~~likely exacerbate the adverse effects~~ of ~~these~~Incorporation ~~difficult~~or ~~market~~Bylaws ~~conditions~~that onmay ~~our clients, which~~discourage ~~would~~takeover ~~likely~~attempts ~~have~~or amake ~~negative~~them ~~impact~~more ondifficult ~~our financial results.~~ include:

~~As discussed~~§ ~~above,~~Classified ~~in July 2011, the Boards of Directors of the Banks agreed to approve certain board Bank Resolutions. In October 2011, the~~ Board of Directors of the Company agreed to approve certain FRB Resolutions. The Bank Resolutions and the FRB Resolutions place significant restrictions on our operations, including minimum capital ratios for the Banks, restrictions on the payment of dividends, prohibitions on redeeming shares of stock, and restrictions on making payments that would cause capital to decrease. Please see the section entitled Item 1. Business-About Us-Regulatory Matter for a further discussion of these important restrictions. ;

~~Our~~§ ~~principal~~Requirement ~~executive~~that ~~offices~~only ~~are located~~directors atmay ~~175~~fill ~~Timacuan~~a ~~Boulevard,~~Board ~~Lake Mary, Florida 32746. The telephone number at that office is (407) 321-3233.~~ vacancy;

~~Results~~§ Requirement that a Special Meeting may be called only by a majority vote of ~~Operations~~our shareholders;

We§ ~~incurred~~Provisions aregarding ~~consolidated net loss of $2.1 million in 2011 compared to a loss of $9.7 million in 2010 and a loss of $10.8 million in 2009. The primary reason for~~ the ~~improvement~~timing ~~in the 2011 net loss versus the 2010~~ and ~~2009~~content ~~net losses was a lower provision for loan losses which was a direct result~~ of ~~improved~~shareholder ~~asset~~proposals ~~quality. Additionally, the streamlining of management~~ and the divestiture of underperforming branch offices attributed to a decrease in noninterest expenses. Furthermore, the 2011 results included a $755,000 charge to recognize impairments to goodwill and deferred tax assets. Goodwill was written off in the fourth quarter. We have consistently recognized a valuation allowance equal to the value of the net deferred tax asset to reflect the unlikelihood of realizing the benefit of the asset. nominations;

In§ ~~both~~Absence ~~2011 and 2010, Floridian Bank’s results were impacted by the Federal Reserve’s rate reductions in combating a slumping economy as well as the addition~~ of acumulative ~~fourth~~voting; banking office in November 2009. Orange Bank’s results were also directly impacted by the Federal Reserve’s rate reductions. In December 2010, Orange Bank announced a restructuring plan which included selling one branch and closing two additional branches. We incurred a $1.0 million restructuring charge as a result of the plan. The closing of the branches resulted in a savings in noninterest expense of $1.2 million or 7.6%.

We§ ~~recorded~~Inability nofor ~~tax~~shareholders ~~benefit of operating losses in 2010 and in 2011 wrote-off the deferred tax assets previously recorded. The tax benefit, however, continues~~ to betake ~~available~~action ~~should~~by ~~the company~~written ~~report net profits in future periods~~consent.

31We have not paid cash dividends to our shareholders and currently have no plans to pay future cash dividends. Our ability to declare and pay dividends is subject to our regulators’ approval.

~~Net~~We ~~Interest~~plan ~~Income~~to retain earnings to finance future growth and have no current plans to pay cash dividends to shareholders. Because we have not paid cash dividends, holders of our securities will experience a gain on their investment in our securities only in the case of an appreciation of value of our securities. You should neither expect to receive dividend income from investing in our common stock nor an appreciation in value. Further, our ability to pay dividends is restricted subject to approval from our regulators pursuant to the FRB Resolutions and the MOU. We may not receive such approvals. See the section entitled “Item 1. Business – Regulatory Matters” for a further discussion. Furthermore, in 2012 we authorized and issued shares of Series A Noncumulative Preferred Stock, the holders of which are entitled to a quarterly noncumulative preferred dividend payable in cash or in kind, with a coupon rate of 4% per annum. Our Articles of Incorporation prohibit the declaration or payment of dividends on our common stock unless the full amount of the Series A Noncumulative Preferred Stock quarterly dividend has been declared and paid (or is contemporaneously declared and paid) for the most recently completed calendar quarter.

Our profitability is dependent to a large extent on net interest income which is the difference between the interest received on earning assets such as loans and securities and the interest paid on interest-bearing liabilities principally deposits and borrowings. Our principal interest earning assets are loans, investment securities, and federal funds sold. Interest-bearing liabilities primarily consist of certificates of deposit, interest-bearing checking accounts (“NOW accounts”), savings deposits, and money market accounts. Funds attracted by these interest-bearing liabilities, as well as noninterest bearing deposits, are invested in interest-earning assets. Accordingly, net interest income depends upon the volume of average interest-earning assets and average interest-bearing liabilities and the interest rates earned or paid on them. 26

~~The~~Your ~~significance~~shares of ~~net~~common ~~interest~~stock ~~income is~~are ~~largely~~not ~~enhanced~~an ~~as our size grows and the impact of market rates of~~insured ~~interest as influenced by the Federal Reserve’s monetary policy~~deposit.

The ~~following~~shares ~~table~~of ~~reflects~~our ~~the~~common ~~components~~stock ofare ~~net~~not ~~interest~~a ~~income,~~bank ~~setting~~deposit ~~forth for the periods presented, (1) average assets, liabilities~~ and ~~shareholders’~~are ~~equity,~~not ~~(2)~~insured ~~interest~~or ~~income earned~~guaranteed onby ~~interest-earning~~the ~~assets~~FDIC ~~and~~or ~~interest~~any ~~paid~~other ongovernment ~~interest-bearing liabilities,~~agency. ~~(3)~~Your ~~average~~investment ~~yields earned on interest-earning assets and average~~is ~~rates~~subject ~~paid~~to oninvestment ~~interest-bearing liabilities~~risk, ~~(4) our net interest spread (i.e., the average yield on interest-earning assets less the average rate on interest-bearing liabilities)~~ and ~~(5)~~you ~~our~~must ~~net~~be ~~interest~~capable ~~margin~~of ~~(i.e.,~~affording the ~~net yield~~loss onof ~~interest~~your ~~earning~~entire ~~assets)~~investment.

	Average Balances and Interest Rates
(Dollars in Thousands)	Year Ended
	December 31, 2011								December 31, 2010								December 31, 2009
	Balance			Interest		Rate			Balance			Interest		Rate			Balance			Interest		Rate
ASSETS
Loans, net(1)(2)	$	311,339		$	15,629		5.02	%	$	335,868		$	17,509		5.21	%	$	319,845		$	16,920		5.29	%
Investment securities		55,292			1,287		2.33			70,417			2,129		3.02			75,532			2,276		3.01
Federal funds sold & excess balance		54,248			130		0.24			32,982			68		0.21			22,947			47		0.20
Deposits at interest with banks		2,520			18		0.71			1,093			15		1.37			1,429			51		3.57
Total earning assets		423,399			17,064		4.03	%		440,360			19,721		4.48	%		419,753			19,294		4.60	%
Cash & due from bank		8,157								8,700								13,324
Allowance for loan losses		(7,822	)							(8,670	)							(5,358	)
Other assets		40,429								35,375								33,256
Total assets	$	464,163							$	475,765							$	460,975
LIABILITIES
Savings, NOW & money market	$	162,996		$	1,163		0.71	%	$	176,131		$	1,967		1.12	%	$	188,451		$	3,003		1.59	%
Time deposits		154,639			2,624		1.70			166,777			3,578		2.15			143,061			3,722		2.60
Total interest bearing deposits		317,635			3,787		1.19			342,908			5,545		1.62			331,512			6,725		2.03
Other borrowings		9,007			231		2.56			6,895			188		2.73			7,283			217		2.98
Total interest bearing liabilities		326,642			4,018		1.23	%		349,803			5,733		1.64	%		338,795			6,942		2.05	%
Noninterest bearing deposits		94,932								75,206								62,849
Other liabilities		2,475								1,963								2,019
Total liabilities		424,049								426,972								403,663
Total shareholders’ equity		40,114								48,793								57,312
Total liabilities and equity	$	464,163							$	475,765							$	460,975
Interest rate spread							2.80	%							2.84	%							2.55	%
Net interest income				$	13,046							$	13,988							$	12,352
Net interest margin							3.08	%							3.18	%							2.94	%

ITEM 1B. UNRESOLVED STAFF COMMENTS

(1)	Average balances include nonaccrual loans, and are net of unearned loan fees of $114, $205, and $279 in 2011, 2010, and 2009, respectively.
(2)	Interest income includes fees on loans of $48, $49, and $57 in 2011, 2010, and 2009, respectively.

None

~~Net~~ITEM ~~interest income decreased 6~~2.7% to $13.0 million in 2011 from $14.0 million in 2010 principally due to lower earning asset volumes as well as lower rates on the respective earning assets, offset partially by increased noninterest bearing deposit balances and lower deposit rates. PROPERTIES

32As of December 31, 2012, the Banks operated 10 full service banking centers in Central Florida. The following table sets forth each of our Banks’ banking centers and date opened.

Now that the Federal Reserve effectively established a zero interest rate policy since 2010 and expects to maintain the policy through 2014, going forward there will be less impact on net interest earnings due to interest rate reductions. Since 2009, the Banks have emphasized originating loans with interest rate floors between five and six percent. Further, the Banks aggressively reduced their costs of funds and lengthened deposit maturities at these lower rates. With these initiatives, it is anticipated that net interest earnings will improve in the short term, and should interest rates begin to rise, net interest income should increase modestly.

Office Name	Leased/Owned	Date Opened/Acquired
Orange Bank of Florida
Clermont	Owned	November 2009
Crystal River	Owned	October 2005⁽¹⁾
Lake Mary	Owned	February 2008
Longwood	Land Leased/Bldg. Owned	April 2007
Orlando (Main Office)	Leased	June 2005
Winter Park	Leased	November 2007

Floridian Bank
Daytona Beach (Main Office)	Owned	March 2007
Ormond	Leased	March 2006
Palm Coast	Leased	March 2007
Port Orange	Owned	June 2008

(1) This branch was sold in January 2013.

~~The~~ITEM following table sets forth certain information regarding changes in our interest income and interest expense for the year ended December 31, 2011, as compared to the year ended December 31, 2010, and during the year ended December 31, 2010 as compared to the year ended December 31, 20093. ~~For~~LEGAL ~~each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to changes in interest rate and changes in the volume~~PROCEEDINGS. ~~Changes in both volume and rate have been allocated based on the proportionate absolute changes in each category.~~

							Rate Volume Analysis
(Dollars In Thousands)	2011 Changes From 2010									2010 Changes From 2009
	Total Change			Due To Average						Total Change			Due To Average
				Volume			Rate						Volume			Rate
Interest Earning Assets
Loans, net	$	(1,880	)	$	(1,279	)	$	(601	)	$	589		$	848		$	(259	)
Investment securities		(842	)		(457	)		(385	)		(147	)		(154	)		7
Federal funds sold & excess balance		62			44			18			21			21			—
Other		3			19			(16	)		(36	)		(12	)		(24	)
Total		(2,657	)		(1,673	)		(984	)		427			703			(276	)
Interest Bearing Liabilities
Savings, NOW, money market accounts		(804	)		(147	)		(657	)		(1,035	)		(196	)		(839	)
Time deposits		(954	)		(260	)		(694	)		(145	)		617			(762	)
Other borrowings		43			57			(14	)		(29	)		(12	)		(17
Total		(1,715	)		(350	)		(1,365	)		(1,209	)		409			(1,618	)
Changes In Net Interest Income	$	(942	)	$	(1,323	)	$	381		$	1,636		$	294		$	1,342

We are periodically a party to or otherwise involved in legal proceedings arising in the normal course of business, such as claims to enforce liens, claims involving the making and servicing of real property loans, and other issues incident to our business. Management does not believe that there is any pending or threatened proceeding against us which, if determined adversely, would have a material adverse effect on our financial position, liquidity, or results of operations.

~~Provision~~ITEM ~~for~~4. ~~Loan~~MINE ~~Losses.~~SAFETY DISCLOSURES

~~The~~Not allowance for loan losses is established through a provision for loan losses charged against net interest income. Loans are charged against the allowance for loan losses when management believes that the collectability of the principal is unlikely. The allowance is an amount that management believes is adequate to absorb possible losses on existing loans that may become uncollectable, based on evaluations of the collectability of loans, industry historical loss experience, current economic conditions, portfolio mix, and other factors. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions. applicable

~~Impaired~~PART loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, as a practical expedient, at the loan’s observable market price or the fair value of the collateral as indicated by an appraisal report, if the loan is collateral dependentII. A loan is impaired when it is probable the creditor will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement. Our policy for recognizing income on impaired loans is to accrue interest unless a loan is placed on nonaccrual status. Cash collections on impaired loans are credited to the loan receivable balance and no interest income is recognized on those loans unless the principal balance is current.

33Absence of a Public Market and Dividends

AsThere ais ~~direct~~no ~~result~~public market for shares of ~~these~~our ~~factors~~common ~~and~~stock ~~analyses~~nor ~~the~~do ~~allowance~~we ~~for~~expect ~~loan~~a ~~loss~~public ~~decreased~~market ~~$1.4 million~~to indevelop ~~2011~~for ~~over~~shares ~~2010~~of ~~and~~our ~~$1.0~~common ~~million~~stock in ~~2010~~the future. ~~versus~~Holders ~~2009~~of ~~resulting~~our incommon ~~an allowance~~stock ofmay ~~2.11%~~not ~~and~~be ~~2.52%~~able ofto ~~total~~sell ~~loans~~their atshares ~~December~~or ~~31,~~may ~~2011~~be ~~and~~able ~~December 31,~~to ~~2010,~~sell ~~respectively.~~them only for less than fair market value.

~~Noninterest~~We ~~Income~~have never declared a cash dividend on our common stock, and we currently have no plans to declare or pay any dividends on the common stock in the foreseeable future. As a bank holding company, we have restrictions on our ability to pay dividends including the FRB Resolutions and the Bank MOU. Please see “Item 1. Business-Regulatory Considerations-Dividends”, See “Item 1. Business – Regulatory Matter”, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Capital resources”, and Note 16 to the Consolidated Financial Statements for a discussion of these additional restrictions. As of March 14, 2013, our common stock was held by approximately 796 shareholders of record.

~~Following is a schedule of noninterest income for the years ended December 31, 2011, 2010, and 2009:~~ 27

	Year ended December 31,
(Dollars in thousands)	2011			2010		2009
Service charges and fees on deposit accounts	$	645		$	445	$	422
Cash surrender value – bank owned life insurance		330			408		479
Loan fee income		48			49		57
Other		230			292		121
Gain (loss) on sale of securities & other assets		(139	)		17		206
Totals	$	1,114		$	1,211	$	1,285

Recent Sales of Unregistered Securities

~~Noninterest income~~On ~~decreased~~December ~~$97~~31, ~~thousand~~2012, orwe ~~8.0%,~~closed ina sale ~~2011~~of ~~versus~~675 ~~2010.~~shares totaling $675,000 of our Series A ~~loss~~Noncumulative onPerpetual ~~the~~Preferred ~~sale~~ Stock to certain of our subsidiaries’ officers and directors and to certain other ~~assets~~accredited investors. These shares of ~~$139~~Series ~~thousand~~A ~~was~~Noncumulative ~~recognized~~Preferred instock ~~2011~~were ~~compared~~offered and sold pursuant to a ~~gain~~private ~~from sales~~offering of ~~securities~~up ofto $1710,000,000 ~~thousand~~of inSeries ~~2010.~~A ~~Fee~~Noncumulative ~~income~~Perpetual ~~increased~~Preferred ~~due~~Stock towhich was exempt ~~increased~~from ~~demand~~registration ~~deposit~~under ~~fees~~federal asand astate ~~result~~securities laws by reason of ~~increased~~the ~~deposit~~exemption ~~balances~~provided ~~in noninterest~~by ~~bearing~~Section ~~deposit~~4(a)(2) ~~accounts.~~of ~~The~~the ~~cash~~Securities Act ~~surrender~~and ~~value~~Rule on506 ~~bank~~of ~~owned life~~Regulation ~~insurance~~D ~~declined~~Promulgated asthereunder. ~~investment~~We ~~returns~~did onnot ~~the~~pay ~~cash~~any ~~surrender~~underwriting ~~value~~discounts ~~were~~or commissions in connection ~~down~~with ~~from~~this ~~2010~~offering.

Growth in future loan and deposit fees will depend on our ability to originate new loans and garner new deposit accounts. We expect increased government regulation will increase our costs and those costs may be passed through to our customers through new and/or increased fees. 28

OnITEM ~~January~~ 6~~, 2011, we announced FBC Mortgage, LLC (“FBC”) had purchased our 49% equity interest in Floridian Financial Mortgage, LLC on December 31, 2010 for approximately $122 thousand~~. InSELECTED ~~2011,~~FINANCIAL FBC and the Banks entered into a marketing arrangement where FBC pays each Bank a monthly fee for marketing services. Both the investment and fees from the marketing arrangement in 2010 and 2011, respectively, were included in other noninterest income. DATA

~~Noninterest~~The ~~Expense~~following table presents our summary consolidated financial data. We derived our balance sheet and income statement data for the years ended December 31, 2012, 2011, 2010, 2009, and 2008, from our audited financial statements. The summary consolidated financial data should be read in conjunction with, and are qualified in their entirety by, our financial statements and the accompanying notes and the other information included elsewhere in this Annual Report.

Following is a schedule of noninterest expense for years ended December 31, 2011, 2010, and 2009:

(Dollars in thousands, except per	As of and for the years ended December 31,
share data)	2012			2011			2010			2009			2008
Balance Sheet Data
Total assets	$	383,055		$	449,559		$	461,631		$	466,897		$	388,145
Total loans, net of unearned fees		273,653			311,654			317,565			336,724			288,791
Allowance for loan losses		8,017			6,566			8,010			9,038			6,051
Securities available for sale		57,820			73,136			42,658			81,707			43,916
Securities held to maturity		—			1,002			10,082			12,259			12,464
Intangible assets		1,009			1,201			1,893			2,085			1,855
Deposits		335,540			393,726			412,187			406,652			307,668
Noninterest bearing deposits		91,070			83,909			78,385			67,594			54,137
Shareholders’ equity		40,137			39,777			40,103			50,483			60,714
Income Statement Data
Interest income	$	15,081		$	17,064		$	19,721		$	19,294		$	13,982
Interest expense		2,367			4,018			5,733			6,942			5,446
Net interest income		12,714			13,046			13,988			12,352			8,536
Provision for loan losses		1,757			1,882			9,583			8,523			3,868
Net interest income after provision for loan losses		10,957			11,164			4,405			3,829			4,668
Noninterest income		2,368			1,114			1,211			1,285			567
Noninterest expense		12,295			14,150			15,318			15,931			11,459
Income tax expense (benefit)		103			(255	)		—			—			111
Net income (loss)	$	927		$	(2,127	)	$	(9,702	)	$	(10,817	)	$	(6,113	)
Per Share Data
Basic profit (loss) per share	$	0.15		$	(0.34	)	$	(1.56	)	$	(1.75	)	$	(1.37	)
Book value per common share	$	6.50		$	6.44		$	6.47		$	8.15		$	9.86
Selected Operating Ratios
Return on average assets		0.25	%		(0.46	)%		(2.04	)%		(2.35	)%		(2.16	)%
Return on average shareholders’ equity		2.55	%		(5.30	)%		(19.88	)%		(18.87	)%		(13.46	)%
Net interest margin		3.34	%		3.08	%		3.18	%		2.94	%		3.34	%
Selected Asset Quality Data
Nonperforming loans/total loans		3.9	%		2.7	%		5.3	%		2.8	%		2.1	%
Nonperforming assets/total assets		3.2	%		3.0	%		4.5	%		2.7	%		1.7	%
Allowance for loan losses/total loans		2.9	%		2.1	%		2.5	%		2.7	%		2.1	%
Allowance for loan losses/nonperforming loans		75.0	%		78.1	%		46.9	%		94.3	%		103.1	%
Net charge-offs (recoveries)/average loans		0.10	%		1.07	%		3.13	%		1.73	%		0.03	%
Capital Data for the Company
Equity/assets		10.5	%		8.8	%		8.7	%		10.8	%		15.6	%
Leverage ratio		10.0	%		8.1	%		8.4	%		10.0	%		18.9	%
Tier 1 risk-based capital ratio		13.5	%		10.9	%		11.0	%		12.5	%		17.7	%
Total risk-based capital ratio		14.7	%		12.1	%		12.3	%		13.8	%		15.4	%
Capital Data for Floridian Bank
Leverage ratio		9.7	%		9.0	%		8.0	%		8.2	%		14.6	%
Tier 1 risk-based capital ratio		12.7	%		11.3	%		10.5	%		10.5	%		13.4	%
Total risk-based capital ratio		14.0	%		12.5	%		11.7	%		11.7	%		12.9	%
Capital Data for Orange Bank
Leverage ratio		9.1	%		6.9	%		7.3	%		7.4	%		7.6	%
Tier 1 risk-based capital ratio		12.4	%		9.5	%		9.5	%		9.0	%		8.5	%
Total risk-based capital ratio		13.6	%		10.7	%		10.7	%		10.3	%		9.8	%

	Year ended December 31,
(Dollars in thousands)	2011		2010		2009
Salaries and employee benefits	$	6,351	$	6,833	$	7,498
Occupancy and equipment expense		2,621		3,368		3,173
Data processing		1,177		1,003		889
Professional fee		990		770		744
Other real estate expense		764		794		631
FDIC insurance		603		787		951
Credit and collections expenses		252		259		412
Telephone and communications		247		248		251
Core deposit intangible amortization		192		192		192
Goodwill impairment		500		—		—
Restructuring charge and operating loss		—		450		570
Other		453		614		620
Totals	$	14,150	$	15,318	$	15,931

~~Total noninterest~~ITEM ~~expense decreased $1.2 million or~~ 7.8% from $15.3 million in 2010 to $14.1 million in 2011. In 2010, we recognized a $1.0 million restructuring charge related to two planned branch closings and one pending branch sale. In addition, a settlement related to customer fraud was reached and $570 thousand was recovered. The closings and sale enabled us to reduce salary and occupancy expenses by 11.8% to $9.0 million in 2011 from $10.2 million in 2010. Salary expense has decreased the last three years by approximately 8% and we would expect salary expense to again decrease in 2012 with the resignation of Orange BankMANAGEMENT’sS ~~president~~DISCUSSION inAND ~~June~~ANALYSIS ~~2011~~OF ~~and~~FINANCIAL ~~the~~CONDITION ~~Company’s~~AND ~~CEO~~RESULTS inOF September 2011. The majority of other expenses remained fairly stable. FDIC insurance decreased to $603 thousand from $787 thousand due to the discontinuance of TAGP and the implementation of Dodd-Frank. OPERATIONS

34The following management’s discussion and analysis provides supplemental information, which sets forth the major factors that have affected our financial condition and results of operations during the periods included in the accompanying consolidated financial statements and should be read in conjunction with the Consolidated Financial Statements and related notes. The analysis is divided into subsections entitled “Business Overview,” “Results of Operations,” “Market Risk,” “Financial Condition,” “Liquidity,” “Capital Resources,” “Off-Balance Sheet Arrangements”, and “Accounting Policies.” The following information should provide a better understanding of the major factors and trends that affect our earnings performance and financial condition, and how our performance during 2012 compares with prior years. Throughout this section, Floridian Financial Group, Inc., and subsidiaries, collectively, are referred to as “Company,” “we,” “us,” or “our.”

~~Noninterest expense~~CAUTION ~~unrelated~~CONCERNING ~~to OREO and collections are expected to moderate in future~~FORWARD-LOOKING periods as we leverage our existing personnel and branch network to increase loans and deposits. We expect increased government regulation will increase our costs. Noninterest expense related to current and potential OREO and collections are dependent on the State of Florida’s economy including, among other factors, lower unemployment, resumption of population growth, and new business formation. STATEMENTS

~~Income~~This Annual ~~Taxes~~Report on Form 10-K, including this management’s discussion and analysis section, contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, statements about our beliefs, plans, objectives, goals, expectations, estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors, many of which are beyond our control. The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “target,” “goal,” and similar expressions are intended to identify forward-looking statements.

WeAll ~~file~~forward-looking ~~consolidated~~statements, ~~tax~~by ~~returns.~~their Wenature, ~~have~~are ~~incurred~~subject ~~operating~~to ~~losses~~risks ~~since our inception in 2006~~ and ~~have~~uncertainties. ~~accumulated~~Our aactual ~~net~~future ~~tax~~results ~~benefit~~may ~~over~~differ ~~the~~materially ~~past~~from ~~three years. We~~those ~~have~~set ~~recorded~~forth ain ~~valuation~~our ~~allowance~~forward-looking tostatements. ~~fully~~Please ~~offset~~see the ~~deferred~~Introductory ~~tax~~Note ~~assets associated~~and ~~with~~Item ~~the~~1A, ~~net~~Risk ~~operating~~Factors ~~loss~~of ~~carry~~this ~~forwards~~Annual ~~generated by our net~~Report, ~~losses. We recognized no income tax benefits~~ for ~~the~~discussion ~~years~~of ~~ended~~factors ~~December~~that ~~31, 2011~~could ~~and~~cause ~~2010. See Note 10 of~~ our ~~Notes~~actual results to ~~Consolidated~~differ ~~Financial~~materially ~~Statements for~~from ~~further~~those ~~information~~in onthe ~~income~~forward ~~taxes.~~looking statements.

~~Inflation~~However, other factors besides those listed in our Item 1A. Risk Factors or discussed in this Annual Report also could adversely affect our results, and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties. Any forward-looking statements made by us or on our behalf speak only as of the date they are made. We do not undertake to update any forward-looking statement, except as required by applicable law.

~~The~~Business ~~impact of~~Overview ~~inflation on the banking industry differs significantly from that of other industries in which a large portion of total resources are invested in fixed assets such as property, plant and equipment.~~

~~Assets~~We are a multi-bank holding company headquartered in Lake Mary, Florida, a community situated between Orlando and Daytona Beach, ~~liabilities~~Florida. ofWe ~~financial~~were ~~institutions~~incorporated ~~are~~on ~~virtually~~September ~~all~~8, ~~monetary~~2005 inas ~~nature~~the bank holding company of Floridian Bank, ~~and~~a Florida chartered ~~therefore~~commercial ~~are~~bank. ~~primarily~~We ~~impacted~~commenced byoperations, ~~interest~~along ~~rates~~with ~~rather~~Floridian ~~than~~Bank, ~~changing~~on ~~prices~~March 20, 2006. ~~While~~ ~~the~~From ~~general~~2006 ~~level~~to 2008, we experienced periods of ~~inflation~~rapid ~~underlies~~growth. ~~most~~On ~~interest~~March ~~rates~~31, ~~interest rates~~2008, ~~react~~we ~~more~~closed toa ~~changes~~merger transaction in ~~the~~which ~~expected~~Orange ~~rate~~Bank of ~~inflation~~Florida, ~~and~~a toFlorida chartered ~~changes~~commercial ~~in monetary~~bank, ~~and~~became ~~fiscal~~our ~~policy~~wholly-owned subsidiary. ~~Net~~The ~~interest~~transaction ~~income~~was ~~and~~treated ~~the~~as ~~interest~~a ~~rate~~merger ~~spread~~of equals where each ~~are~~shareholder ~~good~~of ~~measures~~Orange Bank received 1.04 shares of our ~~ability~~common tostock. ~~react~~At tothe ~~changing~~time ~~interest~~of ~~rates~~the ~~and~~merger, ~~are~~Orange Bank had approximately ~~discussed~~$196 million in ~~further~~assets, ~~detail~~including ~~above~~approximately $121 million in loans, and approximately $176 million in deposits. In 2009, we began a process of slowing our growth and preserving capital.

~~Market~~Both Floridian ~~Risk~~Bank and Orange Bank are full service commercial banks, providing a wide range of business and consumer financial services in our target marketplace, which is comprised primarily of Orange, Seminole, Lake, Flagler, and Volusia Counties in Florida. Floridian Bank is headquartered in Daytona Beach, Florida, with a primary service area in Flagler and Volusia Counties. Orange Bank is headquartered in Orlando, Florida, with a primary service area in Orange, Seminole, and Lake Counties. Collectively, as of December 31, 2012, our Banks operated 10 banking offices.

~~Market~~On ~~risk refers~~August ~~to potential losses arising from changes in interest rates~~17, ~~foreign~~ ~~exchange rates~~2012, ~~equity~~Orange ~~prices~~Bank ~~and~~entered ~~commodity~~into ~~prices.~~a WePurchase ~~are~~and ~~primarily~~Assumption ~~exposed~~Agreement ~~to interest~~(“the ~~rate~~Agreement”) ~~risk~~to ~~inherent~~sell inthe ~~our~~Bank’s ~~lending~~Crystal River ~~and~~branch ~~deposit~~to ~~taking~~Old ~~activities~~Florida asNational ~~a financial intermediary~~Bank. ToThe ~~succeed~~Bank inagreed ~~our~~to ~~capacity~~sell asthe abranch’s ~~financial~~real ~~intermediary, we~~estate ~~offer~~and animprovements, ~~extensive~~furniture and ~~variety~~fixtures, ofthe ~~financial~~deposits ~~products~~associated towith ~~meet~~ the ~~diverse~~branch ~~needs~~ of ~~our~~approximately ~~customers~~$42.6 ~~These~~million, ~~products~~and ~~sometimes~~a ~~contribute~~related toportfolio ~~interest~~of ~~rate~~loans ~~risk~~of ~~for~~approximately us$4.2 ~~when~~million. ~~product~~The ~~groups~~closing dooccurred ~~not~~on ~~complement~~January ~~one another. For example~~25, ~~depositors may~~2013 ~~want~~with ~~short-term~~a ~~deposits~~loss ~~while~~on ~~borrowers~~the ~~desire~~sale ~~long-term~~of ~~loans.~~approximately ~~Changes~~$250 ~~in market~~thousand ~~interest~~recognized ~~rates may also result~~ in ~~changes in~~ the ~~fair value of our~~ ~~financial~~third ~~instruments,~~quarter ~~cash flows, and net interest income~~2012.

Interest rate risk is comprised of re-pricing risk, basis risk, yield curve risk, and options risk. Re-pricing risk arises from differences in the cash flow or re-pricing between asset and liability portfolios. Basis risk arises when asset and liability portfolios are related to different market rate indexes, which do not always change by the same amount. Yield curve risk arises when asset and liability portfolios are related to different maturities on a given yield curve; when the yield curve changes shape, the risk position is altered. Options risk arises from “embedded options” within asset and liability products as certain borrowers have the option to prepay their loans when rates fall while certain depositors can redeem their certificates of deposit early when rates rise. 30

WeThe ~~have~~Banks ~~established~~offer commercial and retail banking services with an ~~Asset/Liability~~emphasis ~~Committee~~on ~~(ALCO)~~commercial ~~for~~and ~~each~~commercial ~~Bank,~~real ~~which~~estate ~~are~~lending, particularly ~~responsible~~to ~~for~~the ~~each~~medical ~~Bank’s~~services ~~interest~~industry. ~~rate~~As ~~risk~~of ~~management.~~December We31, ~~have~~2012, ~~implemented a~~we ~~sophisticated~~had ~~asset/liability~~total ~~model~~assets atof ~~both~~$383.1 ~~Banks~~million, todeposits ~~measure~~of ~~their~~$335.5 ~~interest~~million, ~~rate~~and ~~risk.~~total ~~Interest~~gross ~~rate~~loans ~~risk~~of ~~measures~~$273.8 ~~used~~million. byIn usaddition, ~~include~~as ~~earnings~~of ~~simulation~~December 31, ~~economic~~ ~~value~~2012, ofwe ~~equity~~had ~~(EVE)~~$40.1 ~~and~~million ~~gap~~in ~~analysis~~total shareholders’ equity. WeAt doDecember ~~not~~31, ~~use~~2012, ~~derivative financial~~the ~~instruments~~Company’s ~~for~~capital ~~market~~ratios ~~risk~~surpassed ~~management~~all ~~purposes.~~standard regulatory “minimum well capitalized measures”:

Gap analysis and EVE are static measures that do not incorporate assumptions regarding future business or economic trends. Gap analysis, while a helpful diagnostic tool at a specified date, displays cash flows for only a single rate environment. EVE’s long-term horizon helps identify changes in optionality and longer-term positions. However, EVE’s liquidation perspective does not translate into the earnings-based measures that are the focus of managing and valuing a going concern. Net interest income simulations explicitly measure the exposure to earnings from changes in market rates of interest. Our current financial position is combined with assumptions regarding future business to calculate net interest income under various hypothetical rate scenarios. The Banks’ ALCO reviews earnings simulations over the ensuing 36 months under various interest rate scenarios. Reviewing these various measures provides us with a reasonably comprehensive view of our interest rate risk profile.

	As of December 31, 2012
Total risk based capital		14.7%
Tier 1 capital		13.5%
Leverage capital		10.0%

35Our lending operations are entirely within the State of Florida, which has been particularly hard hit in the current economic recession. Evidence of the economic downturn in Florida is particularly reflected in recent unemployment statistics and realization of real estate devaluation. According to data from the U.S. Department of Labor, the Florida unemployment rate (seasonally adjusted) at December 2012 was 8.0% which was slightly above the national average of 7.8%. High unemployment has adversely affected our market areas as evidenced by layoffs and business closings over the past several years. Recently, the Company has begun to see some improvement in loan demand and the sale of other real estate properties. Whether the recent experience of the Company is part of an improving economic trend is still difficult to ascertain, given the most recent economic cycle and the level of government intervention in monetary and fiscal matters.

~~The~~Florida has ~~following~~also ~~static~~experienced ~~gap~~a ~~analysis~~high ~~compares~~volume ~~the difference between the amount~~ of ~~interest~~ ~~earning~~bankruptcy ~~assets~~filings ~~(IEA)~~during ~~and~~recent ~~interest~~years. ~~bearing~~According ~~liabilities (IBL) subject~~ to ~~re-pricing~~ ~~over~~the ~~periods~~most ofrecent ~~time~~data ~~without~~available ~~any~~from ~~regard to such balances being~~the ~~renewed or rolled over~~U.S. AFederal ~~ratio~~Courts, ofFlorida ~~more~~had ~~than~~the ~~one~~second ~~indicates~~highest anumber ~~higher level~~ of ~~re-pricing~~ ~~assets~~bankruptcy ~~over~~filings ~~re-pricing~~in ~~liabilities~~the ~~for~~United ~~the~~States ~~time~~through ~~period~~December 2012. ~~Conversely,~~Only aCalifornia ~~ratio~~experienced ofmore ~~less~~bankruptcy ~~than~~filings. ~~one~~Over ~~indicates~~95% aof ~~higher~~the ~~level~~filings ofin ~~re-pricing~~Florida ~~liabilities over~~were renon-~~pricing~~business ~~assets for the time period~~bankruptcies.

	Gap Analysis
(Dollars in Thousands)	Within 3 Months			4 To 6 Months			7 To 12 Months			Total 1 Year
Interest Earning Assets (IEA)
Loans	$	165,917		$	9,019		$	14,455		$	189,391
Investment securities		6,755			2,343			2,604			11,702
Federal funds sold		3,550			—			—			3,550
Other		22,823			—			—			22,823
Total		199,045			11,362			17,059			227,466
Interest Bearing Liabilities (IBL)
Savings, NOW, money market		149,945			—			—			149,945
Certificates of deposit		29,930			26,570			63,472			119,972
Other borrowings		12,255			—			1,700			13,955
Total		192,130			26,570			65,172			283,872
Period Gap	$	6,915		$	(15,208	)	$	(48,113	)	$	(56,406	)
Cumulative Gap	$	6,915		$	(8,293	)	$	(56,406	)
Cumulative Gap / Total Assets		1.54	%		(1.84	)%		(12.55	)%
IEA / IBL (Cumulative)		104	%		96	%		80	%

As discussed above, in July 2012, the Boards of Directors of Orange Bank agreed to approve a certain board MOU. In October 2011, the Board of Directors of the Company agreed to approve certain FRB Resolutions. The MOU and the FRB Resolutions place significant restrictions on our operations, including minimum capital ratios for Orange Bank, restrictions on the payment of dividends, prohibitions on redeeming shares of stock, and restrictions on making payments that would cause capital to decrease. Please see the section entitled Item 1. Business-About Us-Regulatory Matter for a further discussion of these important restrictions.

~~Financial~~Our ~~Condition~~principal executive offices are located at 175 Timacuan Boulevard, Lake Mary, Florida 32746. The telephone number at that office is (407) 321-3233.

~~Lending Activity.~~Results of Operations

~~The~~We ~~loan~~earned ~~portfolio~~a ~~consists~~consolidated ~~principally~~net profit of ~~loans~~$927 thousand in 2012 compared to ~~individuals~~a ~~and~~loss ~~small-~~of ~~and medium-sized~~$2.1 ~~businesses~~million ~~within~~in ~~our~~2011 ~~primary~~and ~~market~~a ~~area~~loss of ~~Central~~$9.7 ~~Florida~~million in 2010. The ~~table~~ ~~below~~primary ~~shows~~reason ~~our~~for ~~loan~~the ~~portfolio~~improvement ~~composition~~in ~~for~~2012 versus the ~~years~~net ~~ended~~losses ~~December 31,~~sustained in 2011, and 2010, ~~2009,~~was ~~2008~~due to improved interest rate spread and a $1.3 million net gain on the sale of securities. Additionally, the streamlining of management and the ~~2007~~divestiture of underperforming branch offices attributed to a decrease in noninterest expenses.

~~Loan~~In ~~Portfolio~~both 2011 ~~Composition~~and 2010, Floridian Bank’s results were impacted by the Federal Reserve’s rate reductions in combating a slumping economy as well as the addition of a fourth banking office in November 2009. Orange Bank’s results were also directly impacted by the Federal Reserve’s rate reductions. In December 2010, Orange Bank announced a restructuring plan which included selling one branch and closing two additional branches. We incurred a $1.0 million restructuring charge as a result of the plan. The closing of the branches resulted in a savings in noninterest expense of $1.2 million or 7.6%.

	December 31,
(Dollars in Thousands)	2011		2010		2009		2008		2007
Commercial	$	44,833	$	45,202	$	48,565	$	50,962	$	17,086
Commercial real estate		241,648		240,151		253,177		212,328		31,087
Residential mortgage		8,542		12,580		14,368		9,157		1,531
Consumer and home equity		16,745		19,837		20,893		16,586		3,155
Total loans		311,768		317,770		337,003		289,033		52,859
Less: Allowance for loan losses		6,566		8,010		9,038		6,051		725
Less: Net deferred fees		114		205		279		242		46
Loans, Net	$	305,088	$	309,555	$	327,686	$	282,740	$	52,088

We recorded an income tax liability of $103 thousand in 2012 and in 2011 wrote-off the deferred tax assets previously recorded. The tax benefit, for prior year losses continues to be available should profitability continue in future periods.

~~Total~~Net ~~loans at~~Interest ~~December 31, 2011 decreased by $6~~Income.0 million, or 1.9%, to $311.8 million compared to December 31, 2010 as we charged off loans and realized loan payoffs and pay-downs in excess of new loan originations. We originated $29.1 million in new loans while experiencing $27.3 million in loan pay-downs and payoffs and the transfer of $7.8 million to OREO.

36Our profitability is dependent to a large extent on net interest income which is the difference between the interest received on earning assets such as loans and securities and the interest paid on interest-bearing liabilities principally deposits and borrowings. Our principal interest earning assets are loans, investment securities, and federal funds sold. Interest-bearing liabilities primarily consist of certificates of deposit, interest-bearing checking accounts (“NOW accounts”), savings deposits, and money market accounts. Funds attracted by these interest-bearing liabilities, as well as noninterest bearing deposits, are invested in interest-earning assets. Accordingly, net interest income depends upon the volume of average interest-earning assets and average interest-bearing liabilities and the interest rates earned or paid on them.

~~The Banks’ primary lending concentration is in their respective immediate market areas. As a general policy they do not make out of market loans.~~ 31

~~CRE~~The ~~loans~~significance ~~made~~of upnet ~~the~~interest ~~largest~~income ~~portion~~is oflargely ~~our~~enhanced ~~loans~~ as ofour ~~December~~size ~~31,~~grows ~~2011~~and atthe ~~77.5%, compared~~impact toof ~~75.6%~~market atrates ~~December~~of ~~31,~~interest ~~2010.~~as ~~The~~influenced ~~majority~~by ofthe ~~CRE loans are~~Federal ~~concentrated~~Reserve’s inmonetary ~~rental properties, representing 47~~policy.~~2% of the portfolio.~~

~~Following~~The following istable areflects ~~summary~~the components of net interest income, setting forth for the ~~maturity~~periods ~~distribution~~presented, of(1) ~~certain~~average ~~loan~~assets, ~~categories~~liabilities and ~~based~~shareholders’ equity, (2) interest income earned on interest-earning assets and interest paid on interest-bearing liabilities, ~~remaining~~(3) ~~scheduled~~average ~~repayments~~yields ofearned ~~principal~~on asinterest-earning ofassets ~~December~~and 31average rates paid on interest-bearing liabilities, ~~2011:~~(4) our net interest spread (i.e., the average yield on interest-earning assets less the average rate on interest-bearing liabilities) and (5) our net interest margin (i.e., the net yield on interest earning assets).

~~Loan~~Average ~~Maturities~~Balances and ~~Sensitivities to Changes in~~ Interest Rates*

	Maturity and/or Re-pricing Period
(Dollars in Thousands)	Year Ended
(Dollars in Thousands)	Within 1 Year			1 – 5 Years			Over 5 Years		Total
	December 31, 2012										December 31, 2011							December 31, 2010
Commercial	$	37,266		$	7,559		$	—	$	44,825
		Balance				Interest			Rate			Balance			Interest	Rate			Balance			Interest	Rate
Commercial real estate		133,775			85,036			14,848		233,659
ASSETS
Residential mortgages		2,531			4,456			1,554		8,541
Loans, net(1)(2)	$	292,013			$	14,409			4.93	%	$	311,339		$	15,629	5.02	%	$	335,868		$	17,509	5.21	%
Consumer and home equity		15,819			622			—		16,441
Investment securities		68,371				616			0.90			55,292			1,287	2.33			70,417			2,129	3.02
Total	$	189,391		$	97,673		$	16,402	$	303,466
Federal funds sold & excess balance		18,236				52			0.29			54,248			130	0.24			32,982			68	0.21
Fixed/variable pricing of loans with maturities due after one year
Deposits at interest with banks		2,376				4			0.17			2,520			18	0.71			1,093			15	1.37
Loans at fixed interest rates				$	77,086		$	11,748
Total earning assets		380,996				15,081			3.96	%		423,399			17,064	4.03	%		440,360			19,721	4.48	%
Loans at floating or adjustable interest rates					20,587			4,654
Cash &due from bank		6,597										8,157							8,700
Total				$	97,673		$	16,402
Allowance for loan losses		(7,448	)									(7,822	)						(8,670	)
Other assets		33,253										40,429							35,375
Total assets	$	413,398									$	464,163						$	475,765
LIABILITIES
Savings, NOW & money market	$	150,221			$	625			0.42	%	$	162,996		$	1,163	0.71	%	$	176,131		$	1,967	1.12	%
Time deposits		117,754				1,628			1.38			154,639			2,624	1.70			166,777			3,578	2.15
Total interest bearing deposits		267,975				2,253			0.84			317,635			3,787	1.19			342,908			5,545	1.62
Other borrowings		10,817				114			1.05			9,007			231	2.56			6,895			188	2.73
Total interest bearing liabilities		278,792				2,367			0.85	%		326,642			4,018	1.23	%		349,803			5,733	1.64	%
Noninterest bearing deposits		91,825										94,932							75,206
Other liabilities		2,316										2,475							1,963
Total liabilities		372,933										424,049							426,972
Total shareholders’ equity		40,465										40,114							48,793
Total liabilities and equity	$	413,398									$	464,163						$	475,765
Interest rate spread									3.11	%						2.80	%						2.84	%
Net interest income					$	12,714								$	13,046						$	13,988
Net interest margin									3.34	%						3.08	%						3.18	%

*(1) ~~Excludes~~Average balances include nonaccrual loans, ~~deferred~~ and are net of unearned loan fees of $112, ~~overdrafts~~$114, and ~~purchase~~$205 ~~accounting~~in ~~adjustments~~2012, 2011, and 2010, respectively.

~~Nonperforming Assets~~(2) Interest income includes fees on loans of $69, $48, and $49 in 2012, 2011, and 2010, respectively.

~~Nonperforming~~Net ~~assets~~interest income decreased $72.~~4 million, or 35.4~~5%, ~~from~~to ~~year-end 2010~~$12.7 Wemillion ~~had~~in ~~$971 thousand~~2012 offrom ~~nonperforming restructured loans at December 31, 2011 compared to~~ $113.40 million in ~~the~~2011 ~~prior~~principally ~~year~~due ~~end.~~to ~~Nonperforming~~lower ~~loans~~earning ~~decreased $8~~asset volumes.7 ~~million primarily~~Net ~~due~~interest tomargin aincreased ~~transfer of $7.8 million~~ to ~~OREO~~3.3% ~~OREO~~in ~~increased,~~2012 ~~however, by~~from ~~only $1.~~3.1% ~~million~~in 2011 primarily due to ~~the~~lower ~~sale~~interest ofrates ~~several~~paid ~~properties~~on deposit ~~in 2011~~accounts.

~~Nonperforming assets~~Our ~~include~~net ~~nonaccrual~~interest income ~~loans,~~is ~~loans~~impacted 90by ~~days~~the ormarket ~~greater~~rates ~~delinquent, nonperforming~~of ~~restructured~~interest ~~loans,~~as ~~other~~influenced ~~real~~by ~~estate~~the ~~owned,~~Federal ~~and~~Reserve’s ~~repossessed personal~~monetary ~~property~~policy. ~~Nonaccrual~~We ~~loans~~have ~~represent~~seen ~~loans on which interest accruals~~a ~~have~~general ~~been~~narrowing ~~discontinued.~~of ~~Nonperforming~~margins ~~restructured~~over ~~loans are loans in which~~ the ~~borrower~~ ~~has~~last ~~been~~several ~~granted~~years aand ~~concession~~with on the ~~interest~~Federal ~~rate~~Reserve’s orannouncement ~~the original repayment terms due~~ to ~~financial~~keep ~~distress~~short-term ~~and~~interest rates ~~the~~at ~~borrower~~near ~~has~~zero ~~not~~through ~~made~~mid-2015 ~~six consecutive~~we ~~payments~~expect inthis ~~accordance~~trend ~~with~~to ~~the modified repayment terms~~continue. ~~Other real~~We ~~estate~~believe ~~owned~~our isservice ~~comprised~~commitment ~~principally~~to ofour ~~real~~customers, ~~estate~~however, will ~~properties~~enable ~~obtained in~~us ~~partial~~to orcontinue ~~total~~to ~~loan~~attract ~~satisfactions~~deposits and ismake ~~included~~loans ~~in other assets~~ at ~~the lower~~rates ofthat ~~its~~will ~~cost~~not orsignificantly ~~estimated~~deteriorate ~~fair~~our ~~value less selling costs~~margins.

We discontinue interest accruals when principal or interest is due and has remained unpaid for 90 to 180 days depending on the loan type, unless the loan is both well secured and in the process of collection. When a loan is placed on nonaccrual status, all unpaid interest and fees are reversed. Nonaccrual loans may not be restored to accrual status until all delinquent principal and interest have been paid.32

37The following table sets forth certain information regarding changes in our interest income and interest expense for the year ended December 31, 2012, as compared to the year ended December 31, 2011, and during the year ended December 31, 2011 as compared to the year ended December 31, 2010. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to changes in interest rate and changes in the volume. Changes in both volume and rate have been allocated based on the proportionate absolute changes in each category.

We classify loans consistent with federal banking regulations using a nine category grading system. The following table presents information regarding potential problem loans, consisting of loans graded special mention, substandard, doubtful, and loss, but still performing:

	Rate Volume Analysis

(Dollars In Thousands)	2012 Changes From 2011									2011 Changes From 2010
	Total			Due To Average						Total			Due To Average
	Change			Volume			Rate			Change			Volume			Rate
Interest Earning Assets
Loans, net	$	(1,220	)	$	(970	)	$	(250	)	$	(1,880	)	$	(1,279		$	(601	)
Investment securities		(671	)		304			(975	)		(842	)		(457	)		(385	)
Federal funds sold& excess balance		(78	)		(86	)		8			62			44			18
Other		(14	)		(1	)		(13	)		3			19			(16	)
Total		(1,983	)		(753	)		(1,230	)		(2,657	)		(1,673	)		(984	)

Interest Bearing Liabilities
Savings, NOW, money market accounts		(538	)		(91	)		(447	)		(804	)		(147	)		(657	)
Time deposits		(996	)		(626	)		(370	)		(954	)		(260	)		(694	)
Other borrowings		(117	)		46			(163	)		43			57			(14	)
Total		(1,651	)		(671	)		(980	)		(1,715	)		(350	)		(1,365	)

Changes In Net Interest Income	$	(332	)	$	(82	)	$	(250	)	$	(942	)	$	(1,323	)	$	381

(Dollars in Thousands)	Number of Loans		Loan Balance		Percent of Total Loans
Commercial		3		205		0.1	%
Commercial real estate
Construction and land		11		4,776		1.5
Non-owner occupied		6		8,391		2.7
Owner occupied		12		13,246		4.3
Residential mortgages		—		—		—
Home equity		2		71		NM
Consumer		—		—		—
Total		34		26,689		8.6	%

Provision for Loan Losses.

~~Nonperforming~~The allowance ~~loans~~for ~~are~~loan ~~closely~~losses ~~monitored~~is onestablished anthrough ~~ongoing~~a ~~basis~~provision asfor ~~part~~loan oflosses ~~our~~charged ~~loan~~against ~~review~~net ~~and~~interest income. Loans are charged against ~~work-out~~the ~~process~~allowance for loan losses when management believes that the collectability of the principal is unlikely. The ~~potential~~allowance ~~risk~~is ofan amount ~~loss~~that management believes is adequate to absorb possible losses on ~~these~~existing loans isthat ~~evaluated~~may bybecome uncollectable, based on ~~comparing~~evaluations of the ~~loan~~collectability ~~balance~~of toloans, ~~the~~industry ~~fair~~historical ~~value~~loss ofexperience, ~~any~~current ~~underlying~~economic ~~collateral~~conditions, orportfolio mix, and other factors. While management uses the ~~present~~best ~~value~~information ofavailable ~~projected~~to make its evaluation, future ~~cash~~adjustments ~~flows.~~to ~~Losses~~the allowance may be necessary if there are significant ~~recognized~~changes ~~where appropriate.~~in economic conditions.

	Nonperforming Assets at December 31,
(Dollars in Thousands)	2011			2010			2009			2008			2007
Nonaccrual	$	6,964		$	15,602		$	3,105		$	5,999		$	—
Nonperforming restructured loans		971			1,423			6,476			—			—
Past Due 90 or more days and still accruing		471			63			—			—			—
Total nonperforming loans		8,406			17,088			9,581			5,999			—
Other real estate owned		5,129			3,864			3,023			712			—
Repossessed personal property		—			—			125			—			—
Total nonperforming assets	$	13,535		$	20,952		$	12,729		$	6,711		$	—
Nonperforming loans as a percentage of total loans		2.7	%		5.3	%		2.8	%		2.1	%		—	%
Nonperforming assets as a percentage of total assets		3.0	%		4.5	%		2.7	%		1.7	%		—	%

Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, as a practical expedient, at the loan’s observable market price or the fair value of the collateral as indicated by an appraisal report, if the loan is collateral dependent. A loan is impaired when it is probable the creditor will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement. Our policy for recognizing income on impaired loans is to accrue interest unless a loan is placed on nonaccrual status. Cash collections on impaired loans are credited to the loan receivable balance and no interest income is recognized on those loans unless the principal balance is current.

InThere ~~the year~~are ~~ended~~no ~~December~~residential ~~31,~~mortgage ~~2011,~~loan ~~interest~~concentrations ~~income~~in ~~not~~the ~~recognized~~loan onportfolio. ~~nonperforming~~The majority of the charge-offs and impaired loans were ~~(but~~experienced ~~would~~in ~~have~~the ~~been~~commercial ~~recognized~~real ifestate ~~the~~loan portfolio which represents 78% of gross loans. ~~were~~These ~~current)~~type ~~was~~loans ~~approximately~~are all within ~~$453~~our ~~thousand.~~general ~~Interest~~market ~~income~~areas ~~recognized~~and are made on ~~nonperforming~~original ~~loans~~terms ~~totaled~~typically ~~$10 thousand~~at inup ~~2011~~to 80% loan to value. ~~Nonperforming~~These real estate collateral dependent loans asrequire an updated appraisal at least annually using a ~~percentage~~Board of ~~total~~Directors ~~loans~~approved ~~decreased to~~appraisal 2firm.7% ~~for~~In the event ~~year~~of ~~ended~~a ~~December~~collateral 31shortfall following an appraisal update, ~~2011~~the ~~from~~borrower 5is contacted to provide additional collateral or reduce the outstanding loan balance.3% ~~for~~Subsequent to these actions, if there is concern that the ~~year~~loan ~~ended~~may not be collectable as ~~December~~originally 31documented, ~~2010.~~a ~~The~~loan ~~decrease~~impairment ~~was~~evaluation ~~primarily~~is ~~due~~performed and specific reserves are provided to aoffset ~~55.4%~~any orshortfalls in $8collectability.6 ~~million decrease~~At inDecember ~~nonaccrual~~31, 2012, loans. ~~The~~30+ ~~decrease~~days past due in ~~nonaccrual~~the ~~loans~~commercial ~~resulted~~real ~~from~~ estate portfolio totaled $75.84 million or in2.6% ~~loans~~of ~~transferred~~total tocommercial ~~OREO~~real ~~and~~estate ~~$800~~loans ~~thousand~~and in2.0% ~~pay~~of ~~downs.~~total loans.

~~As of~~The ~~December~~allowance ~~31,~~for ~~2011~~loan ~~the~~loss ~~Company~~increased ~~had~~ $5.1.5 million in ~~OREO,~~2012 aover ~~32.7%~~2011 orand decreased $1.34 million ~~increase~~ ~~from~~in ~~December~~2011 ~~31,~~versus 2010. ~~The~~resulting ~~increase resulted from the Company taking~~in ~~back~~an ~~collateral~~allowance ~~in lieu~~ of or2.93% asand ~~part~~2.11% of ~~foreclosure.~~total ~~During~~loans ~~the~~at ~~year~~December ~~the Company~~31, ~~sold~~2012 ~~approximately~~and ~~38%~~December of31, ~~its OREO~~2011, ~~resulting~~respectively. inThe aincrease ~~net~~in ~~loss recognized~~the ~~for~~allowance was the ~~year~~result of ~~$123~~one ~~thousand.~~loan Atthat ~~December~~was ~~31,~~awaiting ~~2011~~government ~~the~~program ~~Company~~approval ~~had~~and ~~total nonperforming~~outside ~~assets~~investor ~~of $13~~funding.5 ~~million,~~During ~~a $7.4 million or 35.4% decrease from~~the ~~December~~first ~~31,~~quarter ~~2010.~~of ~~Nonperforming~~2013 ~~assets~~notification ~~as a percentage~~ of ~~total~~governmental ~~assets~~approval ~~decreased to~~was 3received.0% atThe ~~December~~loan ~~31,~~is ~~2011~~expected ~~from~~to ~~4.5%~~be atpaid ~~December~~off ~~31,~~by ~~2010. As of December 31, 2011,~~ the ~~Company believes all loans have been classified appropriately and~~second ~~potential~~quarter ~~problems~~of ~~identified~~2013.

~~Allowance and Provision for Loan Losses.~~ 33

~~The~~Noninterest ~~allowance for loan losses represents management’s estimate of probable loan losses inherent in the loan portfolio at a specific point in time~~Income. This estimate includes losses associated with specifically identified loans as well as estimated probable credit losses inherent in the remainder of the loan portfolio. Additions are made to the allowance through periodic provisions charged to income. Reductions to the allowance occur as loans are charged off. During 2011, we had net charge-offs of approximately $3.3 million representing 2.5% of year-to-date average loans. Further, as disclosed in Note 4 of the Consolidated Financial Statements, management added approximately $1.9 million to the allowance for loan losses through the loan loss provision bringing the total allowance to approximately $6.6 million or 2.1% of total loans outstanding at December 31, 2011. Management evaluates the adequacy of the allowance at least quarterly, and in doing so relies on various factors including, but not limited to, assessment of potential loss, delinquency and nonaccrual trends, portfolio growth, underlying collateral coverage and current economic conditions. This evaluation is subjective and requires material estimates that may change over time.

38Following is a schedule of noninterest income for the years ended December 31, 2012, 2011, and 2010:

There are no residential mortgage loan concentrations in the loan portfolio. The majority of the charge-offs and impaired loans were in the commercial real estate loan portfolio which represents 78% of gross loans. Commercial real estate type loans are all within our general market areas and are made on terms typically at 80% loan to value. Commercial real estate collateral dependent loans require an updated appraisal at least annually using a Board of Directors approved appraisal firm. In the event of a collateral shortfall following an appraisal update, the borrower is contacted to provide additional collateral or reduce the outstanding loan balance. Subsequent to these actions, if there is concern that the loan may not be collectable as originally documented, an impairment evaluation is performed and specific reserves are provided to offset any shortfalls in collectability. At December 31, 2011, loans 30 to 89 days past due in the commercial real estate portfolio totaled $399 thousand or 0.1% of total loans.

	Year ended December 31,
(Dollars in thousands)	2012			2011			2010

Service charges and fees on deposit accounts	$	627		$	645		$	445
Cash surrender value – bank owned life insurance		112			330			408
Loan fee income		71			48			49
Loss on sale of assets		(123	)		(139	)		17
Gain on sale of securities		1,284			—			—
Other		397			230			292
Totals	$	2,368		$	1,114		$	1,211

Noninterest income increased to $2.4 million in 2012 from $1.1 million in 2011. The increase was primarily due to a $1.3 million gain on ~~components~~the sale of ~~the~~securities ~~allowance~~available for ~~loan~~sale. ~~losses~~The ~~represent~~loss ~~estimates~~on ~~based~~sale ~~upon generally~~of ~~accepted~~assets ~~accounting~~included ~~principles~~a ~~regarding~~$250 ~~accounting~~thousand ~~for~~recognized ~~contingencies~~loss on the sale of ~~and~~our ~~accounting~~Crystal River branch that occurred in January 2013; partially offset by ~~creditors~~recognized ~~for~~gains ~~impairment~~on the sale of aother ~~loan~~real estate during the year. WeThe ~~apply~~increase ~~this~~in ~~guidance~~deposit fees from 2010 to 2011 and 2012 was the result of more large balance depositors in ~~commercial~~noninterest ~~loans~~bearing ~~that~~deposit ~~are~~accounts ~~considered~~and ~~impaired~~the reallocation of ATM fees from an offset of an expense account to showing the actual income received. This change resulted in increased ATM expenses being reported.

AOn ~~loan is~~January ~~considered~~6, to2011, bewe ~~impaired~~announced ~~when~~FBC Mortgage, ~~based~~LLC ~~upon~~(“FBC”) ~~current~~had ~~information~~purchased ~~and~~our ~~events,~~49% ~~it is~~equity ~~probable~~interest ~~that~~in ~~the~~Floridian ~~loan~~Financial ~~will~~Mortgage, LLC ~~not~~on beDecember ~~repaid~~31, ~~according~~2010 tofor ~~its~~approximately ~~contractual terms,~~$122 ~~including~~thousand. ~~both~~In ~~principal~~2011, FBC and ~~interest.~~the ~~Management~~Banks ~~performs~~entered ~~individual~~into a marketing arrangement where ~~assessments~~FBC ofpays ~~impaired~~each ~~loans,~~Bank ~~which~~a ~~includes~~monthly ~~TDRs,~~fee tofor ~~determine~~marketing ~~the~~services. ~~existence of~~Both ~~loss~~the ~~exposure~~investment and, ~~where~~fees ~~applicable,~~from the ~~extent~~marketing ofarrangement ~~loss~~were ~~exposure~~included in ~~based~~other ~~upon the~~noninterest ~~present~~income. ~~value~~In ofDecember ~~expected~~2012, ~~future~~the ~~cash~~Banks ~~flows~~hired ~~available~~a toresidential ~~pay~~mortgage ~~the~~lender ~~loan,~~and orsigned a Correspondent Agreement ~~based~~with ~~upon~~FBC whereby the ~~estimated~~Banks ~~realizable~~will ~~collateral~~originate ~~where~~residential amortgage ~~loan~~loans isand ~~collateral dependent.~~sell them to FBC.

~~The following~~Noninterest ~~is a summary of information pertaining to impaired loans:~~ Expense.

	December 31,
(Dollars in Thousands)	2011		2010
Impaired loans without a valuation allowance	$	15,269	$	23,929
Impaired loans with a valuation allowance		8,376		10,887
Total impaired loans	$	23,645	$	34,816
Valuation allowance related to impaired loans	$	255	$	1,185

Following is a schedule of noninterest expense for years ended December 31, 2012, 2011, and 2010:

	Year ended December 31,
(Dollars in thousands)	2012		2011		2010

Salaries and employee benefits	$	4,965	$	6,351	$	6,833
Occupancy and equipment expense		2,786		2,621		3,368
Processing, software & communications		1,763		1,286		1,102
Professional fee		880		990		770
Other real estate expense (“OREO”)		387		764		794
FDIC insurance		581		603		787
Credit and collections expenses		108		252		259
Telephone		149		138		149
Core deposit intangible amortization		192		192		192
Goodwill impairment		—		500		—
Restructuring charge and operating loss		—		—		450
Other		484		453		614
Totals	$	12,295	$	14,150	$	15,318

~~The~~Total noninterest ~~activity~~expense decreased $1.9 million or 13.1% from $14.2 million in 2011 to $12.3 million in 2012. In 2011, we recognized a $500 thousand write off of goodwill and had salary expenses of $6.4 million. With the resignation of Orange Bank’s president in ~~our~~June ~~loan~~2011 ~~loss~~and ~~allowance~~the Company’s CEO in September 2011 the Company was asable ~~follows:~~to reduce salaries by 22% to $5.0 million in 2012. We experienced a 37% increase in processing, software, and communication expenses related to our decision in mid-2012 to convert to new servicing and platform systems. Substantial savings in this area are expected to be realized over the life of the contract. Reduction in our OREO properties during 2012 enabled us to reduce OREO expenses to $387 thousand in 2012 from $764 thousand in 2011. The majority of other expenses remained fairly stable.

	Year Ended December 31,
(Dollars in Thousands)	2011			2010			2009			2008			2007
Balance at beginning of period	$	8,010		$	9,038		$	6,051		$	725		$	480
Additions due to acquisitions		—			—			—			1,515			—
Loan charge-offs:
Commercial		320			1,152			1,394			57			—
Commercial real estate		2,656			7,663			3,624			—			—
Residential mortgage		391			2,100			—			—			—
Consumer and home equity		242			289			566			—			—
Total Charge-offs		3,609			11,204			5,584			57			—
Recoveries:
Commercial		107			118			48			—			—
Commercial real estate		172			404			—			—			—
Residential mortgage		—			67			—			—			—
Consumer and home equity		4			4			—			—			—
Total recoveries		283			593			48			—			—
Net charge-offs		3,326			10,611			5,536			57			—
Provision for loan losses		1,882			9,583			8,523			3,868			245
Balance at end of period	$	6,566		$	8,010		$	9,038		$	6,051		$	725
Allowance / Total Loans		2.11	%		2.52	%		2.68	%		2.10	%		1.37	%
Net Charge-Offs / Average Loans		1.07	%		3.13	%		1.73	%		0.03			—
Allowance/Nonperforming Loans		78.1	%		46.9	%		94.3	%		100.9			—

~~The~~Noninterest ~~following~~expense ~~table~~unrelated ~~reflects~~to ~~the~~OREO ~~allowance~~and ~~allocation~~collections ~~per~~are ~~loan~~expected ~~category~~to ~~and~~continue ~~percent of~~to ~~loans~~moderate in ~~each~~future ~~category~~periods as we leverage our existing personnel and branch network to ~~total~~increase loans ~~for~~and deposits. We expect increased government regulation will increase our costs. Noninterest expense related to current and potential OREO and collections are dependent on the ~~periods~~State ~~indicated:~~of Florida’s economy including, among other factors, lower unemployment, resumption of population growth, and new business formation.

Income ~~(Dollars in Thousands)~~Taxes.

	2011				2010				2009				2008
Commercial	$	743	14.4	%	$	1,281	14.2	%	$	1,824	14.4	%	$	683	11.3	%
Commercial real estate		5,151	77.5	%		5,475	75.6	%		5,614	75.1	%		4,577	75.6	%
Residential mortgage		135	2.7	%		460	4.0	%		244	4.3	%		366	6.1	%
Consumer and home equity		303	5.4	%		729	6.2	%		865	6.2	%		207	3.4	%
Unallocated		234	—			65	—			491	—			218	3.6	%
Total	$	6,566	100	%	$	8,010	100.0	%	$	9,038	100.0	%	$	6,051	100.0	%

We file consolidated tax returns. Since our inception in 2006 and through 2011 we incurred substantial losses and accumulated a net tax benefit. In 2011 we recorded a valuation allowance to fully offset the deferred tax assets associated with the net operating loss carry forwards generated by our net losses. We recognized no income tax benefits for the years ended December 31, 2012 and 2011. See Note 10 of our Notes to Consolidated Financial Statements for further information on income taxes.

~~Investment Activity~~Inflation.

~~Investment~~The impact ~~activities~~of ~~serve~~inflation ~~to enhance the overall yield~~ on ~~interest earning assets while supporting interest rate sensitivity and liquidity positions. Securities purchased with~~ the ~~intent~~banking ~~and~~industry ~~ability~~differs tosignificantly ~~retain~~from until maturity are categorized as securities held to maturity and carried at amortized cost. All other securities are categorized as securities available for sale and are recorded at fair value. Securities, like loans, are subject to similar interest rate and credit risk. In addition, by their nature, securities classified as available for sale are also subject to market value risks that ~~could negatively affect the level~~ of ~~liquidity~~other ~~available~~industries ~~to us, as well as shareholders’ equity. A change~~ in ~~the~~which ~~value of securities held to maturity could also negatively affect the level of shareholders’ equity if there was~~ a ~~decline~~large inportion ~~the underlying creditworthiness~~ of ~~the~~total ~~issuers and an other-than-temporary impairment is~~resources ~~deemed~~are orinvested ~~a change~~ in ~~our~~fixed ~~intent~~assets ~~and~~such ~~ability~~as toproperty, ~~hold~~plant ~~the~~and ~~securities to maturity~~equipment.

40Assets and liabilities of financial institutions are virtually all monetary in nature, and therefore are primarily impacted by interest rates rather than changing prices. While the general level of inflation underlies most interest rates, interest rates react more to changes in the expected rate of inflation and to changes in monetary and fiscal policy. Net interest income and the interest rate spread are good measures of our ability to react to changing interest rates and are discussed in further detail above.

As of December 31, 2011, securities totaling $73.1 million and $1.0 million were classified as available for sale and held to maturity, respectively. During 2011, securities available for sale increased by approximately $30.5 million and securities held to maturity declined by $9.1 million from December 31, 2010. In 2011, we decreased our cash and cash equivalents by $29.0 million, due to the Federal Open Market ~~Committee’s extremely accommodative position regarding monetary policy.~~Risk

~~The~~Market ~~following~~risk refers ~~table~~to ~~sets~~potential ~~forth~~losses ~~the~~arising ~~carrying~~from ~~amount~~changes in interest rates, foreign exchange rates, equity prices and commodity prices. We are primarily exposed to interest rate risk inherent in our lending and deposit taking activities as a financial intermediary. To succeed in our capacity as a financial intermediary, we offer an extensive variety of financial products to meet the diverse needs of our ~~investments~~customers. These products sometimes contribute to interest rate risk for us when product groups do not complement ~~portfolio:~~one another. For example, depositors may want short-term deposits while borrowers desire long-term loans. Changes in market interest rates may also result in changes in the fair value of our financial instruments, cash flows, and net interest income.

	December 31,
(Dollars in Thousands)	2011		2010		2009
Carrying value of investment in:
U.S. government and federal agencies:
Held to maturity at amortized cost	$	1,002	$	10,082	$	12,259
Available for sale at fair value		13,690		29,224		81,707
States & political subdivisions – available for sale		1,795		1,658		—
U.S. Agency REMIC		39,038		11,776		—
Residential mortgage-backed securities – available for sale		18,613		—		—
Total	$	74,138	$	52,740	$	93,966

Interest rate risk is comprised of repricing risk, basis risk, yield curve risk, and options risk. Repricing risk arises from differences in the cash flow or repricing between asset and liability portfolios. Basis risk arises when asset and liability portfolios are related to different market rate indexes, which do not always change by the same amount. Yield curve risk arises when asset and liability portfolios are related to different maturities on a given yield curve; when the yield curve changes shape, the risk position is altered. Options risk arises from “embedded options” within asset and liability products as certain borrowers have the option to prepay their loans when rates fall while certain depositors can redeem their certificates of deposit early when rates rise.

~~The~~We have established ~~following~~an ~~table~~Asset/Liability ~~sets~~Committee ~~forth~~(ALCO) ~~the~~for ~~carrying~~each ~~amount~~Bank, ofwhich ~~debt~~are ~~securities~~responsible byfor each Bank’s interest rate risk management. We ~~contractual~~have ~~maturity~~implemented a sophisticated asset/liability model at ~~December~~both Banks to measure their interest rate risk. Interest rate risk measures 31used by us include earnings simulation, ~~2011:~~economic value of equity (EVE) and gap analysis. We do not use derivative financial instruments for market risk management purposes.

(Dollars in Thousands)	Within 1 year		After 1 year through 5 years		After 5 years Through 10 years		Over 10 years		Total
Available for Sale, at fair value
U.S. Government and federal agencies	$	—	$	3,090	$	5,194	$	5,406	$	13,690
States & political subdivisions		—		752		1,043		—		1,795
U.S. Agency REMIC		—		—		4,917		34,121		39,038
Residential mortgage-backed		—		—		12,138		6,475		18,613
Total	$	—	$	3,842	$	23,292	$	46,002	$	73,136
Securities Held to Maturity, at cost
U.S. Government and federal agencies	$	—	$	—	$	—	$	1,002	$	1,002
Total	$	—	$	—	$	—	$	1,002	$	1,002

Gap analysis and EVE are static measures that do not incorporate assumptions regarding future business or economic trends. Gap analysis, while a helpful diagnostic tool at a specified date, displays cash flows for only a single rate environment. EVE’s long-term horizon helps identify changes in optionality and longer-term positions. However, EVE’s liquidation perspective does not translate into the earnings-based measures that are the focus of managing and valuing a going concern. Net interest income simulations explicitly measure the exposure to earnings from changes in market rates of interest. Our current financial position is combined with assumptions regarding future business to calculate net interest income under various hypothetical rate scenarios. The Banks’ ALCO reviews earnings simulations over the ensuing 12 months under various interest rate scenarios. Reviewing these various measures provides us with a reasonably comprehensive view of our interest rate risk profile.

Securities of a single issuer which had book values in excess of 10% of our shareholders’ equity at December 31, 2011 included mortgage-backed securities issued by the Federal National Mortgage Association (“FNMA”), Government National Mortgage Association (“GNMA”), Federal Home Loan Mortgage Corporation (“FHLMC”), Federal Home Loan Bank (“FHLB”), and Federal Farm Credit Banks (“FFCB”).35

The following ~~mortgage-backed~~static ~~securities~~gap ~~issued~~analysis bycompares ~~FNMA~~the ~~had~~difference anbetween ~~aggregate~~the ~~book~~amount ~~value~~ of interest earning assets (IEA) and interest bearing liabilities ~~market~~(IBL) ~~value~~subject ofto ~~$34.8~~repricing ~~million~~over ~~and~~periods ~~$34.9~~of ~~million,~~time ~~respectively,~~without ~~the mortgage-backed~~any ~~securities~~regard ~~issued~~to bysuch ~~GNMA~~balances ~~had~~being anrenewed ~~aggregate~~or ~~book~~rolled ~~value~~over. A ratio of ~~and~~more ~~market~~than ~~value~~one ofindicates ~~$14.1~~a ~~million~~higher ~~and~~level ~~$14.4~~of ~~million,~~repricing ~~respectively,~~assets ~~the mortgage-backed~~over ~~securities~~repricing ~~issued~~liabilities byfor ~~FHLMC~~the ~~had~~time anperiod. ~~aggregate~~Conversely, ~~book~~a ~~value~~ratio of ~~and~~less ~~market~~than ofone ~~$17.8~~indicates ~~million~~a ~~and~~higher ~~$17.6~~level ~~million,~~of ~~respectively,~~repricing ~~the~~liabilities ~~FHLB~~over ~~bonds~~repricing ~~had~~assets ~~an aggregate~~for ~~book~~the ~~and~~time ~~market~~period. ~~value~~As ofindicated ~~$5.4~~in ~~million,~~our ~~and~~Gap ~~the~~Analysis table, ~~Alabama~~our ~~bonds~~one-year ~~had~~cumulative ~~an aggregate~~gap ~~book~~at ~~value~~December ~~and~~31, ~~market~~2012, ~~value~~was ofa $negative 14.784% ~~million~~compared ~~and~~to $a 1negative 12.855% ~~million, respectively,~~ at December 31, 2011. The change is primarily due to long-term time deposits maturing over the next 12 months.

Deposits and Other Borrowings.

	Gap Analysis

(Dollars in Thousands)	Within 3 Months			4 To 6 Months			7 To 12 Months			Total 1 Year

Interest Earning Assets (IEA)

Loans	$	128,807		$	10,007		$	22,954		$	161,768
Investment securities		2,155			1,704			2,786			6,645
Federal funds sold		3,525			—			—			3,525
Other		18,498			—			—			18,498
Total		152,985			11,711			25,740			190,436

Interest Bearing Liabilities (IBL)

Savings, NOW, money market		147,485			—			—			147,485
Certificates of deposit		13,910			14,701			28,644			57,255
Other borrowings		4,252			—			—			4,252
Total		165,647			14,701			28,644			208,992

Period Gap	$	(12,662	)	$	(2,990	)	$	(2,904	)	$	(18,556	)
Cumulative Gap	$	(12,662	)	$	(15,652	)	$	(18,556	)

Cumulative Gap / Total Assets		(3.31	)%		(4.09	)%		(4.84	)%
IEA / IBL (Cumulative)		92	%		91	%		91	%

~~Our primary~~Financial ~~source of funds is deposits. Those deposits are provided by businesses, municipalities, and individuals located within the markets served by our Banks.~~ Condition

41Lending Activity.

~~Total deposits~~The ~~decreased~~loan ~~$18.5~~portfolio consists ~~million~~principally toof ~~$393.7~~loans ~~million at December 31, 2011, compared~~ to ~~December~~individuals ~~31,~~and ~~2010.~~small- ~~In 2011, our demand deposit accounts grew $5.5 million or 7.0% as we garnered new deposit accounts~~ and ~~existing~~medium-sized ~~depositors increased~~businesses ~~balances.~~within ~~NOW~~our ~~accounts~~primary ~~and money~~ market ~~accounts~~area ~~decreased~~of ~~$31~~Central Florida.7 ~~million,~~The ortable ~~17.5%~~below ~~due~~shows ~~to nominal interest rates paid on these accounts. Liquidity from~~ our ~~investment~~loan portfolio ~~coupled~~composition ~~with~~for ~~declining loan balances reduced our need to retain and attract customers seeking high yielding deposits. In~~ the ~~last~~years ~~six~~ended ~~months~~December of31, 2012, 2011, we2010, ~~opted not to retain or pursue deposit customers solely interested in higher yielding time deposits. As a result~~2009, ~~our~~and ~~time deposits excluding brokered deposits declined $15~~2008.~~6 million, or 11.6%.~~

~~Other borrowings,~~Loan ~~made~~Portfolio up of customer retail repurchase agreements (“repurchase agreements”) and loan payable, increased by $7.2 million at December 31, 2011 compared to December 31, 2010 due to a $5.5 million increase in repurchase agreements and the purchase of the Clermont branch. Composition

The distribution by type of our average deposit accounts for December 31, 2011, 2010, and 2009 was as follows:

	December 31,
(Dollars in Thousands)	2012		2011		2010		2009		2008
Commercial	$	37,166	$	44,833	$	45,202	$	48,565	$	50,962
Commercial real estate		212,846		241,648		240,151		253,177		212,328
Residential mortgage		7,371		8,542		12,580		14,368		9,157
Consumer and home equity		16,382		16,745		19,837		20,893		16,586
Total loans		273,765		311,768		317,770		337,003		289,033
Less: Allowance for loan losses		8,017		6,566		8,010		9,038		6,051
Less: Net deferred fees		112		114		205		279		242
Loans, Net	$	265,636	$	305,088	$	309,555	$	327,686	$	282,740

	December 31,
	2011						2010						2009
(Dollars in Thousands)	Average Balance			Average Rate			Average Balance			Average Rate			Average Balance			Average Rate
Noninterest bearing accounts	$	94,932			—		$	75,206			—		$	62,849			—
Interest bearing accounts
Savings, NOW, and money market accounts		162,996			0.71	%		176,131			1.12	%		188,451			1.59	%
Time deposits		154,639			1.70	%		166,777			2.15	%		143,061			2.60	%
Total interest bearing deposits		317,635			1.19	%		342,908			1.62	%		331,512			2.03	%
Average total deposits	$	412,567			0.96	%	$	418,114			1.35	%	$	394,361			1.70	%
Brokered deposits included in total deposits	$	42,335					$	41,796					$	36,257
Brokered deposits as a percentage of total deposits		10.3	%					10.0	%					8.9	%

Net loans at December 31, 2012 decreased by $39.5 million, or 12.9%, to $265.6 million compared to December 31, 2011 due to the payoff of several large loans during the year. We originated $20.1 million in new loans while experiencing $48.4 million in loan pay-downs and payoffs. We transferred $850 thousand to OREO with the remaining decrease attributed to scheduled amortization in the portfolio.

AsThe Banks’ ofprimary ~~December~~lending ~~31,~~concentration ~~2011,~~is ~~certificates~~in oftheir ~~deposit~~respective ofimmediate ~~$100,000~~market orareas. ~~more~~As ~~mature~~a ~~as follows:~~general policy they do not make out of market loans.

(Dollars in Thousands)	Amount		Weighted Average Rate
Up to 3 months	$	9,563		1.64	%
3 to 6 months		13,078		1.97	%
6 to 12 months		27,876		1.55	%
Over 12 months		22,265		1.78	%
	$	72,782		1.56	%

~~Maturity~~CRE loans made ~~terms,~~up ~~service~~the ~~fees~~largest ~~and~~portion ~~withdrawal~~of ~~penalties~~our ~~are~~loans ~~established~~as byof usDecember on31, ~~a periodic~~2012 ~~basis~~at 77.7%, ~~The~~compared ~~determination~~to of77.5% ~~rates~~at ~~and~~December ~~terms~~31, is2011. ~~predicated~~The onhighest ~~funds~~concentration ~~acquisition~~of ~~and~~CRE ~~liquidity~~loans ~~requirements,~~is ~~rates~~in ~~paid~~rental ~~by competitors~~properties, ~~growth~~representing ~~goals and~~39.8% ~~federal~~of ~~regulations.~~the portfolio.

~~Liquidity~~Following is a summary of the maturity distribution of certain loan categories based on remaining scheduled repayments of principal as of December 31, 2012:

~~Our goal~~Loan inMaturities ~~liquidity management is to satisfy the cash flow requirements of depositors~~ and ~~borrowers as well as our operating cash needs with~~Sensitivities ~~cost-effective funding. Our Board of Directors has established an Asset/Liability Policy in order~~ to ~~achieve~~Changes and maintain earnings performance consistent with long-term goals while maintaining acceptable levels of interest rate risk, a “well-capitalized” balance sheet, and adequate levels of liquidity. This policy designates each Bank’s ALCO as the body responsible for meeting these objectives. The ALCO, which includes members of executive management, reviews liquidity on a periodic basis and approves significant changes in ~~strategies~~Interest ~~that affect balance sheet or cash flow positions.~~ Rates*

	Maturity and/or Re-pricing Period
(Dollars in Thousands)	Within 1 Year		1 – 5 Years		Over 5 Years		Total
Commercial	$	26,317	$	7,844	$	2,465	$	36,626
Commercial real estate		117,384		59,943		26,102		203,429
Residential mortgages		3,261		2,111		1,889		7,261
Consumer and home equity		15,397		887		144		16,428
Total	$	162,359	$	70,785	$	30,600	$	263,744

Fixed/variable pricing of loans with maturities due after one year
Loans at fixed interest rates			$	63,514	$	25,503
Loans at floating or adjustable interest rates				7,271		5,097
Total			$	70,785	$	30,600

~~The primary~~* ~~source~~Excludes ofnonaccrual liquidity is deposits provided by commercial and retail customers. The Banks attract these deposits by offering an array of products designed to match customer needs and priced in the middle of our competitors. Deposits can be very price sensitive; thereforeloans, ~~we believe that fluctuating~~deferred ~~deposit offering rates to the top of the market would generate a larger inflow of funds. In addition to local market deposits~~fees, ~~the~~overdrafts Banks have access to national brokered certificates of deposit markets as well as deposit subscription services. The Banks use these alternative sources of deposits to supplement deposits particularly when the rates are lower than the local market. These sources of deposit are limited by our policies to 25% of assets. Further, access to these brokered deposits is limited by regulation to banks that meet or exceed “well capitalized” definitions. In the event that the Company would fall below “well capitalized” levels, regulators will not permit any additional brokered deposits and ~~would~~purchase ~~impose~~accounting ~~deposit rate restrictions not to exceed a published national rates~~adjustments. Overall deposit levels are monitored on a constant basis as are liquidity policy levels, which must be maintained at a minimum of 14% of total deposits. Sources of these liquidity levels include cash and due from banks, short-term investments such as federal funds sold, and our investment portfolio, which can also be used as collateral for short-term borrowings. Alternative sources of funds include unsecured federal funds lines of credit through correspondent banks. The Banks have established contingency plans in the event of extraordinary fluctuations in cash resources.

~~Operating Activities.~~Nonperforming Assets.

~~Cash~~Nonperforming ~~flows~~assets ~~from~~at ~~continuing~~year-end ~~operating~~2012 ~~activities~~decreased ~~primarily~~$1.4 ~~include~~million, ~~net~~or ~~income~~10.6%, ~~(loss)~~from year-end 2011. Nonperforming loans increased $2.3, from ~~adjusted~~$8.4 ~~for~~million ~~items~~on inDecember ~~net~~31, ~~income~~2011 ~~that~~to ~~did~~$10.7 ~~not~~million ~~impact~~on ~~cash~~December 31, 2012. ~~Net~~Included ~~cash~~in ~~provided~~nonperforming ~~by continuing~~loans ~~operating~~at ~~activities~~December ~~decreased~~31, 2012, bywere $27.85 million of nonperforming restructured loans (TDRs) compared to $~~896~~971 thousand ~~for~~ in the prior year ~~ended~~end. ~~December~~The increase ~~31,~~was ~~2011,~~due ~~from~~to ~~$3.7~~two ~~million~~new ~~provided~~restructured byloans ~~continuing operating~~in ~~activities~~2012 ~~for~~plus ~~the~~modifications ~~year~~to ~~ended~~three ~~December~~loans ~~31,~~previously ~~2010~~restructured. ~~The~~One ~~decrease was~~loan ~~primarily~~was restructured due to ~~net~~a ~~accretion~~delay in approval of ~~securities~~a ~~decreasing~~government program for which approval was received in early 2013. Payoff on this loan is expected by second quarter 2013. On two of the other loans we increased the interest rate from ~~$107~~3.25% ~~thousand~~to ~~for~~5.1% and modified the ~~year~~payments ~~ended~~from ~~December~~interest ~~31,~~only ~~2010~~to principal and interest payments sufficient to aterm ~~negative~~the loans out over ten years. OREO decreased by 72.7% or $13.97 million ~~for~~due to the ~~year~~sale ~~ended~~of several properties in 2012 coupled with only one property ~~December~~over 31$500 thousand and three properties under $100 thousand, ~~2011.~~in total, being transferred to OREO.

~~Investing~~Nonperforming ~~Activities~~assets include nonaccrual loans, loans 90 days or greater delinquent, nonperforming restructured loans, other real estate owned, and repossessed personal property. Nonaccrual loans represent loans on which interest accruals have been discontinued. Nonperforming restructured loans are loans in which the borrower has been granted a concession on the interest rate or the original repayment terms due to financial distress and the borrower has not made six consecutive payments in accordance with the modified repayment terms. Other real estate owned is comprised principally of real estate properties obtained in partial or total loan satisfactions and is included in other assets at the lower of its cost or estimated fair value less selling costs.

~~Cash~~We discontinue ~~used~~interest inaccruals ~~continuing~~when ~~investing~~principal ~~activities~~or ~~reflects~~interest ~~the~~is ~~impact~~due ofand ~~loans~~has ~~and investments~~remained ~~acquired~~unpaid for ~~our~~90 ~~interest-earning~~to ~~asset~~180 ~~portfolios,~~days asdepending ~~well~~on ~~as cash flows from asset sales. For~~ the ~~year~~loan ~~ended December 31~~type, ~~2011,~~unless the weloan ~~had~~is ~~net~~both ~~cash flows~~well ~~used~~secured byand ~~continuing~~in ~~investing~~the ~~activities~~process of ~~$18~~collection.5 ~~million,~~When ~~compared~~a ~~to $45.4~~loan ~~million~~is ~~provided~~placed byon ~~investing~~nonaccrual ~~activities~~status, ~~for~~all ~~the~~unpaid ~~year~~interest and ~~ended~~fees ~~December~~are ~~31, 2010~~reversed. ~~The~~Nonaccrual ~~change~~loans inmay ~~cash~~not ~~flows~~be ~~from~~restored ~~continuing~~to ~~investing~~accrual ~~activities~~status ~~was primarily~~until ~~due~~all todelinquent ~~the~~principal ~~purchase~~ and ~~call~~interest ofhave been ~~securities~~paid.

~~Financing Activities.~~ 37

~~Cash~~We classify ~~flows~~loans ~~from~~consistent ~~continuing~~with ~~financing~~federal ~~activities~~banking ~~include~~regulations ~~transactions~~using ~~and~~a ~~events whereby~~nine ~~cash~~category isgrading ~~obtained from depositors, creditors or investors~~system. ~~For~~The ~~the~~following ~~year ended~~table ~~December~~presents ~~31, 2011, we had net cash flows used in continuing financing~~information ~~activities~~regarding ofpotential ~~$11.4~~problem ~~million~~loans, ~~compared~~consisting ~~to net cash provided~~ of ~~$4.5~~loans ~~million~~graded ~~for the~~special ~~year~~mention, ~~ended December 31~~substandard, 2010. The change in cash flows from continuing financing activities was due to a net decrease in deposits of $18.5 million compared to a net increase in deposits of $5.5 million for the year ended December 31doubtful, ~~2010. The purchase of our Clermont branch in January 2011~~ and ~~an increase~~loss, inbut ~~customer~~still ~~repurchase agreements resulted in a $7.2 million net increase in borrowings compared to a net decrease of $1.0 million for the year ended December 31, 2010.~~performing:

Capital Resources

(Dollars in Thousands)	Number of Loans		Loan Balance		Percent of Total Loans
Commercial		17	$	2,614		1.0	%
Commercial real estate
Construction and land		7		3,112		1.1
Non-owner occupied

Filing Compare · FLORIDIAN FINANCIAL GROUP INC