---

---

|                                  
|----------------------------------
|UNITED STATES                     
|SECURITIES AND EXCHANGE COMMISSION
|WASHINGTON,
 DC 20549             
|                                  
|                                  
|                                  
|FORM 10-K                         

|                                                             |                                                                                          
|------------------------------------------------------------ | -----------------------------------------------------------------------------------------
|o                                                            | ANNUAL REPORT PURSUANT TO SECTION
 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|                                                             |                                                                                          
|                                                             | For the fiscal year ended December 31, 2010                                              
|                                                             |                                                                                          
|                                                             | OR                                                                                       
|                                                             |                                                                                          
|o                                                            | TRANSITION REPORT PURSUANT TO
 SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|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)              
|                                                                                           |  |                         
|(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

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 o

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 o No o

Indicate by check mark if disclosure 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. o

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 x

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). Yeso 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 11, 2011
|                                        |  |                              
|Common Stock, $5.00 par value per share |  | 6,204,448 shares             

DOCUMENTS INCORPORATED BY REFERENCE

Portions of our Proxy Statement for the Annual Meeting of Shareholders
to be held on April 28, 2011, are incorporated by reference in Part III.

---

---



FLORIDIAN FINANCIAL GROUP, INC.
ANNUAL REPORT FOR 2010 ON FORM 10-K

TABLE OF CONTENTS

|           |  |                                                                                                                    |  |     
|---------- |  | ------------------------------------------------------------------------------------------------------------------ |  | ----
|           |  |                                                                                                                    |  | PAGE
|PART I     |  |                                                                                                                    |  | 1   
|           |  |                                                                                                                    |  |     
|Item 1.    |  | Business                                                                                                           |  | 2   
|Item 1A.   |  | Risk Factors                                                                                                       |  | 16  
|Item 1B.   |  | Unresolved Staff Comments                                                                                          |  | 23  
|Item 2.    |  | Properties                                                                                                         |  | 24  
|Item 3.    |  | Legal Proceedings                                                                                                  |  | 24  
|Item 4.    |  | [Removed and Reserved]                                                                                             |  | 24  
|           |  |                                                                                                                    |  |     
|PART II    |  |                                                                                                                    |  | 25  
|           |  |                                                                                                                    |  |     
|Item 5.    |  | Market for the
 Registrants Common Equity, Related Shareowner Matters, and Issuer Purchases
 of Equity Securities |  | 25  
|Item 6.    |  | Selected Financial Data                                                                                            |  | 26  
|Item 7.    |  | Managements
 Discussion and Analysis of Financial Condition and Results of Operations                             |  | 27  
|Item 7A.   |  | Quantitative and Qualitative Disclosure About Market Risk                                                          |  | 42  
|Item 8.    |  | Financial Statements and Supplementary Data                                                                        |  | 42  
|Item 9.    |  | Changes in and
 Disagreements with Accountants on Accounting and Financial Disclosure                              |  | 71  
|Item 9A.   |  | Controls and Procedures                                                                                            |  | 71  
|Item 9B.   |  | Other Information                                                                                                  |  | 71  
|           |  |                                                                                                                    |  |     
|PART III   |  |                                                                                                                    |  | 71  
|           |  |                                                                                                                    |  |     
|Item 10.   |  | Directors, Executive Officers, and Corporate Governance                                                            |  | 71  
|Item 11.   |  | Executive Compensation                                                                                             |  | 72  
|Item 12.   |  | Security
 Ownership of Certain Beneficial Owners and Management and Related Shareowner
 Matters                    |  | 72  
|Item 13.   |  | Certain
 Relationships and Related Transactions, and Director Independence                                         |  | 72  
|Item 14.   |  | Principal Accountant Fees and Services                                                                             |  | 72  
|           |  |                                                                                                                    |  |     
|PART IV    |  |                                                                                                                    |  | 73  
|           |  |                                                                                                                    |  |     
|Item 15.   |  | Exhibits and Financial Statement Schedules                                                                         |  | 73  
|           |  |                                                                                                                   
|Signatures |  | 76                                                                                                                

---



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:

| |   |                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------
| | ▪ | legislative
 or regulatory changes, including The Dodd-Frank Act:                                                                                   
| |   |                                                                                                                                                     
| | ▪ | the
 strength of the United States economy in general and the strength of the
 local economies in which we conduct operations;                      
| |   |                                                                                                                                                     
| | ▪ | the
 accuracy of our financial statement estimates and assumptions, including our
 allowance for loan losses;                                       
| |   |                                                                                                                                                     
| | ▪ | the
 frequency and magnitude of foreclosure of our loans;                                                                                           
| |   |                                                                                                                                                     
| | ▪ | the
 effects of the health and soundness of other financial institutions,
 including the FDICs need to increase Deposit Insurance Fund assessments;
| |   |                                                                                                                                                     
| | ▪ | the
 loss of our key personnel;                                                                                                                     
| |   |                                                                                                                                                     
| | ▪ | our
 need and our ability to incur additional debt or equity financing;                                                                             
| |   |                                                                                                                                                     
| | ▪ | our
 ability to execute our growth strategy through expansion;                                                                                      
| |   |                                                                                                                                                     
| | ▪ | inflation,
 interest rate, market and monetary fluctuations;                                                                                        
| |   |                                                                                                                                                     
| | ▪ | the
 effects of our lack of a diversified loan portfolio, including the risk of
 geographic concentration;                                          
| |   |                                                                                                                                                     
| | ▪ | our
 customers willingness and ability to make timely payments on their loans;                                                                     
| |   |                                                                                                                                                     
| | ▪ | 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 disaster;                                                                                                                  
| |   |                                                                                                                                                     
| | ▪ | our
 ability to comply with the extensive laws and regulations to which we are
 subject;                                                            
| |   |                                                                                                                                                     
| | ▪ | our
 customers perception of the safety of their deposits at the banks;                                                                            
| |   |                                                                                                                                                     
| | ▪ | changes
 in the securities and real estate markets;                                                                                                 
| |   |                                                                                                                                                     
| | ▪ | increased
 competition and its effect on pricing;                                                                                                   
| |   |                                                                                                                                                     
| | ▪ | technological
 changes;                                                                                                                             
| |   |                                                                                                                                                     
| | ▪ | negative
 publicity and the impact on our reputation;                                                                                               
| |   |                                                                                                                                                     
| | ▪ | 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;                                                                               
| |   |                                                                                                                                                     
| | ▪ | lack
 of a trading market for our common stock;                                                                                                     
| |   |                                                                                                                                                     
| | ▪ | 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, and you should not consider any such list of factors to be 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.

1

---



ITEM 1. Business

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 Floridian Financial
Mortgage.

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 13 banking offices, however as of December 31,
2010, Orange Bank had entered into an agreement to sell one branch and has
notified the FDIC of its intention to close two other locations. These actions
will result in a total of 10 branches for the combined network in 2011 and
future years.

The
Banks deposits are insured by the Federal Deposit Insurance Corporation
(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. 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 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
continue 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.        

2

---



Our Business

Historically,
the 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.

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, savings bonds, 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 issues
stand-by 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.

The
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 $10 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.

The
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.

The
revenues of the Banks are primarily derived from interest on, and fees received
in connection with, real estate and other loans, from interest and dividends
from investment securities, service charge income generated from demand
accounts, gain on sale of residential loans, ATM fees, and other 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.

As is the case with banking institutions 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 Competition.

Market Area

Our
current primary market area consists of a six county area in Central Florida:
Citrus, Flagler, Lake, Orange, Seminole, and Volusia counties.

Floridian Bank.

Floridian
Banks 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. Based on our managements experience, Volusia County has grown
slower than most of Central Florida, and we have seen that the redevelopment
efforts have been adversely affected by the current economic slow down. Based
on our managements experience, Flagler County, particularly Palm Coast, has
been a fast growing retirement community; however, over the past three years,
we have seen this growth slow considerably. Floridian Bank has focused on the
commercial and professional segment of the market, with the focus on the
customer base associated with the local health care industry.

3

---



Orange Bank of Florida.

Orange
Bank competes primarily in a four county area: Orange, Seminole, Lake and
Citrus. The majority of Orange Banks assets are located in Orange County,
which, according to University of Floridas Bureau of Economic and Business
Research, has seen its population grow by over 212 thousand, or 23.7%, between
2000 and 2009. Based on data from the University of Floridas Bureau of
Economic and Business Research, Seminole and Lake Counties are also considered
to be high growth population areas, and we believe Seminole to be a fairly
affluent market. Population growth has slowed considerably, however, since
2007. We have also focused on Citrus County, which management believes has a
sizable retirement community.

Banking Services

Commercial Banking.

The
Banks focus their commercial loan originations on small- and mid-sized
businesses (generally $10 to $25 million in annual sales) 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.

Retail Banking.

The
Banks retail banking activities emphasize consumer deposit and checking
accounts. An extensive range of these services is offered by the Banks to meet
the varied needs of their customers from young persons to senior citizens. In
addition to traditional products and services, the Banks offer contemporary
products and services, such as debit cards, Internet banking, and electronic
bill payment services. Consumer loan products offered by the Banks include home
equity lines of credit, second mortgages, new and used auto loans, new and used
boat loans, overdraft protection, and unsecured personal credit lines.

Mortgage Banking.

The
Banks have a joint marketing agreement with FBC Mortgage LLC which provides us
with the ability to refer our retail banking customers to FBC Mortgage LLC for
conventional and nonconforming mortgages and construction and permanent
financing.

Lending Services

Loan Portfolio Composition.

At
December 31, 2010, the Banks loan portfolios totaled $309.6 million,
representing approximately 68.8% of our total assets of $461.6 million.

The
composition of the Banks loan portfolios at December 31, 2010 is indicated
below.

|                                |  |        |         |            |  |       |  
|------------------------------- |  | ------ | ------- | ---------- |  | ----- | -
|(Dollars in Thousands)          |  | Amount |         | % of Total | 
|                                |  |        |         |            | 
|Commercial                      |  | $      | 45,202  |            |  | 14.2  | %
|Commercial real estate          |  |        | 240,151 |            |  | 75.6  |  
|Residential real estate         |  |        | 12,580  |            |  | 4.0   |  
|Consumer and home equity        |  |        | 19,837  |            |  | 6.2   |  
|                                |  |        |         |            |  |       |  
|Total loans                     |  |        | 317,770 |            |  | 100.0 | %
|                                |  |        |         |            |  |       |  
|Less: Allowance for loan losses |  |        | (8,010  | )          |  |       |  
|Less: Net deferred fees         |  |        | (205    | )          |  |       |  
|                                |  |        |         |            |  |       |  
|                                |  |        |         |            |  |       |  
|Loans, net                      |  | $      | 309,555 |            |  |       |  
|                                |  |        |         |            |  |       |  

There
were approximately $17.1 million in non-performing loans at December 31, 2010.

4

---



Commercial Loans.

At
December 31, 2010, our commercial loan portfolio totaled $45.2 million. The
Banks originate secured and unsecured loans for business purposes. Loans are
made for acquisition, expansion, and working capital purposes and may be
secured by real estate, accounts receivable, inventory, equipment or other
assets. 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. It is our general policy to obtain
personal guarantees from the principals of commercial loan borrowers.

Commercial Real Estate.

At
December 31, 2010, our commercial real estate loan portfolio totaled $240.2
million. 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. Commercial real estate 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
construction loans, we only lend to experienced local builders who have a
successful track record with us or one of our competitors. If the construction
loan is for a speculative residential or multi-family residential project, the
construction must occur in our market area. Before becoming involved in
discussions with a borrower for a commercial real estate loan, we physically
inspect the property.

Appraisals
on properties securing commercial real estate loans originated by us are
performed by an independent appraiser at the time the loan is made. 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 Real Estate Loans.

At
December 31, 2010, our residential real estate loan portfolio totaled $12.6
million. 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.

We
embrace written, non-discriminatory underwriting standards for use in the
underwriting and review of every loan considered. 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.

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

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.

The
Banks loan portfolios contain no adjustable rate, subprime, or option (pick a
payment) mortgage loans.

Other Installment and Consumer Loans.

At
December 31, 2010, our installment and consumer loan portfolio totaled $19.8
million. The Banks offer a variety of installment and consumer loans. These
loans are typically secured by residential real estate or personal property,
including automobiles and boats. Home equity loans (closed-end and lines of
credit) are typically made up to 85% of the appraised value of the property
securing the loan, in each case, less the amount of any existing liens on the
property. Closed-end loans have terms of up to 15 years. Lines of credit have
an original

5

---



maturity
of 10 years. The interest rates on closed-end home equity loans are fixed,
while interest rates on home equity lines of credit are variable.

Credit Administration

The
Companys Credit Administration 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 Board 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.

The
Banks generally do not make commercial or consumer loans outside their market
area unless the borrower has an established relationship with one of our Banks
and conducts its principal business operations within our market area.
Consequently, the Banks and their borrowers are affected by the economic
conditions prevailing in their market area.

The
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.

Investment Activity

The
primary objectives of our investment portfolio are to earn an acceptable rate
of return through investments with a mixture of maturities and compositions,
meet liquidity requirements, and mitigate interest rate sensitivity. We attempt
to accomplish this by matching, to the greatest extent possible, the maturity
of assets with liabilities. We attempt to maintain an average maturity of
securities of less than 15 years.

We
invest primarily in U.S. agency obligations including collateralized mortgage
obligations which are guaranteed as to principal and interest. We enter into federal
funds transactions with our principal correspondent banks directly or as an
agent.

Competition

We
operate in a highly competitive environment competing for deposits and loans
with commercial banks, thrifts and other financial institutions, many of which
have greater financial resources than us. Many large financial institutions
compete for business in our service area. Certain of these institutions have
significantly higher lending limits than we do and provide services to their
customers which we do not offer.

We
believe 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.

The
following table displays data provided by the FDIC regarding our competition in
Citrus, Flagler, Lake, Orange, Seminole, and Volusia counties (our primary
market area), as of June 30, 2010, the latest date for which data was
available:

|         |  |  |                                           |  |  |                            |  |                     |  | 
|-------- |  |  | ----------------------------------------- |  |  | -------------------------- |  | ------------------- |  | 
|County   |  |  | Number of Insured
 Financial Institutions |  |  | Number of Retail
 Branches |  | Banks Market Share | 
|         |  |  |                                           |  |  |                            |  |                     | 
|Citrus   |  |  | 14                                        |  |  | 49                         |  | 2.7%                |  | 
|Flagler  |  |  | 12                                        |  |  | 25                         |  | .8%                 |  | 
|Lake     |  |  | 26                                        |  |  | 107                        |  | .2%                 |  | 
|Orange   |  |  | 39                                        |  |  | 301                        |  | .5%                 |  | 
|Seminole |  |  | 34                                        |  |  | 140                        |  | 1.6%                |  | 
|Volusia  |  |  | 27                                        |  |  | 160                        |  | 1.5%                |  | 

6

---



Interest
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.

Our largest
competitors in the market include: Bank of America, Wells Fargo, SunTrust,
BB&T, Regions Financial, M&I Bank, RBC Bank, and PNC, and these
institutions capture the majority of the deposits. Our significant community
bank competitors include: Centennial Bank, Florida Bank of Commerce, First
Southern Bank, Florida Capital Bank, East Coast Community Bank, and Gateway
Bank of Florida. We believe community banks can compete successfully by
providing personalized service and making timely, local decisions and thus draw
business away from larger institutions in the market. We also believe further
consolidation in the banking industry is likely to create additional
opportunities for community banks to capture deposits from affected customers
who may become dissatisfied as their financial institutions grow larger. In
addition, we believe that once the Florida economy experiences new job growth,
the growth of our banking markets from new residents affords us an opportunity
to capture new deposits.

Marketing and Distribution

In order to
market our deposit and loan products, we rely heavily on referrals from
existing customers and direct customer contact calling efforts. In addition,
our Board of Directors and management team realize the importance of forging
partnerships within the community as a method of expanding our customer base
and serving the needs of our community. In this regard, we are an active
participant in various community activities and organizations. Participation in
such events and organizations allows management to determine what additional
products and services are needed in our community as well as assisting in our
efforts to determine credit needs in accordance with the Community Reinvestment
Act.

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

Employees

As of
December 31, 2010, we employed 84 full-time employees and four part-time
employees. The employees are not represented by a collective bargaining unit.
We consider relations with our employees to be good.

REGULATORY CONSIDERATIONS

We must
comply with state and federal banking laws and regulations that control
virtually all aspects of our operations. These laws and regulations generally
aim to protect our depositors, not necessarily our shareholders or our
creditors. Any changes in applicable laws or regulations may materially affect
our business and prospects. Proposed legislative or regulatory changes may also
affect our operations. The following description summarizes some of the laws
and regulations to which the Banks and we are subject. References to applicable
statutes and regulations are brief summaries, do not purport to be complete,
and are qualified in their entirety by reference to such statutes and
regulations.

The
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

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). The Dodd-Frank Act
will have 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. Additionally, the Dodd-Frank Act
establishes a new framework for systemic risk oversight within the financial
system to be distributed among new and existing federal regulatory agencies,
including the Financial Stability Oversight Council, the Federal Reserve, the
Office of the Comptroller of the Currency, and the FDIC. A summary of

7

---



certain provisions of the Dodd-Frank Act is set forth below, along with
information set forth in applicable sections of this Regulatory
Considerations section.

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Increased Capital Standards and Enhanced
 Supervision. The federal banking agencies are
 required to establish minimum leverage and risk-based capital requirements
 for banks and bank holding companies. These new standards will be no lower
 than current regulatory capital and leverage standards applicable to insured
 depository institutions and may, in fact, be higher when established by the
 agencies. The Dodd-Frank Act also increases regulatory oversight, supervision
 and examination of banks, bank holding companies and their respective
 subsidiaries by the appropriate regulatory agency.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | The Consumer Financial Protection Bureau (Bureau).The
 Dodd-Frank Act creates the Bureau within the Federal Reserve. The Bureau is
 tasked with establishing and implementing rules and regulations under certain
 federal consumer protection laws with respect to the conduct of providers of
 certain consumer financial products and services. The Bureau has rulemaking
 authority over many of the statutes governing products and services offered
 to bank consumers. In addition, the Dodd-Frank Act permits states to adopt
 consumer protection laws and regulations that are more stringent than those
 regulations promulgated by the Bureau and state attorneys general are
 permitted to enforce consumer protection rules adopted by the Bureau against
 state-chartered institutions.                                                                                                                                                                                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | Deposit Insurance.The Dodd-Frank Act makes
 permanent the $250,000 deposit insurance limit for insured deposits.
 Amendments to the Federal Deposit Insurance Act also revise the assessment
 base against which an insured depository institutions deposit insurance
 premiums paid to the Deposit Insurance Fund (DIF) will be calculated. Under
 the amendments, the assessment base will no longer be the institutions
 deposit base, but rather its average consolidated total assets less its
 average tangible equity during the assessment period. Additionally, the
 Dodd-Frank Act makes changes to the minimum designated reserve ratio of the
 DIF, increasing the minimum from 1.15 percent to 1.35 percent of the
 estimated amount of total insured deposits and eliminating the requirement
 that the FDIC pay dividends to depository institutions when the reserve ratio
 exceeds certain thresholds. In December 2010, the FDIC increased the reserve
 ratio to 2.0 percent. The Dodd-Frank Act also provides that, effective one
 year after the date of enactment, depository institutions may pay interest on
 demand deposits.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | Enhanced Lending Limits.The Dodd-Frank Act
 strengthens the existing limits on a depository institutions credit exposure
 to one borrower. Current banking law limits a depository institutions ability
 to extend credit to one person (or group of related persons) in an amount
 exceeding certain thresholds. The Dodd-Frank Act expands the scope of these
 restrictions to include credit exposure arising from derivative transactions,
 repurchase agreements, and securities lending and borrowing transactions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | Compensation Practices.
 The Dodd-Frank Act provides that the appropriate federal regulators must
 establish standards prohibiting as an unsafe and unsound practice any
 compensation plan of a bank holding company or other covered financial
 institution that provides an insider or other employee with excessive
 compensation or could lead to a material financial loss to such firm. In
 June 2010, prior to the Dodd-Frank Act, the bank regulatory agencies promulgated
 the Interagency
 Guidance on Sound Incentive Compensation Policies, which requires
 that financial institutions establish metrics for measuring the impact of
 activities to achieve incentive compensation with the related risk to the
 financial institution of such behavior. Together, the Dodd-Frank Act and the
 recent guidance on compensation may impact our current compensation policies.                                                                                                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | Holding Company Capital Levels.
 The Dodd-Frank Act requires bank regulators to establish minimum capital levels
 for holding companies that are at least of the same nature as those
 applicable to financial institutions. All trust preferred securities, or
 TRUPs, issued by bank or thrift holding companies after May 19, 2010
 will be counted as Tier II Capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

8

---



We expect
that many of the requirements called for in the Dodd-Frank Act will be
implemented over time, and most will be subject to implementing regulations
over the course of several years. Given the uncertainty associated with the
manner in which the provisions of the Dodd-Frank Act will be implemented by the
various regulatory agencies and through regulations, the full extent of the
impact such requirements will have on financial institutions operations is
unclear. The changes resulting from the Dodd-Frank Act may impact the
profitability of our business activities, require changes to certain of our
business practices, impose upon us more stringent capital, liquidity and
leverage ratio requirements or otherwise adversely 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.

The Company

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.

Permitted Activities.

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 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.

In contrast
to financial holding companies, 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 Federal Reserve
determines by regulation or order to be so closely related to banking or
managing or controlling banks. Except for the activities relating to financial
holding companies permissible under the Gramm-Leach-Bliley Act, these
restrictions apply to us. In determining whether a particular activity is
permissible, the Federal Reserve must consider whether the performance of such
an activity reasonably can be expected to produce benefits to the public that
outweigh possible adverse effects. Possible benefits include greater
convenience, increased competition, and gains in efficiency. Possible adverse
effects include undue concentration of resources, decreased or unfair
competition, conflicts of interest, and unsound banking practices. Despite
prior approval, the Federal Reserve may order a bank holding company or its
subsidiaries to terminate 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 the financial safety, soundness or stability of any bank
subsidiary of that bank holding company may result from such an activity.

Changes in Control.

Subject to
certain exceptions, the Bank Holding Company Act and the Change in Bank Control
Act, together with the applicable regulations, require Federal Reserve approval
(or, depending on the circumstances, no notice of disapproval) prior to any
person or company acquiring control of a bank or bank holding company. A
conclusive presumption of control exists if an individual or company acquires
the power, directly or indirectly, to direct the management or policies of an
insured depository institution or to vote 25% or more of any class of voting
securities of any insured depository institution. A rebuttable presumption of
control exists if a person or company acquires 10% or more but less than 25% of
any class of voting securities of an insured depository institution and either
the institution has registered securities under Section 12 of the Securities
Exchange Act of 1934 or as we will refer to as the Exchange Act, or no other
person will own a greater percentage of that class of voting securities
immediately after the acquisition. Our common stock is registered under Section
12 of the Exchange Act.

The Federal
Reserve Board maintains a policy statement on minority equity investments in
banks and bank holding companies, that permits investors to (1) acquire up
to 33 percent of the total equity of a target bank or bank holding company,
subject to certain conditions,

9

---



including (but not limited to) that the investing firm does not acquire
15 percent or more of any class of voting securities, and
(2) designate at least one director, without triggering the various regulatory
requirements associated with control.

As a bank
holding company, we are required to obtain prior approval from the Federal
Reserve before (i) acquiring all or substantially all of the assets of a bank
or bank holding company, (ii) acquiring direct or indirect ownership or control
of more than 5% of the outstanding voting stock of any bank or bank holding
company (unless we own a majority of such banks voting shares), or (iii)
merging or consolidating with any other bank or bank holding company. In
determining whether to approve a proposed bank acquisition, federal bank
regulators will consider, among other factors, the effect of the acquisition on
competition, the public benefits expected to be received from the acquisition,
the projected capital ratios and levels on a post-acquisition basis, and the
acquiring institutions record of addressing the credit needs of the
communities it serves, including the needs of low and moderate income
neighborhoods, consistent with the safe and sound operation of the bank, under
the Community Reinvestment Act of 1977.

Under
Florida law, a person or entity proposing to directly or indirectly acquire
control of a Florida bank must also obtain permission from the Florida Office
of Financial Regulation. Florida statutes define control as either (a)
indirectly or directly owning, controlling or having power to vote 25% or more
of the voting securities of a bank; (b) controlling the election of a majority
of directors of a bank; (c) owning, controlling, or having power to vote 10% or
more of the 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 Florida Office of Financial Regulation. These requirements
will affect us because the Banks are chartered under Florida law and changes in
control of us are indirect changes in control of the Bank.

Tying.

Bank
holding companies and their affiliates are prohibited from tying the provision
of certain services, such as extending credit, to other services or products
(other than traditional banking products) offered by the holding company or its
affiliates, such as deposit products.

Capital;
Dividends; Source of Strength.

The Federal
Reserve imposes certain capital requirements on bank holding companies under
the Bank Holding Company Act, including a minimum leverage ratio and a minimum
ratio of qualifying capital to risk-weighted assets. These requirements are
described below under Capital Regulations. Subject to its capital
requirements and certain other restrictions, we are able to borrow money to
make a capital contribution to the Banks, and such loans may be repaid from
dividends paid from the Banks to us.

The 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.

In
accordance 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 Banks

The 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 Florida
Office of Financial Regulation and the FDIC, and are subject to other laws and
regulations applicable to banks. The Florida Office of Financial Regulation 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.

As state
chartered banking institutions 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

10

---



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.

Reserves.

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.

Dividends.

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.

In
addition, 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 Florida
Office of Financial Regulation 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 Florida
Office of Financial Regulation or a federal regulatory agency.

Insurance of Accounts and Other Assessments.

We pay our
deposit insurance assessments to the Deposit Insurance Fund, which is
determined through a risk-based assessment system. Our deposit accounts are
currently insured by the Deposit Insurance Fund generally up to a maximum of $250,000
per separately insured depositor.

In
addition, in November 2008, the FDIC issued a final rule under its Transaction
Account Guarantee Program (TAGP), pursuant to which the FDIC fully guarantees
all non-interest bearing transaction deposit accounts, including all personal
and business checking deposit accounts that do not earn interest, lawyer trust
accounts where interest does not accrue to the account owner (IOLTA), and NOW
accounts with interest rates no higher than 0.50% until June 30, 2010 and 0.25%
beginning July 1, 2010. Thus, under TAGP, all money in these accounts are fully
insured by the FDIC regardless of dollar amount. This second increase to
coverage was originally in effect through December 31, 2009, but was extended
until June 30, 2010 and then again until December 31, 2010, unless we elected
to opt out of participating, which we did not do. The Dodd-Frank Act extended
full deposit coverage for non-interest bearing transaction deposit accounts for
two years beginning on December 31, 2010, and all financial institutions are
required to participate in this extended program.

Under the
current assessment system, the FDIC assigns an institution to one of four risk
categories, with the first category having two sub-categories based on the
institutions most recent supervisory and capital evaluations, designed to
measure risk. Total base assessment rates currently range from 0.07% of
deposits for an institution in the highest sub-category of the highest category
to 0.775% of deposits for an institution in the lowest category. On May 22,
2009, the FDIC imposed a special assessment of five basis points on each
FDIC-insured depository institutions assets, minus its Tier 1 capital, as of
June 30, 2009. This special assessment was collected on September 30, 2009.
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 and assumed 5% annual deposit
growth.

11

---



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.

Under the
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.

Transactions With Affiliates.

Pursuant 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.

Loans to
executive officers, directors or to any person who directly or indirectly, or
acting through or in 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 we refer to as 10% Shareholders, or to any political or campaign
committee the funds or services of which will benefit those executive officers,
directors, or 10% Shareholders or which is controlled by those executive
officers, directors or 10% Shareholders, are subject to Sections 22(g) and
22(h) of the Federal Reserve Act and their corresponding regulations
(Regulation O) and Section 13(k) of the Exchange Act relating to the
prohibition on personal loans to executives (which exempts financial
institutions in compliance with the insider lending restrictions of Section
22(h) of the Federal Reserve Act). Among other things, these loans must be made
on terms substantially the same as those prevailing on transactions made to
unaffiliated individuals and certain extensions of credit to those persons must
first be approved in advance by a disinterested majority of the entire board of
directors. Section 22(h) of the Federal Reserve Act prohibits loans to 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 the case of loans that are fully secured by
readily marketable collateral, or when the aggregate amount on all of the
extensions of credit outstanding to all of these persons would exceed the
Banks unimpaired capital and unimpaired surplus. Section 22(g) identifies
limited circumstances in which the Bank are permitted to extend credit to
executive officers.

Community Reinvestment Act.

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 Regulations.

The federal
banking regulators have adopted risk-based, capital adequacy guidelines for
bank holding companies and their subsidiary state-chartered banks. The
risk-based capital guidelines are designed to make regulatory capital
requirements more sensitive to differences in risk profiles among banks and
bank holding companies, to account for off-balance sheet exposure, to minimize
disincentives for holding liquid assets, and to achieve greater consistency in
evaluating the capital adequacy of major banks throughout the world. Under
these guidelines, assets and off-balance sheet items are assigned to broad risk
categories each with designated weights. The resulting capital ratios represent
capital as a percentage of total risk-weighted assets and off-balance sheet
items.

The 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,

12

---



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 total risk-weighted assets, bank holding company assets are given
risk-weights of 0%, 20%, 50% and 100%. In addition, certain off-balance sheet
items are given similar credit conversion factors to convert them to asset
equivalent amounts to which an 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 multi-family
residential property, which carry a 50% risk rating. Most investment securities
(including, primarily, general obligation claims on states or other political
subdivisions of the United States) will be assigned to the 20% category, except
for municipal or state revenue bonds, which have a 50% risk-weight, and direct
obligations of the U.S. Treasury or obligations backed by the full faith and
credit of the U.S. Government, which have a 0% risk-weight. In covering
off-balance sheet items, direct credit substitutes, including general
guarantees and standby letters of credit backing financial obligations, are
given a 100% conversion factor. Transaction-related contingencies such as bid
bonds, standby letters of credit backing non-financial obligations, and undrawn
commitments (including commercial credit lines with an initial 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.

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.

Banking
organizations experiencing or anticipating significant growth, as well as those
organizations which do not satisfy the criteria described above, will be required
to maintain a minimum leverage ratio ranging generally from 4% to 5%. The bank
regulators also continue to consider a tangible Tier I leverage ratio in
evaluating proposals for expansion or new activities.

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.

Federal 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.

Under the
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.

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.

13

---



As of
December 31, 2010, we exceeded the requirements contained in the applicable
regulations, policies and directives pertaining to capital adequacy to be
classified as well capitalized, and are unaware of any material violation or
alleged violation of these regulations, policies or directives. Rapid growth,
poor loan portfolio performance, or poor earnings performance, or a combination
of these factors, could change our capital position in a relatively short
period of time, making additional capital infusions necessary. See section
entitled Item F. Managements Discussion and Analysis of Financial Condition
and Results of Operations  Capital Resources for a further discussion.

Prompt Corrective Action.

Immediately
upon becoming undercapitalized, 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 and critically
undercapitalized institutions.

Basel III.

On
December 17, 2009, the Basel Committee proposed significant changes to
bank capital and liquidity regulation, including revisions to the definitions
of Tier I Capital and Tier II Capital applicable to Basel III.

The
short-term and long-term impact of the new Basel III capital standards and the
forthcoming new capital rules to be proposed for non-Basel III U.S. banks is
uncertain. As a result of the recent deterioration in the global credit markets
and the potential impact of increased liquidity risk and interest rate risk, it
is unclear what the short-term impact of the implementation of Basel III may be
or what impact a pending alternative standardized approach to Basel III option
for non-Basel III U.S. banks (such as the Banks) may have on the cost and
availability of different types of credit and the potential compliance costs of
implementing the new capital standards.

On
September 12, 2010, the oversight body of the Basel Committee announced a
package of reforms which will increase existing capital requirements substantially
over the next four years. These capital reforms were endorsed by the G20
at the summit held in Seoul, South Korea in November 2010.

Interstate Banking and Branching.

The 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.

Under the
Dodd-Frank Act, national banks and state banks are able to establish branches
in any state if that state would permit the establishment of the branch by a
state bank chartered in that state. Florida law permits a state bank to
establish a branch of the bank anywhere in the state. Accordingly, under the
Dodd-Frank Act, a bank with its headquarters outside the State of Florida may
establish branches anywhere within Florida.

14

---



Anti-money Laundering.

The Uniting
and Strengthening America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), provides the federal
government with additional powers to address terrorist threats through enhanced
domestic security measures, expanded surveillance powers, increased information
sharing and broadened anti-money laundering requirements. By way of amendments
to the Bank Secrecy Act (BSA), the USA PATRIOT Act puts in place measures
intended to encourage information sharing among bank regulatory and law
enforcement agencies. In addition, certain provisions of the USA PATRIOT Act
impose affirmative obligations on a broad range of financial institutions.

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

| |   |                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | internal policies, procedures and controls designed to implement and
 maintain the savings associations compliance with all of the requirements of
 the USA PATRIOT Act, the BSA and related laws and regulations;
| |   |                                                                                                                                                                                                                    
| |  | systems and procedures for monitoring and reporting of suspicious
 transactions and activities;                                                                                                                    
| |   |                                                                                                                                                                                                                    
| |  | a designated compliance officer;                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                    
| |  | employee training;                                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                    
| |  | an independent audit function to test the anti-money laundering
 program;                                                                                                                                          
| |   |                                                                                                                                                                                                                    
| |  | procedures to verify the identity of each customer upon the opening
 of accounts; and                                                                                                                              
| |   |                                                                                                                                                                                                                    
| |  | heightened due diligence policies, procedures and controls applicable
 to certain foreign accounts and relationships.                                                                                              

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 components of the CIP are identification, verification, government list
comparison, notice and record retention. The purpose of the CIP is to enable
the financial 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 through documentary and non-documentary methods. Furthermore, all
customers must be screened against any CIP-related government lists of known or
suspected terrorists. We and our affiliates have adopted policies, procedures
and controls to comply with the BSA and the USA PATRIOT Act, and we engage in
very few transactions with foreign persons and no transactions with foreign
financial institutions.

Regulatory Enforcement Authority.

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.

Privacy.

Under the
Gramm-Leach-Bliley 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.

Consumer Laws and Regulations.

The Banks
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 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

15

---



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.

Future
Legislative Developments.

Various
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.

Effect of
Governmental Monetary Policies.

The
commercial 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 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, 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 of the Banks cannot be predicted.

Income
Taxes.

We are
subject to income taxes at the federal level and subject to state taxation in
Florida. We file a consolidated federal income tax return with a fiscal year
ending on December 31.

Website
Access to Companys Reports

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. RISK FACTORS

An 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.

Risks Related to our Business

We incurred net losses for 2009 and 2010 and
may incur further losses.

We
incurred net losses of $9.7 million and $10.8 million for the years ended
December 31, 2010 and December 31, 2009, respectively. We may incur further
losses, especially in light of economic conditions that continue to adversely
affect our borrowers and us.

16

---



An inadequate allowance for loan losses would reduce our earnings.

Our 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.

As of
December 31, 2010, the Banks combined allowance for loan losses was $8.0
million, which represented approximately 2.5% of their total amount of loans.
The Banks had a combined $15.7 million in non-accruing loans as of
December 31, 2010. The allowance may not prove sufficient to cover future
loan losses. Although management uses the best information available to make
determinations with respect to the allowance for 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
non-performing 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.

We will pursue additional capital resources
in the future and these capital resources may not be available on acceptable
terms or at all.

We will
incur additional debt or equity financing in the future to make strategic
acquisitions or investments, for future growth, to fund losses or additional
provisions for loan losses in the future, or to maintain certain capital levels
in accordance with banking regulations. Such financing may not be available to
us on acceptable terms or at all.

Further, in
the event that we offer additional shares of our common stock in the future,
our Articles of Incorporation do not provide shareholders with preemptive
rights and such shares may be offered to investors other than our existing
shareholders for prices at or below the then current market price of our common
stock, all at the discretion of the Board. If we do sell additional shares of
common stock to raise capital, the sale could reduce market price per share of
common stock and dilute your ownership interest and such dilution could be
substantial.

If our non-performing assets continue to
increase, our earnings will suffer.

At December
31, 2010, our non-performing assets (which consist of non-accruing loans, loans
90 days or greater delinquent, non-performing restructured loans, foreclosed
real estate assets, and repossessed personal property) totaled $21.0 million,
or 4.5% of total assets, which is an increase of $8.2 million or 64.6% over
non-performing assets at December 31, 2009. At December 31, 2009, our
non-performing assets were $12.7 million, or 2.7 % of total assets. Our
non-performing assets adversely affect our net income in various ways. We do
not record interest income on non-accrual 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 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 non-performing 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.

Our regulatory
capital levels have declined and may continue to do so, which may have a
material adverse effect on our operations.

At
December 31, 2010, our consolidated Tier I leverage capital ratio was
8.4%, our consolidated total risk based capital ratio was 12.3% and our
consolidated Tier I risk based capital ratio was 11.0%. While we remain well
capitalized at December 31, 2010, these ratios have declined significantly over
the past two years because of the Banks significant losses. If we continue to
experience losses as we have over the past two years, 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. Lower capital ratios may also cause the
issuance of a capital directive by a federal regulatory authority requiring an
increase in capital.

17

---



You may not agree with our decisions on how
we increase our capital levels.

While
we remain well capitalized at December 31, 2010, if we continue to incur losses
we may not remain well capitalized in 2011. We are exploring all opportunities
to reduce 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.

Operating
as a multi-bank holding company can be inefficient and more costly to operate.

We provide
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. 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.

The loss of key personnel may adversely
affect us.

Our success
is, and is expected to remain, highly dependent on our senior management team.
As a bank holding company of community banks, it is our managements extensive
knowledge of and relationships in the community that generate business for us.
Successful execution of our growth strategy will continue to place significant
demands on our management and the loss of any such persons services may
adversely affect our growth and profitability.

Although we
have entered into a restrictive covenant agreement and an employment agreement
with Charlie W. Brinkley, Jr., Thomas H. Dargan, Jr., and Keith A. Bulko, we
may not be able to retain them or other key employees. The loss of such
employees could adversely affect our ability to successfully conduct our
business, which could have an adverse effect on our financial results and the
value of our common stock.

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

We
originate commercial real estate loans, commercial loans, construction loans,
consumer loans, and residential mortgage loans primarily within our market
area. We believe that our commercial real estate, including construction loans
and commercial loans provide the largest risk to our loan portfolio. Commercial
real estate, including construction, and commercial loans tend to involve
larger loan balances to a single borrower or groups of related borrowers and
are more susceptible to a risk of loss during a downturn in the business cycle.
These loans also have greater credit risk for the following reasons:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Commercial Real Estate Loans. 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 the borrowers business. 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 be insufficient to ensure full
 repayment when completed through a permanent loan or by seizure of
 collateral.

These risks
inherent in our loan portfolio are exacerbated by the 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, 2010, approximately
89 % of the Banks loans were secured by 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

18

---



decline during the time the credit is outstanding, and, therefore, the
collateral may become 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.

Additionally,
as of December 31, 2010, 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 and
increases in delinquencies and foreclosures, which would more greatly affect us
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 an increase in the risk of delinquencies,
foreclosures or 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.

Customers may not repay their loans which
could have a material negative impact on earnings and our capital levels.

When we
loan money, commit to loan money, or enter into a letter of credit, we incur
credit risk, or the risk of losses if our borrowers do not repay their loans.
The credit quality of our portfolio can have a significant impact on our
earnings. We attempt to minimize credit risk by carefully monitoring loan
concentrations and through the loan application and approval procedures.
Despite our policies, we may experience credit losses, what will have a
material negative impact on earnings and our capital levels.

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

Our
profitability depends to a large extent on the Banks net interest income,
which is the difference between income on interest-earning assets such as loans
and investment securities, and expense on interest-bearing liabilities such as
deposits and borrowings. We are unable to predict changes in market interest
rates, which are affected by many factors beyond our control, including
inflation, recession, unemployment, money supply, domestic and international
events and changes in the United States and other financial markets. Our net
interest income may be reduced if: (i) more interest-earning assets than
interest-bearing liabilities re-price or mature during a time when interest
rates are declining or (ii) more interest-bearing liabilities than
interest-earning assets re-price or mature during a time when interest rates
are rising.

Changes 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.

If market
interest rates rise rapidly, interest rate adjustment caps may limit increases
in the interest rates on adjustable rate loans, thereby reducing our net
interest income.

Since we engage in lending secured by real
estate and may be forced to foreclose on the collateral property and own the
underlying real estate, we may be subject to the increased costs associated
with the ownership of real property, which could result in reduced net income.

Since we
originate loans secured by real estate, we may have to foreclose on the
collateral property to protect our investment and may thereafter own and
operate such property, in which case we are exposed to the risks inherent in
the ownership of real estate.

The amount
that we, as a mortgagee, may realize after a default is dependent upon factors
outside of our control, including, but not limited to:


| |   |                                                 
| | - | ------------------------------------------------
| |  | general or
 local economic conditions;          
| |   |                                                 
| |  | environmental
 cleanup liability;               
| |   |                                                 
| |  | neighborhood
 values;                           
| |   |                                                 
| |  | interest
 rates;                                
| |   |                                                 
| |  | real estate
 tax rates;                         
| |   |                                                 
| |  | operating
 expenses of the mortgaged properties;

19

---



| |   |                                                                      
| | - | ---------------------------------------------------------------------
| |  | supply of
 and demand for 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.                                                         

Certain
expenditures associated with the 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.

Liquidity risk could impair our ability to
fund operations and jeopardize our financial condition.

Liquidity
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 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.

The banking industry is very competitive.

The banking
industry is highly competitive and the Banks compete directly with financial
institutions that are more established and have significantly greater resources
and lending limits. As a result of those greater resources, the larger
financial institutions may be able to provide a broader range of products and
services to their customers than us and may be able to afford newer and more
sophisticated technology than us. Our long-term success will be dependent on
the ability of the Banks to compete successfully with other financial
institutions in their service areas.

Confidential customer information transmitted
through the Banks online banking service is vulnerable to security breaches
and computer viruses, which could expose us to litigation and adversely affect
the Banks reputation and ability to generate deposits.

The Banks
provide their customers the ability to bank online. The secure transmission of
confidential information over the Internet is a critical element of 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.

Risks Related to Regulation and Legislation

We may be required to pay significantly
higher FDIC deposit insurance premiums and assessments in the future.

Recent
insured depository institution 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 lows. The FDIC recently increased the designated
reserve ratio from 1.25 to 2.00. 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 non-interest expense.

Since 2009,
our assessment rates, which also include 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

20

---



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.

These
higher FDIC assessment rates and special assessments have had and will continue
to have an adverse impact on our results of operations. Our FDIC insurance
related cost was $787 thousand and $951 thousand for the years ended December
31, 2010 and December 31, 2009, respectively, compared to $195 thousand for the
year ended December 31, 2008. We are unable to predict the impact in future
periods, including whether and when additional special assessments will occur.

Higher
insurance premiums and assessments increase our costs and may limit our ability
to pursue certain business opportunities. We also may be required to pay even
higher FDIC premiums than the recently increased level, 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.

We are subject to extensive governmental
regulation.

We are
subject to extensive governmental 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 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.

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.

Florida 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.

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.

In order to
comply with regulations, guidelines and examination procedures in this area,
the Banks have been required to adopt new policies and procedures and to
install new systems. If the Banks policies, procedures and systems are deemed
deficient or the policies, procedures and systems of the financial institutions
that we have already acquired or may acquire in the future are deficient, the
Banks would be subject to liability, including fines and regulatory 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.

Risks Related to Market Events

Future economic growth in our Florida market
area is likely to be slower compared to previous years.

The State
of Floridas population growth has historically exceeded national averages.
Consequently, the state has experienced substantial growth in population, new
business formation and public works spending. Due to the moderation of economic
growth and migration into our market area and the downturn in the real estate
market, management believes that growth in our market area will be restrained
in the near term. The restrained growth limits the growth of existing
businesses and reduces the formation of new businesses in our markets. These
limits and reductions decrease lending opportunities and negatively affect our
income. Commercial real estate valuations may also be negatively affected as
business failures continue and new business formation remains weak.

21

---



The soundness of other financial institutions
could adversely affect us.

Our 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.

The fair value of our investments could
decline.

Our
investment securities portfolio as of December 31, 2010 has been designated as
available-for-sale pursuant to U.S. GAAP relating to accounting for
investments. Such principles require that unrealized gains and losses in the
estimated value of the available-for-sale portfolio be marked to market and
reflected as a separate item in shareholders equity (net of tax) as
accumulated other comprehensive income. At December 31, 2010, we maintained
$42.7 million or 80.8% of our total securities as available for sale.

Shareholders
equity will continue 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.

Management
believes that several factors will affect the fair values of our investment
portfolio. These include, 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 sloped yield curve
means shorter-term rates are lower than longer-term rates). These and other
factors may impact specific categories of the portfolio differently, and we
cannot predict the effect these factors may have on any specific category.

Risks Related to an Investment in our Common
Stock

There is no established trading market for
our common stock and you may not be able to resell your shares.

The 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.

Our management holds a large portion of our
common stock.

As of
December 31, 2010, our directors and executive officers own about 1,262,972
million shares of our common stock, or approximately 20%, of our total
outstanding shares, assuming all of their vested options are exercised. As a
result, our management, if acting together, may be able to influence or control
matters requiring approval by our shareholders, including the election of
directors and the approval of mergers, acquisitions or other extraordinary
transactions.

Management
may also have interests that differ from yours and may vote in a way that is
adverse to your interests. The concentration of ownership may delay, prevent or
deter a change-in-control, could deprive our shareholders of an opportunity to
receive a premium for their common stock as part of a sale of our company and
might ultimately affect the market price of our common stock.

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

We are
registered with the Federal Reserve as a bank holding company under the BHCA.
As a result, we are subject to supervisory regulation and examination by the
Federal Reserve. The BHCA 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.

Provisions
of our Articles of Incorporation, Bylaws, certain laws and regulations and
various other factors may make it more difficult and expensive for companies or
persons to acquire control of us without the consent of our Board of Directors.
It is possible, however, that you would want a takeover attempt to succeed
because, for example, a potential buyer could offer a premium over the then
prevailing price of our common stock and could provide you with an opportunity
to liquidate your investment.

22

---



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                                                
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | -----------------------------------------------------------------------------------------------
|For
example, our Articles of Incorporation permit our Board of Directors to issue
preferred stock without shareholder action. The ability to issue preferred
stock could discourage a company from attempting to obtain control of us by
means of a tender offer, merger, proxy contest or otherwise. We are also
subject to certain provisions of the Florida Business Corporation Act and our
Articles of Incorporation that relate to business combinations with interested
shareholders. Other provisions in our Articles of Incorporation or Bylaws that
may discourage takeover attempts or make them more difficult include:
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | Classified Board of Directors;                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | 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 and content of shareholder proposals and nominations;         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | Absence of
 cumulative voting; and                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | Inability
 for shareholders to take action by written consent.                                 

We are subject to evolving and expensive corporate governance
regulations and requirements. Our failure to adequately adhere to these
requirements or the failure or circumvention of our controls and procedures
could seriously harm our business.

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.

We have not paid cash dividends to our shareholders and
currently have no plans to pay future cash dividends.

We plan 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.

Your shares of common stock are not an insured deposit.


|                                                                                                                                                                                                                                                        | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|The shares
of our common stock are not a bank deposit are not insured or guaranteed by the
FDIC or any other government agency. Your investment is subject to investment
risk, and you must be capable of affording the loss of your entire investment.
|                                                                                                                                                                                                                                                       
|ITEM 1B. UNRESOLVED STAFF COMMENTS                                                                                                                                                                                                                     

None

23

---



ITEM 2. PROPERTIES

As of
December 31, 2010, the Banks operated 13 full service banking centers in
Central Florida. The following table sets forth each of our Banks banking
centers and date opened.

|                            |  |              |  |                     
|--------------------------- |  | ------------ |  | --------------------
|Office Name                 |  | Leased/Owned |  | Date Opened/Acquired
|                            |  |              |  |                     
|Orange Bank of Florida      |  |              |  |                     
|Clermont                    |  | Leased (1)   |  | November 2009       
|Crystal River               |  | Owned        |  | October 2005        
|Dr. Phillips (2)            |  | Leased       |  | July 2005           
|Inverness (2)               |  | Owned        |  | February 2008       
|Lake Mary                   |  | Owned        |  | February 2008       
|Longwood                    |  | Land Leased/ |  | April 2007          
|                            |  | Bldg. Owned  |  |                     
|Orlando (Main Office)       |  | Leased       |  | June 2005           
|Winter Garden (2)           |  | Leased       |  | January 2007        
|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) | On July 6, 2010, we announced Orange Bank entered into a Contract for
 Sale and Purchase (the Agreement) with First Team Clermont OB, LLC, a
 Florida limited liability company (First Team), on June 29, 2010. First
 Team is controlled by W. Warner Peacock, a director of the Company. Pursuant
 to the Agreement, Orange Bank purchased from First Team the real and personal
 property, including the land, building, and furniture and fixtures, which
 comprise Orange Banks Clermont branch (the Clermont Branch). The purchase
 of the Clermont Branch occurred on January 4, 2011.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(2) | During 2010, we announced Orange Bank will close its Dr. Phillips and
 Winter Garden branch banking offices, located in Orange County effective
 December 31, 2010. In addition, Orange Bank entered into an agreement with
 Old Florida National Bank to sell the Orange Bank Inverness branch banking
 office located in Citrus County. The sale is subject to regulatory approval
 and is expected to close in the second quarter of 2011.                                                                                                                                                       

ITEM 3. LEGAL
PROCEEDINGS.

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.

ITEM 4. [REMOVED
AND RESERVED.]

24

---



PART II.

ITEM 5. MARKET
FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.

Absence of a Public Market and Dividends

There is no
public market for shares of our common stock nor do we expect a public market
to develop for shares of our common stock in the future. Holders of our common
stock may not be able to sell their shares or may be able to sell them only for
less than fair market value.

We 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. Please see Item 1. Business-Regulatory Considerations-Dividends,
Item 7. Managements Discussion and Analysis of Financial Condition and Results
of Operations  Capital resources, and Note 17 to the Consolidated Financial
Statements for a discussion of these additional restrictions. As of February
28, 2011, our common stock was held by approximately 792 shareholders of
record.

25

---



ITEM 6. SELECTED
FINANCIAL DATA

The
following table presents our summary consolidated financial data. We derived
our balance sheet and income statement data for the years ended December 31,
2010, 2009, 2008, 2007, and 2006, 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.

|                                                     |  |                                            |         |      |   |         |    |      |         |      |   |        |    |   |        |   
|---------------------------------------------------- |  | ------------------------------------------ | ------- | ---- | - | ------- | -- | ---- | ------- | ---- | - | ------ | -- | - | ------ | --
|(Dollars
 in thousands, except per share data)       |  | As of and for the years ended December 31, |        
|                                                     |  |                                            |        
|                                                     |  | 2010                                       |         | 2009 |   | 2008(1) |    | 2007 |         | 2006 |  
|                                                     |  |                                            |         |      |   |         |    |      |         |      |  
|Balance Sheet Data                                   |  |                                            |         |      |   |         |    |      |         |      |   |        |    |   |        |   
|Total assets                                         |  | $                                          | 461,631 |      | $ | 466,897 |    | $    | 388,145 |      | $ | 68,476 |    | $ | 50,968 |   
|Total loans, net of
 unearned fees                   |  |                                            | 317,565 |      |   | 336,724 |    |      | 288,791 |      |   | 52,813 |    |   | 32,504 |   
|Allowance for loan losses                            |  |                                            | 8,010   |      |   | 9,038   |    |      | 6,051   |      |   | 725    |    |   | 480    |   
|Securities available for
 sale                       |  |                                            | 42,658  |      |   | 81,707  |    |      | 43,916  |      |   | 5,059  |    |   | 7,023  |   
|Securities held to maturity                          |  |                                            | 10,082  |      |   | 12,259  |    |      | 12,464  |      |   | 0      |    |   | 0      |   
|Intangible assets                                    |  |                                            | 1,893   |      |   | 2,085   |    |      | 1,855   |      |   | 0      |    |   | 0      |   
|Deposits                                             |  |                                            | 412,187 |      |   | 406,652 |    |      | 307,668 |      |   | 51,964 |    |   | 34,215 |   
|Non-interest bearing
 deposits                       |  |                                            | 78,385  |      |   | 67,594  |    |      | 54,137  |      |   | 8,955  |    |   | 5,166  |   
|Shareholders equity                                 |  |                                            | 40,103  |      |   | 50,483  |    |      | 60,714  |      |   | 16,412 |    |   | 16,688 |   
|Income Statement Data                                |  |                                            |         |      |   |         |    |      |         |      |   |        |    |   |        |   
|Interest income                                      |  | $                                          | 19,721  |      | $ | 19,294  |    | $    | 13,982  |      | $ | 4,277  |    | $ | 1,929  |   
|Interest expense                                     |  |                                            | 5,733   |      |   | 6,942   |    |      | 5,446   |      |   | 1,832  |    |   | 583    |   
|                                                     |  |                                            |         |      |   |         |    |      |         |      |   |        |    |   |        |   
|Net interest income                                  |  |                                            | 13,988  |      |   | 12,352  |    |      | 8,536   |      |   | 2,445  |    |   | 1,346  |   
|Provision for loan losses                            |  |                                            | 9,583   |      |   | 8,523   |    |      | 3,868   |      |   | 245    |    |   | 480    |   
|                                                     |  |                                            |         |      |   |         |    |      |         |      |   |        |    |   |        |   
|Net interest income after
 provision for loan losses |  |                                            | 4,405   |      |   | 3,829   |    |      | 4,668   |      |   | 2,200  |    |   | 866    |   
|Non-interest income                                  |  |                                            | 1,211   |      |   | 1,285   |    |      | 567     |      |   | 214    |    |   | 91     |   
|Non-interest expense                                 |  |                                            | 15,318  |      |   | 15,931  |    |      | 11,459  |      |   | 2,980  |    |   | 1,945  |   
|Income tax benefit                                   |  |                                            |        |      |   |        |    |      | (111    | )    |   | (185   | )  |   | (481   | ) 
|                                                     |  |                                            |         |      |   |         |    |      |         |      |   |        |    |   |        |   
|Net income (loss)                                    |  | $                                          | (9,702  | )    | $ | (10,817 | )  | $    | (6,113  | )    | $ | (381   | )  | $ | (507   | ) 
|                                                     |  |                                            |         |      |   |         |    |      |         |      |   |        |    |   |        |   
|Per Share Data                                       |  |                                            |         |      |   |         |    |      |         |      |   |        |    |   |        |   
|Basic earnings (loss) per
 share                     |  | $                                          | (1.56   | )    | $ | (1.75   | )  | $    | (1.37   | )    | $ | (0.22  | )  | $ | (0.37  | ) 
|Book value per common share                          |  | $                                          | 6.47    |      | $ | 8.15    |    | $    | 9.86    |      | $ | 9.36   |    | $ | 9.54   |   
|Selected Operating Ratios                            |  |                                            |         |      |   |         |    |      |         |      |   |        |    |   |        |   
|Return on average assets                             |  |                                            | (2.04   | )%   |   | (2.35   | )% |      | (2.16   | )%   |   | (0.59  | )% |   | (1.32  | )%
|Return on average
 shareholders equity              |  |                                            | (19.88  | )%   |   | (18.87  | )% |      | (13.46  | )%   |   | (0.84  | )% |   | (3.05  | )%
|Net interest margin                                  |  |                                            | 3.18    | %    |   | 2.94    | %  |      | 3.34    | %    |   | 4.19   | %  |   | 4.42   | % 
|Selected Asset Quality Data                          |  |                                            |         |      |   |         |    |      |         |      |   |        |    |   |        |   
|Non-performing loans/total
 loans                    |  |                                            | 5.3     | %    |   | 2.8     | %  |      | 2.1     | %    |   |       | %  |   |       | % 
|Non-performing assets/total
 assets                  |  |                                            | 4.5     | %    |   | 2.7     | %  |      | 1.7     | %    |   |       | %  |   |       | % 
|Allowance for loan
 losses/total loans               |  |                                            | 2.5     | %    |   | 2.7     | %  |      | 2.1     | %    |   | 1.4    | %  |   | 1.5    | % 
|Allowance for loan
 losses/non-performing loans      |  |                                            | 46.9    | %    |   | 94.3    | %  |      | 103.1   | %    |   |       | %  |   |       | % 
|Net charge-offs
 (recoveries)/average loans          |  |                                            | 3.13    | %    |   | 1.73    | %  |      | 0.03    | %    |   |       | %  |   |       | % 
|Capital Data for the
 Company                        |  |                                            |         |      |   |         |    |      |         |      |   |        |    |   |        |   
|Equity/assets                                        |  |                                            | 8.7     | %    |   | 10.8    | %  |      | 15.6    | %    |   | 24     | %  |   | 32.7   | % 
|Leverage ratio                                       |  |                                            | 8.4     | %    |   | 10.0    | %  |      | 18.9    | %    |   | 24.3   | %  |   | 36.9   | % 
|Tier 1 risk-based capital
 ratio                     |  |                                            | 11.0    | %    |   | 12.5    | %  |      | 17.7    | %    |   | 25.2   | %  |   | 40.8   | % 
|Total risk-based capital
 ratio                      |  |                                            | 12.3    | %    |   | 13.8    | %  |      | 15.4    | %    |   | 26.3   | %  |   | 41.9   | % 
|Capital Data for Floridian
 Bank                     |  |                                            |         |      |   |         |    |      |         |      |   |        |    |   |        |   
|Leverage ratio                                       |  |                                            | 8.0     | %    |   | 8.2     | %  |      | 14.6    | %    |   | 24.3   | %  |   | 36.9   | % 
|Tier 1 risk-based capital
 ratio                     |  |                                            | 10.5    | %    |   | 10.5    | %  |      | 13.4    | %    |   | 25.2   | %  |   | 40.8   | % 
|Total risk-based capital
 ratio                      |  |                                            | 11.7    | %    |   | 11.7    | %  |      | 12.9    | %    |   | 26.3   | %  |   | 41.9   | % 
|Capital Data for Orange
 Bank                        |  |                                            |         |      |   |         |    |      |         |      |   |        |    |   |        |   
|Leverage ratio                                       |  |                                            | 7.3     | %    |   | 7.4     | %  |      | 7.6     | %    |   | N/A    |    |   | N/A    |   
|Tier 1 risk-based capital
 ratio                     |  |                                            | 9.5     | %    |   | 9.0     | %  |      | 8.5     | %    |   | N/A    |    |   | N/A    |   
|Total risk-based capital
 ratio                      |  |                                            | 10.7    | %    |   | 10.3    | %  |      | 9.8     | %    |   | N/A    |    |   | N/A    |   

(1) Reflects the acquisition
of Orange Bank effective March 31, 2008

26

---



ITEM 7.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The
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 2010 compares with prior years. Throughout this section,
Floridian Financial Group, Inc., and subsidiaries, collectively, are referred
to as Company, we, us, or our.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

This Annual
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.

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 our forward-looking 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.

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.

Business Overview

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. Since 2006, we have 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.

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, 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, Lake and Citrus Counties. Collectively, as of
December 31, 2010, our Banks operated 13 banking offices. On January 4,
2011, we announced Orange Bank will close two banking offices, located in
Orange County and Orange Bank had entered into an agreement to sell one banking
office located in Citrus County. The sale is subject to regulatory approval and
is expected to close in the second quarter of 2011.

The Banks
offer commercial and retail banking services with an emphasis on commercial and
commercial real estate lending, particularly to the medical services industry.
As of December 31, 2010, we had total assets of $461.6 million, deposits of
$412.2 million, and total gross loans of $317.8 million. In addition, as of
December 31, 2010, we had $40.1 million in total shareholders equity. At
December 31, 2010, our capital ratios surpassed all regulatory well
capitalized measures:

27

---



|                          |  |                          |      |                                   |  |      |  
|------------------------- |  | ------------------------ | ---- | --------------------------------- |  | ---- | -
|                          |  | As of
 December 31, 2010 |      | Minimum to be
 Well Capitalized | 
|                          |  |                          |      |                                   | 
|Total risk
 based capital |  |                          | 12.3 | %                                 |  | 10.0 | %
|Tier 1
 capital           |  |                          | 11.0 | %                                 |  | 6.0  | %
|Leverage
 capital         |  |                          | 8.4  | %                                 |  | 5.0  | %

Our lending
operations are entirely in the State of Florida, which has been particularly
hard hit in the recent economic downturn. Evidence of the economic downturn in
Florida is reflected in current unemployment statistics. According to the U.S.
Department of Labor, the Florida unemployment rate (seasonally adjusted) in
December 2010 increased to 12.0% from 11.8% at the end of 2009 and from 7.6% at
the end of 2008. A worsening of the economic conditions in Florida would likely
exacerbate the adverse effects of these difficult market conditions on our
customers, which may have a negative impact on our financial results.

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

Results of Operations

We incurred
a consolidated net loss of $9.7 million in 2010 compared to a loss of $10.8
million in 2009 and a loss of $6.1 million in 2008. The predominate change in
the 2010 and 2009 net losses versus 2008 was the result of a higher provision
for loan losses which were heavily influenced by the economic downturn over the
last 36 months.

As noted
previously, we merged with Orange Bank at the end of the first quarter 2008
which increased our assets from $86 million to $282 million at that time and we
have realized continued growth to a level of $461.6 million at year end 2010.
The significant increase in assets, including interest earning assets, led to a
significant increase in our interest income.

In both
2010 and 2009, 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 2010 and 2009. In
addition, Orange Banks expenses in 2009 increased substantially due to an
aggressive growth plan which included adding business development staff and
four additional branches. In December 2010, Orange Bank announced a
restructuring plan which includes selling one branch and closing two additional
branches. We incurred a $1.0 million restructuring charge as a result of the
plan.

Throughout
2010 and 2009, we continued monitoring the quality of our loan portfolio, which
led to a higher loan loss provision in 2009 and 2010 related to loan downgrades
and impaired loans. Further, considering the relative accounting guidance, we
recorded a $2.2 million valuation allowance in 2008 against deferred tax
assets. We continued to record no tax benefit of operating losses in 2010 and
2009 and expect that this position will continue until positive operating
results are sustainable.

Net
Interest Income.

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
non-interest 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
significance of net interest income is largely enhanced as our size grows and
the impact of market rates of interest as influenced by the Federal Reserves
monetary policy.

The following
table reflects the components of net interest income, setting forth for the
periods presented, (1) average assets, liabilities and shareholders equity,
(2) interest income earned on interest-earning assets and interest paid on
interest-bearing liabilities, (3) average yields earned on interest-earning
assets and average rates paid on interest-bearing liabilities, (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).

28

---



Average Balances and Interest Rates

|                                   |  |                   |         |                   |   |                   |  |         |      |          |   |         |   |         |        |          |  |      |   |   |         |   |   |        |  |  |      |  
|---------------------------------- |  | ----------------- | ------- | ----------------- | - | ----------------- |  | ------- | ---- | -------- | - | ------- | - | ------- | ------ | -------- |  | ---- | - | - | ------- | - | - | ------ |  |  | ---- | -
|(Dollars in Thousands)             |  | Year Ended        |        
|                                   |  |                   |        
|                                   |  | December 31, 2010 |         | December 31, 2009 |   | December 31, 2008 | 
|                                   |  |                   |         |                   |   |                   | 
|                                   |  | Balance           |         | Interest          |   | Rate              |  | Balance |      | Interest |   | Rate    |   | Balance |        | Interest |  | Rate |  
|                                   |  |                   |         |                   |   |                   |  |         |      |          |   |         |   |         |        |          |  |      |  
|ASSETS                             |  |                   |         |                   |   |                   |  |         |      |          |   |         |   |         |        |          |  |      |   |   |         |   |   |        |  |  |      |  
|Loans, net(1)(2)                   |  | $                 | 335,868 |                   | $ | 17,509            |  |         | 5.21 | %        | $ | 319,845 |   | $       | 16,920 |          |  | 5.29 | % | $ | 194,990 |   | $ | 11,650 |  |  | 5.97 | %
|Investment securities              |  |                   | 70,417  |                   |   | 2,129             |  |         | 3.02 |          |   | 75,532  |   |         | 2,276  |          |  | 3.01 |   |   | 38,950  |   |   | 1,720  |  |  | 4.42 |  
|Federal funds sold                 |  |                   | 32,982  |                   |   | 68                |  |         | .21  |          |   | 22,947  |   |         | 47     |          |  | 0.20 |   |   | 11,797  |   |   | 271    |  |  | 2.30 |  
|Repurchase agreements              |  |                   |        |                   |   |                  |  |         |     |          |   |        |   |         |       |          |  |     |   |   | 105     |   |   | 2      |  |  | 1.90 |  
|Deposits at interest with
 banks   |  |                   | 1,093   |                   |   | 15                |  |         | 1.37 |          |   | 1,429   |   |         | 51     |          |  | 3.57 |   |   | 9,823   |   |   | 339    |  |  | 3.44 |  
|                                   |  |                   |         |                   |   |                   |  |         |      |          |   |         |   |         |        |          |  |      |   |   |         |   |   |        |  |  |      |  
|Total earning assets               |  |                   | 440,360 |                   |   | 19,721            |  |         | 4.48 | %        |   | 419,753 |   |         | 19,294 |          |  | 4.60 | % |   | 255,665 |   |   | 13,982 |  |  | 5.47 | %
|                                   |  |                   |         |                   |   |                   |  |         |      |          |   |         |   |         |        |          |  |      |   |   |         |   |   |        |  |  |      |  
|Cash & due from bank               |  |                   | 8,700   |                   |   |                   |  |         |      |          |   | 13,324  |   |         |        |          |  |      |   |   | 7,351   |   |   |        |  |  |      |  
|Allowance for loan losses          |  |                   | (8,670  | )                 |   |                   |  |         |      |          |   | (5,358  | ) |         |        |          |  |      |   |   | (2,768  | ) |   |        |  |  |      |  
|Other assets                       |  |                   | 35,375  |                   |   |                   |  |         |      |          |   | 33,256  |   |         |        |          |  |      |   |   | 22,418  |   |   |        |  |  |      |  
|                                   |  |                   |         |                   |   |                   |  |         |      |          |   |         |   |         |        |          |  |      |   |   |         |   |   |        |  |  |      |  
|Total assets                       |  | $                 | 475,765 |                   |   |                   |  |         |      |          | $ | 460,975 |   |         |        |          |  |      |   | $ | 282,666 |   |   |        |  |  |      |  
|                                   |  |                   |         |                   |   |                   |  |         |      |          |   |         |   |         |        |          |  |      |   |   |         |   |   |        |  |  |      |  
|                                   |  |                   |         |                   |   |                   |  |         |      |          |   |         |   |         |        |          |  |      |   |   |         |   |   |        |  |  |      |  
|LIABILITIES                        |  |                   |         |                   |   |                   |  |         |      |          |   |         |   |         |        |          |  |      |   |   |         |   |   |        |  |  |      |  
|                                   |  |                   |         |                   |   |                   |  |         |      |          |   |         |   |         |        |          |  |      |   |   |         |   |   |        |  |  |      |  
|Savings, NOW & money
 market       |  | $                 | 176,131 |                   | $ | 1,967             |  |         | 1.12 | %        | $ | 188,451 |   | $       | 3,003  |          |  | 1.59 | % | $ | 120,355 |   | $ | 2,559  |  |  | 2.13 | %
|Time deposits                      |  |                   | 166,777 |                   |   | 3,578             |  |         | 2.15 |          |   | 143,061 |   |         | 3,722  |          |  | 2.60 |   |   | 80,748  |   |   | 2,838  |  |  | 3.51 |  
|                                   |  |                   |         |                   |   |                   |  |         |      |          |   |         |   |         |        |          |  |      |   |   |         |   |   |        |  |  |      |  
|Total interest bearing deposits    |  |                   | 342,908 |                   |   | 5,545             |  |         | 1.62 |          |   | 331,512 |   |         | 6,725  |          |  | 2.03 |   |   | 201,103 |   |   | 5,397  |  |  | 2.20 |  
|Short term borrowings              |  |                   | 6,895   |                   |   | 188               |  |         | 2.73 |          |   | 7,283   |   |         | 217    |          |  | 2.98 |   |   | 2,189   |   |   | 49     |  |  | 2.24 |  
|                                   |  |                   |         |                   |   |                   |  |         |      |          |   |         |   |         |        |          |  |      |   |   |         |   |   |        |  |  |      |  
|Total interest bearing liabilities |  |                   | 349,803 |                   |   | 5,733             |  |         | 1.64 | %        |   | 338,795 |   |         | 6,942  |          |  | 2.05 | % |   | 203,292 |   |   | 5,446  |  |  | 2.68 | %
|                                   |  |                   |         |                   |   |                   |  |         |      |          |   |         |   |         |        |          |  |      |   |   |         |   |   |        |  |  |      |  
|Noninterest bearing
 deposits      |  |                   | 75,206  |                   |   |                   |  |         |      |          |   | 62,849  |   |         |        |          |  |      |   |   | 33,254  |   |   |        |  |  |      |  
|Other liabilities                  |  |                   | 1,963   |                   |   |                   |  |         |      |          |   | 2,019   |   |         |        |          |  |      |   |   | 707     |   |   |        |  |  |      |  
|                                   |  |                   |         |                   |   |                   |  |         |      |          |   |         |   |         |        |          |  |      |   |   |         |   |   |        |  |  |      |  
|Total liabilities                  |  |                   | 426,972 |                   |   |                   |  |         |      |          |   | 403,663 |   |         |        |          |  |      |   |   | 237,253 |   |   |        |  |  |      |  
|                                   |  |                   |         |                   |   |                   |  |         |      |          |   |         |   |         |        |          |  |      |   |   |         |   |   |        |  |  |      |  
|Total shareholders equity         |  |                   | 48,793  |                   |   |                   |  |         |      |          |   | 57,312  |   |         |        |          |  |      |   |   | 45,413  |   |   |        |  |  |      |  
|                                   |  |                   |         |                   |   |                   |  |         |      |          |   |         |   |         |        |          |  |      |   |   |         |   |   |        |  |  |      |  
|                                   |  |                   |         |                   |   |                   |  |         |      |          |   |         |   |         |        |          |  |      |   |   |         |   |   |        |  |  |      |  
|Total liabilities and
 equity      |  | $                 | 475,765 |                   |   |                   |  |         |      |          | $ | 460,975 |   |         |        |          |  |      |   | $ | 282,666 |   |   |        |  |  |      |  
|                                   |  |                   |         |                   |   |                   |  |         |      |          |   |         |   |         |        |          |  |      |   |   |         |   |   |        |  |  |      |  
|                                   |  |                   |         |                   |   |                   |  |         |      |          |   |         |   |         |        |          |  |      |   |   |         |   |   |        |  |  |      |  
|Interest rate spread               |  |                   |         |                   |   |                   |  |         | 2.84 | %        |   |         |   |         |        |          |  | 2.55 | % |   |         |   |   |        |  |  | 2.79 | %
|                                   |  |                   |         |                   |   |                   |  |         |      |          |   |         |   |         |        |          |  |      |   |   |         |   |   |        |  |  |      |  
|Net interest income                |  |                   |         |                   | $ | 13,988            |  |         |      |          |   |         |   | $       | 12,352 |          |  |      |   |   |         |   | $ | 8,536  |  |  |      |  
|                                   |  |                   |         |                   |   |                   |  |         |      |          |   |         |   |         |        |          |  |      |   |   |         |   |   |        |  |  |      |  
|Net interest margin                |  |                   |         |                   |   |                   |  |         | 3.18 | %        |   |         |   |         |        |          |  | 2.94 | % |   |         |   |   |        |  |  | 3.34 | %
|                                   |  |                   |         |                   |   |                   |  |         |      |          |   |         |   |         |        |          |  |      |   |   |         |   |   |        |  |  |      |  

|    |                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Average balances include non-accrual loans, and are net of unearned
 loan fees of $205, $279, and $242 in 2010, 2009, and 2008, respectively.
|    |                                                                                                                                              
|(2) | Interest income includes fees on loans of $309, $196, and $303 in
 2010, 2009, and 2008, respectively.                                       

Net
interest income increased $1.6 million, or 13.2%, from $12.4 million in 2009 to
$14.0 million in 2010 principally due to the growth in loans outstanding and
lower cost of deposits. This favorable impact was somewhat offset by a
reduction in loan yields related to troubled loan restructurings, higher
non-accruing loans, and increased pricing competition on loans. The significant
addition of interest earning assets acquired from the Orange Bank merger on
March 31, 2008 greatly contributed to the $3.8 million increase in net interest
income in 2009 versus 2008 as well as the Federal Reserves monetary policy of
significantly reducing short-term interest rates by 400 basis points in 2008.

Now that
the Federal Reserve effectively established a zero interest rate policy
throughout 2010 and 2009, going forward there will be less impact on net
interest earnings due to interest rate reductions. During 2008, 2009, and 2010,
the Banks have emphasized originating loans with interest rate floors of
approximately six percent. Further, the Banks aggressively reduced their costs
of funds through the third quarter of 2010, 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.

The
following table sets forth certain information regarding changes in our
interest income and interest expense for the year ended December 31, 2010, as
compared to the year ended December 31, 2009, and during the year ended
December 31, 2009 as compared to the year ended December 31, 2008. 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.

29

---



|                                    |  |                        |        |                        |      |               |   |                |        |      |   |       |   |   |       |  |   |        |  
|----------------------------------- |  | ---------------------- | ------ | ---------------------- | ---- | ------------- | - | -------------- | ------ | ---- | - | ----- | - | - | ----- |  | - | ------ | -
|                                    |  | Rate Volume Analysis   |       
|                                    |  |                        |       
|                                    |  |                        |        |                        |     
|(Dollars In Thousands)              |  | 2010 Changes From 2009 |        | 2009 Changes From 2008 |     
|                                    |  |                        |        |                        |     
|                                    |  | Total
 Change          |        | Due To Average         |      | Total
 Change |   | Due To Average |       
|                                    |  |                        |        |                        |      |               |  
|                                    |  |                        | Volume |                        | Rate |               |   | Volume         |        | Rate |  
|                                    |  |                        |        |                        |      |               |   |                |        |      |   |       |  
|Interest Earning Assets             |  |                        |        |                        |      |               |   |                |        |      |   |       |   |   |       |  |   |        |  
|Loans, net                          |  | $                      | 589    |                        | $    | 848           |   | $              | (259   | )    | $ | 5,270 |   | $ | 7,448 |  | $ | (2,178 | )
|Investment securities               |  |                        | (147   | )                      |      | (154          | ) |                | 7      |      |   | 556   |   |   | 1,619 |  |   | (1,063 | )
|Federal funds sold                  |  |                        | 21     |                        |      | 21            |   |                |       |      |   | (224  | ) |   | 256   |  |   | (480   | )
|Other                               |  |                        | (36    | )                      |      | (12           | ) |                | (24    | )    |   | (290  |   |   | (292  |  |   | 2      | )
|                                    |  |                        |        |                        |      |               |   |                |        |      |   |       |   |   |       |  |   |        |  
|Total                               |  |                        | 427    |                        |      | 703           |   |                | (276   | )    |   | 5,312 |   |   | 9,031 |  |   | (3,719 | )
|                                    |  |                        |        |                        |      |               |   |                |        |      |   |       |   |   |       |  |   |        |  
|                                    |  |                        |        |                        |      |               |   |                |        |      |   |       |   |   |       |  |   |        |  
|Interest Bearing Liabilities        |  |                        |        |                        |      |               |   |                |        |      |   |       |   |   |       |  |   |        |  
|Savings, NOW, money market accounts |  |                        | (1,035 | )                      |      | (196          | ) |                | (839   | )    |   | 444   |   |   | 1,456 |  |   | (1,012 | )
|Time deposits                       |  |                        | (145   | )                      |      | 617           |   |                | (762   | )    |   | 884   |   |   | 2,186 |  |   | (1,302 | )
|Short term borrowings               |  |                        | (29    | )                      |      | (12           | ) |                | (17    | )    |   | 168   |   |   | 115   |  |   | 53     |  
|                                    |  |                        |        |                        |      |               |   |                |        |      |   |       |   |   |       |  |   |        |  
|Total                               |  |                        | (1,209 | )                      |      | 409           |   |                | (1,618 | )    |   | 1,496 |   |   | 3,757 |  |   | (2,261 | )
|                                    |  |                        |        |                        |      |               |   |                |        |      |   |       |   |   |       |  |   |        |  
|                                    |  |                        |        |                        |      |               |   |                |        |      |   |       |   |   |       |  |   |        |  
|Changes In Net Interest Income      |  | $                      | 1,636  |                        | $    | 294           |   | $              | 1,342  |      | $ | 3,816 |   | $ | 5,274 |  | $ | (1,458 | )
|                                    |  |                        |        |                        |      |               |   |                |        |      |   |       |   |   |       |  |   |        |  

Provision for Loan Losses.

The 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.

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 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. Cash
collections on impaired loans are credited to the loan receivable balance and
no interest income is recognized on those loans until the principal balance is
current.

There are
no residential mortgage loan concentrations in the loan portfolio. The majority
of the charge-offs and impaired loans were experienced in 2010 in the commercial
real estate loan portfolio which represents 76% of gross loans. These type
loans are all within our general market areas and are made on terms typically
at 80% loan to value. These 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, a loan
impairment evaluation is performed and specific reserves are provided to offset
any shortfalls in collectability. At December 31, 2010, loans 30 to 89 days
past due in the commercial real estate portfolio totaled $6.4 million or 2.76%
of total commercial real estate loans and 2.02% of total loans.

As a direct
result of these factors and analyses the loan loss provision increased $1.1
million in 2010 over 2009 and $4.7 million in 2009 versus 2008 resulting in an
allowance of 2.52% and 2.68% of total loans at December 31, 2010 and December
31, 2009, respectively.

30

---



Non
Interest Income.

Following
is a schedule of non-interest income for the years ended December 31, 2010,
2009, and 2008:

|                                                  |  |                         |       |      |   |       |  |   |     | 
|------------------------------------------------- |  | ----------------------- | ----- | ---- | - | ----- |  | - | --- | 
|                                                  |  | Year ended December 31, |      
|                                                  |  |                         |      
|(Dollars in thousands)                            |  | 2010                    |       | 2009 |   | 2008  | 
|                                                  |  |                         |       |      |   |       | 
|                                                  |  |                         |       |      |   |       | 
|Service charges and fees on deposit
 accounts     |  | $                       | 445   |      | $ | 422   |  | $ | 222 | 
|Cash surrender value  bank owned life
 insurance |  |                         | 408   |      |   | 479   |  |   | 209 | 
|Loan fee income                                   |  |                         | 49    |      |   | 57    |  |   | 32  | 
|Originating fees on loans sold                    |  |                         |      |      |   |      |  |   | 41  | 
|Other                                             |  |                         | 292   |      |   | 121   |  |   | 59  | 
|Gain on sale of securities                        |  |                         | 17    |      |   | 206   |  |   | 4   | 
|                                                  |  |                         |       |      |   |       |  |   |     | 
|Totals                                            |  | $                       | 1,211 |      | $ | 1,285 |  | $ | 567 | 
|                                                  |  |                         |       |      |   |       |  |   |     | 

Non-interest
income decreased $74 thousand, or 5.8%, in 2010 versus 2009. Gains from sales
of securities declined $189 thousand. Fee income increased due to increased
demand deposit fees and an increase in our investment in Floridian Financial
Mortgage related to increased mortgage activity. The cash surrender value on
bank owned life insurance declined as investment returns on the cash surrender
value were down from 2009.

The
increase in 2009 over 2008 was due to increased levels of loans and deposits as
well as an effort to minimize fee waivers. Non-interest income was enhanced by
the purchase of bank owned life insurance in mid year 2008.

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.

On January
6, 2011, we announced FBC Mortgage, LLC had purchased our 49% equity interest
in Floridian Financial Mortgage, LLC on December 31, 2010 for approximately
$122 thousand. Subsequent to the sale of our equity interest, FBC and our two
banking subsidiaries entered into a marketing arrangement where FBC will pay
each bank a monthly fee for marketing services. We will experience new fee
income from this arrangement, however, we will also see our non-interest income
impacted as we no longer experience a return on the Floridian Financial Mortgage
investment.

Non
Interest Expense.

Following
is a schedule of non-interest expense for years ended December 31, 2010, 2009,
and 2008:

|                                        |  |                         |        |      |   |        |  |   |        | 
|--------------------------------------- |  | ----------------------- | ------ | ---- | - | ------ |  | - | ------ | 
|                                        |  | Year ended December 31, |       
|                                        |  |                         |       
|(Dollars in thousands)                  |  | 2010                    |        | 2009 |   | 2008   | 
|                                        |  |                         |        |      |   |        | 
|                                        |  |                         |        |      |   |        | 
|Salaries and employee benefits          |  | $                       | 6,833  |      | $ | 7,498  |  | $ | 6,138  | 
|Occupancy and equipment expense         |  |                         | 3,368  |      |   | 3,173  |  |   | 2,320  | 
|Data processing                         |  |                         | 1,003  |      |   | 889    |  |   | 775    | 
|Professional fee                        |  |                         | 770    |      |   | 744    |  |   | 381    | 
|Other real estate expense               |  |                         | 794    |      |   | 631    |  |   |       | 
|FDIC insurance                          |  |                         | 787    |      |   | 951    |  |   | 162    | 
|Credit and collections expenses         |  |                         | 259    |      |   | 412    |  |   | 120    | 
|Telephone and communications            |  |                         | 248    |      |   | 251    |  |   | 208    | 
|Core deposit intangible amortization    |  |                         | 192    |      |   | 192    |  |   | 144    | 
|Restructuring charge and operating loss |  |                         | 450    |      |   | 570    |  |   | 37     | 
|Other                                   |  |                         | 614    |      |   | 620    |  |   | 1,173  | 
|                                        |  |                         |        |      |   |        |  |   |        | 
|Totals                                  |  | $                       | 15,318 |      | $ | 15,931 |  | $ | 11,459 | 
|                                        |  |                         |        |      |   |        |  |   |        | 

Total
non-interest expense decreased $613 thousand or 3.8% from $15.9 million in 2009
to $15.3 million in 2010. In 2010, we recognized a $1.0 million restructuring
charge related to two planned branch closings and one pending branch sale. In
addition, in 2009, $570 thousand was accrued for a probable loss associated
with a customer fraud. In 2010, a settlement related to the customer fraud was
reached and $570 thousand was recovered. Personnel costs declined $665 thousand
primarily due to staff reductions occurring since the

31

---



third quarter of 2009 and a $290 thousand one-time severance expense in
2009. Occupancy and equipment expenses increased $240 thousand primarily due to
a new branch opened in the fourth quarter of 2009.

Total
non-interest expense increased $4.5 million, or 39.2%, from $11.5 million in
2008 to $15.9 million in 2009. Approximately $2.3 million was related to the
addition of Orange Banks operations in March 2008. In addition, 2009
non-interest expenses, particularly personnel and occupancy expenses, reflect
the full year costs associated with six branches opened during 2008.
Non-interest expenses also increased in 2009 as we grew our loan portfolio and
continued to experience declining credit quality. Credit and collection
expenses were up $292 thousand and OREO expenses increased $631 thousand. FDIC
premiums increased $789 thousand as we experienced significant deposit growth and
paid a one-time assessment of $399 thousand levied on all FDIC-insured
depository institutions.

Non-interest
expense unrelated to OREO and collections are expected to moderate in future
periods as we leverage our existing personnel and branch network to increase
loans and deposits. We expect increased government regulation will increase our
costs. Non-interest 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.

Income
Taxes.

We file
consolidated tax returns. We have incurred operating losses since our inception
in 2006 and have accumulated a net tax benefit over the past three years. We
have recorded a valuation allowance to partially offset the deferred tax assets
associated with the net operating loss carry forwards generated by our net
losses. Management will continue to monitor the deferred tax assets, and will
determine whether we will require an additional valuation allowance, or if we
experience net income, whether we will need to reverse any remaining valuation
allowance. We recognized no income tax benefits for the years ended December
31, 2010 and 2009 and $111 thousand for the year ended December 31, 2008.
Please see Note 10 of our Notes to Consolidated Financial Statements for
further information on income taxes.

Inflation.

The impact
of 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 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.

Market Risk

Market risk
refers to potential losses arising from 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 customers. These products sometimes contribute to interest rate risk for
us when product groups do not complement 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.

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.

We have
established an Asset/Liability Committee (ALCO) for each Bank, which are
responsible for each Banks interest rate risk management. We have implemented
a sophisticated asset/liability model at both Banks to measure their interest
rate risk. Interest rate risk measures used by us include earnings simulation,
economic value of equity (EVE) and gap analysis. We do not use derivative
financial instruments for market risk management purposes.

32

---



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, 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.

The
following gap analysis compares the difference between the amount of interest
earning assets (IEA) and interest bearing liabilities (IBL) subject to
re-pricing over a period of time. A ratio of more than one indicates a higher
level of re-pricing assets over re-pricing liabilities for the time period.
Conversely, a ratio of less than one indicates a higher level of re-pricing
liabilities over re-pricing assets for the time period. It is the Banks policy
to maintain a cumulative one year Gap of +/- 10% and a ratio of IEA/IBL of 0.80
to 1.20. At December 31, 2010, we were within our policy limits.

|                                   |  |                  |         |                |   |                 |   |               |         |   |   |         | 
|---------------------------------- |  | ---------------- | ------- | -------------- | - | --------------- | - | ------------- | ------- | - | - | ------- | 
|                                   |  | Gap Analysis     |        
|                                   |  |                  |        
|                                   |  |                  |         |                |  
|(Dollars in Thousands)             |  | Within
 3 Months |         | 4 To 6
 Months |   | 7 To 12
 Months |   | Total
 1 Year |        
|                                   |  |                  |         |                |   |                 |   |               |        
|                                   |  |                  |         |                |   |                 |   |               |        
|Interest Earning Assets (IEA)      |  |                  |         |                |   |                 |   |               |         |   |   |         | 
|                                   |  |                  |         |                |   |                 |   |               |         |   |   |         | 
|Loans                              |  | $                | 165,423 |                | $ | 5,916           |   | $             | 13,586  |   | $ | 184,925 | 
|Investment securities              |  |                  | 8,918   |                |   | 15,378          |   |               | 15,010  |   |   | 39,306  | 
|Federal funds sold                 |  |                  | 2,975   |                |   |                |   |               |        |   |   | 2,975   | 
|Other                              |  |                  | 51,097  |                |   |                |   |               |        |   |   | 51,097  | 
|                                   |  |                  |         |                |   |                 |   |               |         |   |   |         | 
|Total                              |  |                  | 228,413 |                |   | 21,294          |   |               | 28,596  |   |   | 278,303 | 
|                                   |  |                  |         |                |   |                 |   |               |         |   |   |         | 
|                                   |  |                  |         |                |   |                 |   |               |         |   |   |         | 
|Interest Bearing Liabilities (IBL) |  |                  |         |                |   |                 |   |               |         |   |   |         | 
|                                   |  |                  |         |                |   |                 |   |               |         |   |   |         | 
|Savings, NOW, money market         |  |                  | 181,657 |                |   |                |   |               |        |   |   | 181,657 | 
|Certificates of deposit            |  |                  | 28,380  |                |   | 16,731          |   |               | 39,467  |   |   | 84,578  | 
|Short term borrowings              |  |                  | 6,762   |                |   |                |   |               |        |   |   | 6,762   | 
|                                   |  |                  |         |                |   |                 |   |               |         |   |   |         | 
|Total                              |  |                  | 216,799 |                |   | 16,731          |   |               | 39,467  |   |   | 272,997 | 
|                                   |  |                  |         |                |   |                 |   |               |         |   |   |         | 
|                                   |  |                  |         |                |   |                 |   |               |         |   |   |         | 
|Period Gap                         |  | $                | 11,614  |                | $ | 4,563           |   | $             | (10,871 | ) | $ | 5,306   | 
|                                   |  |                  |         |                |   |                 |   |               |         |   |   |         | 
|Cumulative Gap                     |  | $                | 11,614  |                | $ | 16,177          |   | $             | 5,306   |   |   |         | 
|                                   |  |                  |         |                |   |                 |   |               |         |   |   |         | 
|                                   |  |                  |         |                |   |                 |   |               |         |   |   |         | 
|Cumulative Gap / Total Assets      |  |                  | 2.52    | %              |   | 3.50            | % |               | 1.15    | % |   |         | 
|IEA / IBL (Cumulative)             |  |                  | 105     | %              |   | 107             | % |               | 102     | % |   |         | 

Financial Condition

Lending Activity.

The loan
portfolio consists principally of loans to individuals and small- and
medium-sized businesses within our primary market area of Central Florida. The
table below shows our loan portfolio composition for the years ended December
31, 2010, 2009, 2008, 2007, and 2006.

33

---



Loan Portfolio Composition

|                                 |  |   |              |  |      |         |      |   |         |  |      |        |  |   |        |  | 
|-------------------------------- |  | - | ------------ |  | ---- | ------- | ---- | - | ------- |  | ---- | ------ |  | - | ------ |  | 
|                                 |  |   | December 31, | 
|                                 |  |   |              | 
|(Dollars in Thousands)           |  |   | 2010         |  | 2009 |         | 2008 |   | 2007    |  | 2006 |       
|                                 |  |   |              |  |      |         |      |   |         |  |      |       
|Commercial                       |  | $ | 45,202       |  | $    | 48,565  |      | $ | 50,962  |  | $    | 17,086 |  | $ | 16,125 | 
|Commercial
 real estate          |  |   | 240,151      |  |      | 253,177 |      |   | 212,328 |  |      | 31,087 |  |   | 13,655 | 
|Residential
 mortgage            |  |   | 12,580       |  |      | 14,368  |      |   | 9,157   |  |      | 1,531  |  |   | 1,054  | 
|Consumer and
 home equity        |  |   | 19,837       |  |      | 20,893  |      |   | 16,586  |  |      | 3,155  |  |   | 1,710  | 
|                                 |  |   |              |  |      |         |      |   |         |  |      |        |  |   |        | 
|Total loans                      |  |   | 317,770      |  |      | 337,003 |      |   | 289,033 |  |      | 52,859 |  |   | 32,544 | 
|Less:
 Allowance for loan losses |  |   | 8,010        |  |      | 9,038   |      |   | 6,051   |  |      | 725    |  |   | 480    | 
|Less: Net
 deferred fees         |  |   | 205          |  |      | 279     |      |   | 242     |  |      | 46     |  |   | 40     | 
|                                 |  |   |              |  |      |         |      |   |         |  |      |        |  |   |        | 
|Loans, Net                       |  | $ | 309,555      |  | $    | 327,686 |      | $ | 282,740 |  | $    | 52,088 |  | $ | 32,024 | 
|                                 |  |   |              |  |      |         |      |   |         |  |      |        |  |   |        | 

Total loans
at December 31, 2010 decreased by $19.2 million, or 5.7%, to $317.8 million
compared to December 31, 2009 as we charged off loans and realized loan pay
offs and pay downs in excess of new loan originations. We originated $55.5
million in new loans while experiencing $59.1 million in loan pay downs and pay
offs and recording $10.7 million in loan charge offs.

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

Total loans
at December 31, 2009 increased by $48.0 million to $337 million as compared to
December 31, 2008.

Following
is a summary of the maturity distribution of certain loan categories based on
remaining scheduled repayments of principal as of December 31, 2010:

Loan Maturities and Sensitivities to Changes in Interest Rates*

|                                                                   |  |   |                                   |  |              |        |               |   |        |  |   |         |  | 
|------------------------------------------------------------------ |  | - | --------------------------------- |  | ------------ | ------ | ------------- | - | ------ |  | - | ------- |  | 
|                                                                   |  |   | Maturity and/or Re-pricing Period | 
|                                                                   |  |   |                                   | 
|(Dollars in Thousands)                                             |  |   | Within
 1 Year                    |  | 1  5
 Years |        | Over 5
 Years |   | Total  | 
|                                                                   |  |   |                                   |  |              |        |               |   |        | 
|Commercial                                                         |  | $ | 36,488                            |  | $            | 7,988  |               | $ |       |  | $ | 44,476  | 
|Commercial
 real estate                                            |  |   | 124,242                           |  |              | 82,739 |               |   | 20,689 |  |   | 227,670 | 
|Residential
 mortgages                                             |  |   | 5,347                             |  |              | 7,231  |               |   | 2      |  |   | 12,580  | 
|Consumer and
 home equity                                          |  |   | 18,848                            |  |              | 869    |               |   | 18     |  |   | 19,735  | 
|                                                                   |  |   |                                   |  |              |        |               |   |        |  |   |         | 
|Total                                                              |  | $ | 184,925                           |  | $            | 98,827 |               | $ | 20,709 |  | $ | 304,461 | 
|                                                                   |  |   |                                   |  |              |        |               |   |        |  |   |         | 
|                                                                   |  |   |                                   |  |              |        |               |   |        |  |   |         | 
|Fixed/variable pricing of loans with maturities due after one year |  |   |                                   |  |              |        |               |   |        |  |   |         | 
|Loans at fixed interest rates                                      |  |   |                                   |  | $            | 77,116 |               | $ | 11,711 |  |   |         | 
|Loans at floating or adjustable interest
 rates                    |  |   |                                   |  |              | 21,711 |               |   | 8,998  |  |   |         | 
|                                                                   |  |   |                                   |  |              |        |               |   |        |  |   |         | 
|Total                                                              |  |   |                                   |  | $            | 98,827 |               | $ | 20,709 |  |   |         | 
|                                                                   |  |   |                                   |  |              |        |               |   |        |  |   |         | 

* Excludes non-accrual loans and purchase accounting adjustments.

Non-Performing
Assets.

Non-performing
assets increased $8.2 million, or 64.6%, from year-end 2009. We had $1.4
million of non-performing restructured loans at December 31, 2010 compared to
$6.5 million in the prior year end. Non-accrual loans increased $12.6 million
primarily due to five loans totaling $11.0 million. There was no industry
concentration among the five loans as one was a retail strip center, one was an
office building, one was a residential development, one was land and the fifth
was a mortgage origination organization. OREO increased $841 thousand primarily
due to the Company taking back collateral in lieu of or as part of foreclosure.

Non-performing
assets include non-accrual loans, loans 90 days or greater delinquent,
non-performing restructured loans, other real estate owned, and repossessed personal
property. Non-accrual loans represent loans on which interest accruals have
been discontinued. Non-performing 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

34

---



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.

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
non-accrual status, all unpaid interest and fees are reversed. Non-accrual
loans may not be restored to accrual status until all delinquent principal and
interest have been paid.

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:

|                        |  |  |                 |  |              |        |                        |  |      |   | 
|----------------------- |  |  | --------------- |  | ------------ | ------ | ---------------------- |  | ---- | - | 
|(Dollars in Thousands)  |  |  | Number of
Loans |  | Loan Balance |        | Percent of
Total Loans | 
|                        |  |  |                 |  |              |        |                        | 
|Commercial              |  |  | 3               |  | $            | 324    |                        |  | .9   | %
|Commercial
 real estate |  |  |                 |  |              |        |                        |  |      |  
|Construction and land   |  |  | 4               |  |              | 3,891  |                        |  | 6.7  |  
|Non-owner occupied      |  |  | 4               |  |              | 8,132  |                        |  | 13.0 |  
|Owner occupied          |  |  | 9               |  |              | 11,625 |                        |  | 11.7 |  
|Residential
 mortgages  |  |  | 2               |  |              | 1,600  |                        |  | 5.9  |  
|Home equity             |  |  | 3               |  |              | 1,499  |                        |  | 7.8  |  
|Consumer                |  |  |                |  |              |       |                        |  |     |  
|                        |  |  |                 |  |              |        |                        |  |      |  
|Total                   |  |  | 25              |  | $            | 27,071 |                        |  | 8.5  | %
|                        |  |  |                 |  |              |        |                        |  |      |  

Nonperforming
loans are closely monitored on an ongoing basis as part of our loan review and
work-out process. The potential risk of loss on these loans is evaluated by
comparing the loan balance to the fair value of any underlying collateral or
the present value of projected future cash flows. Losses are recognized where
appropriate.

|                                                      |  |   |                                      |   |      |        |      |   |       |   |      |   |   |   |   |   | 
|----------------------------------------------------- |  | - | ------------------------------------ | - | ---- | ------ | ---- | - | ----- | - | ---- | - | - | - | - | - | 
|                                                      |  |   | Nonperforming Assets at December 31, |  
|                                                      |  |   |                                      |  
|(Dollars in Thousands)                                |  |   | 2010                                 |   | 2009 |        | 2008 |   | 2007  |   | 2006 |  
|                                                      |  |   |                                      |   |      |        |      |   |       |   |      |  
|Non-accrual                                           |  | $ | 15,665                               |   | $    | 3,105  |      | $ | 5,999 |   | $    |  |   | $ |  |  
|Non-performing
 restructured loans                    |  |   | 1,423                                |   |      | 6,476  |      |   |      |   |      |  |   |   |  |  
|                                                      |  |   |                                      |   |      |        |      |   |       |   |      |   |   |   |   |  
|Total
 nonperforming loans                            |  |   | 17,088                               |   |      | 9,581  |      |   | 5,999 |   |      |  |   |   |  |  
|Other real
 estate owned                              |  |   | 3,864                                |   |      | 3,023  |      |   | 712   |   |      |  |   |   |  |  
|Repossessed
 personal property                        |  |   |                                     |   |      | 125    |      |   |      |   |      |  |   |   |  |  
|                                                      |  |   |                                      |   |      |        |      |   |       |   |      |   |   |   |   |  
|Total
 nonperforming assets                           |  | $ | 20,952                               |   | $    | 12,729 |      | $ | 6,711 |   | $    |  |   | $ |  |  
|                                                      |  |   |                                      |   |      |        |      |   |       |   |      |   |   |   |   |  
|                                                      |  |   |                                      |   |      |        |      |   |       |   |      |   |   |   |   |  
|Nonperforming
 loans as a percentage of total loans   |  |   | 5.3                                  | % |      | 2.8    | %    |   | 2.1   | % |      |  | % |   |  | %
|Nonperforming
 assets as a percentage of total assets |  |   | 4.5                                  | % |      | 2.7    | %    |   | 1.7   | % |      |  | % |   |  | %
|                                                      |  |   |                                      |   |      |        |      |   |       |   |      |   |   |   |   |  
|Past Due 90
 or more days and still accruing          |  | $ | 63                                   |   | $    |       |      | $ |      |   | $    |  |   | $ |  |  

In the year
ended December 31, 2010, interest income not recognized on non-accrual loans
(but would have been recognized if the loans were current) was approximately
$303 thousand. Interest income recognized on non-performing loans totaled $822
thousand.

Allowance and
Provision for Loan Losses.

The
allowance for loan losses represents managements estimate of probable loan
losses inherent in the loan portfolio at a specific point in time. 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 2010, we had net charge-offs of approximately $10.6 million representing
3.08% of year-to-date average loans. Further, as disclosed in Note 5 of the
Consolidated Financial Statements, management added approximately $9.6 million
to the allowance for loan losses through the loan loss provision bringing the
total allowance to a level of approximately $8.0 million or 2.52% of total
loans outstanding at December 31, 2010. Management evaluates the adequacy of
the allowance at least quarterly,

35

---



and in doing so relies on various factors including, but not limited
to, assessment of potential loss, delinquency and non-accrual trends, portfolio
growth, underlying collateral coverage and current economic conditions. This
evaluation is subjective and requires material estimates that may change over
time.

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 76% of gross loans. These type loans are all within
our general market areas and are made on terms typically at 80% loan to value.
These 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, 2010, loans 30 to 89 days past due in the commercial real estate
portfolio totaled $6.1 million or 2.02% of total loans.

The
components of the allowance for loan losses represent estimates based upon
generally accepted accounting principles regarding accounting for contingencies
and accounting by creditors for impairment of a loan. We apply this guidance to
commercial loans that are considered impaired.

A loan is
considered to be impaired when, based upon current information and events, it
is probable that the loan will not be repaid according to its contractual
terms, including both principal and interest. Management performs individual
assessments of impaired loans to determine the existence of loss exposure and,
where applicable, the extent of loss exposure based upon the present value of
expected future cash flows available to pay the loan, or based upon the
estimated realizable collateral where a loan is collateral dependent.

The
following is a summary of information pertaining to impaired loans:

|                                               |  |   |              |  |      |        |  | 
|---------------------------------------------- |  | - | ------------ |  | ---- | ------ |  | 
|                                               |  |   | December 31, | 
|                                               |  |   |              | 
|(Dollars in Thousands)                         |  |   | 2010         |  | 2009 |       
|                                               |  |   |              |  |      |       
|Impaired
 loans without a valuation allowance  |  | $ | 23,929       |  | $    | 13,959 | 
|                                               |  |   |              |  |      |        | 
|Impaired
 loans with a valuation allowance     |  |   | 10,887       |  |      | 12,769 | 
|                                               |  |   |              |  |      |        | 
|Total
 impaired loans                          |  | $ | 34,816       |  | $    | 26,728 | 
|                                               |  |   |              |  |      |        | 
|                                               |  |   |              |  |      |        | 
|Valuation
 allowance related to impaired loans |  | $ | 1,185        |  | $    | 3,206  | 

The
activity in our loan loss allowance was as follows:

|                                 |  |   |                         |   |      |       |      |   |       |   |      |      |   |   |      |   | 
|-------------------------------- |  | - | ----------------------- | - | ---- | ----- | ---- | - | ----- | - | ---- | ---- | - | - | ---- | - | 
|                                 |  |   | Year Ended December 31, |  
|                                 |  |   |                         |  
|(Dollars in Thousands)           |  |   | 2010                    |   | 2009 |       | 2008 |   | 2007  |   | 2006 |     
|                                 |  |   |                         |   |      |       |      |   |       |   |      |     
|Balance at
 beginning of period  |  | $ | 9,038                   |   | $    | 6,051 |      | $ | 725   |   | $    | 480  |   | $ |     |  
|Additions due
 to acquisitions   |  |   |                        |   |      |      |      |   | 1,515 |   |      |     |   |   |     |  
|                                 |  |   |                         |   |      |       |      |   |       |   |      |      |   |   |      |  
|Loan
 charge-offs:               |  |   |                         |   |      |       |      |   |       |   |      |      |   |   |      |  
|Commercial                       |  |   | 1,152                   |   |      | 1,394 |      |   | 57    |   |      |     |   |   |     |  
|Commercial real estate           |  |   | 7,663                   |   |      | 3,624 |      |   |      |   |      |     |   |   |     |  
|Residential mortgage             |  |   | 2,100                   |   |      |      |      |   |      |   |      |     |   |   |     |  
|Consumer and home equity         |  |   | 289                     |   |      | 566   |      |   |      |   |      |     |   |   |     |  
|                                 |  |   |                         |   |      |       |      |   |       |   |      |      |   |   |      |  
|Total Charge-offs                |  |   | 11,204                  |   |      | 5,584 |      |   | 57    |   |      |     |   |   |     |  
|                                 |  |   |                         |   |      |       |      |   |       |   |      |      |   |   |      |  
|Recoveries:                      |  |   |                         |   |      |       |      |   |       |   |      |      |   |   |      |  
|Commercial                       |  |   | 118                     |   |      | 48    |      |   |      |   |      |     |   |   |     |  
|Commercial real estate           |  |   | 404                     |   |      |      |      |   |      |   |      |     |   |   |     |  
|Residential mortgage             |  |   | 67                      |   |      |      |      |   |      |   |      |     |   |   |     |  
|Consumer and home equity         |  |   | 4                       |   |      |      |      |   |      |   |      |     |   |   |     |  
|                                 |  |   |                         |   |      |       |      |   |       |   |      |      |   |   |      |  
|Total recoveries                 |  |   | 593                     |   |      | 48    |      |   |      |   |      |     |   |   |     |  
|                                 |  |   |                         |   |      |       |      |   |       |   |      |      |   |   |      |  
|Net
 charge-offs                 |  |   | 10,611                  |   |      | 5,536 |      |   | 57    |   |      |     |   |   |     |  
|                                 |  |   |                         |   |      |       |      |   |       |   |      |      |   |   |      |  
|                                 |  |   |                         |   |      |       |      |   |       |   |      |      |   |   |      |  
|Provision
 for loan losses       |  |   | 9,583                   |   |      | 8,523 |      |   | 3,868 |   |      | 245  |   |   | 480  |  
|                                 |  |   |                         |   |      |       |      |   |       |   |      |      |   |   |      |  
|                                 |  |   |                         |   |      |       |      |   |       |   |      |      |   |   |      |  
|Balance at
 end of period        |  | $ | 8,010                   |   | $    | 9,038 |      | $ | 6,051 |   | $    | 725  |   | $ | 480  |  
|                                 |  |   |                         |   |      |       |      |   |       |   |      |      |   |   |      |  
|                                 |  |   |                         |   |      |       |      |   |       |   |      |      |   |   |      |  
|Allowance /
 Total Loans         |  |   | 2.52                    | % |      | 2.68  | %    |   | 2.10  | % |      | 1.37 | % |   | 1.48 | %
|Net
 Charge-Offs / Average Loans |  |   | 3.13                    | % |      | 1.73  | %    |   | 0.03  | % |      |     |   |   |     |  
|Allowance/Non-Performing
 Loans  |  |   | 46.9                    | % |      | 94.3  | %    |   | 100.9 | % |      |     |   |   |     |  

36

---



The
following table reflects the allowance allocation per loan category and percent
of loans in each category to total loans for the periods indicated, for periods
2007 and 2006 disaggregated information is not available:

|                         |  |              |       |      |  |       |   |      |       |      |  |       |   |   |       |  |  |       |   |   |     |  |  |       |   |   |     |  |  |       |  
|------------------------ |  | ------------ | ----- | ---- |  | ----- | - | ---- | ----- | ---- |  | ----- | - | - | ----- |  |  | ----- | - | - | --- |  |  | ----- | - | - | --- |  |  | ----- | -
|                         |  | December 31, |      
|                         |  |              |      
|(Dollars in Thousands)   |  | 2010         |       | 2009 |  | 2008  |   | 2007 |       | 2006 | 
|                         |  |              |       |      |  |       |   |      |       |      | 
|Commercial               |  | $            | 1,281 |      |  | 14.2  | % | $    | 1,824 |      |  | 14.4  | % | $ | 683   |  |  | 11.3  | % | $ |    |  |  |      |   | $ |    |  |  |      |  
|Commercial real estate   |  |              | 5,425 |      |  | 75.6  | % |      | 5,614 |      |  | 75.1  | % |   | 4,577 |  |  | 75.6  | % |   |    |  |  |      |   |   |    |  |  |      |  
|Residential mortgage     |  |              | 510   |      |  | 4.0   | % |      | 244   |      |  | 4.3   | % |   | 366   |  |  | 6.1   | % |   |    |  |  |      |   |   |    |  |  |      |  
|Consumer and home equity |  |              | 729   |      |  | 6.2   | % |      | 865   |      |  | 6.2   | % |   | 207   |  |  | 3.4   | % |   |    |  |  |      |   |   |    |  |  |      |  
|Unallocated              |  |              | 65    |      |  |      |   |      | 491   |      |  |      |   |   | 218   |  |  | 3.6   | % |   | 725 |  |  | 100.0 | % |   | 480 |  |  | 100.0 | %
|                         |  |              |       |      |  |       |   |      |       |      |  |       |   |   |       |  |  |       |   |   |     |  |  |       |   |   |     |  |  |       |  
|Total                    |  | $            | 8,010 |      |  | 100.0 | % | $    | 9,038 |      |  | 100.0 | % | $ | 6,051 |  |  | 100.0 | % | $ | 725 |  |  | 100.0 | % | $ | 480 |  |  | 100.0 | %
|                         |  |              |       |      |  |       |   |      |       |      |  |       |   |   |       |  |  |       |   |   |     |  |  |       |   |   |     |  |  |       |  

Investment Activity.

Investment
activities serve to enhance the overall yield on interest earning assets while
supporting interest rate sensitivity and liquidity positions. Securities
purchased with the intent and ability to retain 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 available to us, as well as shareholders equity. A
change in the value of securities held to maturity could also negatively affect
the level of shareholders equity if there was a decline in the underlying
creditworthiness of the issuers and an other-than-temporary impairment is
deemed or a change in our intent and ability to hold the securities to
maturity.

As of
December 31, 2010, securities totaling $42.7 million and $10.1 million were
classified as available for sale and held to maturity, respectively. During
2010, securities available for sale decreased by approximately $39.0 million
and securities held to maturity declined by $2.2 million from December 31,
2009. In 2010, we increased our cash holdings in anticipation of significant
maturing time deposits in early 2011 which we did not believe would be renewed.
We also increased our cash holdings in anticipation of increased loan
originations in the first half of 2011.

The following
table sets forth the carrying amount of our investments portfolio:

|                                                      |  |   |              |  |      |        |      |   |        |  | 
|----------------------------------------------------- |  | - | ------------ |  | ---- | ------ | ---- | - | ------ |  | 
|                                                      |  |   | December 31, | 
|                                                      |  |   |              | 
|(Dollars in Thousands)                                |  |   | 2010         |  | 2009 |        | 2008 |  
|                                                      |  |   |              |  |      |        |      |  
|Carrying value of investment in:                      |  |   |              |  |      |        |      |   |        | 
|U.S.
 government and federal agencies:                |  |   |              |  |      |        |      |   |        | 
|Held to maturity at amortized cost                    |  | $ | 10,082       |  | $    | 12,259 |      | $ | 12,464 | 
|Available for sale at fair value                      |  |   | 29,224       |  |      | 81,707 |      |   | 26,304 | 
|States &
 political subdivisions  available for sale |  |   | 1,658        |  |      |       |      |   |       | 
|Mortgage
 backed securities  available for sale      |  |   | 11,776       |  |      |       |      |   | 17,612 | 
|                                                      |  |   |              |  |      |        |      |   |        | 
|Total                                                 |  | $ | 52,740       |  | $    | 93,966 |      | $ | 56,380 | 
|                                                      |  |   |              |  |      |        |      |   |        | 

The following
table indicates the respective maturities and weighted-average yields of
securities as of December 31, 2010:

|                                      |  |   |                                                     |  |           |       |             |   |                |  |                             |       |  |  |      |   | 
|------------------------------------- |  | - | --------------------------------------------------- |  | --------- | ----- | ----------- | - | -------------- |  | --------------------------- | ----- |  |  | ---- | - | 
|                                      |  |   | Market Values with
 Maturities or Call Dates Within | 
|                                      |  |   |                                                     | 
|(Dollars in
Thousands)                |  |   | 1 Year                                              |  | 1-5 Years |       | 5-10
 Years |   | Over
 10 Years |  | Yield To
 Maturity
 Or Call |      
|                                      |  |   |                                                     |  |           |       |             |   |                |  |                             |      
|U.S.
 government and federal agencies |  | $ | 38,296                                              |  | $         | 1,010 |             | $ | ,             |  | $                           |      |  |  | 2.66 | %
|States &
 political subdivisions      |  |   |                                                    |  |           |      |             |   | 1,658          |  |                             |      |  |  | 3.40 |  
|Mortgage
 backed securities           |  |   | 1,815                                               |  |           |      |             |   |               |  |                             | 9,961 |  |  | 2.68 |  
|                                      |  |   |                                                     |  |           |       |             |   |                |  |                             |       |  |  |      |  
|Total                                 |  | $ | 40,111                                              |  | $         | 1,010 |             | $ | 1,658          |  | $                           | 9,961 |  |  |      |  
|                                      |  |   |                                                     |  |           |       |             |   |                |  |                             |       |  |  |      |  

37

---



Securities
of a single issue which had book values in excess of 10% of our shareholders
equity at December 31, 2010 included bonds 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)

The FNMA
bonds had an aggregate book value of and market value of $20.3 million and
$19.8 million, respectively, the GNMA bonds had an aggregate book value of and
market value of $12.0 million and $11.8 million, respectively, the FHLMC bonds
had an aggregate book value of and market of $9.6 million and $9.7 million,
respectively, the FHLB bonds had an aggregate book value and market value of
$5.4 million and $5.1 million, respectively, and the FFCB bonds had an
aggregate book value and market value of $5.0 million and $4.8 million,
respectively, at December 31, 2010.

Deposits and Short-Term Borrowings.

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

Total
deposits increased $5.5 million to $412.2 million at December 31, 2010,
compared to December 31, 2009. In 2010, our demand deposit accounts, NOW
accounts and money market accounts grew $18.2 million, or 7.5%, as we garnered
new deposit accounts and existing depositors increased balances. Liquidity from
these deposits coupled with declining loan balances reduced our need to retain
and attract customers seeking higher yielding time deposits. In the last nine
months of 2010, we opted not to retain or pursue deposit customers solely
interested in higher yielding time deposits. As a result, our time deposits
excluding brokered deposits declined $21.7 million, or 16.9%. Brokered deposits
increased $9.0 million as we opted to lock in longer term funding at rates
which were favorable relative to rates on time deposits being offered in our
local markets..

Short-term
borrowings, made up of federal funds purchased, and customer retail repurchase
agreements, decreased by $1.0 million at December 31, 2010 compared to December
31, 2009 due to a lesser reliance on federal funds purchased as deposit growth
satisfied our funding needs.

The
distribution by type of our average deposit accounts for December 31, 2010,
2009, and 2008 was as follows:

|                                                     |  |   |                  |   |               |      |                  |   |               |   |                  |      |               |   |         |   |  |      |   | 
|---------------------------------------------------- |  | - | ---------------- | - | ------------- | ---- | ---------------- | - | ------------- | - | ---------------- | ---- | ------------- | - | ------- | - |  | ---- | - | 
|                                                     |  |   | December 31,     |  
|                                                     |  |   |                  |  
|                                                     |  |   | 2010             |   | 2009          |      | 2008             |  
|                                                     |  |   |                  |   |               |      |                  |  
|(Dollars in Thousands)                               |  |   | Average
 Balance |   | Average
 Rate |      | Average
 Balance |   | Average
 Rate |   | Average
 Balance |      | Average
 Rate |  
|                                                     |  |   |                  |   |               |      |                  |   |               |   |                  |      |               |  
|Noninterest bearing accounts                         |  | $ | 75,206           |   |               |     |                  | $ | 62,849        |   |                  |     |               | $ | 33,254  |   |  |     |  
|                                                     |  |   |                  |   |               |      |                  |   |               |   |                  |      |               |   |         |   |  |      |  
|                                                     |  |   |                  |   |               |      |                  |   |               |   |                  |      |               |   |         |   |  |      |  
|Interest bearing accounts                            |  |   |                  |   |               |      |                  |   |               |   |                  |      |               |   |         |   |  |      |  
|Savings, NOW, and money market accounts              |  |   | 176,131          |   |               | 1.12 | %                |   | 188,451       |   |                  | 1.59 | %             |   | 120,355 |   |  | 2.13 | %
|Time
 deposits                                       |  |   | 166,777          |   |               | 2.15 | %                |   | 143,061       |   |                  | 2.60 | %             |   | 80,748  |   |  | 3.51 | %
|                                                     |  |   |                  |   |               |      |                  |   |               |   |                  |      |               |   |         |   |  |      |  
|Total
 interest bearing deposits                     |  |   | 342,908          |   |               | 1.62 | %                |   | 331,512       |   |                  | 2.03 | %             |   | 201,103 |   |  | 2.20 | %
|                                                     |  |   |                  |   |               |      |                  |   |               |   |                  |      |               |   |         |   |  |      |  
|Average
 total deposits                              |  | $ | 418,114          |   |               | 1.35 | %                | $ | 394,361       |   |                  | 1.70 | %             | $ | 234,357 |   |  | 2.30 | %
|                                                     |  |   |                  |   |               |      |                  |   |               |   |                  |      |               |   |         |   |  |      |  
|                                                     |  |   |                  |   |               |      |                  |   |               |   |                  |      |               |   |         |   |  |      |  
|Brokered deposits included in total
 deposits        |  | $ | 41,796           |   |               |      |                  | $ | 36,257        |   |                  |      |               | $ | 9,749   |   |  |      |  
|Brokered deposits as a percentage of total
 deposits |  |   | 10.0             | % |               |      |                  |   | 8.9           | % |                  |      |               |   | 3.1     | % |  |      |  

38

---



As
of December 31, 2010, certificates of deposit of $100,000 or more mature as follows:

|                       |  |   |        |  |                        | 
|---------------------- |  | - | ------ |  | ---------------------- | 
|(Dollars in Thousands) |  |   | Amount |  | Weighted
 Average Rate | 
|                       |  |   |        |  |                        | 
|Up to 3 months         |  | $ | 10,098 |  | 1.83%                  | 
|3 to 6 months          |  |   | 6,664  |  | 1.31%                  | 
|6 to 12 months         |  |   | 17,154 |  | 1.92%                  | 
|Over 12 months         |  |   | 27,480 |  | 2.03%                  | 
|                       |  |   |        |  |                        | 
|                       |  | $ | 61,396 |  | 1.89%                  | 
|                       |  |   |        |  |                        | 

Maturity
terms, service fees and withdrawal penalties are established by us on a
periodic basis. The determination of rates and terms is predicated on funds
acquisition and liquidity requirements, rates paid by competitors, growth goals
and federal regulations.

Liquidity

Our
goal in liquidity management is to satisfy the cash flow requirements of
depositors and borrowers as well as our operating cash needs with
cost-effective funding. Our Board of Directors has established an
Asset/Liability Policy in order to achieve 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 that affect balance sheet or cash flow positions.

The
primary source of 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; therefore, we believe that fluctuating
deposit offering rates to the top of the market would generate a larger inflow
of funds. In addition to local market deposits, the 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 impose deposit rate restrictions not
to exceed a published national rates. 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.

Cash
flows from continuing operating activities primarily include net income (loss),
adjusted for items in net income that did not impact cash. Net cash provided by
continuing operating activities increased by $6.2 million to $3.7 million for
the year ended December 31, 2010, from $2.5 million used in continuing
operating activities for the year ended December 31, 2009. The increase was
primarily due to an increase in other assets principally for $1.9 million due from
another bank and an increase in other liabilities related to the $1.0 million
restructuring charge recorded in 2010.

Investing
Activities.

Cash
used in continuing investing activities reflects the impact of loans and
investments acquired for our interest-earning asset portfolios, as well as cash
flows from asset sales. For the year ended December 31, 2010, we had net cash
flows provided by continuing investing
activities of $45.4 million, compared to $95.4 million used in investing
activities for the year ended December 31, 2009. The change in cash flows from
continuing investing activities was primarily due to an increase in called
investment securities and lower

39

---



investment purchases for the year ended
December 31, 2010 compared to the year ended December 31, 2009. In addition, we
experienced a decline in loan balances in 2010 due to significant pay downs and
pay offs.

Financing
Activities.

Cash
flows from continuing financing activities include transactions and events
whereby cash is obtained from depositors, creditors or investors. For the year
ended December 31, 2010, we had net cash flows provided by continuing financing
activities of $4.5 million, compared to $88.4 million for the year ended
December 31, 2009. The change in cash flows from continuing financing
activities was due to slower growth in our deposits somewhat offset by a lower
decline in short term borrowings.

Capital Resources

The
assessment of capital adequacy depends on a number of factors such as asset
quality, liquidity, earnings performance, changing competitive conditions and
economic forces. We seek to maintain a strong capital base to support our
growth and expansion activities, to provide stability to current operations and
to promote public confidence. We successfully completed a $30 million secondary
capital offering in June 2008 at a price of $12.50 per share. However, over the
past two years, poor loan portfolio performance and the related impact on
earnings have deteriorated our capital position. As of December 31, 2010, we
exceeded the requirements contained in the applicable regulations, policies and
directives pertaining to capital adequacy to be classified as well
capitalized, and are unaware of any material violation or alleged violation of
these regulations, policies or directives. Pursuant to our intent on
maintaining a strong capital position, management and the Board of Directors
have had exploratory discussions to determine the availability and cost of additional
capital. Based on these discussions and further investigations, it may be
prudent that the Company pursue another capital offering in the next 12 to 24
months.

Key
to our efforts to maintain existing capital adequacy is the need for the banks
to become profitable by focusing on increasing core earnings and decreasing the
levels of adversely classified and non-performing assets. Management is
pursuing a number of strategic alternatives to improve the core earnings of the
Banks and to reduce the level of classified assets. Current market conditions
for banking institutions, the overall uncertainty in financial markets and the
Banks high level of non-performing assets are barriers to the success of these
strategies. If current adverse market factors continue for a prolonged period
of time, new adverse market factors emerge, and/or the Banks are unable to
successfully execute its plans in a sufficient and timely manner, it could have
a material adverse effect on the Banks business, results of operations and
financial position.

We
offer a stock purchase plan to our employees and directors to purchase shares
of our common stock at fair market value. In 2010, employees purchased 4,727
shares valued at $10.00, which will be issued in February 2011. In 2009,
employees purchased 7,616 shares valued at $12.50, which were issued in
February 2010.

Holders
of our common stock are entitled to receive dividends when, as and if declared
by our Board of Directors out of funds legally available for that purpose. We
have not paid any dividends to our holders of common stock in the past and we
currently do not intend to pay dividends on our common stock in the near
future. In the event that we decide to pay dividends, there are a number of restrictions
on our ability to do so.

For
a foreseeable period of time, our principal source of cash revenues will be
dividends paid by the Banks to us with respect to their common stock. There are
certain restrictions on the payment of these dividends imposed by federal
banking laws, regulations and authorities. See the sections of this Annual
Report captioned Item 1. Business - Regulatory Considerations  The Banks 
Dividends.

The
declaration and payment of dividends on our common stock will depend upon our
earnings and financial condition, liquidity and capital requirements, the
general economic and regulatory climate, our ability to service any equity or
debt obligations senior to the common stock and other factors deemed relevant
by our Board of Directors. Regulatory authorities in their discretion could
impose administratively stricter limitations on the ability of the Banks to pay
dividends to us if such limits were deemed appropriate to preserve certain
capital adequacy requirements.

Off-Balance Sheet Arrangements

We
do not currently engage in the use of derivative instruments to hedge interest
rate risks. However, we are a party to financial instruments with off-balance
sheet risks in the normal course of business to meet the financing needs of our
customers.

40

---



At
December 31, 2010, we had approximately $59.0 million in commitments to extend
credit and $3.0 million in standby letters of credit. Commitments to extend
credit are agreements to lend to a customer so long as there is no violation of
any condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee.
Since many of the commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. Standby letters of credit are conditional commitments issued by
us to guarantee the performance of a customer to a third party. We use the same
credit policies in establishing commitments and issuing letters of credit as we
do for on-balance sheet instruments.

If
commitments arising from these financial instruments continue to require
funding at historical levels, management does not anticipate that such funding
will adversely impact our ability to meet on-going obligations. In the event
these commitments require funding in excess of historical levels, management
believes current liquidity, available deposit sources from brokered and
bulletin board services, investment security maturities and our revolving
credit facility provide a sufficient source of funds to meet these commitments.

Accounting Policies

Critical
Accounting Policies.

Allowance
for Loan Losses

The
allowance for loan losses is a valuation allowance for probable incurred credit
losses. Loan losses are charged against the allowance when management believes
a loan balance is uncollectible. Subsequent recoveries, if any, are credited to
the allowance. Management estimates the allowance balance required using past
loan loss experience, the nature and volume of the portfolio, information about
specific borrower situations and estimated collateral values, economic
conditions, and other factors. Allocations of the allowance may be made for
specific loans, but the entire allowance is available for any loan that, in
managements judgment, should be charged-off.

The
allowance consists of specific and general components. The specific component
relates to loans that are individually classified as impaired or loans
otherwise classified as substandard or doubtful. The general component covers
non-classified loans and is based on historical loss experience adjusted for
current factors.

A
loan is impaired when full payment under the loan terms is not expected.
Commercial and commercial real estate loans are individually evaluated for
impairment. If a loan is impaired, a portion of the allowance is allocated so
that the loan is reported, net, at the present value of estimated future cash
flows using the loans existing rate or at the fair value of collateral if
repayment is expected solely from the collateral. Large groups of smaller
balance homogeneous loans, such as consumer and residential real estate loans,
are collectively evaluated for impairment, and, accordingly, they are not
separately identified for impairment disclosures.

Income
Taxes

The
Company accounts for income taxes according to the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax basis. Deferred tax assets and liabilities are measured using
the enacted tax rates applicable to taxable income for the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. Valuation reserves are
established against certain deferred tax assets when it is more likely than not
that the deferred tax assets will not be realized. Increases or decreases in
the valuation reserve are charged or credited to the income tax provision.

The
Company recognizes a benefit from its tax positions only if it is
more-likely-than-not that the tax position will be sustained on examination by
taxing authorities, based on the technical merits of the position. The tax
benefits recognized in the financial statements from such a position are
measured based on the largest benefit that has a greater than 50% likelihood of
being realized upon ultimate settlement with a taxing authority that has full
knowledge of all relevant information.

The
periods subject to examination for the Companys federal returns are the tax
years subsequent to 2005. The periods subject to examination for the Companys
significant state return, which is Florida, are the tax years subsequent to
2005. The Company believes that its income tax filing positions and deductions
will be sustained upon examination and does not anticipate any adjustments that
will result in a material change in its financial statements. As a result, no
reserve for uncertain income tax positions has been recorded.

41

---



The
Companys policy for recording interest and penalties related to uncertain tax
positions is to record such items as part of its provision for federal and
state income taxes.

Recent
Accounting Pronouncements.

The
Financial Accounting Standards Board, the SEC, and other regulatory bodies have
enacted new accounting pronouncements and standards that either has impacted
our results in prior years presented, or will likely impact our results in
2011. Please refer to Note 1 in the Notes to our Consolidated Financial
Statements.

|                                                                     | 
|-------------------------------------------------------------------- | 
|ITEM 7A. QUANTITATIVE
 AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The
information called for by this item is provided in the Market risk section of
Managements Discussion and Analysis of Financial Condition and results of
Operations, which is included in Item 7 of this report.

|                                                     | 
|---------------------------------------------------- | 
|ITEM 8. FINANCIAL
 STATEMENTS AND SUPPLEMENTARY DATA

42

---



Report of Independent Registered Public Accounting Firm



To the Board of Directors and Shareholders

Floridian Financial Group, Inc.



We have audited the accompanying consolidated balance sheets of Floridian Financial Group, Inc. and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of operations, shareholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to
  express an opinion on these financial statements based on our audits.



We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its
  internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the
  financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Floridian Financial Group, Inc. and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting
  principles.





/s/ McGladrey & Pullen, LLP

Jacksonville, Florida

March 25, 2011

43

---



Floridian Financial Group, Inc. and
Subsidiaries

Consolidated Balance Sheets 
December 31, 2010 and 2009 
(Dollars in thousands, except for per share amounts)

|                                                                                                                                                  |  |   |         |   |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ------- | - | - | ------- | -
|Assets                                                                                                                                            |  |   | 2010    |   |   | 2009    |  
|                                                                                                                                                  |  |   |         |   |   |         |  
|Cash and due from banks                                                                                                                           |  | $ | 9,399   |   | $ | 7,743   |  
|Federal funds sold                                                                                                                                |  |   | 52,473  |   |   | 550     |  
|                                                                                                                                                  |  |   |         |   |   |         |  
|Total cash and cash equivalents                                                                                                                   |  |   | 61,872  |   |   | 8,293   |  
|Securities available for sale                                                                                                                     |  |   | 42,658  |   |   | 81,707  |  
|Securities held to maturity (Fair value of
 $10,281 and $12,266 at December 31, 2010 and 2009, respectively)                                      |  |   | 10,082  |   |   | 12,259  |  
|Other investments                                                                                                                                 |  |   | 100     |   |   | 42      |  
|Loans, net of allowance for loan losses of
 $8,010 and $9,038 at December 31, 2010 and 2009, respectively                                         |  |   | 309,555 |   |   | 327,686 |  
|Property and equipment, net                                                                                                                       |  |   | 14,283  |   |   | 15,250  |  
|Intangible assets                                                                                                                                 |  |   | 1,893   |   |   | 2,085   |  
|Deferred income taxes                                                                                                                             |  |   | 187     |   |   | 275     |  
|Other real estate owned                                                                                                                           |  |   | 3,864   |   |   | 3,023   |  
|Other assets                                                                                                                                      |  |   | 17,137  |   |   | 16,277  |  
|                                                                                                                                                  |  |   |         |   |   |         |  
|Total assets                                                                                                                                      |  | $ | 461,631 |   | $ | 466,897 |  
|                                                                                                                                                  |  |   |         |   |   |         |  
|Liabilities and shareholders equity                                                                                                              |  |   |         |   |   |         |  
|Liabilities                                                                                                                                       |  |   |         |   |   |         |  
|Deposits:                                                                                                                                         |  |   |         |   |   |         |  
|Noninterest-bearing demand                                                                                                                        |  | $ | 78,385  |   | $ | 67,594  |  
|Savings, NOW and money market                                                                                                                     |  |   | 181,657 |   |   | 174,238 |  
|Time deposits under $100                                                                                                                          |  |   | 90,749  |   |   | 92,999  |  
|Time deposits of $100 or more                                                                                                                     |  |   | 61,396  |   |   | 71,821  |  
|                                                                                                                                                  |  |   |         |   |   |         |  
|Total deposits                                                                                                                                    |  |   | 412,187 |   |   | 406,652 |  
|Short-term borrowings                                                                                                                             |  |   | 6.762   |   |   | 7,805   |  
|Other liabilities                                                                                                                                 |  |   | 2,579   |   |   | 1,957   |  
|                                                                                                                                                  |  |   |         |   |   |         |  
|Total liabilities                                                                                                                                 |  |   | 421,528 |   |   | 416,414 |  
|                                                                                                                                                  |  |   |         |   |   |         |  
|Shareholders equity                                                                                                                              |  |   |         |   |   |         |  
|Preferred stock, $5 par value, 1,000,000
 shares authorized; none outstanding                                                                     |  |   |        |   |   |        |  
|Common stock, $5 par value, 100,000,000
 shares authorized; 6,199,849 and 6,193,846 shares issued and outstanding in
 2010 and 2009, respectively |  |   | 30,995  |   |   | 30,969  |  
|Additional paid-in capital                                                                                                                        |  |   | 38,148  |   |   | 37,793  |  
|Retained deficit                                                                                                                                  |  |   | (27,835 | ) |   | (18,133 | )
|Accumulated other comprehensive loss                                                                                                              |  |   | (1,205  | ) |   | (146    | )
|                                                                                                                                                  |  |   |         |   |   |         |  
|Total shareholders equity                                                                                                                        |  |   | 40,103  |   |   | 50,483  |  
|                                                                                                                                                  |  |   |         |   |   |         |  
|Total liabilities and shareholders equity                                                                                                        |  | $ | 461,631 |   | $ | 466,897 |  
|                                                                                                                                                  |  |   |         |   |   |         |  

See Notes to Consolidated Financial
Statements

44

---



|                                                     |  |   |        |   |   |         |  
|---------------------------------------------------- |  | - | ------ | - | - | ------- | -
|Floridian Financial Group, Inc. and Subsidiaries     |  |   |        |   |   |         |  
|                                                     |  |   |        |   |   |         |  
|Consolidated Statements of Operations                |  |   |        |   |   |         |  
|Years Ended December 31, 2010 and 2009               |  |   |        |   |   |         |  
|(Dollars in thousands, except for per share amounts) |  |   |        |   |   |         |  
|                                                     |  |   |        |   |   |         |  
|                                                     |  |   |        |   |   |         |  
|                                                     |  |   | 2010   |   |   | 2009    |  
|Interest income:                                     |  |   |        |   |   |         |  
|Interest and fees on loans                           |  | $ | 17,509 |   | $ | 16,920  |  
|Interest on securities                               |  |   | 2,129  |   |   | 2,276   |  
|Interest on federal funds sold                       |  |   | 68     |   |   | 47      |  
|Other interest                                       |  |   | 15     |   |   | 51      |  
|                                                     |  |   |        |   |   |         |  
|Total interest income                                |  |   | 19,721 |   |   | 19,294  |  
|                                                     |  |   |        |   |   |         |  
|Interest expense:                                    |  |   |        |   |   |         |  
|Interest on deposits                                 |  |   | 5,545  |   |   | 6,725   |  
|Other interest                                       |  |   | 188    |   |   | 217     |  
|                                                     |  |   |        |   |   |         |  
|Total interest expense                               |  |   | 5,733  |   |   | 6,942   |  
|                                                     |  |   |        |   |   |         |  
|                                                    
|Net interest income                                  |  |   | 13,988 |   |   | 12,352  |  
|Provision for loan losses                            |  |   | 9,583  |   |   | 8,523   |  
|                                                     |  |   |        |   |   |         |  
|Net interest income after provision for
 loan losses |  |   | 4,405  |   |   | 3,829   |  
|                                                     |  |   |        |   |   |         |  
|Noninterest income:                                  |  |   |        |   |   |         |  
|Other noninterest income                             |  |   | 1,194  |   |   | 1,079   |  
|Gain on sale of securities                           |  |   | 17     |   |   | 206     |  
|                                                     |  |   |        |   |   |         |  
|Total noninterest income                             |  |   | 1,211  |   |   | 1,285   |  
|                                                     |  |   |        |   |   |         |  
|Noninterest expense:                                 |  |   |        |   |   |         |  
|Salaries and employee benefits                       |  |   | 6,833  |   |   | 7,498   |  
|Occupancy and equipment expense                      |  |   | 3,368  |   |   | 3,173   |  
|Data processing                                      |  |   | 1,003  |   |   | 889     |  
|Professional fees                                    |  |   | 770    |   |   | 744     |  
|Other real estate expense                            |  |   | 794    |   |   | 631     |  
|FDIC insurance                                       |  |   | 787    |   |   | 951     |  
|Credit and collections expenses                      |  |   | 259    |   |   | 412     |  
|Telephone and communications                         |  |   | 248    |   |   | 251     |  
|Core deposit intangible amortization                 |  |   | 192    |   |   | 192     |  
|Restructuring charge and operating loss              |  |   | 450    |   |   | 570     |  
|Other                                                |  |   | 614    |   |   | 620     |  
|                                                     |  |   |        |   |   |         |  
|Total noninterest expense                            |  |   | 15,318 |   |   | 15,931  |  
|                                                     |  |   |        |   |   |         |  
|                                                    
|Loss before income taxes                             |  |   | (9,702 | ) |   | (10,817 | )
|                                                    
|Income tax benefit                                   |  |   |       |   |   |        |  
|                                                     |  |   |        |   |   |         |  
|Net loss                                             |  | $ | (9,702 | ) | $ | (10,817 | )
|                                                     |  |   |        |   |   |         |  
|                                                    
|Basic net loss per share                             |  | $ | (1.56  | ) | $ | (1.75   | )
|                                                     |  |   |        |   |   |         |  

See Notes to Consolidated Financial Statements.

45

---



Floridian Financial Group, Inc. and Subsidiaries

Consolidated Statements of Shareholders Equity 
Years Ended December 31, 2010 and 2009 
(Dollars in thousands, except for per share amounts)

|                                                                                                                                                               |  |                    |        |                            |   |                  |   |                                               |         |                            |   |        |   |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | -------------------------- | - | ---------------- | - | --------------------------------------------- | ------- | -------------------------- | - | ------ | - | - | ------- | -
|                                                                                                                                                              
|                                                                                                                                                               |  | Common
Stock
Value |        | Additional
Paid-in
Capital |   | Retained
Deficit |   | Accumulated
Other
Comprehensive
Income (Loss) |         | Total
Shareholders
Equity |  
|Balance at December 31, 2008                                                                                                                                   |  | $                  | 30,786 |                            | $ | 36,983           |   | $                                             | (7,316  | )                          | $ | 261    |   | $ | 60,714  |  
|Comprehensive loss:                                                                                                                                            |  |                    |        |                            |   |                  |   |                                               |         |                            |   |        |   |   |         |  
|Net loss                                                                                                                                                       |  |                    |       |                            |   |                 |   |                                               | (10,817 | )                          |   |       |   |   | (10,817 | )
|Change in unrealized gain on securities available for sale, net of
income tax                                                                                  |  |                    |       |                            |   |                 |   |                                               |        |                            |   | (613   | ) |   |         |  
|Less
reclassification adjustment for gains included in net Income, net of taxes of
$0                                                                          |  |                    |        |                            |   |                  |   |                                               |         |                            |   | 206    |   |   |         |  
|                                                                                                                                                               |  |                    |        |                            |   |                  |   |                                               |         |                            |   |        |   |   |         |  
|Net unrealized loss                                                                                                                                            |  |                    |        |                            |   |                  |   |                                               |         |                            |   | (407   | ) |   | (407    | )
|                                                                                                                                                               |  |                    |        |                            |   |                  |   |                                               |         |                            |   |        |   |   |         |  
|Total comprehensive loss                                                                                                                                       |  |                    |        |                            |   |                  |   |                                               |         |                            |   |        |   |   | (11,224 | )
|                                                                                                                                                               |  |                    |        |                            |   |                  |   |                                               |         |                            |   |        |   |   |         |  
|Sale of 17,312 shares of common stock to employee benefit plan                                                                                                 |  |                    | 87     |                            |   | 63               |   |                                               |        |                            |   |       |   |   | 150     |  
|Share-based compensation                                                                                                                                       |  |                    |       |                            |   | 388              |   |                                               |        |                            |   |       |   |   | 388     |  
|Share-based compensation in acquisition, net of registration expense
of $349                                                                                   |  |                    |       |                            |   | 235              |   |                                               |        |                            |   |       |   |   | 235     |  
|Exercise of 6,450 stock options                                                                                                                                |  |                    | 32     |                            |   | 32               |   |                                               |        |                            |   |       |   |   | 64      |  
|Sale of 7,616 shares of common stock for employee stock purchase plan                                                                                          |  |                    | 38     |                            |   | 57               |   |                                               |        |                            |   |       |   |   | 95      |  
|Issuance of 5,290 shares of common stock issued in lieu of cash
director fees                                                                                  |  |                    | 26     |                            |   | 35               |   |                                               |        |                            |   |       |   |   | 61      |  
|                                                                                                                                                               |  |                    |        |                            |   |                  |   |                                               |         |                            |   |        |   |   |         |  
|Balance at December 31, 2009                                                                                                                                   |  | $                  | 30,969 |                            | $ | 37,793           |   | $                                             | (18,133 | )                          | $ | (146   | ) | $ | 50,483  |  
|Comprehensive loss:                                                                                                                                            |  |                    |        |                            |   |                  |   |                                               |         |                            |   |        |   |   |         |  
|Net loss                                                                                                                                                       |  |                    |       |                            |   |                 |   |                                               | (9,702  | )                          |   |       |   |   | (9,702  | )
|Change in unrealized gain on securities available for
sale, net of income tax                                                                                  |  |                    |       |                            |   |                 |   |                                               |        |                            |   | (1,076 | ) |   |         |  
|Less reclassification adjustment for gains included
in net Income, net of taxes of $0                                                                          |  |                    |        |                            |   |                  |   |                                               |         |                            |   | 17     |   |   |         |  
|                                                                                                                                                               |  |                    |        |                            |   |                  |   |                                               |         |                            |   |        |   |   |         |  
|Net unrealized loss                                                                                                                                            |  |                    |        |                            |   |                  |   |                                               |         |                            |   | (1,059 | ) |   | (1,059  | )
|                                                                                                                                                               |  |                    |        |                            |   |                  |   |                                               |         |                            |   |        |   |   |         |  
|Total comprehensive loss                                                                                                                                       |  |                    |        |                            |   |                  |   |                                               |         |                            |   |        |   |   | (11,361 | )
|                                                                                                                                                               |  |                    |        |                            |   |                  |   |                                               |         |                            |   |        |   |   |         |  
|Sale of 3,965 shares of common stock to employee
benefit plan; 4,727 shares for employee stock purchase plan; and 2.300 shares
issued in lieu of director fees |  |                    | 56     |                            |   | 64               |   |                                               |        |                            |   |       |   |   | 120     |  
|Share-based compensation                                                                                                                                       |  |                    |       |                            |   | 315              |   |                                               |        |                            |   |       |   |   | 315     |  
|Retirement of 6,000 shares of common stock                                                                                                                     |  |                    | (30    | )                          |   | (24              | ) |                                               |        |                            |   |       |   |   | (54     | )
|                                                                                                                                                               |  |                    |        |                            |   |                  |   |                                               |         |                            |   |        |   |   |         |  
|Balance at December 31, 2010                                                                                                                                   |  | $                  | 30,995 |                            | $ | 38,148           |   | $                                             | (27,835 | )                          | $ | (1,205 | ) | $ | 40,103  |  
|                                                                                                                                                               |  |                    |        |                            |   |                  |   |                                               |         |                            |   |        |   |   |         |  

See
Notes to Consolidated Financial Statements.

46

---



Floridian
Financial Group, Inc. and Subsidiaries

Consolidated Statements of Cash Flows 
Years Ended December 31, 2010 and 2009 
(Dollars in thousands)

|                                                                                         |  |      |         |      |   |          |  
|---------------------------------------------------------------------------------------- |  | ---- | ------- | ---- | - | -------- | -
|                                                                                         |  | 2010 |         | 2009 |  
|                                                                                         |  |      |         |      |  
|Cash Flows
From Operating Activities                                                     |  |      |         |      |   |          |  
|Net loss                                                                                 |  | $    | (9,702  | )    | $ | (10,817  | )
|Adjustments to reconcile net loss to net
cash used in operating activities:              |  |      |         |      |   |          |  
|Provision for loan losses                                                                |  |      | 9,583   |      |   | 8,523    |  
|Impairment of other real estate owned, net                                               |  |      | 436     |      |   | 295      |  
|Depreciation expense                                                                     |  |      | 1,072   |      |   | 1,077    |  
|Amortization expense                                                                     |  |      | 192     |      |   | 192      |  
|Net accretion of securities                                                              |  |      | 107     |      |   | 584      |  
|Share-based compensation                                                                 |  |      | 344     |      |   | 388      |  
|Realized gain on sales of available-for-sale
securities, net                             |  |      | (17     | )    |   | (206     | )
|Net gain on the sale of other real estate
owned                                          |  |      |        |      |   | (68      | )
|Net loss on the disposal of premises and
equipment                                       |  |      | 9       |      |   | 15       |  
|Increase in cash surrender value                                                         |  |      | (408    | )    |   | (463     | )
|Decrease (increase) in accrued interest
receivable                                       |  |      | 395     |      |   | (307     | )
|Decrease in accrued interest payable                                                     |  |      | (90     | )    |   | (18      | )
|Other, net                                                                               |  |      | 1,739   |      |   | (1,701   | )
|                                                                                         |  |      |         |      |   |          |  
|Net cash provided by (used in) operating
activities                                      |  |      | 3,660   |      |   | (2,470   | )
|                                                                                         |  |      |         |      |   |          |  
|Cash Flows
From Investing Activities                                                     |  |      |         |      |   |          |  
|Purchase of securities available for sale                                                |  |      | (99,811 | )    |   | (157,758 | )
|Payments, maturities and calls of
securities available for sale                          |  |      | 137,906 |      |   | 119,141  |  
|Payments, maturities and calls of
securities held to maturity                            |  |      | 2,000   |      |   |         |  
|Net decrease (increase) in loans                                                         |  |      | 3,645   |      |   | (57,793  | )
|Purchases of property and equipment, net                                                 |  |      | (114    | )    |   | (942     | )
|Proceeds from the sale of premises and
equipment                                         |  |      |        |      |   | 168      |  
|Net (increase) decrease in other
investments                                             |  |      | (180    | )    |   | (24      | )
|Proceeds from the sale of Floridian
Financial Mortgage                                   |  |      | 122     |      |   |         |  
|Proceeds from sale of other real estate
owned                                            |  |      | 1,822   |      |   | 1,748    |  
|                                                                                         |  |      |         |      |   |          |  
|Net cash provided by (used in) investing
activities                                      |  |      | 45,390  |      |   | (95,412  | )
|                                                                                         |  |      |         |      |   |          |  
|Cash Flows
From Financing Activities                                                     |  |      |         |      |   |          |  
|Net increase in deposits                                                                 |  |      | 5,535   |      |   | 98,984   |  
|Net decrease in short-term borrowings                                                    |  |      | (1,043  | )    |   | (10,932  | )
|Proceeds from sale of stock                                                              |  |      | 91      |      |   | 370      |  
|Retirement of shares                                                                     |  |      | (54     | )    |   |         |  
|                                                                                         |  |      |         |      |   |          |  
|Net cash provided by financing activities                                                |  |      | 4,529   |      |   | 88,422   |  
|                                                                                         |  |      |         |      |   |          |  
|Net increase
(decrease) in cash and cash equivalents                                     |  |      | 53,579  |      |   | (9,460   | )
|Cash and
cash equivalents                                                                |  |      |         |      |   |          |  
|Beginning of year                                                                        |  |      | 8,293   |      |   | 17,753   |  
|                                                                                         |  |      |         |      |   |          |  
|Ending of year                                                                           |  | $    | 61,872  |      | $ | 8,293    |  
|                                                                                         |  |      |         |      |   |          |  
|                                                                                         |  |      |         |      |   |          |  
|                                                                                         |  |      |         |      |   |          |  
|Supplemental Disclosures of Cash Flow Information
and noncash transactions Interest paid |  | $    | 5,619   |      | $ | 6,928    |  
|                                                                                         |  |      |         |      |   |          |  
|                                                                                         |  |      |         |      |   |          |  
|Income taxes paid                                                                        |  | $    |        |      | $ |         |  
|                                                                                         |  |      |         |      |   |          |  
|Loans transferred to other real estate
owned                                             |  | $    | 3,099   |      | $ | 4,286    |  
|                                                                                         |  |      |         |      |   |          |  

See Notes to
Consolidated Financial Statements.

47

---



|                                                                          
|--------------------------------------------------------------------------
|Floridian Financial Group, Inc.                                           
|Notes to Consolidated Financial Statements                                
|(Dollars in thousands, except for per share
 amounts)                     
|                                                                          
|                                                                          
|Note 1. Nature of Business and Summary of
 Significant Accounting Policies

Nature of business: Floridian Financial Group,
Inc. (the Company) is a registered bank holding company formed to own 100% of
its subsidiary banks, Floridian Bank and Orange Bank of Florida, (collectively
referred to as the Banks). The Company was incorporated in 2005, and became
operational as a bank holding company once Floridian Bank opened. Floridian
Bank is a Florida-chartered, federally-insured full service commercial banking
institution and presently conducts business from its headquarters and main
office in Daytona Beach and branch offices in Ormond Beach, Palm Coast, and
Port Orange, Florida. Orange Bank of Florida is a Florida-chartered,
federally-insured full service commercial banking institution with its
headquarters in Orlando, Florida. The Bank operates from its main office and branch
offices in the Orlando area, Crystal River and Lake County, Florida.

Basis of Financial Statement Presentation: The
consolidated financial statements include the accounts of the Company and its
Banks. Significant intercompany items and transactions have been eliminated in
consolidation. The accounting and reporting policies of the Company conform to
accounting principles generally accepted in the United States of America and
general practices within the financial services industry.

Use of estimates: In preparing the
consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. Material estimates that are particularly susceptible to
significant change in the near term relate to the determination of the
allowance for loan losses, deferred tax assets and the fair value of financial
instruments.

A summary of the Companys significant
accounting policies follows:

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Comprehensive income (loss): Comprehensive
 income or loss is comprised of the net loss and any items of other
 comprehensive income. The only item of other comprehensive income for the
 Banks is the unrealized gain or loss on the available-for-sale investment
 securities portfolio, net of tax.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Cash and cash equivalents: For purposes of
 reporting cash flows, cash and cash equivalents include cash on hand, amounts
 due from banks (including cash items in process of clearing) and federal
 funds sold. Cash flows from loans originated by the Company and deposits are
 reported net. The Company maintains amounts due from banks, which at times
 may exceed federally insured limits. The Company has not experienced any
 losses in such accounts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Securities: Certain securities which
 management has the positive intent and ability to hold until their maturity
 are classified as held to maturity. Such securities are carried at cost,
 adjusted for related amortization of premium and accretion of discounts
 through interest income from securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Securities available for sale which are used for asset/liability,
 liquidity and other funds management purposes have indefinite holding periods
 and are accounted for on a fair value basis with net unrealized gains and
 losses included in other comprehensive income net of tax. Declines in the
 fair value of securities available for sale that are deemed to be other than
 temporary are reflected in earnings as realized losses. In estimating
 other-than-temporary impairment losses, management considers: (1) the length
 of time and the extent to which the fair value has been less than cost, (2)
 the financial condition and near-term prospects of the issuer including an
 evaluation of credit ratings, and (3) the impact of changes in market
 interest rates, (4) the intent of the Company to sell a security, and (5)
 whether it is more likely than not the Company will have to sell the security
 before recovery of its cost basis. If the Company intends to sell an impaired
 security, the Company records an other-than-temporary loss in the amount equal
 to the entire difference between the fair value and amortized cost. If a
 security is determined to be other-than-temporarily impaired, but the Company
 does not intend to sell the security, only the credit portion of the
 estimated loss is recognized in earnings, with the other portion of the loss
 recognized in other comprehensive income. Amortization and accretion of
 premiums and discounts are recognized as adjustments to interest income.
 Realized gains and losses are recognized using the specific identification
 method.

48

---



|                                                                                      
|--------------------------------------------------------------------------------------
|Floridian Financial Group, Inc.                                                       
|Notes to Consolidated Financial Statements                                            
|(Dollars in thousands, except for per share amounts)                                  
|                                                                                      
|                                                                                      
|Note 1. Nature of Business and Summary of
 Significant Accounting Policies (Continued)
|                                                                                      

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Loans: Loans are stated at the amount of
 unpaid principal balances, reduced by an allowance for loan losses and
 unearned fees and costs. Interest on loans is calculated by using the simple
 interest method on daily balances of the principal amounts outstanding unless
 loans are classified as nonaccrual loans. The accrual of interest is
 discontinued when future collection of principal or interest in accordance
 with the contractual terms becomes doubtful. When interest accrual is
 discontinued, all unpaid accrued interest is reversed against interest
 income. Accrual of interest is generally resumed when the customer is current
 on all principal and interest payments and has been paying on a timely basis
 for a period of time. To determine financial performance for each segment the
 Company allocates capital, funding charges and credits, provisions for loan
 losses, and certain noninterest expenses, as applicable.                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Accounting standards require the presentation of certain disclosure
 information at the portfolio segment level, which represents the level at
 which the Company determines its allowance for credit losses. The Company has
 four reportable loan segments: Commercial, Commercial Real Estate (CRE),
 Residential Real Estate (RRE), and Consumer and home equity. Segments are
 determined based on the products and services provided and the type of
 customer served. Commercial loans represent all business purpose loans not
 collateralized by real estate. CRE represent all business purpose loans
 collateralized by any type of real estate. RRE represent all consumer purpose
 loans collateralized by one to four family residences. Home equity represents
 all consumer open end lines of credit secured by one to four family lines of
 credit. Consumer loans represent any consumer purpose loans not secured by
 real estate. See Note 4 for a breakdown of loans by segment.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Within each segment, the Company monitors and assesses the credit
 risk in the following classes, based on the risk characteristic of each loan
 segment: Pass, Special Mention, Substandard, Doubtful, and Loss. See Note 4
 for a breakdown of loans by class. Within the Commercial and CRE portfolio
 risk grades are assigned based on an assessment of conditions that affect the
 borrowers ability to meet obligations as outlined in their loan agreement.
 This process includes reviewing financial information of the borrower, credit
 documentation, public information, past experience with the borrower, and
 other information that may be available specific to each borrower. 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 their contractual obligations.                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Troubled Debt Restructuring: Loans
 classified as Troubled Debt Restructurings (TDR) include loans on nonaccrual,
 loans moving to nonaccrual, and loans in an accruing status. The Company
 evaluates each individual borrowers financial condition and prospects for
 repayment under the modified terms prior to establishing a TDR. The
 evaluation includes but is not limited to the borrowers capacity and
 willingness to pay, past payment history, and any secondary sources of
 payment. There were no defaults on any of the Companys TDRs in 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Nonaccrual and Impaired loans: Borrowers
 who have not made scheduled payments within 30 days of their due date are
 considered past due. The Company has a formal review process for all past due
 loans which includes a review of previous performance, collateral and future
 cash flows. The Companys policies related to when loans are placed on
 nonaccrual status conform to guidelines prescribed by bank regulatory
 authorities. Cash collections on nonaccrual loans are credited to the loan
 receivable balance and no interest income is recognized on those loans until
 the principal balance is current Nonaccrual loans, after a reasonable period
 of sustained repayment performance (generally minimum of six months), are
 re-evaluated for possible return to an accrual status. See Note 4 for a
 breakdown of the Companys loan portfolio based on aging.                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Impaired loans are measured based on the present value of expected
 future cash flows discounted at the loans original effective interest rate
 or, as a practical expedient, at the loans observable market price or the
 fair value of the collateral, net of selling costs, 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. On at least a quarterly basis the
 Company reviews impaired loans for any changes in the borrowers ability to
 repay the loan. Based on this review the Company may consider making
 modifications to the original loan agreement                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Allowance for loan losses: The allowance for
 loan losses is established through a provision for loan losses charged
 against operations. A portion of the Companys allowance is not allocated to
 any specific category of loans and represents managements best estimate of
 risk inherent in the calculation of the overall allowance. All commercial
 loans risk rated substandard or doubtful are reviewed on a quarterly basis
 determine if a specific reserve needs to be allocated..                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

49

---



|                                                                                      
|--------------------------------------------------------------------------------------
|Floridian Financial Group, Inc.                                                       
|Notes to Consolidated Financial Statements                                            
|(Dollars in thousands, except for per share amounts)                                  
|                                                                                      
|                                                                                      
|Note 1. Nature of Business and Summary of Significant Accounting
 Policies (Continued)
|                                                                                      

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 losses
 on existing loans that may become uncollectible, 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Loan Charge-Offs: All loan segments except
 consumer are charged off within 30 days from the date the loan is deemed
 uncollectible. The recognition of the loss of loans or portions of loans occurs
 as soon as there is a reasonable probability of loss. When the amount of loss
 can be readily calculated, then the loss is recognized. In cases where an
 amount cannot be calculated, a specific allowance for loan losses is
 estimated and provided for.                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Losses on consumer credit card loans are taken as soon as possible
 and no later than when the loan is 90 days delinquent. All other consumer
 loan losses are taken as soon as possible and no later than when delinquency
 exceeds 120 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | As a policy, the bank reverses accrued interest on loans placed on
 non-accrual. If the accrued interest being reversed was recorded in a
 previous calendar year and the amount is material, the accrued interest
 associated with the previous calendar year is charged off.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Credit related financial instruments: In the
 ordinary course of business the Banks have entered into off-balance-sheet
 financial instruments consisting of commitments to extend credit and standby
 letters of credit. Such financial instruments are recorded in the financial
 statements when they are funded.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Transfers of financial assets: Transfers of
 financial assets are accounted for as sales only when control over the assets
 has been surrendered. Control over transferred assets is deemed to be surrendered
 when (1) the assets have been legally isolated from the Company and any of
 its affiliates, (2) the transferee has the ability to sell or pledge the
 transferred asset and, (3) the Company does not maintain effective control
 over the transferred assets through an agreement to repurchase them before
 their maturity or maintain effective control through a third-party beneficial
 interest in the transferred assets, the ability to unilaterally cause the
 holder to return specific assets, or have an in-the-money option held by a
 transferor when probable that the transferor will repurchase the assets.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Property and equipment: Leasehold
 improvements and property and equipment are stated at cost, less accumulated
 depreciation computed on the straight-line method over the estimated useful
 lives assigned to furniture and equipment which range generally from 5 to 15
 years, while leasehold improvements are amortized over the shorter of the
 estimated useful life or the lease term. Maintenance and repairs are charged
 to operations, and improvements and additions are capitalized.                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Intangible assets: The Companys intangible
 assets include an immaterial amount of goodwill and the value of ongoing
 customer relationships (core deposit intangibles) arising form the purchase
 of certain assets and the assumption of certain liabilities from unrelated
 entities. Core deposit intangibles are amortized on a straight line basis
 over a 10 year period. Any impairment in the intangibles would be recorded
 against income in the period of impairment. No impairment was recognized for
 the years ended December 31, 2010 and 2009.                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Other Real Estate Owned: Other real estate
 owned consists of property acquired through, or in lieu of, loan foreclosures
 or other proceedings and is initially recorded at the fair value less
 estimated selling costs at the date of foreclosure, which establishes a new
 cost basis. Subsequent to foreclosure, the properties are held for sale and
 are carried at the lower of cost or fair value less estimated costs of
 disposal. Any write-down to fair value at the time of acquisition is charged
 to the allowance for loan losses. Properties are evaluated regularly to
 ensure the recorded amounts are supported by current fair values, and a
 charge to operations is recorded as necessary to reduce the carrying amount
 to fair value less estimated costs to dispose.                                            

50

---



|                                                                                      
|--------------------------------------------------------------------------------------
|Floridian Financial Group, Inc.                                                       
|Notes to Consolidated Financial Statements                                            
|(Dollars in thousands, except for per share amounts)                                  
|                                                                                      
|                                                                                      
|Note 1. Nature of Business and Summary of Significant Accounting
 Policies (Continued)
|                                                                                      

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Income taxes: The Company accounts for
 income taxes according to the asset and liability method. Under this method,
 deferred tax assets and liabilities are recognized for the future tax
 consequences attributable to differences between the financial statement
 carrying amounts of existing assets and liabilities and their respective tax
 basis. Deferred tax assets and liabilities are measured using the enacted tax
 rates applicable to taxable income for the years in which those temporary
 differences are expected to be recovered or settled. The effect on deferred
 tax assets and liabilities of a change in tax rates is recognized in income
 in the period that includes the enactment date. Valuation reserves are
 established against certain deferred tax assets when it is more likely than
 not that the deferred tax assets will not be realized. Increases or decreases
 in the valuation reserve are charged or credited to the income tax provision.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | The Company recognizes a benefit from its tax positions only if it is
 more-likely-than-not that the tax position will be sustained on examination
 by taxing authorities, based on the technical merits of the position. The tax
 benefits recognized in the financial statements from such a position are
 measured based on the largest benefit that has a greater than 50% likelihood
 of being realized upon ultimate settlement with a taxing authority that has
 full knowledge of all relevant information.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | The periods subject to examination for the Companys federal returns
 are the tax years subsequent to 2007. The periods subject to examination for
 the Companys significant state return, which is Florida, are the tax years
 subsequent to 2007. The Company believes that its income tax filing positions
 and deductions will be sustained upon examination and does not anticipate any
 adjustments that will result in a material change in its financial
 statements. As a result, no reserve for uncertain income tax positions has
 been recorded.                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | The Companys policy for recording interest and penalties related to
 uncertain tax positions is to record such items as part of its provision for
 federal and state income taxes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Earnings per share: Basic earnings per share
 is calculated by dividing net income (loss) by the weighted average number of
 shares of common stock outstanding for each period presented.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Share-based compensation: The Company has a
 stock option plan for its employees and for its directors, as more fully
 described in Note 14 to these financial statements. The Company is required
 to recognize compensation cost relating to share-based payment transactions,
 based on the fair value of the equity or liability instruments issued, in its
 financial statements. Compensation cost has been measured using the fair
 value of an award on the grant dates and is recognized over the service
 period, which is usually the vesting period.                                                                                                                                                                                                                                                                                                                                                                                                                          

.On July 21, 2010, the FASB issued Accounting Standards Update (ASU)
No. 2010-20, Disclosures about the Credit
Quality of Financing Receivables and the Allowance for Credit Losses.
This new accounting guidance under Accounting Standards Codification (ASC)
310, Receivables, requires
disclosure of additional information about the credit quality of an entitys
financing receivables and the allowance for credit losses. Disclosures must be
disaggregated by class or portfolio segment and include, among other things,
such items as a roll forward of the allowance for credit losses, certain credit
quality indicators, past due and impaired loan information, and loan
modification information. Except for the allowance roll forward and loan
modification information, the new requirements became effective for interim and
annual reporting periods beginning with year-end December 31, 2010. The new
guidance only relates to financial statement disclosures and will not affect
the Companys financial condition or results of operations.

The FASB issued additional guidance on Fair Value Measurements and
DisclosuresImproving Disclosures about Fair Value Measurements. This update
requires additional fair value disclosures including:

| |   |                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Transfers in and out of Levels 1 and 2: A reporting entity
 should disclose separately the amounts of significant transfers in and out of
 Level 1 and Level 2 fair value measurements and describe the reasons for the
 transfers.                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                           
| |  | Activity in Level 3 fair
 value measurements. In the reconciliation for fair value measurements using
 significant unobservable inputs (Level 3), a reporting entity should present
 separately information about purchases, sales, issuances, and settlements
 (that is, on a gross basis rather than as one net number).

51

---



|                                                                                      
|--------------------------------------------------------------------------------------
|Floridian Financial Group, Inc.                                                       
|Notes to Consolidated Financial Statements                                            
|(Dollars in thousands, except for per share amounts)                                  
|                                                                                      
|                                                                                      
|Note 1. Nature of Business and Summary of Significant Accounting
 Policies (Continued)

The update also clarifies two existing disclosures as follows:

| |   |                                                                                                                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Level of disaggregation: A reporting entity should provide fair
 value measurement disclosures for each class of assets and liabilities.                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                  
| |  | Disclosures about inputs and valuation techniques: A reporting
 entity is required to provide disclosures about the valuation techniques and
 inputs used to measure fair value for both recurring and nonrecurring fair
 value measurements. Those disclosures are required for fair value
 measurements that fall in either Level 2 or Level 3.

The new disclosures and clarifications of existing disclosures are
effective for interim and annual reporting periods beginning after December 15,
2009, except for the disclosures about purchases, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value measurements.
Those disclosures are effective for fiscal years beginning after December 15,
2010, and for interim periods within those fiscal years. Early adoption is
permitted. The Company adopted the applicable disclosure provisions required
for adoption in 2010.

Reclassifications: Certain amounts in the 2009
financial statements have been reclassified for comparative purposes to conform
with the presentation in the 2010 financial statements. The results of these
classifications had no effect on net operations or shareholders equity.

Note 2. Cash and Due From Banks

The Banks are required to maintain vault cash and reserve balances with
the Federal Reserve Bank based upon a percentage of deposits. These
requirements were $1.6 million and $0 at December 31, 2010 and 2009,
respectively.

Note 3. Securities

The amortized cost and estimated fair value of securities with gross
unrealized gains and losses follows:

|                                     |                   |                   |        |                        |   |                         |  |   |            |  |   |        | 
|------------------------------------ | ----------------- | ----------------- | ------ | ---------------------- | - | ----------------------- |  | - | ---------- |  | - | ------ | 
|                                     |                   | December 31, 2010 |       
|                                     |                   |                   |       
|                                     |                   | Amortized Cost    |        | Gross Unrealized Gains |   | Gross Unrealized Losses |  |   | Fair Value | 
|                                     |                   |                   |       
|Securities Available for Sale        |                   |                   |        |                        |   |                         |  |   |            |  |   |        | 
|Debt Securities:                     |                   |                   |        |                        |   |                         |  |   |            |  |   |        | 
|U.S. Government and federal agencies |                   | $                 | 30,133 |                        | $ | 24                      |  | $ | 933        |  | $ | 29,224 | 
|States & political subdivisions      |                   |                   | 1,706  |                        |   |                        |  |   | 48         |  |   | 1,658  | 
|Mortgage backed                      |                   |                   | 12,024 |                        |   | 1                       |  |   | 249        |  |   | 11,776 | 
|                                     |                   |                   |        |                        |   |                         |  |   |            |  |   |        | 
|Total securities available for sale  |                   | $                 | 43,863 |                        | $ | 25                      |  | $ | 1,230      |  | $ | 42,658 | 
|                                     |                   |                   |        |                        |   |                         |  |   |            |  |   |        | 
|                                     |                   |                   |        |                        |   |                         |  |   |            |  |   |        | 
|Securities Held to Maturity          |                   |                   |        |                        |   |                         |  |   |            |  |   |        | 
|Debt securities:                     |                   |                   |        |                        |   |                         |  |   |            |  |   |        | 
|U.S. Government and federal agencies |                   | $                 | 10,082 |                        | $ | 199                     |  | $ |           |  | $ | 10,281 | 
|                                     |                   |                   |        |                        |   |                         |  |   |            |  |   |        | 
|Total securities held to maturity    |                   | $                 | 10,082 |                        | $ | 199                     |  | $ |           |  | $ | 10,281 | 
|                                     |                   |                   |        |                        |   |                         |  |   |            |  |   |        | 
|                                     |                   |                   |        |                        |   |                         |  |   |            |  |   |        | 
|                                     | December 31, 2009
|                                     |                   |                   |       
|Securities
 Available for Sale       |                   |                   |        |                        |   |                         |  |   |            |  |   |        | 
|Debt Securities:                     |                   |                   |        |                        |   |                         |  |   |            |  |   |        | 
|U.S. Government and federal agencies |                   | $                 | 81,942 |                        | $ | 60                      |  | $ | 295        |  | $ | 81,707 | 
|                                     |                   |                   |        |                        |   |                         |  |   |            |  |   |        | 
|Total securities available for sale  |                   | $                 | 81,942 |                        | $ | 60                      |  | $ | 295        |  | $ | 81,707 | 
|                                     |                   |                   |        |                        |   |                         |  |   |            |  |   |        | 
|                                     |                   |                   |        |                        |   |                         |  |   |            |  |   |        | 
|Securities
 Held to Maturity         |                   |                   |        |                        |   |                         |  |   |            |  |   |        | 
|Debt securities:                     |                   |                   |        |                        |   |                         |  |   |            |  |   |        | 
|U.S. Government and federal agencies |                   | $                 | 12,259 |                        | $ | 41                      |  | $ | 34         |  | $ | 12,266 | 
|                                     |                   |                   |        |                        |   |                         |  |   |            |  |   |        | 
|Total securities held to maturity    |                   | $                 | 12,259 |                        | $ | 41                      |  | $ | 34         |  | $ | 12,266 | 
|                                     |                   |                   |        |                        |   |                         |  |   |            |  |   |        | 

52

---



|                                                    
|----------------------------------------------------
|Floridian Financial Group, Inc.                     
|Notes to Consolidated Financial Statements          
|(Dollars in thousands, except for per share amounts)
|                                                    
|                                                    
|Note 3.
 Securities (Continued)                     

At
December 31, 2010 and 2009, U.S. government obligations with a carrying value
of $16.6 million and $21.3 million, respectively, were pledged to secure public
deposits and for other purposes required or permitted by law. At December 31,
2010 and 2009, the carrying amount of securities pledged to secure repurchase
agreements was $6.7 million and $7.6 million, respectively.

The
carrying amount of debt securities by contractual maturity at December 31, 2010
follows:

|                                     |  |               |   |                              |   |                                |  |               |        |       |   |        |  |   |        | 
|------------------------------------ |  | ------------- | - | ---------------------------- | - | ------------------------------ |  | ------------- | ------ | ----- | - | ------ |  | - | ------ | 
|                                     |  | 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 |  | $             |  |                              | $ | 6,928                          |  | $             | 17,161 |       | $ | 5,136  |  | $ | 29,225 | 
|States & political subdivisions      |  |               |  |                              |   |                               |  |               | 1,658  |       |   |       |  |   | 1,658  | 
|Mortgage-backed                      |  |               |  |                              |   |                               |  |               |       |       |   | 11,775 |  |   | 11,775 | 
|                                     |  |               |   |                              |   |                                |  |               |        |       |   |        |  |   |        | 
|Total                                |  | $             |  |                              | $ | 6,928                          |  | $             | 18,819 |       | $ | 16,911 |  | $ | 42,658 | 
|                                     |  |               |   |                              |   |                                |  |               |        |       |   |        |  |   |        | 
|                                     |  |               |   |                              |   |                                |  |               |        |       |   |        |  |   |        | 
|Securities Held to Maturity, at cost |  |               |   |                              |   |                                |  |               |        |       |   |        |  |   |        | 
|U.S. Government and federal agencies |  | $             |  |                              | $ |                               |  | $             |       |       | $ | 10,082 |  | $ | 10,082 | 
|                                     |  |               |   |                              |   |                                |  |               |        |       |   |        |  |   |        | 
|Total                                |  | $             |  |                              | $ |                               |  | $             |       |       | $ | 10,082 |  | $ | 10,082 | 
|                                     |  |               |   |                              |   |                                |  |               |        |       |   |        |  |   |        | 

For
the years ended December 31, 2010 and 2009, proceeds from sales, maturities,
and calls of securities available for sale amounted to $137.9 and $119.1
million, respectively. For the years ended December 31, 2010 and 2009, proceeds
from maturities and calls of securities being held to maturity amounted to $2.0
million and zero, respectively. Gross realized gains amounted to $17 and $206 thousand,
respectively. There were no gross realized losses for the years ended December
31, 2010 and 2009.

Information
pertaining to securities with gross unrealized losses at December 31, 2010 and
2009 aggregated by investment category and length of time that individual
securities have been in a continuous loss position, follows:

|                                     |  |                         |       |                    |   |                           |  |            |   |                           |   |   |  |   |       | 
|------------------------------------ |  | ----------------------- | ----- | ------------------ | - | ------------------------- |  | ---------- | - | ------------------------- | - | - |  | - | ----- | 
|                                     |  | December 31, 2010       |       |                    |   |                          
|                                     |  |                         |       |                    |   |                          
|                                     |  | Less Than Twelve
Months |       | Over Twelve Months |   |                           |  |           
|                                     |  |                         |       |                    |   |                           |  |           
|                                     |  | Gross
Unrealized
Losses |       | Fair Value         |   | Gross
 Unrealized
 Losses |  | Fair Value |   | Total
 Unrealized
 Losses |  
|                                     |  |                         |       |                    |   |                           |  |            |   |                           |  
|Securities Available for Sale        |  |                         |       |                    |   |                           |  |            |   |                           |   |   |  |   |       | 
|Debt Securities:                     |  |                         |       |                    |   |                           |  |            |   |                           |   |   |  |   |       | 
|U.S. Government and federal agencies |  | $                       | 933   |                    | $ | 22,702                    |  | $          |  |                           | $ |  |  | $ | 933   | 
|States & political subdivisions      |  |                         | 48    |                    |   | 1,658                     |  |            |  |                           |   |  |  |   | 48    | 
|Mortgage-backed                      |  |                         | 249   |                    |   | 6,704                     |  |            |  |                           |   |  |  |   | 249   | 
|                                     |  |                         |       |                    |   |                           |  |            |   |                           |   |   |  |   |       | 
|Total securities available for sale  |  | $                       | 1,230 |                    | $ | 31,064                    |  | $          |  |                           | $ |  |  | $ | 1,230 | 
|                                     |  |                         |       |                    |   |                           |  |            |   |                           |   |   |  |   |       | 
|                                     |  |                         |       |                    |   |                           |  |            |   |                           |   |   |  |   |       | 
|Securities Held to Maturity          |  |                         |       |                    |   |                           |  |            |   |                           |   |   |  |   |       | 
|Debt Securities:                     |  |                         |       |                    |   |                           |  |            |   |                           |   |   |  |   |       | 
|U.S. Government and federal agencies |  | $                       |      |                    | $ |                          |  | $          |  |                           | $ |  |  | $ |      | 
|                                     |  |                         |       |                    |   |                           |  |            |   |                           |   |   |  |   |       | 
|Total securities held to maturity    |  | $                       |      |                    | $ |                          |  | $          |  |                           | $ |  |  | $ |      | 
|                                     |  |                         |       |                    |   |                           |  |            |   |                           |   |   |  |   |       | 

53

---



|                                                    
|----------------------------------------------------
|Floridian Financial Group, Inc.                     
|Notes to Consolidated Financial Statements          
|(Dollars in thousands, except for per share amounts)
|                                                    
|                                                    
|Note 3.
 Securities (Continued)                     



|                                     |  |                         |     |                    |   |                         |  |            |   |                         |   |   |  |   |     | 
|------------------------------------ |  | ----------------------- | --- | ------------------ | - | ----------------------- |  | ---------- | - | ----------------------- | - | - |  | - | --- | 
|                                     |  | December
31, 2009       |    
|                                     |  |                         |    
|                                     |  | Less
Than Twelve Months |     | Over
Twelve Months |   |                         |  |           
|                                     |  |                         |     |                    |   |                         |  |           
|                                     |  | Gross
Unrealized
Losses |     | Fair
Value         |   | Gross
Unrealized
Losses |  | Fair
Value |   | Total
Unrealized
Losses |  
|                                     |  |                         |     |                    |   |                         | 
|Securities Available for Sale        |  |                         |     |                    |   |                         |  |            |   |                         |   |   |  |   |     | 
|Debt Securities:                     |  |                         |     |                    |   |                         |  |            |   |                         |   |   |  |   |     | 
|U.S. Government and federal agencies |  | $                       | 295 |                    | $ | 36,121                  |  | $          |  |                         | $ |  |  | $ | 295 | 
|Mortgage-backed                      |  |                         |     |                    |   |                         |  |            |   |                         |   |   |  |   |     | 
|                                     |  |                         |     |                    |   |                         |  |            |   |                         |   |   |  |   |     | 
|Total securities available for sale  |  | $                       | 295 |                    | $ | 36,121                  |  | $          |  |                         | $ |  |  | $ | 295 | 
|                                     |  |                         |     |                    |   |                         |  |            |   |                         |   |   |  |   |     | 
|                                     |  |                         |     |                    |   |                         |  |            |   |                         |   |   |  |   |     | 
|Securities Held to Maturity          |  |                         |     |                    |   |                         |  |            |   |                         |   |   |  |   |     | 
|Debt Securities:                     |  |                         |     |                    |   |                         |  |            |   |                         |   |   |  |   |     | 
|U.S. Government and federal agencies |  | $                       | 34  |                    | $ | 8,186                   |  | $          |  |                         | $ |  |  | $ | 34  | 
|                                     |  |                         |     |                    |   |                         |  |            |   |                         |   |   |  |   |     | 
|Total securities held to maturity    |  | $                       | 34  |                    | $ | 8,186                   |  | $          |  |                         | $ |  |  | $ | 34  | 
|                                     |  |                         |     |                    |   |                         |  |            |   |                         |   |   |  |   |     | 

As
of December 31, 2010, the Companys security portfolio consisted of 19
securities, 13 of which were in an unrealized loss position for a period less
than 12 months. Approximately $51.1 million, or 97% of the debt securities held
by the Company were issued by U.S. government-sponsored entities and agencies,
primarily Fannie Mae, Freddie Mac, and Ginnie Mae, institutions which the
government has affirmed its commitment to support. Because the decline in fair
value is attributable to changes in interest rates and illiquidity, and not
credit quality, and because the Company does not have the intent to sell these
securities and it is likely it will not be required to sell the securities
before their anticipated recovery, the Company does not consider these
securities to be other-than temporarily impaired at December 31, 2010.

Note 4. Loans and Allowance for Loan Losses

Loans
at December 31, 2010 and 2009 were comprised of the following:

|                                |  |      |         |      |   |         | 
|------------------------------- |  | ---- | ------- | ---- | - | ------- | 
|                                |  | 2010 |         | 2009 |  
|                                |  |      |         |      |  
|                               
|Commercial                      |  | $    | 45,202  |      | $ | 48,565  | 
|Commercial real estate          |  |      | 240,151 |      |   | 253,177 | 
|Residential mortgage            |  |      | 12,580  |      |   | 14,368  | 
|Consumer and home equity        |  |      | 19,837  |      |   | 20,893  | 
|                                |  |      |         |      |   |         | 
|Total loans                     |  |      | 317,770 |      |   | 337,003 | 
|Less: Allowance for loan losses |  |      | 8,010   |      |   | 9,038   | 
|Less: Unearned fees             |  |      | 205     |      |   | 279     | 
|                                |  |      |         |      |   |         | 
|Net loans                       |  | $    | 309,555 |      | $ | 327,686 | 
|                                |  |      |         |      |   |         | 

54

---



|                                                                                                                                  
|----------------------------------------------------------------------------------------------------------------------------------
|Floridian Financial Group, Inc. 
 Notes to Consolidated Financial Statements
 (Dollars in thousands, except for per share amounts)
|                                                                                                                                  

Note 4. Loans and Allowance for Loan Losses
(Continued)

Activity in the allowance for loan losses during 2010 and 2009 is as
follows:

|                                |  |                               |        |      |   |       |  
|------------------------------- |  | ----------------------------- | ------ | ---- | - | ----- | -
|                                |  | For Years Ending December 31, |       
|                                |  |                               |       
|(Dollars in Thousands)          |  | 2010                          |        | 2009 |  
|                                |  |                               |        |      |  
|Balance at beginning of period  |  | $                             | 9,038  |      | $ | 6,051 |  
|                                |  |                               |        |      |   |       |  
|Loan charge-offs:               |  |                               |        |      |   |       |  
|Commercial                      |  |                               | 1,152  |      |   | 1,394 |  
|Commercial real estate          |  |                               | 7,663  |      |   | 3,624 |  
|Residential mortgage            |  |                               | 2,100  |      |   |      |  
|Consumer and home equity        |  |                               | 289    |      |   | 566   |  
|                                |  |                               |        |      |   |       |  
|Total Charge-offs               |  |                               | 11,204 |      |   | 5,584 |  
|                                |  |                               |        |      |   |       |  
|Recoveries:                     |  |                               |        |      |   |       |  
|Commercial                      |  |                               | 115    |      |   | 48    |  
|Commercial real estate          |  |                               | 406    |      |   |      |  
|Residential mortgage            |  |                               | 68     |      |   |      |  
|                                |  |                               |        |      |   |       |  
|Consumer and home equity        |  |                               | 4      |      |   |      |  
|                                |  |                               |        |      |   |       |  
|Total recoveries                |  |                               | 593    |      |   | 48    |  
|                                |  |                               |        |      |   |       |  
|Net charge-offs                 |  |                               | 10,611 |      |   | 5,536 |  
|                                |  |                               |        |      |   |       |  
|                                |  |                               |        |      |   |       |  
|Provision for loan losses       |  |                               | 9,583  |      |   | 8,523 |  
|                                |  |                               |        |      |   |       |  
|                                |  |                               |        |      |   |       |  
|Balance at end of period        |  | $                             | 8,010  |      | $ | 9,038 |  
|                                |  |                               |        |      |   |       |  
|                                |  |                               |        |      |   |       |  
|Allowance / Total Loans         |  |                               | 2.52   | %    |   | 2.68  | %
|Net Charge-Offs / Average Loans |  |                               | 3.13   | %    |   | 1.73  | %
|Allowance/Non-Performing Loans  |  |                               | 46.9   | %    |   | 94.3  | %

Non-accruing
loans amounted to $15.7 million and $3.1 million, at December 31, 2010 and
2009, respectively. Non-performing restructured loans totaled $1.4 million at
December 31, 2010 and $6.5 million at December 31, 2009. Interest income on non
accrual loans is recognized on a cash basis when the ultimate collectability is
no longer considered doubtful. Cash collected on nonaccrual loans is applied
against the principal balance or recognized as interest income based upon
managements expectations as to the ultimate collectability of principal and
interest in full. If interest on non-accruing loans had been recognized on a
fully accruing basis, interest income recorded would have been $287 thousand
and $369 thousand higher for the years ended December 31, 2010 and 2009,
respectively. As of December 31, 2010, there was one loan totaling $63 thousand
which was past due 90 days or more and still accruing interest income. This
loan was subsequently paid off in its entirety.

55

---



|                                                                                                                                  
|----------------------------------------------------------------------------------------------------------------------------------
|Floridian Financial Group, Inc. 
 Notes to Consolidated Financial Statements
 (Dollars in thousands, except for per share amounts)
|                                                                                                                                  

Note 4. Loans and Allowance for Loan Losses (Continued)

The
following presents the balance in the allowance for loan losses and the
recorded investment in loans by portfolio segment, less unearned fees, and
based on impairment method as of December 31, 2010:

|                                      |  |            |        |                          |   |                           |  |              |        |          |   |             |  |       |       |  |   |    |  |   |         | 
|------------------------------------- |  | ---------- | ------ | ------------------------ | - | ------------------------- |  | ------------ | ------ | -------- | - | ----------- |  | ----- | ----- |  | - | -- |  | - | ------- | 
|                                      |  | Commercial |        | Commercial
 Real
 Estate |   | Residential
 Real
 Estate |  | Home
 Equity |        | Consumer |   | Unallocated |  | Total |      
|                                      |  |            |        |                          |   |                           |  |              |        |          |   |             |  |       |      
|Ending allowance for loan losses:     |  |            |        |                          |   |                           |  |              |        |          |   |             |  |       |       |  |   |    |  |   |         | 
|Individually evaluated for impairment |  | $          | 308    |                          | $ | 827                       |  | $            | 50     |          | $ |            |  | $     |      |  | $ |   |  | $ | 1,185   | 
|                                      |  |            |        |                          |   |                           |  |              |        |          |   |             |  |       |       |  |   |    |  |   |         | 
|Collectively evaluated for impairment |  |            | 973    |                          |   | 4,598                     |  |              | 460    |          |   | 708         |  |       | 21    |  |   | 65 |  |   | 6,825   | 
|                                      |  |            |        |                          |   |                           |  |              |        |          |   |             |  |       |       |  |   |    |  |   |         | 
|Total ending allowance balance        |  | $          | 1,281  |                          | $ | 5,425                     |  | $            | 510    |          | $ | 708         |  | $     | 21    |  | $ | 65 |  | $ | 8,010   | 
|                                      |  |            |        |                          |   |                           |  |              |        |          |   |             |  |       |       |  |   |    |  |   |         | 
|                                      |  |            |        |                          |   |                           |  |              |        |          |   |             |  |       |       |  |   |    |  |   |         | 
|Loans:                                |  |            |        |                          |   |                           |  |              |        |          |   |             |  |       |       |  |   |    |  |   |         | 
|Individually evaluated for impairment |  | $          | 711    |                          | $ | 28,621                    |  | $            | 5,235  |          | $ | 249         |  | $     |      |  | $ |   |  | $ | 34,816  | 
|                                      |  |            |        |                          |   |                           |  |              |        |          |   |             |  |       |       |  |   |    |  |   |         | 
|Collectively evaluated for impairment |  |            | 35,312 |                          |   | 203,987                   |  |              | 21,979 |          |   | 19,070      |  |       | 2,401 |  |   |   |  |   | 282,749 | 
|                                      |  |            |        |                          |   |                           |  |              |        |          |   |             |  |       |       |  |   |    |  |   |         | 
|Total ending loan balance             |  | $          | 36,023 |                          | $ | 232,608                   |  | $            | 27,214 |          | $ | 19,319      |  | $     | 2,401 |  | $ |   |  | $ | 317,565 | 
|                                      |  |            |        |                          |   |                           |  |              |        |          |   |             |  |       |       |  |   |    |  |   |         | 

The
following presents loans individually evaluated for impairment by class of
loans as of December 31, 2010:

|                                    |  |                            |        |                      |   |                                       |  |   |       | 
|----------------------------------- |  | -------------------------- | ------ | -------------------- | - | ------------------------------------- |  | - | ----- | 
|                                    |  | Unpaid
 Principal
 Balance |        | Recorded
 Investment |   | Allowance for
 Loan Losses
 Allocated | 
|                                    |  |                            |        |                      |   |                                       | 
|With no related allowance recorded: |  |                            |        |                      |   |                                       |  |   |       | 
|Commercial                          |  | $                          | 150    |                      | $ | 150                                   |  | $ |      | 
|Commercial real estate              |  |                            |        |                      |   |                                       |  |   |       | 
|Construction and land               |  |                            | 6,954  |                      |   | 6,954                                 |  |   |      | 
|Non-owner occupied                  |  |                            | 10,140 |                      |   | 10,140                                |  |   |      | 
|Owner occupied                      |  |                            | 1,360  |                      |   | 1,360                                 |  |   |      | 
|Residential                         |  |                            | 5,076  |                      |   | 5,076                                 |  |   |      | 
|Home equity                         |  |                            | 249    |                      |   | 249                                   |  |   |      | 
|Consumer                            |  |                            |       |                      |   |                                      |  |   |      | 
|                                    |  |                            |        |                      |   |                                       |  |   |       | 
|Total                               |  |                            | 23,929 |                      |   | 23,929                                |  |   |      | 
|                                    |  |                            |        |                      |   |                                       |  |   |       | 
|                                    |  |                            |        |                      |   |                                       |  |   |       | 
|With an allowance recorded:         |  |                            |        |                      |   |                                       |  |   |       | 
|Commercial                          |  |                            | 561    |                      |   | 253                                   |  |   | 308   | 
|Commercial real estate              |  |                            |        |                      |   |                                       |  |   |       | 
|Construction and land               |  |                            | 109    |                      |   | 86                                    |  |   | 23    | 
|Non-owner occupied                  |  |                            |        |                      |   |                                       |  |   |       | 
|Owner occupied                      |  |                            | 8,717  |                      |   | 7,913                                 |  |   | 804   | 
|Residential                         |  |                            | 1,500  |                      |   | 1,450                                 |  |   | 50    | 
|Home equity                         |  |                            |       |                      |   |                                      |  |   |      | 
|Consumer                            |  |                            |       |                      |   |                                      |  |   |      | 
|                                    |  |                            |        |                      |   |                                       |  |   |       | 
|Total                               |  |                            | 10,887 |                      |   | 9,702                                 |  |   | 1,185 | 
|                                    |  |                            |        |                      |   |                                       |  |   |       | 
|                                    |  |                            |        |                      |   |                                       |  |   |       | 
|Total                               |  |                            | 34,816 |                      | $ | 33,631                                |  | $ | 1,185 | 
|                                    |  |                            |        |                      |   |                                       |  |   |       | 

56

---



|                                                                                        
|----------------------------------------------------------------------------------------
|Floridian Financial Group, Inc.                                                         
|Notes to Consolidated Financial Statements                                              
|(Dollars in thousands, except for per share amounts)                                    
|                                                                                        
|                                                                                        
|Note 4. Loans and Allowance for Loan Losses (Continued)                                 
|                                                                                        
|The
 following is a summary of information pertaining to impaired and nonaccrual
 loans:

|                                                              |  |                          |              |      |   |        | 
|------------------------------------------------------------- |  | ------------------------ | ------------ | ---- | - | ------ | 
|                                                              |  |                          | December 31, |     
|                                                              |  |                          |             
|                                                              |  | 2010                     |              | 2009 |  
|                                                              |  |                          |              |      |  
|Impaired
 loans without a valuation allowance                 |  | $                        | 23,929       |      | $ | 13,959 | 
|Impaired
 loans with a valuation allowance                    |  |                          | 10,887       |      |   | 12,769 | 
|                                                              |  |                          |              |      |   |        | 
|Total
 impaired loans                                         |  | $                        | 34,816       |      | $ | 26,728 | 
|                                                              |  |                          |              |      |   |        | 
|                                                              |  |                          |              |      |   |        | 
|Valuation
 allowance related to impaired loans                |  | $                        | 1,185        |      | $ | 3,206  | 
|Total
 nonaccrual loans                                       |  | $                        | 15,665       |      | $ | 3,105  | 
|Total loans
 past-due 90 days or more and still accruing      |  | $                        | 63           |      | $ |       | 
|                                                              |  |                          |              |      |   |        | 
|                                                              |  | Years Ended December 31, |             
|                                                              |  |                          |             
|                                                              |  | 2010                     |              | 2009 |  
|                                                              |  |                          |              |      |  
|Average
 investment in impaired loans                         |  | $                        | 34,837       |      | $ | 17,165 | 
|Interest
 income recognized on impaired loans                 |  | $                        | 867          |      | $ | 425    | 
|Interest
 income recognized on a cash basis on impaired loans |  | $                        |             |      | $ |       | 

No additional
funds are committed to be advanced in connection with impaired loans.

The following
presents the recorded investment in non-accrual loans and loans past due over
90 days past due and still accruing by class of loans as of December 31, 2010:

|                       |  |            |        |                                           |   |    | 
|---------------------- |  | ---------- | ------ | ----------------------------------------- | - | -- | 
|                       |  | Nonaccrual |        | Loans PastDue Over 90
 Days StillAccruing |  
|                       |  |            |        |                                           |  
|                      
|Commercial             |  | $          | 529    |                                           | $ |   | 
|Commercial real estate |  |            |        |                                           |   |    | 
|Construction and land  |  |            | 4,871  |                                           |   |   | 
|Non-owner occupied     |  |            | 4,141  |                                           |   | 63 | 
|Owner occupied         |  |            | 2,171  |                                           |   |   | 
|Residential            |  |            | 3,901  |                                           |   |   | 
|Home equity            |  |            | 52     |                                           |   |   | 
|Consumer               |  |            |       |                                           |   |   | 
|                       |  |            |        |                                           |   |    | 
|Total                  |  | $          | 15,665 |                                           | $ | 63 | 
|                       |  |            |        |                                           |   |    | 

The following
presents the aging of the recorded investment in past due loans, less unearned
fees, as of December 31, 2010 by class of loans:

|                       |  |                         |       |                         |   |                                 |  |                 |       |                     |   |        |  |   |         | 
|---------------------- |  | ----------------------- | ----- | ----------------------- | - | ------------------------------- |  | --------------- | ----- | ------------------- | - | ------ |  | - | ------- | 
|                       |  | 30 - 59
 Days
 Past Due |       | 60 - 89
 Days
 Past Due |   | Greater than
 90 Days
 Past Due |  | Total
 Past Due |       | Loans Not
 Past Due |  
|                       |  |                         |       |                         |   |                                 |  |                 |       |                     |  
|                       |  |                         |       |                         |   |                                 |  |                 |       |                     |   |        |  |   |         | 
|Commercial             |  | $                       | 190   |                         | $ |                                |  | $               | 150   |                     | $ | 340    |  | $ | 35,684  | 
|Commercial real estate |  |                         |       |                         |   |                                 |  |                 |       |                     |   |        |  |   |         | 
|Construction and land  |  |                         | 272   |                         |   |                                |  |                 | 1,141 |                     |   | 1,413  |  |   | 57,810  | 
|Non-owner occupied     |  |                         |      |                         |   | 193                             |  |                 | 3,947 |                     |   | 4,140  |  |   | 70,041  | 
|Owner occupied         |  |                         | 469   |                         |   |                                |  |                 | 63    |                     |   | 532    |  |   | 98,670  | 
|Residential            |  |                         | 249   |                         |   | 328                             |  |                 | 1,642 |                     |   | 2,219  |  |   | 24,995  | 
|Home equity            |  |                         | 2,311 |                         |   |                                |  |                 | 52    |                     |   | 2,311  |  |   | 17,008  | 
|Consumer               |  |                         | 4     |                         |   |                                |  |                 |      |                     |   | 56     |  |   | 2,346   | 
|                       |  |                         |       |                         |   |                                 |  |                 |       |                     |   |        |  |   |         | 
|Total                  |  | $                       | 3,495 |                         | $ | 521                             |  | $               | 6,995 |                     | $ | 11,011 |  | $ | 306,554 | 
|                       |  |                         |       |                         |   |                                 |  |                 |       |                     |   |        |  |   |         | 

57

---



|                                                       
|-------------------------------------------------------
|Floridian Financial Group, Inc.                        
|Notes to Consolidated Financial Statements             
|(Dollars in thousands, except for per share amounts)   
|                                                       
|                                                       
|Note 4. Loans and Allowance for Loan Losses (Continued)

The Company assigns a risk
rating to all business purpose loans and periodically performs reviews to
identify credit risks and to assess the overall collectability of the
portfolio. During these internal reviews, management monitors and analyzes the
financial condition of borrowers and guarantors, trends in the industries in
which borrowers operate and the fair values of collateral securing these loans.
These credit quality indicators are used to assign a risk rating to each
individual loan. The risk ratings can be grouped into five major categories,
defined as follows:

Pass
 A pass loan is a strong credit with no existing or known potential weaknesses
deserving of managements close attention.

Special Mention  A special mention loan has potential weaknesses that deserve
managements close attention. If left uncorrected, these potential weaknesses
may result in deterioration of the repayment prospects for the loan or in the
Companys credit position at some future date. Special Mention loans are not
adversely classified and do not expose the Company to sufficient risk to
warrant adverse classification.

Substandard  A substandard loan is not adequately protected by the current
financial condition and paying capacity of the borrower or the value of the
collateral pledged, if any. Loans classified as substandard have a well-defined
weakness or weaknesses that jeopardize the liquidation of the debt.
Well-defined weaknesses include a projects lack of marketability, inadequate
cash flow or collateral support, failure to complete construction on time or
the projects failure to fulfill economic expectations. They are characterized
by the distinct possibility that the Company will sustain some loss if the
deficiencies are not corrected.

Doubtful  Loans classified doubtful have all the weaknesses inherent in those
classified as substandard with the added characteristic that the weaknesses
make collection or liquidation in full, on the basis of currently known facts,
conditions and values, highly questionable or improbable.

Loss
 Loans classified as loss are considered uncollectible. Once a loan becomes
delinquent and repayment becomes questionable, the Company will address
collateral shortfalls with the borrower and attempt to obtain additional
collateral. If this is not forthcoming and payment in full is unlikely, the
Bank will estimate its probable loss and immediately charge-off some or all of
the balance.

As of December
31, 2010, and based on the most recent analysis performed, the risk category of
loans by class of loans, less unearned fees, is as follows:

|                       |  |      |         |                  |   |             |  |          |        |      |   |            |  |   |   |  |   |   | 
|---------------------- |  | ---- | ------- | ---------------- | - | ----------- |  | -------- | ------ | ---- | - | ---------- |  | - | - |  | - | - | 
|                       |  | Pass |         | Special
 Mention |   | Substandard |  | Doubtful |        | Loss |   | Not
 Rated | 
|                       |  |      |         |                  |   |             |  |          |        |      |   |            | 
|Commercial             |  | $    | 35,170  |                  | $ |            |  | $        | 535    |      | $ | 318        |  | $ |  |  | $ |  | 
|Commercial real estate |  |      |         |                  |   |             |  |          |        |      |   |            |  |   |   |  |   |   | 
|Construction and land  |  |      | 50,461  |                  |   | 1,917       |  |          | 6,702  |      |   | 143        |  |   |   |  |   |   | 
|Non-owner occupied     |  |      | 61,910  |                  |   | 1,620       |  |          | 10,653 |      |   |           |  |   |  |  |   |  | 
|                       |  |      |         |                  |   |             |  |          |        |      |   |            |  |   |   |  |   |   | 
|Owner occupied         |  |      | 85,408  |                  |   | 8,217       |  |          | 5,577  |      |   |           |  |   |  |  |   |  | 
|Residential            |  |      | 20,389  |                  |   |            |  |          | 4,514  |      |   | 2,311      |  |   |  |  |   |  | 
|Home equity            |  |      | 17,769  |                  |   |            |  |          | 1,371  |      |   | 179        |  |   |  |  |   |  | 
|Consumer               |  |      | 2,401   |                  |   |            |  |          |       |      |   |           |  |   |  |  |   |  | 
|                       |  |      |         |                  |   |             |  |          |        |      |   |            |  |   |   |  |   |   | 
|Total                  |  | $    | 273,508 |                  | $ | 11,754      |  | $        | 29,352 |      | $ | 2,951      |  | $ |  |  | $ |  | 
|                       |  |      |         |                  |   |             |  |          |        |      |   |            |  |   |   |  |   |   | 

The following
presents the recorded investment in residential and consumer loans based on
payment activity as of December 31, 2010:

|              |  |             |        |              |   |          |  |   |      
|------------- |  | ----------- | ------ | ------------ | - | -------- |  | - | -----
|              |  | Residential |        | Home
 Equity |   | Consumer
|              |  |             |        |              |   |         
|Performing    |  | $           | 24,653 |              | $ | 19,267   |  | $ | 2,401
|Nonperforming |  |             | 2,561  |              |   | 52       |  |   |     
|              |  |             |        |              |   |          |  |   |      
|Total         |  | $           | 27,214 |              | $ | 19,319   |  | $ | 2,401
|              |  |             |        |              |   |          |  |   |      

58

---



|                                                    
|----------------------------------------------------
|Floridian Financial Group, Inc.                     
|Notes to Consolidated Financial Statements          
|(Dollars in thousands, except for per share amounts)
|                                                    

Note 5. Property and Equipment

The components
of property and equipment, and the aggregate related accumulated depreciation
and amortization at December 31, 2010 and 2009 are as follows:

|                                                |  |      |        |      |   |        | 
|----------------------------------------------- |  | ---- | ------ | ---- | - | ------ | 
|                                                |  | 2010 |        | 2009 |  
|                                                |  |      |        |      |  
|Land and land improvements                      |  | $    | 3,726  |      | $ | 3,726  | 
|Buildings                                       |  |      | 9,074  |      |   | 9,074  | 
|Leasehold improvements                          |  |      | 1,331  |      |   | 1,141  | 
|Construction in process                         |  |      |       |      |   | 309    | 
|Furniture and equipment                         |  |      | 3,926  |      |   | 3,733  | 
|Automobiles                                     |  |      | 99     |      |   | 99     | 
|                                                |  |      |        |      |   |        | 
|                                                |  |      | 18,156 |      |   | 18,082 | 
|Less accumulated depreciation and
 amortization |  |      | 3,873  |      |   | 2,832  | 
|                                                |  |      |        |      |   |        | 
|                                                |  | $    | 14,283 |      | $ | 15,250 | 
|                                                |  |      |        |      |   |        | 

Depreciation
charged to operations during 2010 and 2009 was $1.1 million and $1.1 million,
respectively.

Note 6. Intangible Assets

The Companys
intangible assets consisted of the following:

|                              |  |              |       |      |   |       | 
|----------------------------- |  | ------------ | ----- | ---- | - | ----- | 
|                              |  | December 31, |      
|                              |  |              |      
|                              |  | 2010         |       | 2009 |  
|                              |  |              |       |      |  
|                             
|Core deposit intangibles      |  | $            | 1,921 |      | $ | 1,921 | 
|Non-amortizable goodwill      |  |              | 500   |      |   | 500   | 
|                              |  |              |       |      |   |       | 
|                              |  |              | 2,421 |      |   | 2,421 | 
|                             
|Less accumulated amortization |  |              | 528   |      |   | 336   | 
|                              |  |              |       |      |   |       | 
|Intangible assets, net        |  | $            | 1,893 |      | $ | 2,085 | 
|                              |  |              |       |      |   |       | 

Core deposit
intangibles of $1.9 million are being amortized over a 10 year period. Core
deposit intangible assets are periodically reviewed for impairment. Any
impairment in the core deposit would be recognized against income in the period
of impairment.

Amortization
of core deposit intangibles was approximately $192 thousand during the years
ended December 31, 2010 and 2009. Estimated aggregate amortization expenses for
the core deposit intangibles for the next five years and fully amortized are as
follows:

|                         |  |   |       | 
|------------------------ |  | - | ----- | 
|Year Ending December 31, |  |   |       | 
|                         |  |   |       | 
|2011                     |  | $ | 192   | 
|2012                     |  |   | 192   | 
|2013                     |  |   | 192   | 
|2014                     |  |   | 192   | 
|2015                     |  |   | 192   | 
|Thereafter               |  |   | 433   | 
|                         |  |   |       | 
|                         |  | $ | 1,393 | 
|                         |  |   |       | 

59

---



|                                                    
|----------------------------------------------------
|Floridian Financial Group, Inc.                     
|Notes to Consolidated Financial Statements          
|(Dollars in thousands, except for per share amounts)
|                                                    

Note 7. Deposits and Short-Term Borrowings

Maturities of
time certificates of deposit scheduled to mature after December 31, 2010 are as
follows:

|                         |  |   |         | 
|------------------------ |  | - | ------- | 
|Year Ending December 31, |  |   |         | 
|                         |  |   |         | 
|2011                     |  | $ | 84,773  | 
|2012                     |  |   | 60,573  | 
|2013                     |  |   | 3,676   | 
|2014                     |  |   | 1,653   | 
|2015                     |  |   | 1,470   | 
|Thereafter               |  |   |        | 
|                         |  |   |         | 
|                         |  | $ | 152,145 | 
|                         |  |   |         | 

The time
deposits under $100 thousand and of $100 thousand or more, as reflected on the
consolidated balance sheet, includes approximately $45.3 million and $36.3
million of brokered deposits at December 31, 2010 and 2009, respectively. At
December 31, 2010, original maturities of brokered deposits range from one
month to 20 months. Short term borrowings are comprised of collateralized
retail repurchase agreements at December 31, 2010. These borrowings can be
withdrawn by the customer at any time and therefore have no set maturity date.

Note 8. Employee Benefit Plans

During 2006,
the Company adopted a 401(k) plan under which all full-time employees may elect
to participate. There was no Company contribution to the plan in either 2010 or
2009. During 2010 and 2009, the plan acquired 3,965 and 17,312 shares,
respectively, of Company common stock from the Company for the plans
investment portfolio.

Note 9. Operating Leases

As of December
31, 2010, the Company leased nine banking facilities under non-cancelable
operating leases. Eight leases are with
unrelated parties and one is with a director. On January 3, 2011, the
Company purchased the banking office which was being leased from a director.

The Company
gave written notification at year end to the landlords of three of its
facilities of its intention to vacate the premises. Two of the facilities
represent branches where the customer relationship is being moved to other
branches. The third facility housed the
Companys loan operations department, which was relocated to the Companys Lake
Mary location in December 2010, and the Companys IT department, which was
moved to the Clermont office effective 1/1/2011.

No restructure
charge was recognized on one of the facilities since it is expected that the
Company will be able to sub-lease the facility and receive book value for all
leasehold improvements and furniture, fixtures, and equipment. A one-time charge of $738 thousand was
recognized for the other two facilities to reflect the present value of future
lease payments, net of expected subleases, and leasehold improvements that are
not deemed recoverable through the end of the lease term.

The Company
signed an agreement of sale on a fourth facility at year end. The restructure charge on this facility
represents the write down of the carrying value of the land and building,
leasehold improvements, and furniture, fixtures and equipment to reflect the
amount to be recognized through the sale.
A one-time charge of $262 thousand was recognized.

Total
restructuring charges of $1.0 million was recorded for 2010 to reflect the
impact of these decisions. Future amounts due under the leases in
the five years after 2010 and in the aggregate for the two banking offices
being closed in the first quarter of 2011 and the five banking offices
continuing to operate are as follows:

|                         |  |   |       | 
|------------------------ |  | - | ----- | 
|Year Ending December 31, |  |   |       | 
|                         |  |   |       | 
|2011                     |  | $ | 804   | 
|2012                     |  |   | 756   | 
|2013                     |  |   | 779   | 
|2014                     |  |   | 633   | 
|2015                     |  |   | 290   | 
|Thereafter               |  |   | 2,510 | 
|                         |  |   |       | 
|                         |  | $ | 5,772 | 
|                         |  |   |       | 

60

---



|                                                    
|----------------------------------------------------
|Floridian Financial Group, Inc.                     
|Notes to Consolidated Financial Statements          
|(Dollars in thousands, except for per share amounts)
|                                                    

Note 9. Operating Leases (Continued)

The total
charge to 2010 and 2009 operations for all operating leases was $1.3 million
and $1.1 million, respectively. The leases for the five banking offices
continuing to operate are generally for a ten year term, one ending in 2014,
two ending in 2015, one ending in 2016, another is a seven year lease ending in
2014, and one is a thirty year land lease ending in 2036. These leases usually
contain five or ten year renewal options.

Note 10. Income Taxes

Due to the
Companys recording of a valuation allowance for deferred taxes there were no
income taxes charged to operations for the years ended December 31, 2010 and
2009.

The provision
for income taxes differs from the amounts determined by applying the statutory
federal income tax rate to income before income taxes for the following
reasons:

|                                                     |  |                                 |        |   |  |                   |   |   |   |        |   |  |       |  
|---------------------------------------------------- |  | ------------------------------- | ------ | - |  | ----------------- | - | - | - | ------ | - |  | ----- | -
|                                                     |  | For the Year ended December 31,
|                                                     |  |                                
|                                                     |  | 2010
      Amount               |        | % |  | 2009
      Amount |   | %
|                                                     |  |                                 |        |  
|Income tax at statutory rate                         |  | $                               | (3,298 | ) |  | 34.0              | % |   | $ | (3,678 | ) |  | 34.0  | %
|                                                     |  |                                 |        |   |  |                   |   |   |   |        |   |  |       |  
|Increase (decrease) in tax expenses
 resulting from: |  |                                 |        |   |  |                   |   |   |   |        |   |  |       |  
|Permanent differences                                |  |                                 | (35    | ) |  | 0.4               | % |   |   | (20    | ) |  | 0.2   | %
|State tax, net of federal benefit                    |  |                                 | (400   | ) |  | 4.1               | % |   |   | (359   | ) |  | 3.3   | %
|Change in valuation allowance during year            |  |                                 | 4,143  |   |  | -42.7             | % |   |   | 3,726  |   |  | -34.5 | %
|Other                                                |  |                                 | (410   | ) |  | 4.2               | % |   |   | 331    |   |  | -3.0  | %
|                                                     |  |                                 |        |   |  |                   |   |   |   |        |   |  |       |  
|Income tax benefit                                   |  |                                 | 0      |   |  | 0.0               | % |   | $ | 0      |   |  | 0.0   | %
|                                                     |  |                                 |        |   |  |                   |   |   |   |        |   |  |       |  

Net deferred
tax assets are included in other assets in the accompanying balance sheets. The
tax effects of temporary differences that give rise to deferred tax assets and
deferred tax liabilities at December 31, 2010 and 2009 follow:

|                                                            |  |      |         |      |   |        |  
|----------------------------------------------------------- |  | ---- | ------- | ---- | - | ------ | -
|                                                            |  | 2010 |         | 2009 |  
|                                                            |  |      |         |      |  
|Deferred tax assets                                         |  |      |         |      |   |        |  
|Loan loss allowance                                         |  | $    | 1,439   |      | $ | 2,515  |  
|Pre-opening and organizational costs                        |  |      | 327     |      |   | 362    |  
|Net operating loss carry forward                            |  |      | 8,383   |      |   | 4,079  |  
|Contribution carryover                                      |  |      | 30      |      |   | 25     |  
|Non-accrual interest income                                 |  |      | 188     |      |   | 49     |  
|Compensation costs                                          |  |      | 47      |      |   | 22     |  
|Accrued Registration expenses  merger
 adjustment          |  |      | 111     |      |   | 111    |  
|Other real estate owned impairments                         |  |      | 63      |      |   |        |  
|Unrealized losses on available for sale
 securities         |  |      | 132     |      |   |        |  
|Accrued expenses                                            |  |      | 215     |      |   | 211    |  
|                                                            |  |      |         |      |   |        |  
|Gross deferred tax assets                                   |  |      | 10,935  |      |   | 7,374  |  
|Valuation allowance                                         |  |      | (10,070 | )    |   | (5,926 | )
|                                                            |  |      |         |      |   |        |  
|Net deferred tax assets                                     |  | $    | 865     |      | $ | 1,448  |  
|                                                            |  |      |         |      |   |        |  
|                                                            |  |      |         |      |   |        |  
|Deferred tax liabilities                                    |  |      |         |      |   |        |  
|Property and equipment                                      |  | $    | (61     | )    | $ | (172   | )
|Unrealized gains/(losses) on available for
 sale securities |  |      |        |      |   | (233   | )
|Unearned compensation  merger adjustment                   |  |      | (61     | )    |   | (61    | )
|Core deposit intangible  merger adjustment                 |  |      | (524    | )    |   | (596   | )
|Loan portfolio mark up  merger adjustment                  |  |      | (33     | )    |   | (110   | )
|                                                            |  |      |         |      |   |        |  
|Deferred tax liabilities                                    |  |      | (679    | )    |   | (1,173 | )
|                                                            |  |      |         |      |   |        |  
|Net deferred tax assets                                     |  | $    | 187     |      | $ | 275    |  
|                                                            |  |      |         |      |   |        |  

61

---



|                                                    
|----------------------------------------------------
|Floridian Financial Group, Inc.                     
|Notes to Consolidated Financial Statements          
|(Dollars in thousands, except for per share amounts)
|                                                    

Note 10. Income Taxes (Continued)

At December 31, 2010 and 2009, the consolidated company has a net
operating loss carryover of approximately $22.9 and $10.8 million,
respectively, for income tax purposes which will expire in 2027, 2028, 2029 and
2030 if not utilized earlier.

Note 11. Related Party Accounts

The Banks periodically make loans to principal shareholders and to
directors and/or companies in which they hold a 10% or more beneficial
ownership. Any such loans are made in the normal course of business at
prevailing interest rates and terms. Annual activity consisted of the
following:

|                   |  |                                 |        |      |   |        | 
|------------------ |  | ------------------------------- | ------ | ---- | - | ------ | 
|                   |  | For the Year Ended December 31, |       
|                   |  |                                 |       
|                   |  | 2010                            |        | 2009 |  
|                   |  |                                 |        |      |  
|Beginning
 balance |  | $                               | 15,779 |      | $ | 13,876 | 
|New loans          |  |                                 | 2,891  |      |   | 7,895  | 
|Less:
 Repayments  |  |                                 | 1,419  |      |   | 5,992  | 
|                   |  |                                 |        |      |   |        | 
|Ending
 balance    |  | $                               | 17,251 |      | $ | 15,779 | 
|                   |  |                                 |        |      |   |        | 

Note 12. Commitments and Contingencies

Financial instruments with off-balance-sheet risk: The financial
statements do not reflect various commitments and contingent liabilities that
arise in the normal course of business to meet the financing needs of
customers. These include commitments to extend credit and honor stand-by
letters of credit. These instruments involve, to varying degrees, elements of
credit, interest rate and liquidity risks in excess of amounts reflected in the
balance sheets. The extent of the Banks involvement in these commitments or
contingent liabilities is expressed by the contractual, or notional, amounts of
the instruments. Commitments to extend credit, which amount to $59.0 million
and $62.5 million at December 31, 2010 and 2009, respectively, represent
agreements to lend to customers with fixed expiration dates or other
termination clauses.

Since many commitments are expected to expire without being funded,
committed amounts do not necessarily represent future liquidity requirements.
The amount of collateral obtained, if any, is based on managements credit
evaluation in the same manner as though an immediate credit extension were to
be granted.

Stand-by letters of credit are conditional commitments issued by the
Banks guaranteeing the performance of a customer to a third party. The decision
whether to guarantee such performance and the extent of collateral requirements
are made considering the same factors as are considered in credit extension.
Stand-by letters of credit totaling $3.0 million and zero are outstanding as of
December 31 2010 and 2009, respectively.

Lines of credit: At December 31, 2010 and 2009, the Bank has unsecured
federal funds lines of credit of $16.1 and $20.2 million, respectively,
available from its correspondent banks. The highest single day borrowing under
these lines was $3.1 million during the year ended December 31, 2010.

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.

62

---



|                                                    
|----------------------------------------------------
|Floridian Financial Group, Inc.                     
|Notes to Consolidated Financial Statements          
|(Dollars in thousands, except for per share amounts)
|                                                    
|                                                    
|Note 13. Earnings Per Share                         

The following
table sets forth the computation of basic earnings per share:

|                                                                  |  |                                 |       |      |   |        | 
|----------------------------------------------------------------- |  | ------------------------------- | ----- | ---- | - | ------ | 
|                                                                  |  | For the Year Ended December 31, |      
|                                                                  |  |                                 |      
|                                                                  |  | 2010                            |       | 2009 |  
|                                                                  |  |                                 |       |      |  
|Numerator:
 Net Loss                                              |  | $                               | 9,702 |      | $ | 10,817 | 
|                                                                  |  |                                 |       |      |   |        | 
|                                                                 
|Denominator
 for Basic Earnings Per Share Weighted-Average Shares |  |                                 | 6,201 |      |   | 6,181  | 
|                                                                  |  |                                 |       |      |   |        | 
|                                                                 
|Basic Loss
 Per Share                                             |  | $                               | 1.56  |      | $ | 1.75   | 
|                                                                  |  |                                 |       |      |   |        | 

As of December 31, 2010 and 2009, all of the existing stock options
were considered anti-dilutive. Therefore, diluted earnings per share is not calculated.

Note 14. Share-Based Compensation

The boards of directors and shareholders have approved stock option
plans permitting the granting of options to acquire up to 1,548,461 shares of
the Companys common stock to employees, directors and consultants. At December
31, 2010 there were 811,362 options outstanding and 737,098 options yet to be
granted.

The Company adopted the FASB standard for stock options effective
January 1, 2006. The fair value of options granted during 2010 and 2009 have
been estimated on the date of grant, using the Black-Scholes option pricing
model, under the following assumptions:

|                                                                              |  |      |       |      |   |       |  
|----------------------------------------------------------------------------- |  | ---- | ----- | ---- | - | ----- | -
|                                                                              |  | 2010 |       | 2009 |  
|                                                                              |  |      |       |      |  
|Risk-free
 interest rate                                                      |  |      | 2.71  | %    |   | 3.06  | %
|Expected
 life in years                                                       |  |      | 7.00  |      |   | 7.00  |  
|Expected
 dividend yield                                                      |  |      |      |      |   |      |  
|Expected
 stock volatility                                                    |  |      | 10.00 | %    |   | 10.00 | %
|Average
 grant-date fair value of options issued during the year  per option |  | $    | 2.34  |      | $ | 2.75  |  

The Company granted 161,500 options in 2010 and 144,050 options in
2009. Share-based compensation included in the consolidated Statements of
Operations is $315 thousand and $388 thousand in 2010 and 2009, respectively.

The company estimates the expected life of options by calculating the
average of the vesting period and the contractual life. The risk-free rate for
periods within the contractual life of the option is based on the yield of the
seven year U.S. Treasury Note in effect at the time of the grant. The dividends
rate assumption of zero is based on managements intention not to pay dividends
for the foreseeable future. Since there is no active market for the Companys
stock, expected volatility was estimated based on the historical volatility
experience of other de novo banks in Central Florida.

Options granted vest ratably over five years. The exercise price of
these options is the deemed fair value of the underlying stock on the date of
grant. Any options not exercised expire ten years after their date of grant.

63

---



|                                                                                                                                  
|----------------------------------------------------------------------------------------------------------------------------------
|Floridian Financial Group, Inc. 
 Notes to Consolidated Financial Statements
 (Dollars in thousands, except for per share amounts)
|                                                                                                                                  

Note 14. Share-Based Compensation (Continued)

Option
activity during 2010 and 2009 is as follows:

|                                      |  |        |         |            |   |        |  |            |          |   |   |       | 
|------------------------------------- |  | ------ | ------- | ---------- | - | ------ |  | ---------- | -------- | - | - | ----- | 
|                                      |  | 2010   |         | 2009       |  
|                                      |  |        |         |            |  
|                                      |  | Number |         | Avg. Price |   | Number |  | Avg. Price |         
|                                      |  |        |         |            |   |        |  |            |         
|                                      |  |        |         |            |   |        |  |            |         
|Options outstanding beginning of year |  |        | 712,627 |            | $ | 10.38  |  |            | 840,361  |   | $ | 10.43 | 
|Forfeited                             |  |        | (62,765 | )          |   | 10.59  |  |            | (265,334 | ) |   | 9.99  | 
|Exercised                             |  |        |        |            |   |       |  |            | (6,450   | ) |   | 10.00 | 
|Granted                               |  |        | 161,500 |            |   | 11.39  |  |            | 144,050  |   |   | 12.50 | 
|                                      |  |        |         |            |   |        |  |            |          |   |   |       | 
|Options outstanding end of year       |  |        | 811,362 |            |   | 11.08  |  |            | 712,627  |   |   | 10.98 | 
|                                      |  |        |         |            |   |        |  |            |          |   |   |       | 
|                                      |  |        |         |            |   |        |  |            |          |   |   |       | 
|Exercisable at end of year            |  |        | 512,098 |            | $ | 10.57  |  |            | 489,492  |   | $ | 10.38 | 
|                                      |  |        |         |            |   |        |  |            |          |   |   |       | 

Information
pertaining to options outstanding at December 31, 2010 is as follows:

|                           |  |                     |         |                                                 |  |                                    |  |                     |       |                                    |  |         |  |   |       | 
|-------------------------- |  | ------------------- | ------- | ----------------------------------------------- |  | ---------------------------------- |  | ------------------- | ----- | ---------------------------------- |  | ------- |  | - | ----- | 
|                           |  | Options Outstanding |         | Options Exercisable                             | 
|                           |  |                     |         |                                                 | 
|Range of
 Exercise Prices  |  | Number
 Outstanding |         | Weighted
 Average
 Remaining
 Contractual
 Life |  | Weighted
 Average
 Exercise
 Price |  | Number
 Exercisable |       | Weighted
 Average
 Exercise
 Price | 
|                           |  |                     |         |                                                 |  |                                    |  |                     |       |                                    | 
|$9.58 - $11.00             |  |                     | 457,862 |                                                 |  | 5.8 years                          |  | $                   | 9.97  |                                    |  | 390,598 |  | $ | 9.97  | 
|$11.01 - $12.50            |  |                     | 353,500 |                                                 |  | 8.0 years                          |  |                     | 12.50 |                                    |  | 121,500 |  |   | 12.50 | 
|                           |  |                     |         |                                                 |  |                                    |  |                     |       |                                    |  |         |  |   |       | 
|                           |  |                     |         |                                                 |  |                                    |  |                     |       |                                    |  |         |  |   |       | 
|Outstanding at end of year |  |                     | 811,362 |                                                 |  | 6.8 years                          |  | $                   | 11.08 |                                    |  | 512,098 |  | $ | 10.57 | 
|                           |  |                     |         |                                                 |  |                                    |  |                     |       |                                    |  |         |  |   |       | 

|                                      |  |                   |         |                                          |   |      | 
|------------------------------------- |  | ----------------- | ------- | ---------------------------------------- | - | ---- | 
|                                      |  | Number
 of Shares |         | Weighted Average
 Grant Date Fair
 Value |  
|                                      |  |                   |         |                                          |  
|Non-vested options, December 31, 2009 |  |                   | 223,135 |                                          | $ | 3.12 | 
|Granted                               |  |                   | 161,500 |                                          |   | 2.34 | 
|Vested                                |  |                   | (58,228 | )                                        |   | 3.38 | 
|Forfeited                             |  |                   | (27,143 | )                                        |   | 2.99 | 
|                                      |  |                   |         |                                          |   |      | 
|Non-vested options, December 31, 2010 |  |                   | 299,264 |                                          |   | 2.67 | 
|                                      |  |                   |         |                                          |   |      | 

The remaining
average contractual life for options outstanding and for those exercisable at
December 31, 2010 is:

|            |    
|----------- | ---
|Outstanding | 6.8
|Exercisable | 5.9

At December
31, 2010, there is approximately $554 thousand of unrecognized compensation
expense relating to non-vested options at that date. This amount will be
recognized in expense ratably as these options vest over a weighted average
period of approximately 43 months.

Note 15. Concentration of Credit Risk

The current
policy of the Company and the Banks is to not engage in the use of
interest-rate swaps, futures, or option contracts.

Practically
all of the Banks loans, commitments, and standby letters of credit have been
granted to customers in the Banks market areas. The Banks are dependent on the
ability of their debtors to honor their contracts which may be affected by the
economic conditions of the counties surrounding the Banks. The concentration of
credit by type of loan is set forth in Note 4.

64

---



|                                                                                                                                  
|----------------------------------------------------------------------------------------------------------------------------------
|Floridian Financial Group, Inc. 
 Notes to Consolidated Financial Statements
 (Dollars in thousands, except for per share amounts)
|                                                                                                                                  

Note 16. Regulatory Capital Matters

The Company (on a consolidated basis) and Banks are subject to various
regulatory capital requirements administered by the federal banking agencies.
Failure to meet minimum capital requirements can initiate certain mandatory -
and possibly additional discretionary - actions by regulators that, if
undertaken, could have a direct material effect on the Companys financial
statements. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Company and the Banks must meet specific capital
guidelines that involve quantitative measures of the Banks assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk weightings,
and other factors. Prompt corrective action provisions are not applicable to
bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy
require the Company and Banks to maintain minimum amounts and ratios (set forth
in the table below) of total and Tier I capital (as defined in the
regulations), to risk-weighted assets (as defined), and Tier I capital (as
defined) to average assets (as defined). Management believes, as of December
31, 2010 and 2009, that the Company and Banks meet all capital adequacy
requirements to which they are subject.

As of December 31, 2010, the most recent notification from the Federal
Deposit Insurance Company categorized all the Banks as well capitalized under
the regulatory framework for prompt corrective action. To be categorized as
well capitalized, the Banks must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the table below. There
are no conditions or events since that notification that management believes
have changed the Companys or Banks classification as of December 31, 2010.

|                                         |  |        |        |                                                      |  |        |   |       |        |  |  |      |  
|---------------------------------------- |  | ------ | ------ | ---------------------------------------------------- |  | ------ | - | ----- | ------ |  |  | ---- | -
|                                         |  | Actual |        | Minimum Amount and Ratio to
 Remain Well Capitalized | 
|                                         |  |        |        |                                                      | 
|                                         |  | Amount |        | Ratio                                                |  | Amount |   | Ratio |       
|                                         |  |        |        |                                                      |  |        |   |       |       
|                                         |  |        |        |                                                      |  |        |   |       |        |  |  |      |  
|As of December 31, 2010:                 |  |        |        |                                                      |  |        |   |       |        |  |  |      |  
|Total capital (to risk-weighted assets)  |  |        |        |                                                      |  |        |   |       |        |  |  |      |  
|Consolidated                             |  | $      | 43,736 |                                                      |  | 12.3   | % | $     | 35,717 |  |  | 10.0 | %
|Floridian Bank                           |  | $      | 13,479 |                                                      |  | 11.7   | % | $     | 11,486 |  |  | 10.0 | %
|Orange Bank of Florida                   |  | $      | 25,337 |                                                      |  | 10.7   | % | $     | 23,657 |  |  | 10.0 | %
|                                         |  |        |        |                                                      |  |        |   |       |        |  |  |      |  
|Tier I capital (to risk-weighted assets) |  |        |        |                                                      |  |        |   |       |        |  |  |      |  
|Consolidated                             |  | $      | 39,228 |                                                      |  | 11.0   | % | $     | 21,430 |  |  | 6.0  | %
|Floridian Bank                           |  | $      | 12,033 |                                                      |  | 10.5   | % | $     | 6,891  |  |  | 6.0  | %
|Orange Bank of Florida                   |  | $      | 22,345 |                                                      |  | 9.5    | % | $     | 14,194 |  |  | 6.0  | %
|Tier I capital (to average assets)       |  |        |        |                                                      |  |        |   |       |        |  |  |      |  
|Consolidated                             |  | $      | 39,228 |                                                      |  | 8.4    | % | $     | 23,317 |  |  | 5.0  | %
|Floridian Bank                           |  | $      | 12,033 |                                                      |  | 8.0    | % | $     | 7,570  |  |  | 5.0  | %
|Orange Bank of Florida                   |  | $      | 22,345 |                                                      |  | 7.3    | % | $     | 15,404 |  |  | 5.0  | %
|                                         |  |        |        |                                                      |  |        |   |       |        |  |  |      |  
|As of December 31, 2009:                 |  |        |        |                                                      |  |        |   |       |        |  |  |      |  
|Total capital (to risk-weighted assets)  |  |        |        |                                                      |  |        |   |       |        |  |  |      |  
|Consolidated                             |  | $      | 53,149 |                                                      |  | 13.8   | % | $     | 38,633 |  |  | 10.0 | %
|Floridian Bank                           |  | $      | 14,477 |                                                      |  | 11.7   | % | $     | 12,372 |  |  | 10.0 | %
|Orange Bank of Florida                   |  | $      | 26,514 |                                                      |  | 10.3   | % | $     | 25,830 |  |  | 10.0 | %
|Tier I capital (to risk-weighted assets) |  |        |        |                                                      |  |        |   |       |        |  |  |      |  
|Consolidated                             |  | $      | 48,268 |                                                      |  | 12.5   | % | $     | 23,180 |  |  | 6.0  | %
|Floridian Bank                           |  | $      | 12,925 |                                                      |  | 10.5   | % | $     | 7,423  |  |  | 6.0  | %
|Orange Bank of Florida                   |  | $      | 23,238 |                                                      |  | 9.0    | % | $     | 15,498 |  |  | 6.0  | %
|Tier I capital (to average assets)       |  |        |        |                                                      |  |        |   |       |        |  |  |      |  
|Consolidated                             |  | $      | 48,268 |                                                      |  | 10.0   | % | $     | 24,190 |  |  | 5.0  | %
|Floridian Bank                           |  | $      | 12,925 |                                                      |  | 8.2    | % | $     | 7,882  |  |  | 5.0  | %
|Orange Bank of Florida                   |  | $      | 23,238 |                                                      |  | 7.4    | % | $     | 15,697 |  |  | 5.0  | %

65

---



|                                                    
|----------------------------------------------------
|Floridian Financial Group, Inc.                     
|Notes to Consolidated Financial Statements          
|(Dollars in thousands, except for per share amounts)
|                                                    

The
payment of dividends by a Florida state bank is subject to various restrictions
set forth in the Florida Financial Institutions Code. Such restrictions
generally limit dividends to an amount not exceeding net income for the current
and two preceding years, less any dividends paid during that period.
Accordingly, management does not expect the payment of dividends at any time in
the near future. Since the Company is dependent upon the Banks ability to pay
dividends, the Company is, in effect, similarly restricted as to its ability to
pay dividends.

Note 17. Fair Values of financial instruments

Effective
January 1, 2008, we adopted the provisions of FASB guidance for fair value
measurements for financial assets and financial liabilities. This guidance
defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles and expands disclosures about fair
value measurements. The application of this standard in situations where the
market for a financial asset is not active was clarified by the issuance of and
interpretation by the FASB in Determining the Fair Value of a Financial Asset
When the Market for That Asset Is Not Active, in October 2008.

This
Interpretation became effective immediately and did not significantly impact
the methods by which the Company determines the fair values of its financial
assets.

The
original standard defines fair value as the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between
market participants. A fair value measurement assumes that the transaction to
sell the asset or transfer the liability occurs in the principal market for the
asset or liability or, in the absence of a principal market, the most
advantageous market for the asset or liability. The price in the principal (or
most advantageous) market used to measure the fair value of the asset or
liability shall not be adjusted for transaction costs. An orderly transaction
is a transaction that assumes exposure to the market for a period prior to the
measurement date to allow for marketing activities that are usual and customary
for transactions involving such assets and liabilities; it is not a forced
transaction. Market participants are buyers and sellers in the principal market
that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv)
willing to transact.

This
guidance requires the use of valuation techniques that are consistent with the
market approach, the income approach and/or the cost approach. The market
approach uses prices and other relevant information generated by market
transactions involving identical or comparable assets and liabilities. The
income approach uses valuation techniques to convert expected future amounts,
such as cash flows or earnings, to a single present value amount on a
discounted basis. The cost approach is based on the amount that currently would
be required to replace the service capacity of an asset (replacement cost).
Valuation techniques should be consistently applied. Inputs to valuation
techniques refer to the assumptions that market participants would use in
pricing the asset or liability. Inputs may be observable, meaning those that
reflect the assumptions market participants would use in pricing the asset or
liability developed based on market data obtained from independent sources, or
unobservable, meaning those that reflect the reporting entitys own assumptions
about the assumptions market participants would use in pricing the asset or
liability developed based on the best information available in the
circumstances. In that regard, the guidance establishes a fair value hierarchy for
valuation inputs that gives the highest priority to quoted prices in active
markets for identical assets or liabilities and the lowest priority to
unobservable inputs. The fair value hierarchy is as follows:

Level
1. Quoted prices (unadjusted) for identical assets or liabilities in active
markets that the entity has the ability to access as of the measurement date.

Level
2. Significant other observable inputs other than Level 1 prices such as quoted
prices for similar assets or liabilities; quoted prices in markets that are not
active; or other inputs that are observable or can be corroborated by
observable market data.

Level
3. Significant unobservable inputs that reflect a reporting entitys own
assumptions about the assumptions that market participants would use in pricing
an asset or liability.

A
financial instruments categorization within the valuation hierarchy is based
upon the lowest level of input that is significant to the fair value
measurement.

A
description of the valuation methodologies used for instruments measured at
fair value, as well as the general classification of such instruments pursuant
to the valuation hierarchy, is set forth below.

66

---



|                                                          
|----------------------------------------------------------
|Floridian
 Financial Group, Inc.                          
|Notes to
 Consolidated Financial Statements               
|(Dollars
 in thousands, except for per share amounts)     
|                                                          
|                                                          
|Note 17.
 Fair Values of Financial Instruments (Continued)

In
general, fair value is based upon quoted market prices, where available. If
such quoted market prices are not available, fair value is based upon
internally developed models that primarily use, as inputs, observable
market-based parameters. Valuation adjustments may be made to ensure that
financial instruments are recorded at fair value. These adjustments may include
amounts to reflect counterparty credit quality, the Companys creditworthiness,
among other things, as well as unobservable parameters. Any such valuation
adjustments are applied consistently over time. Our valuation methodologies may
produce a fair value calculation that may not be indicative of net realizable
value or reflective of future fair values. While management believes the
Companys valuation methodologies are appropriate and consistent with other
market participants, the use of different methodologies or assumptions to
determine the fair value of certain financial instruments could result in a
different estimate of fair value at the reporting date.

The
following methods and assumptions were used by the Company in estimating the
fair value of its financial instruments:

Cash
and due from banks, interest-bearing demand deposits in other banks, and
federal funds sold:
Due to the short-term nature of these instruments, fair values approximate
their carrying amounts.

Investment
Securities: The fair
values of investment securities are determined by quoted prices in active
markets, when available. If quoted market prices are not available, the fair
value is determined by a matrix pricing, which is a mathematical technique,
widely used in the industry to value debt securities without relying
exclusively on quoted prices for the specific securities but rather by relying
on the securities relationship to other benchmark quoted securities.

Loans: For variable-rate loans that re-price
frequently and with no significant change in credit risk, fair values are based
on carrying values. Fair values for all other loans (for example, commercial,
commercial real estate, residential real estate, and consumer loans) are
estimated using discounted cash flow analyses, using interest rates currently
being offered for loans with similar terms to borrowers of similar credit
quality. Fair values for nonperforming loans are estimated using discounted
cash flow analyses or underlying collateral values, where applicable.

Impaired
Loans. Loans for which
it is probable that payment of interest and principal will not be made in
accordance with the contractual terms of the loan agreement are considered
impaired. Once a loan is identified as individually impaired, management
measures impairment in accordance with the FASB guidance accounting by
creditors for impairment of a loan, and the fair value of impaired loans is
estimated using one of several methods, including collateral value, market
value of similar debt, enterprise value, liquidation value and discounted cash
flows. Those impaired loans not requiring an allowance represent loans for
which the fair value of the expected repayments or collateral exceed the
recorded investments in such loans. At December 31, 2010, $2.3 million of the
total impaired loans were evaluated based on the fair value of the collateral.
In accordance with accounting literature, impaired loans where an allowance is
established based on the fair value of collateral require classification in the
fair value hierarchy. Collateral values are estimated using Level 3 inputs
based on customized discounting criteria.

Other
Real Estate Owned.
Other real estate owned consists of property acquired though, or in lieu of,
loan foreclosures or other proceedings and is initially recorded at the lower
of the related loan balances less any specific allowance for loss, or fair
value at the date of foreclosure, which establishes a new cost basis.
Subsequent to foreclosure, the properties are held for sale and are carried at
the net fair value at the time of acquisition is charged to the allowance for
loan losses. Properties are evaluated regularly to ensure the recorded amounts
are supported by current fair values, and a charge to operations is recorded as
necessary to reduce the carrying amount to fair value less estimated costs to
dispose.

Accrued
interest receivable and accrued interest payable: The fair values of accrued interest
receivable and accrued interest payable approximate their carrying amounts.

Deposits: The fair value of demand deposits, including
non-interest-bearing demand deposits, savings accounts, NOW accounts and money
market demand accounts, is equal to their carrying value. Fixed rate term
deposits are valued using discounted cash flows. The discount rate used is
based on interest rates currently being offered on comparable deposits as to
amount and term.

Short-term
borrowings. The
carrying amounts of borrowings under repurchase agreements maturing within 90
days in the amount of $6.8 million and federal funds of $52.5 million
approximate their fair values.

67

---



|                                                         
|---------------------------------------------------------
|Floridian
 Financial Group, Inc.                         
|Notes to
 Consolidated Financial Statements              
|(Dollars
 in thousands, except for per share amounts)    
|                                                         
|                                                         
|Note 17. Fair Values of Financial Instruments (Continued)

Off-balance-sheet
instruments. Loan
commitments and letters of credit are negotiated at current market rates and
are relatively short-term in nature. Therefore, their estimated fair value
approximates the fees charged and is nominal at December 31, 2010 and December
31, 2009.

Financial Instruments Recorded at Fair Value on a Recurring
Basis

The
following table sets forth the Companys assets and liabilities which are
carried at fair value on a recurring basis as of December 31, 2010 and 2009,
segregated by the level of the valuation inputs within the fair value hierarchy
utilized to measure fair value:

|                                    |  |                                                                 |   |                                                |   |                                            |  |                      |   |  |   |        | 
|----------------------------------- |  | --------------------------------------------------------------- | - | ---------------------------------------------- | - | ------------------------------------------ |  | -------------------- | - |  | - | ------ | 
|                                    |  | December 31, 2010                                               |  
|                                    |  |                                                                 |  
|                                    |  | Quoted Prices in
 Active Markets
 For Identical Assets
 Level 1 |   | Significant Other
 Observable
 Inputs
 Level 2 |   | Significant
 Unobservable
 Inputs
 Level 3 |  | Total at Fair
 Value |  
|                                    |  |                                                                 |  
|Securities available for sale       |  |                                                                 |   |                                                |   |                                            |  |                      |   |  |   |        | 
|Debt securities:                    |  |                                                                 |   |                                                |   |                                            |  |                      |   |  |   |        | 
|U.S Government and federal agencies |  | $                                                               |  |                                                | $ | 29,224                                     |  | $                    |  |  | $ | 29,224 | 
|States & political subdivisions     |  |                                                                 |  |                                                |   | 1,658                                      |  |                      |  |  |   | 1,658  | 
|Mortgage backed                     |  |                                                                 |  |                                                |   | 11,776                                     |  |                      |  |  |   | 11,776 | 
|                                    |  |                                                                 |   |                                                |   |                                            |  |                      |   |  |   |        | 
|Total securities available for sale |  | $                                                               |  |                                                | $ | 42,658                                     |  | $                    |  |  | $ | 42,658 | 
|                                    |  |                                                                 |   |                                                |   |                                            |  |                      |   |  |   |        | 

|                                     |  |                                                              |   |                                             |   |                                         |  |                     |   |  |   |        | 
|------------------------------------ |  | ------------------------------------------------------------ | - | ------------------------------------------- | - | --------------------------------------- |  | ------------------- | - |  | - | ------ | 
|                                     |  | December 31, 2009                                            |  
|                                     |  |                                                              |  
|                                     |  | Quoted
Prices in
Active Markets
For Identical Assets
Level 1 |   | Significant
Other
Observable
Inputs
Level 2 |   | Significant
Unobservable
Inputs
Level 3 |  | Total
at Fair
Value |  
|                                     |  |                                                              |  
|Securities available for sale        |  |                                                              |   |                                             |   |                                         |  |                     |   |  |   |        | 
|Debt securities:                     |  |                                                              |   |                                             |   |                                         |  |                     |   |  |   |        | 
|U.S. Government and federal agencies |  | $                                                            |  |                                             | $ | 81,707                                  |  | $                   |  |  | $ | 81,707 | 
|                                     |  |                                                              |   |                                             |   |                                         |  |                     |   |  |   |        | 
|Total securities available for sale  |  | $                                                            |  |                                             | $ | 81,707                                  |  | $                   |  |  | $ | 81,707 | 
|                                     |  |                                                              |   |                                             |   |                                         |  |                     |   |  |   |        | 

Financial Instruments Recorded at Fair Value on a
Nonrecurring Basis

The
Company may be required, from time to time, to measure certain financial assets
and financial liabilities at fair value on a nonrecurring basis in accordance
with U.S. generally accepted accounting principles. These include assets that
are measured at the lower of cost or market that were recognized at fair value
below cost at the end of the period. The fair values of assets measured at fair
value on a nonrecurring basis are as follows at December 31, 2010 and December
31, 2009:

|                                                 |  |                                                                  |   |                                                |   |                                            |  |   |        | 
|------------------------------------------------ |  | ---------------------------------------------------------------- | - | ---------------------------------------------- | - | ------------------------------------------ |  | - | ------ | 
|                                                 |  | December 31, 2010                                                |  
|                                                 |  |                                                                  |  
|                                                 |  | Quoted Prices in
 Active Markets
 For Identical
 Assets
 Level 1 |   | Significant Other
 Observable
 Inputs
 Level 2 |   | Significant
 Unobservable
 Inputs
 Level 3 | 
|                                                 |  |                                                                  |  
|Impaired loans                                   |  | $                                                                |  |                                                | $ |                                           |  | $ | 13,355 | 
|Other real estate owned and repossessed property |  | $                                                                |  |                                                | $ |                                           |  | $ | 3,864  | 

|                                                  |  |                                                              |   |                                             |   |                                         |  |   |       | 
|------------------------------------------------- |  | ------------------------------------------------------------ | - | ------------------------------------------- | - | --------------------------------------- |  | - | ----- | 
|                                                  |  | December
31, 2009                                            |  
|                                                  |  |                                                              |  
|                                                  |  | Quoted
Prices in
Active Markets
For Identical
Assets
Level 1 |   | Significant
Other
Observable
Inputs
Level 2 |   | Significant
Unobservable
Inputs
Level 3 | 
|                                                  |  |                                                              |  
|Impaired loans                                    |  | $                                                            |  |                                             | $ |                                        |  | $ | 6,051 | 
|Other real estate owned and repossessed
 property |  | $                                                            |  |                                             | $ |                                        |  | $ | 3,148 | 

68

---



|                                                    
|----------------------------------------------------
|Floridian Financial Group, Inc.                     
|Notes to Consolidated Financial Statements          
|(Dollars in thousands, except for per share amounts)
|                                                    

Note 17. Fair Values of Financial Instruments
(Continued)

Following is a summary of the carrying amounts and approximate fair
values of the Companys financial instruments at December 31, 2010 and December
31, 2009. The fair value estimates presented are based on pertinent information
available to management as of December 31, 2010 and December 31, 2009. Although
management is not aware of any factors that would significantly affect the
estimated fair values, they have not been comprehensively revalued for purposes
of these financial statements since the statement of financial condition date
and therefore, current estimates of fair value may differ significantly from
the amounts disclosed.

|                              |  |                   |         |                       |   |         | 
|----------------------------- |  | ----------------- | ------- | --------------------- | - | ------- | 
|                              |  |                   |        
|                              |  | December 31, 2010 |        
|                              |  |                   |        
|                              |  | Carrying
 Amount  |         | Estimated
 Fair Value |  
|                              |  |                   |        
|Financial assets:             |  |                   |         |                       |   |         | 
|Cash and due from banks       |  | $                 | 9,399   |                       | $ | 9,399   | 
|Federal funds sold            |  |                   | 52,473  |                       |   | 52,473  | 
|Securities held to maturity   |  |                   | 10,081  |                       |   | 10,281  | 
|Available-for-sale securities |  |                   | 42,658  |                       |   | 42,658  | 
|Loans, net                    |  |                   | 309,555 |                       |   | 306,114 | 
|Accrued interest receivable   |  |                   | 1,322   |                       |   | 1,322   | 
|                              |  |                   |         |                       |   |         | 
|Financial liabilities:        |  |                   |         |                       |   |         | 
|Deposits                      |  |                   | 412,187 |                       |   | 413,555 | 
|Short-term borrowings         |  |                   | 6,762   |                       |   | 6,762   | 
|Accrued interest payable      |  |                   | 114     |                       |   | 114     | 

|                               |  |                   |         |                       |   |         | 
|------------------------------ |  | ----------------- | ------- | --------------------- | - | ------- | 
|                               |  | December 31, 2009 |        
|                               |  |                   |        
|                               |  | Carrying
 Amount  |         | Estimated
 Fair Value |  
|                               |  |                   |        
|Financial
 assets:             |  |                   |         |                       |   |         | 
|Cash and due
 from banks       |  | $                 | 7,743   |                       | $ | 7,743   | 
|Federal
 funds sold            |  |                   | 550     |                       |   | 550     | 
|Securities
 held to maturity   |  |                   | 12,259  |                       |   | 12,266  | 
|Available-for-sale
 securities |  |                   | 81,707  |                       |   | 81,707  | 
|Loans, net                     |  |                   | 327,686 |                       |   | 325,524 | 
|Accrued
 interest receivable   |  |                   | 1,717   |                       |   | 1,717   | 
|                               |  |                   |         |                       |   |         | 
|Financial
 liabilities:        |  |                   |         |                       |   |         | 
|Deposits                       |  |                   | 406,652 |                       |   | 408,203 | 
|Short-term
 borrowings         |  |                   | 7,805   |                       |   | 7,805   | 
|Accrued
 interest payable      |  |                   | 204     |                       |   | 204     | 

69

---



|                                                    
|----------------------------------------------------
|Floridian Financial Group, Inc.                     
|Notes to Consolidated Financial Statements          
|(Dollars in thousands, except for per share amounts)
|                                                    

Note 18. Floridian Financial Group, Inc.
(Parent Company-Only) Financial Information

|                                                                             |  |      |        |      |   |         |  
|---------------------------------------------------------------------------- |  | ---- | ------ | ---- | - | ------- | -
|                                                                             |  | 2010 |        | 2009 |  
|                                                                             |  |      |        |      |  
|Condensed Balance Sheets                                                     |  |      |        |      |   |         |  
|Assets                                                                       |  |      |        |      |   |         |  
|Cash and cash equivalents                                                    |  | $    | 720    |      | $ | 406     |  
|Securities available for sale                                                |  |      | 1,510  |      |   | 8,812   |  
|Investment in subsidiaries                                                   |  |      | 35,206 |      |   | 38,358  |  
|Other assets                                                                 |  |      | 3,388  |      |   | 3,391   |  
|                                                                             |  |      |        |      |   |         |  
|Total assets                                                                 |  | $    | 40,824 |      | $ | 50,967  |  
|                                                                             |  |      |        |      |   |         |  
|                                                                             |  |      |        |      |   |         |  
|Liabilities                                                                  |  |      |        |      |   |         |  
|Other liabilities                                                            |  | $    | 721    |      | $ | 484     |  
|Shareholders equity                                                         |  |      | 40,103 |      |   | 50,483  |  
|                                                                             |  |      |        |      |   |         |  
|Total liabilities and shareholders equity                                   |  | $    | 40,824 |      | $ | 50,967  |  
|                                                                             |  |      |        |      |   |         |  
|                                                                             |  |      |        |      |   |         |  
|Condensed Statements of Operations                                           |  |      |        |      |   |         |  
|Interest income                                                              |  | $    | 141    |      | $ | 444     |  
|Noninterest income                                                           |  |      | 2,976  |      |   | 2,070   |  
|Expenses:                                                                    |  |      |        |      |   |         |  
|Other operating expenses                                                     |  |      | 3,443  |      |   | 2,919   |  
|                                                                             |  |      |        |      |   |         |  
|Loss before income tax and recognition of
 net loss of subsidiaries          |  |      | (326   | )    |   | (405    | )
|Income tax                                                                   |  |      |       |      |   |        |  
|                                                                             |  |      |        |      |   |         |  
|Loss before recognition of net loss of
 subsidiaries                         |  |      | (326   | )    |   | (405    | )
|Recognition of net loss of subsidiaries                                      |  |      | (9,376 | )    |   | (10,412 | )
|                                                                             |  |      |        |      |   |         |  
|Net loss                                                                     |  | $    | (9,702 | )    | $ | (10,817 | )
|                                                                             |  |      |        |      |   |         |  
|                                                                             |  |      |        |      |   |         |  
|Condensed Statements of Cash Flows                                           |  |      |        |      |   |         |  
|Operating activities                                                         |  |      |        |      |   |         |  
|Net loss                                                                     |  | $    | (9,702 | )    | $ | (10,817 | )
|Adjustments to reconcile net loss to cash
 provided by operating activities: |  |      |        |      |   |         |  
|Recognition of net loss of subsidiaries                                      |  |      | 9,376  |      |   | 10,412  |  
|Other accounts  net                                                         |  |      | (592   | )    |   | 555     |  
|                                                                             |  |      |        |      |   |         |  
|Net cash provided by (used in) operating
 activities                         |  |      | (918   | )    |   | 150     |  
|                                                                             |  |      |        |      |   |         |  
|Investing Activities                                                         |  |      |        |      |   |         |  
|Purchase of securities available for sale                                    |  |      | (2,996 | )    |   | (18,909 | )
|Maturities and calls of securities
 available for sale                       |  |      | 10,362 |      |   | 27,694  |  
|Investment in subsidiaries                                                   |  |      | (6,225 | )    |   | (14,106 | )
|                                                                             |  |      |        |      |   |         |  
|Net cash provided by (used in) investing
 activities                         |  |      | 1,141  |      |   | (5,321  | )
|                                                                             |  |      |        |      |   |         |  
|Financing Activities                                                         |  |      |        |      |   |         |  
|Proceeds from issuance of common stock                                       |  |      | 91     |      |   | 370     |  
|                                                                             |  |      |        |      |   |         |  
|Net increase (decrease) in cash and cash
 equivalents                        |  |      | 314    |      |   | (4,801  | )
|                                                                             |  |      |        |      |   |         |  
|Cash and cash equivalents                                                    |  |      |        |      |   |         |  
|Beginning                                                                    |  |      | 406    |      |   | 5,207   |  
|                                                                             |  |      |        |      |   |         |  
|Ending                                                                       |  | $    | 720    |      | $ | 406     |  
|                                                                             |  |      |        |      |   |         |  

70

---



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
 FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation
of Disclosure Controls and Procedures. As of December 31, 2010, the end of the period covered by this Annual
Report on Form 10-K, our management, including our Chief Executive Officer and
Chief Financial Officer, evaluated the effectiveness of our disclosure controls
and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act
of 1934). Based upon that evaluation, our Chief Executive Officer and Chief
Financial Officer each concluded that as of December 31, 2010, the end of the
period covered by this Annual Report on Form 10-K, we maintained effective
disclosure controls and procedures.

Managements
Report on Internal Control Over Financial Reporting. Our
management is responsible for establishing and maintaining effective internal
control over financial reporting. Internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with U.S. generally accepted accounting principles.

Under
the supervision and with the participation of management, including the Chief
Executive Officer and Chief Financial Officer, we conducted an evaluation of
the effectiveness of internal control over financial reporting based on the
framework in Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this evaluation
under the framework in Internal Control - Integrated Framework, our management
has concluded we maintained effective internal control over financial
reporting, as such term is defined in Securities Exchange Act of 1934 Rule
13a-15(f), as of December 31, 2010.

Internal
control over financial reporting cannot provide absolute assurance of achieving
financial reporting objectives because of its inherent limitations. Internal
control over financial reporting is a process that involves human diligence and
compliance and is subject to lapses in judgment and breakdowns resulting from
human failures. Internal control over financial reporting can also be
circumvented by collusion or improper management override. Because of such
limitations, there is a risk that material misstatements may not be prevented
or detected on a timely basis by internal control over financial reporting.
However, these inherent limitations are known features of the financial
reporting process. Therefore, it is possible to design into the process
safeguards to reduce, though not eliminate, this risk.

Management
is also responsible for the preparation and fair presentation of the
consolidated financial statements and other financial information contained in
this report. The accompanying consolidated financial statements were prepared
in conformity with U.S. generally accepted accounting principles and include,
as necessary, best estimates and judgments by management.

As
a smaller reporting company, we are not required to include in this annual
report an attestation report of the Companys registered public accounting firm
regarding internal control over financial reporting.

Change
in Internal Control. Our management, including the Chief Executive
Officer and Chief Financial Officer, has reviewed our internal control. There
have been no significant changes in our internal control during our most
recently completed fiscal quarter, nor subsequent to the date of their
evaluation, that could significantly affect our internal control over financial
reporting.

ITEM 9B. OTHER INFORMATION

None

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The
information required by Item 10 of Form 10-K with respect to identification of
directors and officers is incorporated by reference from the information
contained in the sections captioned Proposal 1  Nominees for Election as
Directors Executive Officers, and Corporate Governance  Codes of Conduct
and Ethics in our Proxy Statement for the Annual Meeting of Shareholders to be
held on April 28, 2011 (the Proxy Statement), a copy of which we intend to
file with the SEC within 120 days after the end of the year covered by this
Annual Report on Form 10-K.

Section 16 Compliance

71

---



Information
appearing under the captions Section 16(a) Beneficial Ownership Reporting
Compliance in the Proxy Statement is incorporated herein by reference.

Item 11. Executive Compensation

The
information required by Item 11 of the Form 10-K is incorporated by reference
from the information contained in the sections captioned Executive Compensation
and Nominees for Election as Directors, Directors Fees in the Proxy
Statement.

Item 12. Security
 Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Equity Compensation Plan Information

On
March 20, 2008, our stockholders approved our 2008 Stock Option Plan (the 2008
Plan), which provides for the granting of options to purchase up to 20% of the
shares of our common stock outstanding from time to time, less the number of
shares which would remain available for issuance under our previous stock
option plans. Both incentive stock options and nonqualified stock options may
be issued under the provisions of the 2008 Plan. Our employees and
subsidiaries, members of the Board of Directors, independent consultants and
advisors are eligible to participate in the 2008 Plan. Our Board of Directors
or a committee of the Board of Directors authorizes the granting and vesting of
options under the 2008 Plan.

In
2009, the Company adopted a 2009 Stock Option Plan (the 2009 Plan) which
provides for the granting of nonqualified stock options, restricted stock
grants, phantom stock unit awards, and stock appreciation rights up to 5% of
the issued and outstanding shares of our common stock from time to time. These
awards are restricted to key persons as defined in the Plan - employee,
officer, director or consultant of the Company. Our Board of Directors or a
committee of the Board of Directors administers the Plan including the granting
of awards, limitations, restrictions and conditions.

The following table provides
certain information regarding our equity compensation plans.

|                                                             |  |                                                                                                   |         |                                                                                  |   |                                                                                                                                                   |  |  |         | 
|------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------- | ------- | -------------------------------------------------------------------------------- | - | ------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ------- | 
|Plan
 Category                                               |  | Number of
 securities to be
 issued upon
 exercise of
 outstanding
 options, warrants
 and rights |         | Weighted-
 average exercise
 price of
 outstanding
 options,warrants
 and rights |   | Number of securities
 remaining available
 for future issuance
 under equity
 compensation plans
 (excluding securities
 reflected in column (a)) | 
|                                                             |  |                                                                                                   |         |                                                                                  |   |                                                                                                                                                   | 
|                                                             |  | (a)                                                                                               |         | (b)                                                                              |   | (c)                                                                                                                                               | 
|Equity compensation plans approved by securities holders     |  |                                                                                                   | 811,362 |                                                                                  | $ | 11.08                                                                                                                                             |  |  | 429,528 | 
|                                                             |  |                                                                                                   |         |                                                                                  |   |                                                                                                                                                   |  |  |         | 
|Equity compensation plans not approved by securities holders |  |                                                                                                   |        |                                                                                  |   | N/A                                                                                                                                               |  |  | 298,500 | 
|                                                             |  |                                                                                                   |         |                                                                                  |   |                                                                                                                                                   |  |  |         | 
|Total                                                        |  |                                                                                                   | 811,362 |                                                                                  | $ | 11.08                                                                                                                                             |  |  | 728,028 | 
|                                                             |  |                                                                                                   |         |                                                                                  |   |                                                                                                                                                   |  |  |         | 

The
other information required by Item 12 of Form 10-K is incorporated by reference
from the information contained in the sections captioned Security Ownership of
Certain Beneficial Owners and Management in our Proxy Statement.

Item 13. Certain
 Relationships and Related Transactions, and Director Independence

The
information required by Item 13 of Form 10-K is incorporated by reference from
the information contained in the sections captioned Transactions with
Management and Related Persons and Proposal 1 - Nominees for Election of
Directors  Committees of the Board of Directors in the Proxy Statement.

Item 14. Principal Accountant Fees and Services

The
information required by Item 14 of Form 10-K is incorporated by reference from
the information in the section captioned Audit Fees and Related Matters in
the Proxy Statement.

72

---



PART IV

Item 15. Exhibits and Financial Statement Schedules

The following documents are filed as part of this report

| |    |                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | Financial Statements                                                                                                                                              
| |    |                                                                                                                                                                   
| |    | Report of Independent
 Registered Public Accounting Firm                                                                                                          
| |    |                                                                                                                                                                   
| |    | Consolidated Balance Sheets
 at the end of Fiscal Years 2010 and 2009                                                                                             
| |    |                                                                                                                                                                   
| |    | Consolidated Statements of
 Operations for Fiscal Years 2010 and 2009                                                                                             
| |    |                                                                                                                                                                   
| |    | Consolidated Statements of
 Changes in Shareholders Equity for Fiscal Years 2010 and 2009                                                                        
| |    |                                                                                                                                                                   
| |    | Consolidated Statements of
 Cash Flows for Fiscal Years 2010 and 2009                                                                                             
| |    |                                                                                                                                                                   
| |    | Notes to Consolidated
 Financial Statements                                                                                                                       
| |    |                                                                                                                                                                   
| | 2. | Financial Statement
 Schedules                                                                                                                                    
| |    |                                                                                                                                                                   
| |    | Other schedules and
 exhibits are omitted because the required information either is not
 applicable or is shown in the financial statements or the notes thereto.
| |    |                                                                                                                                                                   
| | 3. | Exhibits Required to be
 Filed by Item 601 of Regulation S-K                                                                                                      

73

---



|             |             |                                                                                                                                                                                                                                                                                                
|------------ | ----------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT
 NO. |             |                                                                                                                                                                                                                                                                                                
|             | DESCRIPTION
|             |             |                                                                                                                                                                                                                                                                                                
|2.1          |             | Plan of
 Merger and Merger Agreement, by and between Orange Bank of Florida and
 Floridian Financial Group, Inc., dated as of October 31, 2007  incorporated
 herein by reference to Exhibit 2.1 of the Registrants Registration Statement
 on Form 10 (filed 2/27/09) (No. 000-53589)       
|             |             |                                                                                                                                                                                                                                                                                                
|3.1          |             | Articles of
 Incorporation of the Registrant  incorporated herein by reference to Exhibit
 3.1 of the Registrants Registration Statement on Form 10 (filed 2/27/09)
 (No. 000-53589)                                                                                                         
|             |             |                                                                                                                                                                                                                                                                                                
|3.2          |             | First
 Amendment to the Articles of Incorporation of the Registrant  incorporated
 herein by reference to Exhibit 3.2 of the Registrants Registration Statement
 on Form 10 (filed 2/27/09) (No. 000-53589)                                                                                  
|             |             |                                                                                                                                                                                                                                                                                                
|3.3          |             | Bylaws of
 the Registrant  incorporated herein by reference to Exhibit 3.3 of the
 Registrants Registration Statement on Form 10 (filed 2/27/09) (No.
 000-53589)                                                                                                                            
|             |             |                                                                                                                                                                                                                                                                                                
|3.4          |             | Second
 Amendment to the Articles of Incorporation of the Registrant  incorporated
 herein by reference to Exhibit 3.4 of the Registrants Registration Statement
 on Form 10 (filed 2/27/09) (No. 000-53589)                                                                                 
|             |             |                                                                                                                                                                                                                                                                                                
|4.1          |             | See Exhibits
 3.1, 3.2, 3.3, and 3.4 for provisions of the Articles of Incorporation and
 Bylaws of the Registrant defining rights of the holders of common stock of
 the Registrant                                                                                                           
|             |             |                                                                                                                                                                                                                                                                                                
|4.2          |             | Floridian
 Financial Group, Inc. 2008 Stock Option Plan  incorporated herein by
 reference to Exhibit 4.2 of the Registrants Registration Statement on Form
 10 (filed 2/27/09) (No. 000-53589)                                                                                              
|             |             |                                                                                                                                                                                                                                                                                                
|4.3          |             | Floridian
 Financial Group, Inc. Employee Stock Purchase Plan  incorporated herein by
 reference to Exhibit 4.3 of the Registrants Registration Statement on Form
 10 (filed 2/27/09) (No. 000-53589)                                                                                        
|             |             |                                                                                                                                                                                                                                                                                                
|4.4          |             | Floridian
 Financial Group, Inc. 2009 Stock Option Plan  incorporated herein by
 reference to Exhibit 4.2 of the Registrants Registration Statement on Form
 S-8 (filed 6/29/09) (No. 333-160319)                                                                                            
|             |             |                                                                                                                                                                                                                                                                                                
|10.1         |             | Floridian
 Financial Group, Inc. 401(k) Plan  incorporated herein by reference to
 Exhibit 10.1 of the Registrants Registration Statement on Form 10 (filed
 2/27/09) (No. 000-53589)                                                                                                        
|             |             |                                                                                                                                                                                                                                                                                                
|10.2         |             | Form of
 Stock Option Agreement for the Floridian Financial Group, Inc. 2008 Stock
 Option Plan for Directors  incorporated herein by reference to Exhibit 10.2
 of the Registrants Registration Statement on Form 10 (filed 2/27/09) (No.
 000-53589)                                       
|             |             |                                                                                                                                                                                                                                                                                                
|10.3         |             | Form of
 Stock Option Agreement for the Floridian Financial Group, Inc. 2008 Stock
 Option Plan for Incentive Stock Options  incorporated herein by reference to
 Exhibit 10.3 of the Registrants Registration Statement on Form 10 (filed
 2/27/09) (No. 000-53589)                         
|             |             |                                                                                                                                                                                                                                                                                                
|10.4         |             | Employment
 Agreement with Charlie W. Brinkley, dated as of October 1, 2007 
 incorporated herein by reference to Exhibit 10.4 of the Registrants
 Registration Statement on Form 10 (filed 2/27/09) (No. 000-53589)                                                                         
|             |             |                                                                                                                                                                                                                                                                                                
|10.5         |             | Employment
 Agreement with Thomas H. Dargan, dated as of April 1, 2009 **                                                                                                                                                                                                                      
|             |             |                                                                                                                                                                                                                                                                                                
|10.6         |             | Salary
 Continuation Agreement for Charlie W. Brinkley, dated as of July 1, 2008 
 incorporated herein by reference to Exhibit 10.7 of the Registrants
 Registration Statement on Form 10 (filed 2/27/09) (No. 000-53589)                                                                    
|             |             |                                                                                                                                                                                                                                                                                                
|10.7         |             | 1st
 Amendment to the Salary Continuation Agreement for Charlie W. Brinkley, dated
 as of December 18, 2008  incorporated herein by reference to Exhibit 10.8 of
 the Registrants Registration Statement on Form 10 (filed 2/27/09) (No.
 000-53589)                                         
|             |             |                                                                                                                                                                                                                                                                                                
|10.8         |             | Operating
 Agreement by and among Floridian Financial Mortgage LLC, Floridian Financial
 Group, Inc., and FBC Mortgage, LLC, dated September 5, 2008  incorporated
 herein by reference to Exhibit 10.9 of the Registrants Registration
 Statement on Form 10 (filed 2/27/09) (No. 000-53589)
|             |             |                                                                                                                                                                                                                                                                                                
|10.9         |             | Employment
 Agreement with Keith A. Bulko, dated as of April 1, 2009 **                                                                                                                                                                                                                        
|             |             |                                                                                                                                                                                                                                                                                                
|10.10        |             | Separation
 Agreement with Michael A. McClanahan, dated November 20, 2009  incorporated
 herein by reference to Exhibit 10.1 of the Registrants Current Report on
 Form 8-K (filed 12/16/09) (No. 000-53589)                                                                                 
|             |             |                                                                                                                                                                                                                                                                                                
|10.11        |             | Employment
 Agreement with Michael V. Kearney, dated December 18, 2009  incorporated
 herein by reference to Exhibit 10.1 of the Registrants Current Report on
 Form 8-K (filed 1/7/10) (No. 000-53589)                                                                                      
|             |             |                                                                                                                                                                                                                                                                                                
|10.12        |             | Salary
 Continuation Agreement for Thomas Dargan, dated as of April 1, 2009 
 incorporated herein by reference to Exhibit 10.12 of the Registrants Annual
 Report on Form 10-K (filed 3/26/10) (No. 000-53589)                                                                               
|             |             |                                                                                                                                                                                                                                                                                                
|10.13        |             | Salary
 Continuation Agreement for Keith Bulko, dated as of April 1, 2009 
 incorporated herein by reference to Exhibit 12.13 of the Registrants Annual
 Report on Form 10-K (filed 3/26/10) (No. 000-53589)                                                                                 

74

---



|             |  |                                                                                                                                                                                                                                                                                         
|------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT
 NO. |  | DESCRIPTION                                                                                                                                                                                                                                                                             
|             |  |                                                                                                                                                                                                                                                                                         
|10.14        |  | Contract for
 Sale and Purchase made and entered into as of June 30, 2010 by and between
 First Team Clermont OB, LLC, and Orange Bank of Florida  incorporated herein
 by reference to Exhibit 10.1 of the Registrants Quarterly Report on Form
 10-Q (filed 8/13/10) (No. 000-53589)
|             |  |                                                                                                                                                                                                                                                                                         
|10.15        |  | Consulting
 Agreement with John D. Waters, dated as of March 15, 2011 **                                                                                                                                                                                                                
|             |  |                                                                                                                                                                                                                                                                                         
|11.1         |  | Statement re
 Computation of Per Share Earnings*                                                                                                                                                                                                                                        
|             |  |                                                                                                                                                                                                                                                                                         
|21.1         |  | Subsidiaries
 of the Registrant  incorporated herein by reference to Exhibit 21.1 of the
 Registrants Registration Statement on Form 10 (filed 2/27/09) (No.
 000-53589)                                                                                                              
|             |  |                                                                                                                                                                                                                                                                                         
|23.1         |  | Consent of
 McGladrey & Pullen LLP, independent registered public accounting firm**                                                                                                                                                                                                     
|             |  |                                                                                                                                                                                                                                                                                         
|31.1         |  | Certification
 of CEO pursuant to Securities and Exchange Act Section 302 of the
 Sarbanes-Oxley Act of 2002.**                                                                                                                                                                         
|             |  |                                                                                                                                                                                                                                                                                         
|31.2         |  | Certification
 of CFO pursuant to Securities and Exchange Act Section 302 of the
 Sarbanes-Oxley Act of 2002.**                                                                                                                                                                         
|             |  |                                                                                                                                                                                                                                                                                         
|32.1         |  | Certification
 of CEO and CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
 Section 906 of the Sarbanes-Oxley Act of 2002.**                                                                                                                                              
|             |  |                                                                                                                                                                                                                                                                                         
|*            |  | Information
 required to be presented in Exhibit 11 is provided in Note 14 to the
 Consolidated Financial Statements under Part II, Item 8 of this Form 10-K in
 accordance with the provisions of U.S. generally accepted accounting
 principles.                                      
|             |  |                                                                                                                                                                                                                                                                                         
|**           |  | Filed
 electronically herewith.                                                                                                                                                                                                                                                         

75

---



SIGNATURES

Pursuant to
the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on March 25, 2011, its
behalf by the undersigned thereunto duly authorized.

|                                 |                          | 
|-------------------------------- | ------------------------ | 
|FLORIDIAN
 FINANCIAL GROUP, INC.
|                                
|By                               | /s/ John D.
 Waters      | 
|                                 |                          | 
|                                 | John D.
 Waters          | 
|                                 | Chief Financial
 Officer | 

Pursuant to
the requirements of the Securities Exchange Act of 1934, this report has been
signed on March 25, 2011, by the following persons on behalf of the Registrant
and in the capacities indicated.

|                                              |  |                                      
|--------------------------------------------- |  | -------------------------------------
|/s/ Charlie
 W. Brinkley, Jr.                 |  |                                      
|                                              |  |                                      
|Charlie W.
 Brinkley, Jr.                     |  |                                      
|Chief
 Executive Officer                      |  |                                      
|(Principal
 Executive Officer)                |  |                                      
|                                              |  |                                      
|/s/ John D.
 Waters                           |  |                                      
|                                              |  |                                      
|John D.
 Waters                               |  |                                      
|Chief
 Financial Officer                      |  |                                      
|(Principal
 Financial and Accounting Officer) |  |                                      
|                                              |  |                                      
|/s/ Charlie
 W. Brinkley, Jr.                 |  | /s/ Jennings
 L. Hurt                
|                                              |  |                                      
|Charlie W.
 Brinkley, Jr., Director           |  | Jennings
 L. Hurt III, Director      
|                                              |  |                                      
|/s/ Keith A.
      Bulko                      |  | /s/ Blaine
      Staed Lansberry     
|                                              |  |                                      
|Keith A.
     Bulko, Director                 |  | Blaine
     Staed Lansberry, Director
|                                              |  |                                      
|/s/ William
 F. Crider                        |  | /s/ W.
 Warner Peacock               
|                                              |  |                                      
|William
     F. Crider, Director              |  | W.
     Warner Peacock, Director     
|                                              |  |                                      
|/s/ Thomas
 H. Dargan                         |  | /s/ Stanley
 H. Sandefur             
|                                              |  |                                      
|Thomas
     H. Dargan, Director               |  | Stanley
     H. Sandefur, Director   
|                                              |  |                                      
|/s/ Truman
 E. Gailey, Jr.                    |  | /s/ John D.
 Waters                  
|                                              |  |                                      
|Truman
 E. Gailey, Jr., Director              |  | John D.
 Waters, Director            

76

---



|            |             |                                                                                                                                                                                                                                                                                                
|----------- | ----------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT
NO. |             |                                                                                                                                                                                                                                                                                                
|            | DESCRIPTION
|            |             |                                                                                                                                                                                                                                                                                                
|2.1         |             | Plan of
 Merger and Merger Agreement, by and between Orange Bank of Florida and
 Floridian Financial Group, Inc., dated as of October 31, 2007  incorporated
 herein by reference to Exhibit 2.1 of the Registrants Registration Statement
 on Form 10 (filed 2/27/09) (No. 000-53589)       
|            |             |                                                                                                                                                                                                                                                                                                
|3.1         |             | Articles of
 Incorporation of the Registrant  incorporated herein by reference to Exhibit
 3.1 of the Registrants Registration Statement on Form 10 (filed 2/27/09)
 (No. 000-53589)                                                                                                         
|            |             |                                                                                                                                                                                                                                                                                                
|3.2         |             | First
 Amendment to the Articles of Incorporation of the Registrant  incorporated
 herein by reference to Exhibit 3.2 of the Registrants Registration Statement
 on Form 10 (filed 2/27/09) (No. 000-53589)                                                                                  
|            |             |                                                                                                                                                                                                                                                                                                
|3.3         |             | Bylaws of
 the Registrant  incorporated herein by reference to Exhibit 3.3 of the
 Registrants Registration Statement on Form 10 (filed 2/27/09) (No.
 000-53589)                                                                                                                            
|            |             |                                                                                                                                                                                                                                                                                                
|3.4         |             | Second
 Amendment to the Articles of Incorporation of the Registrant  incorporated
 herein by reference to Exhibit 3.4 of the Registrants Registration Statement
 on Form 10 (filed 2/27/09) (No. 000-53589)                                                                                 
|            |             |                                                                                                                                                                                                                                                                                                
|4.1         |             | See Exhibits
 3.1, 3.2, 3.3, and 3.4 for provisions of the Articles of Incorporation and
 Bylaws of the Registrant defining rights of the holders of common stock of
 the Registrant                                                                                                           
|            |             |                                                                                                                                                                                                                                                                                                
|4.2         |             | Floridian
 Financial Group, Inc. 2008 Stock Option Plan  incorporated herein by
 reference to Exhibit 4.2 of the Registrants Registration Statement on Form
 10 (filed 2/27/09) (No. 000-53589)                                                                                              
|            |             |                                                                                                                                                                                                                                                                                                
|4.3         |             | Floridian
 Financial Group, Inc. Employee Stock Purchase Plan  incorporated herein by
 reference to Exhibit 4.3 of the Registrants Registration Statement on Form
 10 (filed 2/27/09) (No. 000-53589)                                                                                        
|            |             |                                                                                                                                                                                                                                                                                                
|4.4         |             | Floridian
 Financial Group, Inc. 2009 Stock Option Plan  incorporated herein by
 reference to Exhibit 4.2 of the Registrants Registration Statement on Form
 S-8 (filed 6/29/09) (No. 333-160319)                                                                                            
|            |             |                                                                                                                                                                                                                                                                                                
|10.1        |             | Floridian
 Financial Group, Inc. 401(k) Plan  incorporated herein by reference to
 Exhibit 10.1 of the Registrants Registration Statement on Form 10 (filed
 2/27/09) (No. 000-53589)                                                                                                        
|            |             |                                                                                                                                                                                                                                                                                                
|10.2        |             | Form of
 Stock Option Agreement for the Floridian Financial Group, Inc. 2008 Stock
 Option Plan for Directors  incorporated herein by reference to Exhibit 10.2
 of the Registrants Registration Statement on Form 10 (filed 2/27/09) (No.
 000-53589)                                       
|            |             |                                                                                                                                                                                                                                                                                                
|10.3        |             | Form of
 Stock Option Agreement for the Floridian Financial Group, Inc. 2008 Stock
 Option Plan for Incentive Stock Options  incorporated herein by reference to
 Exhibit 10.3 of the Registrants Registration Statement on Form 10 (filed
 2/27/09) (No. 000-53589)                         
|            |             |                                                                                                                                                                                                                                                                                                
|10.4        |             | Employment
 Agreement with Charlie W. Brinkley, dated as of October 1, 2007 
 incorporated herein by reference to Exhibit 10.4 of the Registrants
 Registration Statement on Form 10 (filed 2/27/09) (No. 000-53589)                                                                         
|            |             |                                                                                                                                                                                                                                                                                                
|10.5        |             | Employment
 Agreement with Thomas H. Dargan, dated as of April 1, 2009 **                                                                                                                                                                                                                      
|            |             |                                                                                                                                                                                                                                                                                                
|10.6        |             | Salary
 Continuation Agreement for Charlie W. Brinkley, dated as of July 1, 2008 
 incorporated herein by reference to Exhibit 10.7 of the Registrants
 Registration Statement on Form 10 (filed 2/27/09) (No. 000-53589)                                                                    
|            |             |                                                                                                                                                                                                                                                                                                
|10.7        |             | 1st
 Amendment to the Salary Continuation Agreement for Charlie W. Brinkley, dated
 as of December 18, 2008  incorporated herein by reference to Exhibit 10.8 of
 the Registrants Registration Statement on Form 10 (filed 2/27/09) (No.
 000-53589)                                         
|            |             |                                                                                                                                                                                                                                                                                                
|10.8        |             | Operating
 Agreement by and among Floridian Financial Mortgage LLC, Floridian Financial
 Group, Inc., and FBC Mortgage, LLC, dated September 5, 2008  incorporated
 herein by reference to Exhibit 10.9 of the Registrants Registration
 Statement on Form 10 (filed 2/27/09) (No. 000-53589)
|            |             |                                                                                                                                                                                                                                                                                                
|10.9        |             | Employment
 Agreement with Keith A. Bulko, dated as of April 1, 2009 **                                                                                                                                                                                                                        
|            |             |                                                                                                                                                                                                                                                                                                
|10.10       |             | Separation
 Agreement with Michael A. McClanahan, dated November 20, 2009  incorporated
 herein by reference to Exhibit 10.1 of the Registrants Current Report on
 Form 8-K (filed 12/16/09) (No. 000-53589)                                                                                 
|            |             |                                                                                                                                                                                                                                                                                                
|10.11       |             | Employment
 Agreement with Michael V. Kearney, dated December 18, 2009  incorporated
 herein by reference to Exhibit 10.1 of the Registrants Current Report on
 Form 8-K (filed 1/7/10) (No. 000-53589)                                                                                      
|            |             |                                                                                                                                                                                                                                                                                                
|10.12       |             | Salary
 Continuation Agreement for Thomas Dargan, dated as of April 1, 2009 
 incorporated herein by reference to Exhibit 10.12 of the Registrants Annual
 Report on Form 10-K (filed 3/26/10) (No. 000-53589)                                                                               
|            |             |                                                                                                                                                                                                                                                                                                
|10.13       |             | Salary
 Continuation Agreement for Keith Bulko, dated as of April 1, 2009 
 incorporated herein by reference to Exhibit 10.13 of the Registrants Annual
 Report on Form 10-K (filed 3/26/10) (No. 000-53589)                                                                                 
|            |             |                                                                                                                                                                                                                                                                                                
|10.14       |             | Contract for
 Sale and Purchase made and entered into as of June 30, 2010 by and between
 First Team Clermont OB, LLC, and Orange Bank of Florida  incorporated herein
 by reference to Exhibit 10.1 of the Registrants Quarterly Report on Form
 10-Q (filed 8/13/10) (No. 000-53589)       
|            |             |                                                                                                                                                                                                                                                                                                
|10.15       |             | Consulting
 Agreement with John D. Waters, dated as of March 15, 2011 **                                                                                                                                                                                                                       
|            |             |                                                                                                                                                                                                                                                                                                
|11.1        |             | Statement re
 Computation of Per Share Earnings*                                                                                                                                                                                                                                               

77

---



|     |  |                                                                                                                                                                                                                                                   
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|21.1 |  | Subsidiaries
 of the Registrant  incorporated herein by reference to Exhibit 21.1 of the
 Registrants Registration Statement on Form 10 (filed 2/27/09) (No.
 000-53589)                                                                        
|     |  |                                                                                                                                                                                                                                                   
|23.1 |  | Consent of
 McGladrey & Pullen LLP, independent registered public accounting firm**                                                                                                                                                               
|     |  |                                                                                                                                                                                                                                                   
|31.1 |  | Certification
 of CEO pursuant to Securities and Exchange Act Section 302 of the
 Sarbanes-Oxley Act of 2002.**                                                                                                                                   
|     |  |                                                                                                                                                                                                                                                   
|31.2 |  | Certification
 of CFO pursuant to Securities and Exchange Act Section 302 of the
 Sarbanes-Oxley Act of 2002.**                                                                                                                                   
|     |  |                                                                                                                                                                                                                                                   
|32.1 |  | Certification
 of CEO and CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
 Section 906 of the Sarbanes-Oxley Act of 2002.**                                                                                                        
|     |  |                                                                                                                                                                                                                                                   
|    
|*    |  | Information
 required to be presented in Exhibit 11 is provided in Note 14 to the
 Consolidated Financial Statements under Part II, Item 8 of this Form 10-K in
 accordance with the provisions of U.S. generally accepted accounting
 principles.
|     |  |                                                                                                                                                                                                                                                   
|**   |  | Filed
 electronically herewith.                                                                                                                                                                                                                   

78

---