10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Form 10-K
ANNUAL REPORT
PURSUANT TO SECTIONS 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2009
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from          to

Commission File No. 0-13660

SEACOAST BANKING CORPORATION OF FLORIDA

(Exact Name of Registrant as Specified in Its Charter)

Florida	59-2260678
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
815 Colorado Avenue, Stuart, FL	34994
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code (772) 287-4000

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

Title of Each Class Name of Each Exchange on Which Registered

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, Par Value $.10

(Title of Class)

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 þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  YES o     NO þ

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 þ     NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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 (§ 229.405 of this chapter) 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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer þ Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).  YES o     NO þ

The aggregate market value of Seacoast Banking Corporation of Florida Common Stock, par value $0.10 per share, held by non-affiliates, computed by reference to the price at which the stock was last sold on June 30, 2009, as reported on the Nasdaq Global Select Market, was $36,071,484.

The number of shares outstanding of Seacoast Banking Corporation of Florida common stock, par value $0.10 per share, as of March 9, 2010, was 58,887,646.

DOCUMENTS INCORPORATED BY REFERENCE

1. Certain portions of the registrant’s 2010 Proxy Statement for the Annual Meeting of Shareholders to be held May 27, 2010 (the “2010 Proxy Statement”) are incorporated by reference into Part III, Items 10 through 14 of this report. Other than those portions of the 2010 Proxy Statement specifically incorporated by reference herein pursuant to Items 10 through 14, no other portions of the 2010 Proxy Statement shall be deemed so incorporated.

2. Certain portions of the registrant’s 2009 Annual Report to Shareholders for the fiscal year ended December 31, 2009 (the “2009 Annual Report”) are incorporated by reference in Part II, Items 6 through 8 of this report. Other than those portions of the 2009 Annual Report specifically incorporated by reference herein pursuant to Items 6 through 8, no other portions of the 2009 Annual Report shall be deemed so incorporated.

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TABLE OF CONTENTS

			Page
	Part I
	Item 1.	Business		6
	Item 1A.	Risk Factors		21
	Item 1B.	Unresolved Staff Comments		33
	Item 2.	Properties		33
	Item 3.	Legal Proceedings		39
	Item 4.	Submission of Matters to a Vote of Security Holders		39
	Part II
	Item 5.	Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		39
	Item 6.	Selected Financial Data		40
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		40
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		41
	Item 8.	Financial Statements and Supplementary Data		41
	Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		41
	Item 9A.	Controls and Procedures		41
	Item 9B.	Other Information		41
	Part III
	Item 10.	Directors, Executive Officers and Corporate Governance		42
	Item 11.	Executive Compensation		42
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		42
	Item 13.	Certain Relationships and Related Transactions, and Director Independence		43
	Item 14.	Principal Accountant Fees and Services		43
	Part IV
	Item 15.	Exhibits, Financial Statement Schedules		43
EX-13
EX-21
EX-23
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-99.1
EX-99.2

Certain statistical data required by the Securities and Exchange Commission are included on pages 15-50 of Exhibit 13.

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SPECIAL CAUTIONARY NOTICE
REGARDING FORWARD-LOOKING STATEMENTS

Various of the statements made herein under the captions “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Quantitative and Qualitative Disclosures about Market Risk”, “Risk Factors” and elsewhere, are “forward-looking statements” within the meaning and protections of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause the actual results, performance or achievements of Seacoast to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. You should not expect us to update any forward-looking statements.

All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “will,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “further,” “plan,” “point to,” “project,” “could,” “intend,” “target” and other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation:

•  the effects of future economic, business and market conditions and changes, domestic and foreign, including seasonality;

•  governmental monetary and fiscal policies;

•  legislative and regulatory changes, including changes in banking, securities and tax laws, regulations and policies and their application by our regulators, and changes in the scope and cost of Federal Deposit Insurance Corporation (“FDIC”) insurance and other coverage;

•  changes in accounting policies, rules and practices;

•  the risks of changes in interest rates on the levels, composition and costs of deposits, loan demand, and the values and liquidity of loan collateral, securities, and interest sensitive assets and liabilities;

•  changes in borrower credit risks and payment behaviors;

•  changes in the availability and cost of credit and capital in the financial markets;

•  changes in the prices, values and sales volumes of residential and commercial real estate;

•  the effects of competition from a wide variety of local, regional, national and other providers of financial, investment and insurance services;

•  the failure of assumptions and estimates underlying the establishment of reserves for possible loan losses and other estimates;

•  the risks of mergers, acquisitions and divestitures, including, without limitation, the related time and costs of implementing such transactions, integrating operations as part of these transactions and possible failures to achieve expected gains, revenue growth and/or expense savings from such transactions;

•  changes in technology or products that may be more difficult, costly, or less effective than anticipated;

•  the effects of war or other conflicts, acts of terrorism or other catastrophic events that may affect general economic conditions;

•  the failure of assumptions and estimates, as well as differences in, and changes to, economic, market and credit conditions, including changes in borrowers’ credit risks and payment behaviors from those used in our loan portfolio stress test;

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•  the risks that our deferred tax assets could be reduced if estimates of future taxable income from our operations and tax planning strategies are less than currently estimated, and sales of our capital stock could trigger a reduction in the amount of net operating loss carryforwards that we may be able to utilize for income tax purposes; and

•  other factors and risks described under “Risk Factors” herein and in any of our subsequent reports that we make with the Securities and Exchange Commission (the “Commission” or “SEC”) under the Exchange Act.

All written or oral forward-looking statements that are made by us or are attributable to us are expressly qualified in their entirety by this cautionary notice. We have no obligation and do not undertake to update, revise or correct any of the forward-looking statements after the date of this report, or after the respective dates on which such statements otherwise are made.

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Part I

Item 1.   Business

General

We are a bank holding company registered under the Bank Holding Company Act of 1956, as amended (the “BHC Act”), and our principal subsidiary is Seacoast National Bank (“Seacoast National”). Seacoast National commenced its operations in 1933, and operated prior to 2006 as “First National Bank & Trust Company of the Treasure Coast”.

We and our subsidiaries offer a full array of deposit accounts and retail banking services, engage in consumer and commercial lending and provide a wide variety of trust and asset management services, as well as securities and annuity products. Seacoast National had 40 banking offices in 13 counties in Florida at year-end 2009.

We have 24 branches in the “Treasure Coast,” including the counties of Martin, St. Lucie and Indian River on Florida’s southeastern coast. In April 2005, we acquired a bank in Orlando, Florida. In April 2006, we acquired a bank with nine offices in seven counties, including DeSoto, Glades, Hardee, Hendry, Highlands, Okeechobee, and St. Lucie counties. De novo banking offices were opened in Palm Beach County in May 2006, Brevard County in February 2007 and April 2008, Broward County in October 2007, and St. Lucie County in March 2008. Seacoast National closed its Port St. Lucie Wal-Mart location in St. Lucie County in December 2007 and its operations were relocated to a nearby full-service branch, its Ft. Pierce Wal-Mart location in St. Lucie County in February 2008, and its Mariner Square and Juno Beach locations in Martin and Palm Beach County, respectively, in March 2008, and their operations moved to newer branches. More recently, Seacoast National closed its Ft. Lauderdale location in Broward County in December 2009 and its Northlake Blvd. location in Palm Beach County in June 2009. Our Ft. Pierce and Rivergate locations in St. Lucie County and Wedgewood location in Martin County were relocated to newly constructed buildings in close proximity to their original sites in June 2008, October 2008 and January 2009, respectively. We operate banking offices in the following locations:

•  four in Stuart,

•  two in Palm City,

•  two in Jensen Beach,

•  one on Hutchinson Island,

•  one in Hobe Sound,

•  six in Vero Beach,

•  two in Sebastian,

•  five in Port St. Lucie,

•  one in Ft. Pierce,

•  three in northern Palm Beach County,

•  three in Orlando,

•  two in Okeechobee,

•  one in Arcadia,

•  one in Moore Haven,

•  one in Wauchula,

•  one in Clewiston,

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•  one in Labelle,

•  one in Lake Placid, and

•  two in Viera.

Loan production offices for our Seacoast Marine Finance Division, described in more detail below, are located in Ft. Lauderdale, Florida and Alameda and Newport Beach, California.

Most of our banking offices have one or more automated teller machine (“ATMs”) providing customers with 24-hour access to their deposit accounts. We are a member of the “Star System,” the largest electronic funds transfer organization in the United States, which permits banking customers access to their accounts at 2.2 million participating ATM and retail locations throughout the United States.

Seacoast National’s “MoneyPhone” system allows customers to access information on their loan or deposit account balances, to transfer funds between linked accounts, to make loan payments, and to verify deposits or checks that may have cleared. This service is available 24 hours a day, seven days a week.

In addition, customers may access information via Seacoast National’s Customer Service Center (“CSC”). From 7 A.M. to 7 P.M., EST Monday through Friday, and on Saturdays from 9 A.M. to 4 P.M., our CSC staff is available to open accounts, take applications for certain types of loans, resolve account issues and offer information on other bank products and services to existing and potential customers.

We also offer Internet banking. Our Internet service allows customers to access transactional information on their deposit accounts, review loan and deposit balances, transfer funds between linked accounts and make loan payments from a deposit account, 24 hours a day, seven days a week.

We have operated an office of Seacoast Marine Finance Division, a division of Seacoast National, in Ft. Lauderdale, Florida since February 2000. Seacoast Marine is staffed with experienced marine lending professionals with a marketing emphasis on marine loans of $200,000 and greater, with the majority of loan production sold to correspondent banks on a non-recourse basis. In November 2002, the Seacoast Marine Finance Division added offices and personnel in California to serve the western markets.

We have five indirect, wholly-owned subsidiaries:

•  FNB Brokerage Services, Inc. (“FNB Brokerage”), which provides brokerage and annuity services;

•  FNB Insurance Services, Inc. (“FNB Insurance”), an inactive subsidiary, which was formed to provide insurance agency services;

•  South Branch Building, Inc., which is a general partner in a partnership that constructed a branch facility of Seacoast National;

•  TCoast Holdings, LLC, which was formed to own and operate certain properties acquired through foreclosure;

•  BR West, LLC, which was formed in 2008 to hold foreclosed real estate, but which was inactive at year-end 2009;

We directly own all the common equity in five statutory trusts:

•  SBCF Capital Trust I, formed on March 31, 2005 for the purpose of issuing $20 million in trust preferred securities;

•  SBCF Statutory Trust II, formed on December 16, 2005, also for the purpose of issuing $20 million in trust preferred securities;

•  SBCF Statutory Trust III, formed on June 29, 2007, for the purpose of issuing $12 million in trust preferred securities; and

•  SBCF Statutory Trusts IV and V, formed on May 16, 2008 for the purpose of issuing additional preferred securities in the future. These have been inactive since their formation.

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FNB Property Holdings, Inc., a Delaware holding company, whose primary asset was an investment in FNB RE Services, Inc., was dissolved on June 1, 2009; and FNB RE Services, Inc., a real estate investment trust that held mortgage loans originated by Seacoast National, also was dissolved, at the end of May 2009.

In addition, Big O RV, Inc., also formed to own and operate certain properties acquired through foreclosure, was reactivated during 2008. It owned one asset that it sold in the fourth quarter of 2008, and was dissolved at the end of 2008.

With the exception of FNB Property Holdings, Inc. and FNB RE Services, Inc. (before dissolution), the operations of each of these direct and indirect subsidiaries represented less than 10% of our consolidated assets and contributed less than 10% of our consolidated revenues.

As a bank holding company, we are a legal entity separate and distinct from our subsidiaries, including Seacoast National. We coordinate the financial resources of the consolidated enterprise and maintain financial, operational and administrative systems that allow centralized evaluation of subsidiary operations and coordination of selected policies and activities. Our operating revenues and net income are derived primarily from Seacoast National through dividends and fees for services performed. See “Item 1. Business-Supervision and Regulation.”

As of December 31, 2009, we had total consolidated assets of approximately $2,151.3 million, total deposits of approximately $1,779.4 million, total consolidated liabilities, including deposits, of approximately $1,999.4 million and consolidated shareholders’ equity of approximately $151.9 million. Our operations are discussed in more detail under “Item 7. Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations” incorporated by reference from our 2009 Annual Report.

Our principal offices are located at 815 Colorado Avenue, Stuart, Florida 34994, and the telephone number at that address is (772) 287-4000. We and our subsidiary Seacoast National maintain Internet websites at www.seacoastbanking.com and www.seacoastnational.com, respectively. We are not incorporating the information on our or Seacoast National’s website into this report, and none of these websites nor the information appearing on these websites is included or incorporated in, or is a part of, this report. We file annual, quarterly and current reports, proxy statements, and other information with the SEC. You may read and copy any document we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE., Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information. Our SEC filings are also available to the public free of charge from the SEC’s web site at www.sec.gov.

In addition, we make available, free of charge, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with or furnish it to the SEC.

Employees

As of December 31, 2009, we and our subsidiaries employed 409 full-time equivalent employees. We consider our employee relations to be good, and we have no collective bargaining agreements with any employees.

Expansion of Business

We have expanded our products and services to meet the changing needs of the various segments of our market, and we presently expect to continue this strategy. Prior to 1991, we had expanded geographically primarily through the addition of branches, including the acquisition of a branch in St. Lucie County. We also from time to time have acquired banks, bank branches and deposits, and have opened new branches and loan production offices.

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In 2002, we entered Palm Beach County by establishing a new branch office. On April 30, 2005, we acquired Century National Bank, a commercial bank headquartered in Orlando, Florida. Century National Bank operated as our wholly owned subsidiary until August 2006 when it was merged with Seacoast National.

In April 2006, we acquired Big Lake National Bank (“Big Lake”), a commercial bank headquartered in Okeechobee, Florida, inland from our Treasure Coast markets. Big Lake was merged with Seacoast National in June 2006.

Florida law permits statewide branching, and Seacoast National has expanded, and anticipates future expansion, by opening additional bank offices and facilities, as well as by acquisition of other financial institutions and branches. Since 2002, we have opened and acquired, on a net basis, 17 new offices in 14 counties of Florida. The Seacoast Marine Finance Division operates loan production offices, or “LPOs”, in Ft. Lauderdale, Florida, and Newport Beach and Alameda, California. See “Item 2. Properties”.

We regularly evaluate possible mergers, acquisitions and other expansion opportunities.

Seasonality; Cycles

We believe our commercial banking operations are somewhat seasonal in nature. Investment management fees and deposits often peak in the first and second quarters, and often are lowest in the third quarter, as do transactional fees from merchants, and ATM and debit card use. Public deposits tend to increase with tax collections in the second and fourth quarters and decline with spending thereafter.

Deposits can increase due to hurricanes as insurers disburse insurance proceeds and hurricane-related damage is repaired. No major hurricanes occurred in 2006, 2007, 2008 or 2009 and deposits were more normal than 2004 and 2005, when major hurricanes hit our coastal areas.

Commercial and residential real estate activity, demand, prices and sales volumes vary based upon various factors including economic conditions, interest rates and credit availability.

Competition

We and our subsidiaries operate in the highly competitive markets of Martin, St. Lucie, Indian River, Brevard, Palm Beach and Broward Counties, in southeastern Florida and in the Orlando metropolitan statistical area. We also operate in six competitive counties in central Florida near Lake Okeechobee. Seacoast National not only competes with other banks in its markets, but also competes with various other types of financial institutions for deposits, commercial, fiduciary and investment services and various types of loans and other financial services. Seacoast National also competes for interest-bearing funds with a number of other financial intermediaries and investment alternatives, including mutual funds, brokerage and insurance firms, governmental and corporate bonds, and other securities.

Our competitors include not only financial institutions based in the State of Florida, but also a number of large out-of-state and foreign banks, bank holding companies and other financial institutions that have an established market presence in the State of Florida, or that offer products by mail, telephone or over the Internet. Many of our competitors are engaged in local, regional, national and international operations and have greater assets, personnel and other resources than us. Some of these competitors are subject to less regulation and/or more favorable tax treatment than us. Many of these institutions have greater resources, broader geographic markets and higher lending limits than us and may offer various services that we do not offer. In addition, these institutions may be able to better afford and make broader use of media advertising, support services, and electronic and other technology than us. To offset these potential competitive disadvantages, we depend on our reputation as an independent, “super” community bank headquartered locally, our personal service, our greater community involvement and our ability to make credit and other business decisions quickly and locally.

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Supervision and Regulation

Bank holding companies and banks are extensively regulated under federal and state law. This discussion is qualified in its entirety by reference to the particular statutory and regulatory provisions referred to below and is not intended to be an exhaustive description of the statutes or regulations applicable to us and our bank subsidiary’s business. Supervision, regulation, and examination of us and Seacoast National and our respective subsidiaries by the bank regulatory agencies are intended primarily for the protection of bank depositors rather than holders of our capital stock. Any change in applicable law or regulation may have a material effect on our business.

We are required to comply with various corporate governance and financial reporting requirements under the Sarbanes-Oxley Act of 2002, as well as new rules and regulations adopted by the SEC, the Public Company Accounting Oversight Board, Nasdaq, and, more recently, the Treasury, since we are a participant in the Treasury’s Troubled Assets Relief Program (“TARP”) Capital Purchase Program (“CPP”). In particular, we are required to include management and independent registered public accounting firm reports on internal controls as part of our annual report on Form 10-K in order to comply with Section 404 of the Sarbanes-Oxley Act. We have evaluated our controls, including compliance with the SEC rules on internal controls, and have and expect to continue to spend significant amounts of time and money on compliance with these rules. Our failure to comply with these internal control rules may materially adversely affect our reputation, ability to obtain the necessary certifications to financial statements, and the values of our securities. The assessments of our financial reporting controls as of December 31, 2009 are included elsewhere in this report with no material weaknesses reported.

Bank Holding Company Regulation

We, as a bank holding company, are subject to supervision and regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) under the BHC Act. Bank holding companies generally are limited to the business of banking, managing or controlling banks, and other activities that the Federal Reserve determines to be closely related to banking, or managing or controlling banks and a proper incident thereto. We are required to file with the Federal Reserve periodic reports and such other information as the Federal Reserve may request. The Federal Reserve examines us, and may examine our non-bank subsidiaries.

The BHC Act requires prior Federal Reserve approval for, among other things, the acquisition by a bank holding company of direct or indirect ownership or control of more than 5% of the voting shares or substantially all the assets of any bank, or for a merger or consolidation of a bank holding company with another bank holding company. With certain exceptions, the BHC Act prohibits a bank holding company from acquiring direct or indirect ownership or control of voting shares of any company which is not a bank or bank holding company, and from engaging directly or indirectly in any activity other than banking or managing or controlling banks or performing services for its authorized subsidiaries. A holding company, may, however, engage in or acquire an interest in a company that engages in activities which the Federal Reserve has determined by regulation or order to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.

The Gramm-Leach-Bliley Act of 1999 (the “GLB”) substantially revised the statutory restrictions separating banking activities from certain other financial activities. Under the GLB, bank holding companies that are “well-capitalized” and “well-managed”, as defined in Federal Reserve Regulation Y, which have and maintain “satisfactory” Community Reinvestment Act of 1977, as amended (the “CRA”) ratings, and meet certain other conditions, can elect to become “financial holding companies”. Financial holding companies and their subsidiaries are permitted to acquire or engage in activities such as insurance underwriting, securities underwriting, travel agency activities, a broad range of insurance agency activities, merchant banking, and other activities that the Federal Reserve determines to be financial in nature or complementary thereto. In addition, under the merchant banking authority added by the GLB and Federal Reserve regulation, financial holding companies are authorized to invest in companies that engage in activities that are not financial in nature, as long as the financial holding company makes its investment with the intention of limiting the term of its investment and does not manage the company on a day-to-day basis, and the invested company does not

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cross-market with any of the financial holding company’s controlled depository institutions. Financial holding companies continue to be subject to supervision and regulation of the Federal Reserve, but the GLB applies the concept of functional regulation to the activities conducted by subsidiaries. For example, insurance activities would be subject to supervision and regulation by state insurance authorities. While we have not become a financial holding company, we may elect to do so in the future in order to exercise the broader activity powers provided by the GLB. Banks may also engage in similar “financial activities” through subsidiaries. The GLB also includes consumer privacy provisions, and the federal bank regulatory agencies have adopted extensive privacy rules implementing these statutory provisions.

We are a legal entity separate and distinct from Seacoast National and our other subsidiaries. Various legal limitations restrict our banking subsidiaries from lending or otherwise supplying funds to us or our non-bank subsidiaries. We and our banking subsidiaries are subject to Section 23A of the Federal Reserve Act and Federal Reserve Regulation W thereunder. Section 23A defines “covered transactions” to include extensions of credit, and limits a bank’s covered transactions with any affiliate to 10% of such bank’s capital and surplus. All covered and exempt transactions between a bank and its affiliates must be on terms and conditions consistent with safe and sound banking practices, and banks and their subsidiaries are prohibited from purchasing low-quality assets from the bank’s affiliates. Finally, Section 23A requires that all of a bank’s extensions of credit to its affiliates be appropriately secured by acceptable collateral, generally United States government or agency securities. We and our bank subsidiaries also are subject to Section 23B of the Federal Reserve Act, which generally requires covered and other transactions among affiliates to be on terms, including credit standards, that are substantially the same or at least as favorable to the bank or its subsidiary as those prevailing at the time for similar transactions with unaffiliated companies.

The BHC Act permits acquisitions of banks by bank holding companies, such that we and any other bank holding company, whether located in Florida or elsewhere, may acquire a bank located in any other state, subject to certain deposit-percentage, age of bank charter requirements, and other restrictions. Federal law also permits national and state-chartered banks to branch interstate through acquisitions of banks in other states. Florida’s Interstate Branching Act (the “Florida Branching Act”) permits interstate branching. Under the Florida Branching Act, with the prior approval of the Florida Department of Banking and Finance, a Florida bank may establish, maintain and operate one or more branches in a state other than the State of Florida pursuant to a merger transaction in which the Florida bank is the resulting bank. In addition, the Florida Branching Act provides that one or more Florida banks may enter into a merger transaction with one or more out-of-state banks, and an out-of-state bank resulting from such transaction may maintain and operate the branches of the Florida bank that participated in such merger. An out-of-state bank, however, is not permitted to acquire a Florida bank in a merger transaction, unless the Florida bank has been in existence and continuously operated for more than three years.

Federal Reserve policy requires a bank holding company to act as a source of financial and managerial strength and to preserve and protect its bank subsidiaries in situations where additional investments in a troubled bank may not otherwise be warranted. In addition, under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”), where a bank holding company has more than one bank or thrift subsidiary, each of the bank holding company’s subsidiary depository institutions are responsible for any losses to the FDIC resulting from an affiliated depository institution’s failure. Accordingly, a bank holding company may be required to loan money to its bank subsidiaries in the form of capital notes or other instruments that qualify as capital under bank regulatory rules. However, any loans from the holding company to such subsidiary banks likely will be unsecured and subordinated to such bank’s depositors and perhaps to other creditors of the bank.

The Federal Reserve has proposed guidelines for employee compensation to reduce incentives to take undue risks.

Bank and Bank Subsidiary Regulation

Seacoast National is subject to supervision, regulation and examination by the Office of the Comptroller of the Currency (the “OCC”), which monitors all areas of operations, including reserves, loans, mortgages, the

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issuance of securities, payment of dividends, establishing branches, capital adequacy, and compliance with laws. Seacoast National is a member of the FDIC and, as such, its deposits are insured by the FDIC to the maximum extent provided by law. See “FDIC Insurance Assessments”.

Under Florida law, Seacoast National may establish and operate branches throughout the State of Florida, subject to the maintenance of adequate capital and the receipt of OCC approval.

The OCC has adopted the Federal Financial Institutions Examination Council’s (“FFIEC”) rating system and assigns each financial institution a confidential composite rating based on an evaluation and rating of six essential components of an institution’s financial condition and operations including Capital Adequacy, Asset Quality, Management, Earnings, Liquidity and Sensitivity to Market Risk, as well as the quality of risk management practices. For most institutions, the FFIEC has indicated that market risk primarily reflects exposures to changes in interest rates. When regulators evaluate this component, consideration is expected to be given to: management’s ability to identify, measure, monitor, and control market risk; the institution’s size; the nature and complexity of its activities and its risk profile, and the adequacy of its capital and earnings in relation to its level of market risk exposure. Market risk is rated based upon, but not limited to, an assessment of the sensitivity of the financial institution’s earnings or the economic value of its capital to adverse changes in interest rates, foreign exchange rates, commodity prices, or equity prices; management’s ability to identify, measure, monitor, and control exposure to market risk; and the nature and complexity of interest rate risk exposure arising from nontrading positions.

FNB Brokerage, a Seacoast National subsidiary, is registered as a securities broker-dealer under the Exchange Act and is regulated by the Securities and Exchange Commission (the “Commission” or SEC). It also is subject to examination and supervision of its operations, personnel and accounts by the Financial Industry Regulatory Authority, Inc. (“FINRA”). FNB Brokerage is a separate and distinct entity from Seacoast National, and must maintain adequate capital under the SEC’s net capital rule. The net capital rule limits FNB Brokerage’s ability to reduce capital by payment of dividends or other distributions to Seacoast National. FNB Brokerage is also authorized by the State of Florida to act as a securities dealer and an investment advisor.

FNB Insurance, a Seacoast National subsidiary, is authorized by the State of Florida to market insurance products as an agent. FNB Insurance is a separate and distinct entity from Seacoast National and is subject to supervision and regulation by state insurance authorities. It is a financial subsidiary, but is inactive.

The Internal Revenue Code of 1986 (the “Code”), as amended, provides requirements that must be met with respect to Seacoast National’s indirect subsidiary, FNB RE Services, Inc., which has elected to be taxed as a “real estate investment trust” under the Code. FNB RE Services, Inc. was dissolved at the end of May 2009.

Community Reinvestment Act

We and our banking subsidiaries are subject to the provisions of the CRA and related federal bank regulatory agencies’ regulations. Under the CRA, all banks and thrifts have a continuing and affirmative obligation, consistent with their safe and sound operation, to help meet the credit needs for their entire communities, including low- and moderate-income neighborhoods. The CRA requires a depository institution’s primary federal regulator, in connection with its examination of the institution, to assess the institution’s record of assessing and meeting the credit needs of the communities served by that institution, including low- and moderate-income neighborhoods. The bank regulatory agency’s assessment of the institution’s record is made available to the public. Further, such assessment is required of any institution which has applied to: (i) charter a national bank; (ii) obtain deposit insurance coverage for a newly-chartered institution; (iii) establish a new branch office that accepts deposits; (iv) relocate an office; (v) merge or consolidate with, or acquire the assets or assume the liabilities of, a federally regulated financial institution, or (vi) expand other activities, including engaging in financial services activities authorized by the GLB. A less than satisfactory CRA rating will slow, if not preclude, expansion of banking activities and prevent a company from becoming or remaining a financial holding company.

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Following the enactment of the GLB, CRA agreements with private parties must be disclosed and annual CRA reports must be made to a bank’s primary federal regulator. A bank holding company will not be permitted to become or remain a financial holding company and no new activities authorized under GLB may be commenced by a holding company or by a bank financial subsidiary if any of its bank subsidiaries received less than a “satisfactory” CRA rating in its latest CRA examination. Federal CRA regulations require, among other things, that evidence of discrimination against applicants on a prohibited basis, and illegal or abusive lending practices be considered in the CRA evaluation.

Seacoast National is also subject to, among other things, the provisions of the Equal Credit Opportunity Act (the “ECOA”) and the Fair Housing Act (the “FHA”), both of which prohibit discrimination based on race or color, religion, national origin, sex, and familial status in any aspect of a consumer or commercial credit or residential real estate transaction. The Department of Justice (the “DOJ”), and the federal bank regulatory agencies have issued an Interagency Policy Statement on Discrimination in Lending that provides guidance to financial institutions in determining whether discrimination exists, how the agencies will respond to lending discrimination, and what steps lenders might take to prevent discriminatory lending practices. The DOJ has increased its efforts to prosecute what it regards as violations of the ECOA and FHA.

Payments of Dividends

We are a legal entity separate and distinct from Seacoast National and other subsidiaries. Our primary source of cash, other than securities offerings, is dividends from Seacoast National. The prior approval of the OCC is required if the total of all dividends declared by a national bank (such as Seacoast National) in any calendar year will exceed the sum of such bank’s net profits for that year and its retained net profits for the preceding two calendar years, less any required transfers to surplus. Federal law also prohibits any national bank from paying dividends that would be greater than such bank’s undivided profits after deducting statutory bad debts in excess of such bank’s allowance for possible loan losses.

In addition, our Company and Seacoast National are subject to various general regulatory policies and requirements relating to the payment of dividends, including requirements to maintain adequate capital above regulatory minimums. The appropriate federal bank regulatory authority may prohibit the payment of dividends where it has determined that the payment of dividends would be an unsafe or unsound practice and to prohibit payment thereof. The OCC and the Federal Reserve have indicated that paying dividends that deplete a national or state member bank’s capital base to an inadequate level would be an unsound and unsafe banking practice. The OCC and the Federal Reserve have each indicated that depository institutions and their holding companies should generally pay dividends only out of current operating earnings.

Under a Federal Reserve policy adopted in 2009, the board of directors of a bank holding company must consider different factors to ensure that its dividend level is prudent relative to maintaining a strong financial position, and is not based on overly optimistic earnings scenarios, such as potential events that could affect its ability to pay, while still maintaining a strong financial position. As a general matter, the Federal Reserve has indicated that the board of directors of a bank holding company should consult with the Federal Reserve and eliminate, defer or significantly reduce the bank holding company’s dividends if:

•  its net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends;

•  its prospective rate of earnings retention is not consistent with its capital needs and overall current and prospective financial condition; or

•  it will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios.

In 2009, Seacoast National recorded a net loss and did not pay any dividends. In 2008, Seacoast National recorded a net loss and paid $6.8 million in dividends to us. In 2007, Seacoast National paid 116% of its net profits in dividends to us.

Prior approval by the OCC is required if the total of all dividends declared by a national bank in any calendar year exceeds the bank’s “profits”, as defined, for that year combined with its retained net profits for

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the preceding two calendar years. Under this restriction, Seacoast National cannot distribute any dividends to us, without prior OCC approval, as of December 31, 2009. We are also subject to contractual limitations on our ability to declare dividends as a participant of TARP CPP as summarized in “Item 1. Business-Participation in the Troubled Assets Relief Program.”

Capital

The Federal Reserve and the OCC have risk-based capital guidelines for bank holding companies and national banks, respectively. These guidelines require a minimum ratio of capital to risk-weighted assets (including certain off-balance-sheet activities, such as standby letters of credit) of 8%. At least half of the total capital must consist of common equity, retained earnings and a limited amount of qualifying preferred stock, less goodwill and certain core deposit intangibles (“Tier 1 capital”). The remainder may consist of non-qualifying preferred stock, qualifying subordinated, perpetual, and/or mandatory convertible debt, term subordinated debt and intermediate term preferred stock and up to 45% of pretax unrealized holding gains on available for sale equity securities with readily determinable market values that are prudently valued, and a limited amount of any loan loss allowance (“Tier 2 capital” and, together with Tier 1 capital, “Total Capital”). The Federal Reserve has stated that Tier 1 voting common equity should be the predominant form of capital.

In addition, the Federal Reserve and the OCC have established minimum leverage ratio guidelines for bank holding companies and national banks, which provide for a minimum leverage ratio of Tier 1 capital to adjusted average quarterly assets (“leverage ratio”) equal to 3%, plus an additional cushion of 1.0% to 2.0%, if the institution has less than the highest regulatory rating. The guidelines also provide that institutions experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets. All bank holding companies and banks are expected to hold capital commensurate with the level and nature of their risks, including the volume and severity of their problem loans, and higher capital may be required as a result of an institution’s risk profile. Lastly, the Federal Reserve’s guidelines indicate that the Federal Reserve will continue to consider a “tangible Tier 1 leverage ratio” (deducting all intangibles) in evaluating proposals for expansion or new activities. The OCC and Seacoast National agreed by letter agreement that Seacoast National shall maintain specific minimum capital ratios by March 31, 2009 and subsequent periods, including a total risk-based capital ratio of 12.00 percent and a Tier 1 leverage ratio of 7.50 percent. Recently, the minimum Tier 1 capital ratio was revised by the OCC and Seacoast National to 8.50 percent for periods after January 31, 2010. The minimum total risk-based capital ratio was left unchanged. The federal bank regulatory agencies have begun seeking higher capital levels than the minimums due to market conditions and the OCC had indicated that Seacoast National, in light of risks in its loan portfolio and local economic conditions, especially in the real estate markets, should hold capital commensurate with such risks.

The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), among other things, requires the federal bank regulatory agencies to take “prompt corrective action” regarding depository institutions that do not meet minimum capital requirements. FDICIA establishes five capital tiers: “well capitalized”, “adequately capitalized”, “undercapitalized”, “significantly undercapitalized”, and “critically undercapitalized”. A depository institution’s capital tier will depend upon how its capital levels compare to various relevant capital measures and certain other factors, as established by regulation.

All of the federal bank regulatory agencies have adopted regulations establishing relevant capital measures and relevant capital levels for federally insured depository institutions. The relevant minimum capital measures are the total risk-based capital ratio, Tier 1 capital ratio, and the leverage ratio. Under the regulations, a national bank will be (i) “well capitalized” if it has a total risk-based capital ratio of 10% or greater, a Tier 1 capital ratio of 6% or greater, and a leverage ratio of at least 5%, and is not subject to any written agreement, order, capital directive, or prompt corrective action directive by a federal bank regulatory agency to meet and maintain a specific capital level for any capital measure, (ii) “adequately capitalized” if it has a total risk-based capital ratio of 8% or greater, a Tier 1 capital ratio of 4% or greater, and a leverage ratio of 4% or greater (3% in certain circumstances), (iii) “undercapitalized” if it has a total risk-based capital ratio of less than 8%, a Tier 1 capital ratio of less than 4% (3% in certain circumstances), (iv) “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6% or a Tier I capital ratio of less than 3%, or a

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leverage ratio of less than 3%, or (v) “critically undercapitalized” if its tangible equity is equal to or less than 2% of average quarterly tangible assets. The federal bank regulatory agencies have authority to require additional capital.

As of December 31, 2009, the consolidated capital ratios of the Seacoast and Seacoast National were as follows:

	Regulatory			Seacoast			Seacoast
	Minimum			(Consolidated)			National
Tier 1 capital ratio		4.0	%		13.8	%		13.0	%
Total risk-based capital ratio		8.0	%		15.2	%		14.3	%
Leverage ratio		3.0-5.0	%		8.9	%		8.4	%

(1) As described above, Seacoast National has agreed with the OCC to maintain higher minimum Tier 1 leverage and total risk-based capital ratios.

FDICIA

FDICIA directs that each federal bank regulatory agency prescribe standards for depository institutions and depository institution holding companies relating to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth compensation, a maximum ratio of classified assets to capital, minimum earnings sufficient to absorb losses, a minimum ratio of market value to book value for publicly traded shares, and such other standards as the federal bank regulatory agencies deem appropriate.

FDICIA generally prohibits a depository institution from making any capital distribution (including payment of a dividend) or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized. Undercapitalized depository institutions are subject to growth limitations and are required to submit a capital restoration plan for approval. For a capital restoration plan to be acceptable, the depository institution’s parent holding company must guarantee that the institution will comply with such capital restoration plan. The aggregate liability of the parent holding company is limited to the lesser of 5% of the depository institution’s total assets at the time it became undercapitalized and the amount necessary to bring the institution into compliance with applicable capital standards. If a depository institution fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized. If the controlling holding company fails to fulfill its obligations under FDICIA and files (or has filed against it) a petition under the federal Bankruptcy Code, the claim for such liability would be entitled to a priority in such bankruptcy proceeding over third party creditors of the bank holding company. Significantly undercapitalized depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets, and cessation of receipt of deposits from correspondent banks. Critically undercapitalized institutions are subject to the appointment of a receiver or conservator. Because our company and Seacoast National exceed applicable capital requirements, the respective managements of our company and Seacoast National do not believe that the provisions of FDICIA have had any material effect on our company and Seacoast National or our respective operations.

FDICIA also contains a variety of other provisions that may affect the operations of our company and Seacoast National, including reporting requirements, regulatory standards for real estate lending, “truth in savings” provisions, the requirement that a depository institution give 90 days’ prior notice to customers and regulatory authorities before closing any branch, and a prohibition on the acceptance or renewal of brokered deposits by depository institutions that are not well capitalized, or are adequately capitalized and have not received a waiver from the FDIC. Seacoast National was well capitalized at December 31, 2009, and brokered deposits are not restricted.

Enforcement Policies and Actions

The Federal Reserve and the OCC monitor compliance with laws and regulations. Violations of laws and regulations, or other unsafe and unsound practices, may result in these agencies imposing fines or penalties,

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cease and desist orders, or taking other enforcement actions. Under certain circumstances, these agencies may enforce these remedies directly against officers, directors, employees and others participating in the affairs of a bank or bank holding company.

Seacoast National entered into a formal agreement with the OCC on December 16, 2008 to improve Seacoast National’s asset quality. Under the formal agreement, Seacoast National’s board of directors appointed a compliance committee to monitor and coordinate Seacoast National’s performance under the formal agreement. The formal agreement provided for the development and implementation of written programs to reduce Seacoast National’s credit risk, monitor and reduce the level of criticized assets, and manage commercial real estate (“CRE”) loan concentrations in light of current adverse CRE market conditions. Seacoast National believes it has complied with all of the terms of this agreement.

The International Money Laundering Abatement and Anti-Terrorism Funding Act of 2001 specifies “know your customer” requirements that obligate financial institutions to take actions to verify the identity of the account holders in connection with opening an account at any U.S. financial institution. Banking regulators will consider compliance with the Act’s money laundering provisions in acting upon acquisition and merger proposals, and sanctions for violations of the Act can be imposed in an amount equal to twice the sum involved in the violating transaction, up to $1 million.

Under the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (“USA PATRIOT”) Act of 2001, financial institutions are subject to prohibitions against specified financial transactions and account relationships as well as enhanced due diligence and “know your customer” standards in their dealings with foreign financial institutions and foreign customers.

The USA PATRIOT Act requires financial institutions to establish anti-money laundering programs. The USA PATRIOT Act sets forth minimum standards for these programs, including:

•  the development of internal policies, procedures, and controls;

•  the designation of a compliance officer;

•  an ongoing employee training program; and

•  an independent audit function to test the programs.

Fiscal and Monetary Policy

Banking is a business that depends on interest rate differentials. In general, the difference between the interest paid by a bank on its deposits and its other borrowings, and the interest received by a bank on its loans and securities holdings, constitutes the major portion of a bank’s earnings. Thus, the earnings and growth of our company and Seacoast National are subject to the influence of economic conditions generally, both domestic and foreign, and also to the monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve. The Federal Reserve regulates the supply of money through various means, including open market dealings in United States government securities, the discount rate at which banks may borrow from the Federal Reserve, and the reserve requirements on deposits.

In 2008 and 2009, the Federal Reserve has taken various actions to increase market liquidity and reduce interest rates.

The Federal Reserve lowered its target federal funds rate from 5.25% per annum on August 7, 2007 to 3.00% on January 30, 2008, and finally to 0-0.25% on December 16, 2008. The Federal Reserve’s discount rate was reduced on December 16, 2008 to its current rate of 0.50% per annum, down from 5.75% on September 17, 2007, 4.75% on January 2, 2008, and 1.25% on October 29, 2008. The Federal Reserve has extended the term for which banks can borrow from the discount window to up to 90 days; and developed a program, called the Term Auction Facility, under which predetermined amounts of credit are auctioned to depository institutions for terms of up to 84 days. These innovations resulted in large increases in the amount of Federal Reserve credit extended to the banking system.

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In addition, the Federal Reserve and the Treasury have jointly announced a Term Asset-Backed Securities Loan Facility (“TALF”) that will lend against AAA-rated asset-backed securities collateralized by student loans, auto loans, credit card loans, and loans guaranteed by the Small Business Administration. TALF is expiring on March 31, 2010, except for qualifying newly-issue commercial mortgage-backed securities (“CMBS”), which is expected to expire on June 30, 2010.

The Federal Reserve announced on November 28, 2008 that it was initiating a program to purchase the direct obligations of housing-related government-sponsored enterprises (GSEs) — Fannie Mae, Freddie Mac, and the Federal Home Loan Banks — and mortgage-backed securities (MBS) backed by Fannie Mae, Freddie Mac, and Ginnie Mae. This action was taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally. In the week ending February 3, 2010, the Federal Reserve purchased a total of $17.63 billion agency MBS under this program. This program is set to expire on March 31, 2010.

Beginning October 6, 2008, the Federal Reserve began paying interest on depository institutions’ required and excess reserve balances. The payment of interest on excess reserve balances was expected to give the Federal Reserve greater scope to use its lending programs to address conditions in credit markets while also maintaining the federal funds rate close to the target rate established by the Federal Open Market Committee. The Federal Reserve has indicated that it may use this authority to implement mandatory policy and reduce excess liquidity.

The nature and timing of any changes in such policies and their effect on our company and Seacoast National cannot be predicted.

FDIC Insurance Assessments

Seacoast National’s deposits are insured by the FDIC’s Deposit Insurance Fund (“DIF”), and Seacoast National is subject to FDIC assessments for its deposit insurance, as well as assessments by the FDIC to pay interest on Financing Corporation (“FICO”) bonds. During 2006 through 2008, the FDIC’s risk-based deposit insurance assessment schedule ranged from zero to 43 basis points per annum. During 2006 and 2007, Seacoast National, including its predecessors from their date of acquisition, paid no FDIC deposit insurance premiums. FICO assessments of approximately $225,000, $224,000 and $192,000 were paid to the FDIC in 2007, 2008 and 2009, respectively.

Seacoast National paid FDIC deposit insurance assessments of $1,804,000 in 2008 based upon the expiration of a one-time credit provided by the Reform Act and FDIC rules for deposit insurance premiums previously paid. At the beginning of 2007, this credit totaled approximately $1,240,000. FDIC insurance assessments for 2007 were offset entirely by an equivalent amount of the credit during 2007, and the credit was fully used by early 2008. Assessments will change with the levels of our deposits and as a result of quarterly changes by the FDIC in its assessment rates or changes in Seacoast National’s risk category.

Effective January 1, 2009, the FDIC increased it deposit insurance assessment rates uniformly by 7 basis points annually for the first quarter 2009 assessment period only. Annual rates applicable to the first quarter 2009 assessments, which were collected at the end of June, are as follows:

	Deposit Insurance
Risk Category	Assessment Rate
I	12 to 14 basis points
II	17 basis points
III	35 basis points
IV	50 basis points

The FDIC issued another final rule effective April 1, 2009, to change the way that the FDIC’s assessment system differentiates for risk, make corresponding changes to assessment rates beginning with the second quarter of 2009, as well as other changes to the deposit insurance assessment rules. In addition, a one-time special assessment was imposed for the second quarter of 2009 only, based on the total assets of Seacoast National, and resulting in an additional $976,000 of premium paid. The FDIC’s new rules include a decrease for long-term unsecured debt, including senior and subordinated debt and, for small institutions with assets

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under $10 billion, a portion of Tier 1 capital; (2) an increase for secured liabilities above a threshold amount; and (3) an increase for brokered deposits above a threshold amount. The new assessment rules increase assessments for banks that use brokered deposits above a threshold level to fund “rapid asset growth”. As a result, we have been required to pay significantly increased premiums or additional special assessments. In 2009, we paid $5.0 million in FDIC insurance premiums, including $976,000 for a special industry-wide FDIC deposit insurance assessment. In addition, to restore the FDIC’s Deposit Insurance Fund, all FDIC-insured institutions were required to prepay their deposit premiums for 3 years. On December 30, 2009, we prepaid $14.8 million of FDIC insurance premiums for the calendar quarters ending December 31, 2009 through December 31, 2012. Additionally, in January 2010, the FDIC issued an Advance Notice of Proposed Rulemaking seeking comment on ways that the FDIC’s risk-based deposit insurance assessment system could be changed to account for the risks posed by certain employee compensation programs.

FICO assessments are set by the FDIC quarterly and ranged from 1.22 basis points in the first quarter of 2007 to 1.14 basis points in the last quarter of 2007, 1.14 basis points in the first quarter of 2008 to 1.10 basis points in the last quarter of 2008, and 1.14 basis points in the first quarter of 2009 to 1.02 basis points in the last quarter of 2009. The FICO assessment rate for the first quarter of 2010 is 1.06 basis points.

Under the FDIC’s Temporary Liquidity Guarantee Program (the “TLG”), the entire amount in any eligible noninterest bearing transaction accounts will be guaranteed by the FDIC to the extent such balances are not covered by FDIC insurance. The TLG also provides FDIC guarantees to newly issued senior unsecured debt of banks and holding companies. The TLG debt guarantee program expired on December 31, 2009, and Seacoast National has not opted out from the extension of the transaction account guarantee program which is scheduled to expire on June 30, 2010. We and Seacoast National did not issue any guaranteed debt under TLG. Banks that participate in the TLG’s extended noninterest bearing transaction account guarantee program will pay the FDIC an increased fee of 15 to 25 basis points depending on an institution’s risk category for deposit insurance purposes. To the extent that these TLG assessments are insufficient to cover any loss or expenses arising from the TLG program, the FDIC is authorized to impose an emergency special assessment on FDIC-insured depository institutions. Legislation has been proposed to give the FDIC authority to impose charges for the TLG program upon depository institution holding companies, as well.

Concentrations in Lending

During 2006, the federal bank regulatory agencies released guidance on “Concentrations in Commercial Real Estate Lending” (the “Guidance”). The Guidance defines commercial real estate (“CRE”) loans as exposures secured by raw land, land development and construction (including 1-4 family residential construction), multi-family property, and non-farm nonresidential property where the primary or a significant source of repayment is derived from rental income associated with the property (that is, loans for which 50 percent or more of the source of repayment comes from third party, non-affiliated, rental income) or the proceeds of the sale, refinancing, or permanent financing of the property. Loans to Real Estate Investment Trusts (“REIT”) and unsecured loans to developers that closely correlate to the inherent risks in CRE markets would also be considered CRE loans under the Guidance. Loans on owner occupied CRE are generally excluded.

The Guidance requires that appropriate processes be in place to identify, monitor and control risks associated with real estate lending concentrations. This could include enhanced strategic planning, CRE underwriting policies, risk management, internal controls, portfolio stress testing and risk exposure limits as well as appropriately designed compensation and incentive programs. Higher allowances for loan losses and capital levels may also be required. The Guidance is triggered when CRE loan concentrations exceed either:

•  Total reported loans for construction, land development, and other land of 100 percent or more of a bank’s total capital; or

•  Total reported loans secured by multifamily and nonfarm nonresidential properties and loans for construction, land development, and other land of 300 percent or more of a bank’s total capital.

The Guidance also applies when a bank has a sharp increase in CRE loans or has significant concentrations of CRE secured by a particular property type.

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The Guidance applies to our CRE lending activities due to the concentration in construction and land development loans. At December 31, 2009, we had outstanding $125.1 million in commercial construction and residential land development loans and $37.8 in residential construction loans to individuals, which represents approximately 81 percent of Seacoast National’s total risk based capital at December 31, 2009, well below the Guidance’s threshold.

We have always had significant exposures to loans secured by commercial real estate due to the nature of our markets and the loan needs of both retail and commercial customers. We believe our long term experience in CRE lending, underwriting policies, internal controls, and other policies currently in place, as well as our loan and credit monitoring and administration procedures, are generally appropriate to managing our concentrations as required under the Guidance. The federal bank regulators are looking more closely at the risks of various assets and asset categories and risk management, and the need for additional rules regarding liquidity, as well as capital rules that better reflects risk. We have agreed with the OCC to manage our CRE risks. At December 2009, total CRE exposure for Seacoast National had been significantly reduced to 274 percent of total risk based capital, below the Guidance’s threshold. See “Item 1. Business-Enforcement Policies and Actions.”

On February 18, 2009, the Homeowner Affordability and Stability Plan (“HASP”) was announced by the President of the United States. HASP is intended to support a recovery in the housing market and ensure that workers can continue to pay off their mortgages through the following elements:

•  Provide access to low-cost refinancing for responsible homeowners suffering from falling home prices.

•  A $75 billion homeowner stability initiative to prevent foreclosure and help responsible families stay in their homes.

•  Support low mortgage rates by strengthening confidence in Fannie Mae and Freddie Mac.

The Treasury has issued extensive guidance on the scope and mechanics of various components of HASP. We continue to monitor these developments and assess their potential impact on our business.

Participation in the Troubled Asset Relief Program

On October 3, 2008, Emergency Economic Stabilization Act of 2008 (“EESA”) became law. Under the TARP authorized by EESA, the U.S. Department of the Treasury (the “Treasury”) established the CPP providing for the purchase of senior preferred shares of qualifying FDIC-insured depository institutions and their holding companies. On December 19, 2008, pursuant to a letter agreement (the “Purchase Agreement”), we sold 2,000 shares of Series A Preferred Stock (the “Series A Preferred Stock”) and warrants (the “Warrant”) to acquire 1,179,245 shares of common stock to the U.S. Treasury (the “Treasury”) pursuant to the CPP for an aggregate consideration of $50 million. Pursuant to the Purchase Agreement, the successful public capital raise conducted by the Company during 2009 reduced the number of shares under the Warrant by 50 percent to 589,623 shares of common stock. As a result of our participation in the CPP, we have agreed to certain limitations on our dividends, distributions and executive compensation.

Specifically, we are unable to declare dividend payments on our common, junior preferred or pari passu preferred shares if we are in arrears on the dividends on the Series A Preferred Stock. Further, without the Treasury approval, we are not permitted to increase dividends on our common stock above $0.01 per share without the Treasury’s approval until December 19, 2011 unless all of the Series A Preferred Stock has been redeemed or transferred by the Treasury. In addition, we cannot repurchase shares of common stock or use proceeds from the Series A Preferred Stock to repurchase trust preferred securities. Consent of the Treasury generally is required for us to make any stock repurchase until December 19, 2011 unless all of the Series A Preferred Stock has been redeemed or transferred by the Treasury to a third party. Further, our common, junior preferred or pari passu preferred shares may not be repurchased if we are in arrears on the Series A Preferred Stock dividends.

In addition, we have adopted the Treasury’s standards for executive compensation and corporate governance for the period during which the Treasury holds the equity issued pursuant to the Purchase Agreement, including the common stock which may be issued pursuant to the warrant. These standards

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generally apply to our chief executive officer, chief financial officer and the three next most highly compensated senior executive officers. The standards include:

•  ensuring that incentive compensation for senior executives does not encourage unnecessary and excessive risks that threaten the value of the financial institution;

•  required clawback of any bonus or incentive compensation paid to a senior executive based on statements of earnings, gains or other criteria that are later proven to be materially inaccurate;

•  prohibition on making golden parachute payments to senior executives; and

•  an agreement not to deduct for tax purposes executive compensation in excess of $500,000 for each senior executive.

On February 17, 2009 President Obama signed into law The American Recovery and Reinvestment Act of 2009 (the “ARRA”), commonly known as the economic stimulus or economic recovery package. The ARRA retroactively imposes certain new executive compensation and corporate expenditure limits and corporate governance standards on all current and future TARP recipients, including us, that are in addition to those previously announced by the Treasury, until the institution has repaid the Treasury. The Treasury released an interim final rule on TARP standards for compensation and corporate governance on June 10, 2009, which implemented and further expanded the limitations and restrictions imposed on executive compensation and corporate governance by the TARP CPP and ARRA. The new Treasury interim final rules also prohibit any tax gross-up payments to senior executive officers and the next 20 highest paid executives; require “say on pay” vote in annual shareholders’ meeting; and impose restrictions on bonus payments with the exceptions for long-term restricted stock.

In addition, we are also required to include certificates from our management in our annual report on Form 10-K regarding the compliance with all regulations summarized above as a result of our participation in TARP CPP.

Repayment of the outstanding Series A Preferred Stock and the Warrant is now permitted under the ARRA without penalty and without the need to raise new capital, subject to the Treasury’s consultation with the recipient’s appropriate regulatory agency, the prior approval of the Federal Reserve and the maintenance of appropriate levels of capital by the issuers and their subsidiaries.

A new program for banks with assets under $10 billion of assets has been proposed which would allow TARP participants to convert their CPP instruments to the new program as incentives for banks to increase their small business lending. This program may not be subject to various TARP restrictions. However, it is unclear if the proposal will be adopted by the Congress, and whether we will be able to participate in the new program or convert our current CPP investment. The requirements and constraints of this proposal are not yet known.

Financial Regulatory Reform

Congress is considering extensive changes to the laws regulating financial services firms. In December 2009, the House of Representatives approved the “Wall Street Reform and Consumer Protection Act.” The Senate Banking Committee plans to consider its own version of financial regulatory reform legislation in 2010.

These bills seek to address risks to the economy and the financial system, especially those posed by large “systemically significant” financial firms, through a variety of measures, including regulatory oversight of nonbanking entities, increased capital requirements, enhanced authority to limit activities and growth, changes in supervisory authority, resolution authority for failed financial firms (and the establishment of a fund to pay for the costs financed by assessments on financial firms with more than $10 billion in assets), enhanced regulation of derivatives and asset-backed securities, restrictions on executive compensation, and oversight of credit rating agencies. Both bills currently contain versions of a new independent Consumer Financial Protection Agency (“CFPA”) that would regulate consumer financial services and products, including credit, savings and payment products to prevent “unfair, deceptive or abusive practices,” promote product “simplicity” and ensure “equal access” to financial products. The CFPA would have sole rulemaking and interpretive

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authority under existing and future consumer financial services laws and supervisory, examination and enforcement authority over institutions subject to its regulations. The bills would limit the ability of federal laws to preempt state and local law. If implemented, the foregoing regulatory reforms may have a material effect on our operations. However, the final legislation may differ significantly from the legislation currently being considered. The nature and timing of any financial services reform legislation and its final terms as well as its effects cannot be predicted and we cannot determine the scope and specific impact on our Company of regulatory reform at this time.

Additionally, in January 2010, the Administration announced plans to propose a “Financial Crisis Responsibility Fee” over a 10-year period on large financial firms to offset the cost of the U.S. Treasury’s Troubled Asset Relief Program. As currently outlined, we would not be subject to the fee because the size of our balance sheet will not exceed the $50 billion threshold established by the proposal. However, whether the fee will be implemented, and in what form, as well as its effects, are uncertain.

Recent Legislative and Regulatory Changes

Congress and the U.S. government continue to evaluate and develop various programs and initiatives designed to stabilize the financial and housing markets and stimulate the economy, including the Financial Stability Plan and various residential programs to reduce foreclosures and stabilize the housing market.

Legislative and regulatory proposals regarding changes in banking, and the regulation of banks, thrifts and other financial institutions and bank and bank holding company powers are being considered by the executive branch of the Federal government, Congress and various state governments, including Florida. Certain of these proposals, if adopted, could significantly change the regulation or operations of banks and the financial services industry. New regulations and statutes are regularly proposed that contain wide-ranging proposals for altering the structures, regulations and competitive relationships of the nation’s financial institutions. For example, President Obama recently proposed to prohibit any proprietary trading by financial institutions. We cannot predict whether or in what form any proposed law or regulation will be adopted or the extent to which our business may be affected by any new law or regulation. The current stresses on the financial system and the economy generally and the powers granted to the Treasury under EESA and the ARRA make the nature and extent of future legislative and regulatory changes affecting financial institutions unpredictable and subject to rapid changes.

Statistical Information

Certain statistical and financial information (as required by SEC Guide 3) is included in response to Item 7 of this Annual Report on Form 10-K. Certain statistical information is also included in response to Item 6 and Item 8 of this Annual Report on Form 10-K.

Item 1A.   Risk Factors

Any of the following risks could harm our business, results of operations and financial condition and an investment in our stock. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these risk factors.

Risks Related to Our Business

There can be no assurance that recent or future legislation and administrative actions authorizing the U.S. government to take direct actions within the financial services industry will help stabilize the U.S. financial system or how such actions will impact the Company.

Numerous actions have been taken by the U.S. Congress, the Federal Reserve, the Treasury, the FDIC, the SEC and others to address the liquidity and credit crisis that followed the sub-prime mortgage crisis that commenced in 2007. These actions include the Financial Stability Program adopted by the Treasury, the Emergency Economic Stabilization Act of 2008 (or “EESA”), which was enacted on October 3, 2008 and the American Recovery and Reinvestment Act of 2009 (or “ARRA”), which was enacted on February 17, 2009.

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Additional regulatory reform measures have also been proposed and are currently under consideration by Congress, the Executive branch and the various regulatory authorities.

We cannot predict the continued effects of EESA, the ARRA, any new proposed regulatory reform measures that become law and various other governmental, regulatory, monetary and fiscal initiatives which have been and may be proposed or adopted on the economy, the financial markets, on us and on Seacoast National. The terms and costs of these measures, or the failure of these actions to help stabilize the financial markets, asset prices, market liquidity and a continuation or worsening of current financial market and economic conditions could materially and adversely affect our business, financial condition, results of operations, and the trading prices of our securities. In addition, a number of the programs enacted in 2008 and 2009 are in the process of winding down and the effects of the wind-down on us and Seacoast National can not be predicted.

Difficult market conditions have adversely affected and may continue to affect our industry.

We are exposed to downturns in the U.S. economy, and particularly the local markets in which we operate in Florida. Declines in the housing markets over the past two years, including falling home prices and sales volumes, and increasing foreclosures, have negatively affected the credit performance of mortgage loans and resulted in significant write-downs of asset values by financial institutions, including government-sponsored entities and major commercial and investment banks, as well as Seacoast National. These write-downs have caused many financial institutions to seek additional capital, to merge with larger and stronger institutions and, in some cases, to fail. Many lenders and institutional investors have reduced or ceased providing funding to borrowers, including other financial institutions. This market turmoil and the tightening of credit have led to increased levels of commercial and consumer delinquencies, lack of consumer confidence, increased market volatility and reductions in business activity generally. The resulting economic pressure on consumers and lack of confidence in the financial markets has adversely affected our business, financial condition and results of operations. We do not expect that the difficult conditions in the financial markets are likely to improve in the near future. A worsening of these conditions would likely exacerbate the adverse effects of these difficult market conditions on us and other financial institutions. In particular:

•  We expect to face increased regulation of our industry, including as a result of proposed regulatory reform initiatives by the U.S. government. Compliance with such regulations may increase our costs and limit our ability to pursue business opportunities.

•  Market developments, government programs and the winding down of various government programs may continue to adversely affect consumer confidence levels and may cause adverse changes in borrower behaviors and payment rates, resulting in further increases in delinquencies and default rates, which could affect our loan charge-offs and our provisions for credit losses.

•  Our ability to assess the creditworthiness of our customers or to estimate the values of our assets and collateral for loans will be reduced if the models and approaches we use become less predictive of future behaviors, valuations, assumptions or estimates. We estimate losses inherent in our credit exposure, the adequacy of our allowance for loan losses and the values of certain assets by using estimates based on difficult, subjective, and complex judgments, including estimates as to the effects of economic conditions and how these economic conditions might affect the ability of our borrowers to repay their loans or the value of assets.

•  Our ability to borrow from other financial institutions on favorable terms or at all, or to raise capital, could be adversely affected by further disruptions in the capital markets or other events, including, among other things, deterioration in investor expectations and changes in the FDIC’s resolution authority or practices.

•  Failures of other depository institutions in our markets and increasing consolidation of financial services companies as a result of current market conditions could increase our deposits and assets, necessitating additional capital, and may have unexpected adverse effects upon our ability to compete effectively.

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We are not paying dividends on our preferred stock or common stock and are deferring distribution on our trust preferred securities, and we are restricted in otherwise paying cash dividends on our common stock. The failure to resume paying dividends on our preferred stock and trust preferred securities may adversely affect us.

We historically paid cash dividends before we suspended dividend payments on our preferred and common stock and distributions on our trust preferred securities on May 19, 2009, pursuant to the request of the Federal Reserve, because, as a matter of policy, the Federal Reserve indicated that bank holding companies should not pay dividends or make distributions on trust preferred securities using funds from the TARP Capital Purchase Program (or “CPP”). There is no assurance that we will receive approval to resume paying cash dividends. Even if we are allowed to resume paying dividends again by the Federal Reserve, future payment of cash dividends on our common stock, if any, will be subject to the prior payment of all unpaid dividends and deferred distributions on our Series A Preferred Stock and trust preferred securities. Further, we need prior Treasury approval to increase our quarterly cash dividends above $0.01 per common share through the earliest of December 19, 2011, the date we redeem all shares of Series A Preferred Stock or the Treasury has transferred all shares of Series A Preferred Stock to third parties. All dividends are declared and paid at the discretion of our board of directors and are dependent upon our liquidity, financial condition, results of operations, capital requirements and such other factors as our board of directors may deem relevant

Further, dividend payments on our Series A Preferred Stock and distributions on our trust preferred securities are cumulative and therefore unpaid dividends and distributions will accrue and compound on each subsequent dividend payment date. In the event of any liquidation, dissolution or winding up of the affairs of our Company, holders of the Series A Preferred Stock shall be entitled to receive for each share of Series A Preferred Stock the liquidation amount plus the amount of any accrued and unpaid dividends. If we miss six quarterly dividend payments, whether or not consecutive, the Treasury will have the right to appoint two directors to our board of directors until all accrued but unpaid dividends have been paid. We cannot pay dividends on our outstanding shares of Series A Preferred Stock or our common stock until we have paid in full all deferred distributions on our trust preferred securities, which will require prior approval of the Federal Reserve.

Nonperforming assets take significant time and adversely affect our results of operations and financial condition.

At December 31, 2009 and 2008, our nonperforming loans (which consist of non-accrual loans) totaled $97.9 million and $87.0 million, or 7.0 percent and 5.2 percent of the loan portfolio, respectively. At December 31, 2009 and 2008, our nonperforming assets (which include foreclosed real estate) were $123.3 million and $92.0 million, or 5.72 percent and 3.97 percent of assets, respectively. In addition, we had approximately $8.8 million and $15.8 million in accruing loans that were 30 days or more delinquent at December 31, 2009 and 2008, respectively. Our nonperforming assets adversely affect our net income in various ways. Until economic and market conditions improve, we may incur additional losses relating to an increase in nonperforming loans. We do not record interest income on nonaccrual loans or other real estate owned, thereby adversely affecting our income, and increasing our loan administration costs. When we take collateral in foreclosures and similar proceedings, we are required to mark the related loan to the then fair market value of the collateral, which may result in a loss. These loans and other real estate owned also increase our risk profile and the capital our regulators believe is appropriate in light of such risks.

Seacoast National has adopted and implemented a written program to ensure Bank adherence to a written program designed to eliminate the basis of criticism of criticized assets as required by the OCC pursuant to the formal agreement that Seacoast National entered into with the OCC. While we have reduced our problem assets through loan sales, workouts, restructurings and otherwise, decreases in the value of these remaining assets, or the underlying collateral, or in these borrowers’ performance or financial conditions, whether or not due to economic and market conditions beyond our control, could adversely affect our business, results of operations and financial condition. In addition, the resolution of nonperforming assets requires significant commitments of time from management and our directors, which can be detrimental to the performance of

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their other responsibilities. There can be no assurance that we will not experience further increases in nonperforming loans in the future, or that nonperforming assets will not result in further losses in the future.

Our allowance for loan losses may prove inadequate or we may be adversely affected by credit risk exposures.

Our business depends on the creditworthiness of our customers. We periodically review our allowance for loan losses for adequacy considering economic conditions and trends, collateral values and credit quality indicators, including past charge-off experience and levels of past due loans and nonperforming assets. We cannot be certain that our allowance for loan losses will be adequate over time to cover credit losses in our portfolio because of unanticipated adverse changes in the economy, market conditions or events adversely affecting specific customers, industries or markets, or borrower behaviors towards repaying their loans. The credit quality of our borrowers has deteriorated as a result of the economic downturn in our markets. If the credit quality of our customer base or their debt service behavior materially decreases further, if the risk profile of a market, industry or group of customers declines further or weaknesses in the real estate markets and other economics persist or worsen, or if our allowance for loan losses is not adequate, our business, financial condition, including our liquidity and capital, and results of operations could be materially adversely affected.

All of our loan portfolios have been affected by the sustained economic weakness of our markets and the effects of higher unemployment rates. Our commercial and residential real estate and real estate-related portfolios have been especially affected by adverse market conditions, including reduced real estate prices and sales levels.

Our commercial and residential real estate and real estate-related loans, especially construction and development loans, have been affected adversely by the on-going correction in real estate prices, reduced levels of sales during the recessions, and the economic weakness of our Florida markets and the effects of higher unemployment rates. We may have to increase our allowance for loan losses through additional provisions for loan losses because of continued adverse changes in the economy, market conditions, and events that adversely affect our customers or markets. Our business, financial condition, liquidity, capital (especially tangible common equity), and results of operations could be materially adversely affected by additional provisions for loan losses.

Weaknesses in the real estate markets, including the secondary market for residential mortgage loans, have adversely affected us and may continue to adversely affect us.

The effects of ongoing mortgage market challenges, combined with the correction in residential real estate market prices and reduced levels of home sales, could result in further price reductions in single family home values, further adversely affecting the liquidity and value of collateral securing commercial loans for residential land acquisition, construction and development, as well as residential mortgage loans and residential property collateral securing loans that we hold, mortgage loan originations and gains on sale of mortgage loans. Declining real estate prices have caused higher delinquencies and losses on certain mortgage loans, generally, particularly second lien mortgages and home equity lines of credit. Significant ongoing disruptions in the secondary market for residential mortgage loans have limited the market for and liquidity of most residential mortgage loans other than conforming Fannie Mae and Freddie Mac loans. These trends could continue, notwithstanding various government programs to boost the residential mortgage markets and stabilize the housing markets. Declines in real estate values, home sales volumes and financial stress on borrowers as a result of job losses, interest rate resets on adjustable rate mortgage loans or other factors could have further adverse effects on borrowers that result in higher delinquencies and greater charge-offs in future periods, which would adversely affect our financial condition, including capital and liquidity, or results of operations. In the event our allowance for loan losses is insufficient to cover such losses, our earnings, capital and liquidity could be adversely affected.

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Our real estate portfolios are exposed to weakness in the Florida housing market and the overall state of the economy.

The declines in home prices and the volume of home sales in Florida, along with the reduced availability of certain types of mortgage credit, have resulted in increases in delinquencies and losses in our portfolios of home equity lines and loans, and commercial loans related to residential real estate acquisition, construction and development. Further declines in home prices coupled with the continued economic recession in our markets and continued high or increased unemployment levels could cause additional losses which could adversely affect our earnings and financial condition, including our capital and liquidity.

Our concentration of commercial real estate loans could result in further increased loan losses.

CRE is cyclical and poses risks of loss to us due to concentration levels and similar risks of the asset, especially since we had 50.7 percent and 53.5 percent of our portfolio in CRE loans at year-end 2009 and 2008, respectively. The banking regulators continue to give CRE lending greater scrutiny, and banks with higher levels of CRE loans are expected to implement improved underwriting, internal controls, risk management policies and portfolio stress testing, as well as higher levels of allowances for possible losses and capital levels as a result of CRE lending growth and exposures. During 2009, we added $124.8 million of provisioning for loan losses compared to $88.6 million in 2008 and $12.7 million in 2007, in part reflecting collateral evaluations in response to recent changes in the market values of land collateralizing acquisition and development loans.

Pursuant to the formal agreement that Seacoast National entered into with the OCC, Seacoast National adopted and implemented a written commercial real estate concentration risk management program. However, there is no guarantee that the program will effectively reduce our concentration of commercial real estate.

Higher FDIC deposit insurance premiums and assessments could adversely affect our financial condition.

FDIC insurance premiums increased substantially in 2009 and we expect to pay significantly higher FDIC premiums in the future. Market developments have significantly depleted the insurance fund of the FDIC and reduced the ratio of reserves to insured deposits. The FDIC adopted a revised risk-based deposit insurance assessment schedule on February 27, 2009, which raised deposit insurance premiums. On May 22, 2009, the FDIC implemented a five basis point special assessment of each insured depository institution’s assets minus Tier 1 capital as of June 30, 2009, but no more than 10 basis points times the institution’s assessment base for the second quarter of 2009, collected on September 30, 2009. The FDIC has also required all FDIC-insured institutions to prepay their estimated quarterly risk-based assessments for the fourth quarter of 2009 and for all of 2010, 2011 and 2012, which was paid on December 30, 2009.

We also participated in the FDIC’s TLG for noninterest-bearing transaction deposit accounts. Banks that participated in the TLG’s noninterest-bearing transaction account guarantee paid the FDIC an annual assessment of 10 basis points on the amounts in such accounts above the amounts covered by FDIC deposit insurance. TLG’s noninterest-bearing transaction deposit account guarantee program was scheduled to expire on December 31, 2009, but was extended to June 30, 2010. Our management has decided that we will participate in the extended program. Institutions that participate in the extended program are required to pay an annualized fee of 15 to 25 basis points in accordance with their risk category rating assigned by the FDIC. To the extent that these TLG assessments are insufficient to cover any loss or expenses arising from the TLG program, the FDIC is authorized to impose an emergency special assessment on all FDIC-insured depository institutions. The FDIC has authority to impose charges for the TLG program upon depository institution holding companies, as well. The increased premiums and TLG assessments charged by the FDIC increased our noninterest expense in 2009 and we expect that it will continue to increase our noninterest expense in 2010.

Current levels of market volatility are unprecedented.

The capital and credit markets have been experiencing volatility and disruption for more than two years. In some cases, the markets have produced downward pressure on stock prices and credit availability for certain

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issuers without regard to those issuers’ underlying financial condition or performance. If current levels of market disruption and volatility continue or worsen, we may experience adverse effects, which may be material, on our ability to maintain or access capital and on our business, financial condition and results of operations.

Liquidity risks could affect operations and jeopardize our financial condition.

Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans and other sources could have a substantial negative effect on our liquidity. Our funding sources include federal funds purchases, securities sold under repurchase agreements, non-core deposits, and short- and long-term debt. We are also members of the Federal Home Loan Bank of Atlanta and the Federal Reserve Bank of Atlanta, where we can obtain advances collateralized with eligible assets. We maintain a portfolio of securities that can be used as a secondary source of liquidity. There are other sources of liquidity available to us or Seacoast National should they be needed, including our ability to acquire additional non-core deposits, the issuance and sale of debt securities, and the issuance and sale of preferred or common securities in public or private transactions. Our access to funding sources in amounts adequate to finance or capitalize our activities or on terms which are acceptable to us could be impaired by factors that affect us specifically or the financial services industry or economy in general. Our liquidity, on a parent only basis, is adversely affected by our current inability to receive dividends from Seacoast National without prior regulatory approval. However, we held approximately $13.1 million of cash and short-term investments at December 31, 2009, largely due to the receipt of proceeds from our common stock offering, which was consummated in the third quarter of 2009 and a private placement of common stock completed in the fourth quarter of 2009. We invested all of the $50.0 million of the TARP CPP proceeds and an additional $70.0 million of proceeds from our offerings in Seacoast National to meet the OCC capital requirements. Our ability to borrow could also be impaired by factors that are not specific to us, such as further 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 continued deterioration in credit markets.

We could encounter difficulties as a result of our growth.

Our loans, deposits, fee businesses and employees have increased as a result of our organic growth and acquisitions. Our failure to successfully manage and support this growth with sufficient human resources, training and operational, financial and technology resources in challenging markets and economic conditions could have a material adverse effect on our operating results and financial condition. We may not be able to sustain our historical growth rates.

We are required to maintain capital to meet regulatory requirements, and if we fail to maintain sufficient capital, whether due to losses, an inability to raise additional capital or otherwise, our financial condition, liquidity and results of operations, as well as our regulatory requirements, would be adversely affected.

Both we and Seacoast National must meet regulatory capital requirements and maintain sufficient liquidity and our regulators may modify and adjust such requirements in the future. The OCC and Seacoast National agreed by letter agreement that Seacoast National shall maintain specific minimum capital ratios by March 31, 2009 and subsequent periods, including a total risk-based capital ratio of 12.00 percent and a Tier 1 leverage ratio of 7.50 percent. Recently, the minimum Tier 1 capital ratio was revised by the OCC and Seacoast National to 8.50 percent for periods after January 31, 2010. The minimum total risk-based capital ratio was left unchanged. We also face significant regulatory and other governmental risk as a financial institution and a participant in the TARP CPP.

Our ability to raise additional capital, when and if needed, will depend on conditions in the capital markets, economic conditions and a number of other factors, including investor perceptions regarding the banking industry and market condition, and governmental activities, many of which are outside our control, and on our financial condition and performance. Accordingly, we cannot assure you that we will be able to raise additional capital if needed or on terms acceptable to us. If we fail to meet these capital and other

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regulatory requirements, our financial condition, liquidity and results of operations would be materially and adversely affected.

Although we currently comply with all capital requirements, we may be subject to more stringent regulatory capital ratio requirements in the future and we may need additional capital in order to meet those requirements. Our failure to remain “well capitalized” for bank regulatory purposes could affect customer confidence, our ability to grow, our costs of funds and FDIC insurance costs, our ability to pay dividends on common and preferred stock, make distributions on our trust preferred securities, our ability to make acquisitions, and our business, results of operation and financial conditions, generally. Under FDIC rules, if Seacoast National ceases to be a “well capitalized” institution for bank regulatory purposes, its ability to accept brokered deposits may be restricted and the interest rates that it pays may be restricted.

Our ability to realize our deferred tax assets may be further reduced in the future if our estimates of future taxable income from our operations and tax planning strategies do not support this amount, and the amount of net operating loss carry-forwards realizable for income tax purposes may be reduced under Section 382 of the Internal Revenue Code by sales of our capital securities.

As of December 31, 2009, we had deferred tax assets of $18.8 million after we recorded $29.7 million of valuation allowance based on management’s estimation of the likelihood of those deferred tax assets being realized. These and future deferred tax assets may be further reduced in the future if our estimates of future taxable income from our operations and tax planning strategies do not support the amount of the deferred tax asset. The amount of net operating loss carry-forwards realizable for income tax purposes may be further reduced under Section 382 of the Internal Revenue Code by an offering and/or other sales of our capital securities.

As a TARP CPP participant, we are not allowed to carry-back losses for five years for Federal income tax purposes as otherwise permitted generally under the Worker, Homeownership, and Business Assistance Act of 2009 which was signed into law on November 6, 2009.

Our cost of funds may increase as a result of general economic conditions, FDIC insurance assessments, interest rates and competitive pressures.

Our cost of funds may increase as a result of general economic conditions, FDIC insurance assessments, interest rates and competitive pressures. We have traditionally obtained funds principally through local deposits and we have a base of lower cost transaction deposits. Generally, we believe local deposits are a cheaper and more stable source of funds than other borrowings because interest rates paid for local deposits are typically lower than interest rates charged for borrowings from other institutional lenders and reflect a mix of transaction and time deposits, whereas brokered deposits typically are higher cost time deposits. Our costs of funds and our profitability and liquidity are likely to be adversely affected if, and to the extent, we have to rely upon higher cost borrowings from other institutional lenders or brokers to fund loan demand or liquidity needs, and changes in our deposit mix and growth could adversely affect our profitability and the ability to expand our loan portfolio.

Our profitability and liquidity may be affected by changes in interest rates and economic conditions.

Our profitability depends upon net interest income, which is the difference between interest earned on assets, and interest expense on interest-bearing liabilities, such as deposits and borrowings. Net interest income will be adversely affected if market interest rates change such that the interest we pay on deposits and borrowings and our FDIC deposit insurance assessments increase faster than the interest earned on loans and investments. Interest rates, and consequently our results of operations, are affected by general economic conditions (domestic and foreign) and fiscal and monetary policies may materially affect the level and direction of interest rates. From June 2004 to mid-2006, the Federal Reserve raised the federal funds rate from 1.0 percent to 5.25 percent. Since then, beginning in September 2007, the Federal Reserve decreased the federal funds rates by 100 basis points to 4.25 percent over the remainder of 2007, and has since reduced the target federal funds rate by an additional 400 basis points to a range between zero and 25 basis points

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beginning in December 2008. Decreases in interest rates generally increase the market values of fixed-rate, interest-bearing investments and loans held, and increase the values of loan sales and mortgage loan activities. However, the production of mortgages and other loans and the value of collateral securing our loans, are dependent on demand within the markets we serve, as well as interest rates. The levels of sales, as well as the values of real estate in our markets, have declined. Declining rates reflect efforts by the Federal Reserve to stimulate the economy, but may not be effective, and thus may negatively affect our results of operations and financial condition, liquidity and earnings.

On February 18, 2010, the Federal Reserve raised the discount rate from 0.5 percent to 0.75%. Increases in interest rates generally decrease the market values of fixed-rate, interest-bearing investments and loans held and the production of mortgage and other loans and the value of collateral securing our loans, and therefore may adversely affect our liquidity and earnings.

The TARP CPP and the ARRA impose, and other proposed rules may impose additional, executive compensation and corporate governance requirements that may adversely affect us and our business, including our ability to recruit and retain qualified employees.

The purchase agreement we entered into in connection with our participation in the TARP CPP required us to adopt the Treasury’s standards for executive compensation and corporate governance while the Treasury holds the equity issued pursuant to the TARP CPP, including the common stock which may be issued pursuant to the warrant to purchase 589,623 shares of common stock (or the “Warrant”) which we refer to as the TARP Assistance Period. These standards generally apply to our chief executive officer, chief financial officer and the three next most highly compensated senior executive officers. The standards include:

•  ensuring that incentive compensation for senior executives does not encourage unnecessary and excessive risks that threaten the value of the financial institution;

•  required clawback of any bonus or incentive compensation paid to a senior executive based on statements of earnings, gains or other criteria that are later proven to be materially inaccurate;

•  prohibition on making golden parachute payments to senior executives; and

•  agreement not to deduct for tax purposes executive compensation in excess of $500,000 for each senior executive.

In particular, the change to the deductibility limit on executive compensation may increase the overall cost of our compensation programs in future periods.

The ARRA imposed further limitations on compensation during the TARP Assistance Period including:

•  a prohibition on making any golden parachute payment to a senior executive officer or any of our next five most highly compensated employees;

•  a prohibition on any compensation plan that would encourage manipulation of the reported earnings to enhance the compensation of any of its employees; and

•  a prohibition of the five highest paid executives from receiving or accruing any bonus, retention award or incentive compensation, or bonus except for long-term restricted stock with a value not greater than one-third of the total amount of annual compensation of the employee receiving the stock.

The Treasury released an interim final rule on TARP standards for compensation and corporate governance on June 10, 2009, which implemented and further expanded the limitations and restrictions imposed on executive compensation and corporate governance by the TARP CPP and ARRA. The new Treasury interim final rules also prohibit any tax gross-up payments to senior executive officers and the next 20 highest paid executives; require a “say on pay” vote in annual shareholders’ meetings; and restrict stock or units that may vest or become transferable granted to executives.

The Federal Reserve has proposed guidelines on executive compensation. The FDIC also has proposed a rule to incorporate employee compensation factors into the risk assessment system which would adjust risk-

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based deposit insurance assessment rates if the design of certain compensation programs does not satisfy certain FDIC goals to prevent executive compensation from encouraging undue risk-taking.

These provisions and any future rules issued by the Treasury, the Federal Reserve and the FDIC or any other regulatory agencies could adversely affect our ability to attract and retain management capable and motivated sufficiently to manage and operate our business through difficult economic and market conditions. If we are unable to attract and retain qualified employees to manage and operate our business, we may not be able to successfully execute our business strategy.

Changes in accounting and tax rules applicable to banks could adversely affect our financial conditions and results of operations

From time to time, the FASB and SEC change the financial accounting and reporting standards that govern the preparation of our financial statements. These changes can be hard to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in us restating prior period financial statements.

TARP lending goals may not be attainable.

Congress and the bank regulators have encouraged recipients of TARP capital to use such capital to make loans and it may not be possible to safely, soundly and profitably make sufficient loans to creditworthy persons in the current economy to satisfy such goals. Congressional demands for additional lending by recipients of TARP capital, and regulatory demands for demonstrating and reporting such lending, are increasing. On November 12, 2008, the bank regulatory agencies issued a statement encouraging banks to, among other things, “lend prudently and responsibly to creditworthy borrowers” and to “work with borrowers to preserve homeownership and avoid preventable foreclosures.” We continue to lend and have expanded our mortgage loan originations, and to report our lending to the Treasury. The future demands for additional lending are unclear and uncertain, and we could be forced to make loans that involve risks or terms that we would not otherwise find acceptable or in our shareholders’ best interest. Such loans could adversely affect our results of operation and financial condition, and may be in conflict with bank regulations and requirements as to liquidity and capital. The profitability of funding such loans using deposits may be adversely affected by increased FDIC insurance premiums.

Changes of TARP program and future rules applicable to banks generally or to TARP recipients could adversely affect our operations, financial condition, and results of operations.

The rules and policies applicable to recipients of capital under the TARP CPP continue to evolve and their scope, timing and effect cannot be predicted. Any redemption of the securities sold to the Treasury to avoid these restrictions would require prior Federal Reserve and Treasury approval. Based on recently issued Federal Reserve guidelines, institutions seeking to redeem TARP CPP preferred stock must demonstrate an ability to access the long-term debt markets without reliance on the FDIC’s TLG, successfully demonstrate access to public equity markets and meet a number of additional requirements and considerations before we can redeem any securities sold to the Treasury. Therefore, it is uncertain if we will be able to redeem such securities even if we have sufficient financial resources to do so.

In addition, the government is contemplating potential new programs under TARP, including programs to promote small business lending, among other initiatives. It is uncertain whether we will qualify for those new programs and whether those new programs may impose additional restrictions on our operation and affect our financial condition in the future.

Our future success is dependent on our ability to compete effectively in highly competitive markets.

We operate in the highly competitive markets of Martin, St. Lucie, Brevard, Indian River and Palm Beach Counties in southeastern Florida, the Orlando, Florida metropolitan statistical area, as well as in more rural competitive counties in the Lake Okeechobee, Florida region. Our future growth and success will depend on

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our ability to compete effectively in these markets. We compete for loans, deposits and other financial services in geographic markets with other local, regional and national commercial banks, thrifts, credit unions, mortgage lenders, and securities and insurance brokerage firms. Many of our competitors offer products and services different from us, and have substantially greater resources, name recognition and market presence than we do, which benefits them in attracting business. Larger competitors may be able to price loans and deposits more aggressively than we can, and have broader customer and geographic bases to draw upon.

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 services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, have led to market-wide liquidity problems, losses of depositor, creditor and 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 failure, which would increase the capital we need to support such growth.

We operate in a heavily regulated environment.

We and our subsidiaries are regulated by several regulators, including the Federal Reserve, the OCC, the SEC, the FDIC and FINRA, and since December 2008, the Treasury. Our success is affected by state and federal regulations affecting banks and bank holding companies, and the securities markets and securities and insurance regulators. Banking regulations are primarily intended to protect depositors, not shareholders. The financial services industry also is subject to frequent legislative and regulatory changes and proposed changes, the effects of which cannot be predicted. Federal bank regulatory agencies and the Treasury, as well as the Congress and the President, are evaluating and have proposed numerous significant changes in the regulation of banks, other financial services providers and the financial markets. These changes, if adopted, could require us to maintain more capital, liquidity and risk controls which could adversely affect our growth, profitability and financial condition.

We are subject to internal control reporting requirements that increase compliance costs and failure to comply timely could adversely affect our reputation and the value of our securities.

We are required to comply with various corporate governance and financial reporting requirements under the Sarbanes-Oxley Act of 2002, as well as rules and regulations adopted by the SEC, the Public Company Accounting Oversight Board and Nasdaq. In particular, we are required to include management and independent registered public accounting firm reports on internal controls as part of our annual report on Form 10-K pursuant to Section 404 of the Sarbanes-Oxley Act. We are also subject to a number of disclosure and reporting requirements as a result of our participation in TARP CPP. The SEC also has proposed a number of new rules or regulations requiring additional disclosure, such as lower-level employee compensation. We expect to continue to spend significant amounts of time and money on compliance with these rules. Our failure to track and comply with the various rules may materially adversely affect our reputation, ability to obtain the necessary certifications to financial statements, and the value of our securities.

Technological changes affect our business, and we may have fewer resources than many competitors to invest in technological improvements.

The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. In addition to serving clients better, the effective use of technology may increase efficiency and may enable financial institutions to reduce costs. Our future success will depend, in part, upon our ability to use technology to provide products and services that provide convenience to customers and to create additional efficiencies in operations. We may need to make significant additional capital investments in technology in the future, and we may not be able to effectively implement new technology-driven products and services. Many competitors have substantially greater resources to invest in technological improvements.

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The anti-takeover provisions in our Articles of Incorporation and under Florida law may make it more difficult for takeover attempts that have not been approved by our board of directors.

Florida law and our Articles of Incorporation include anti-takeover provisions, such as provisions that encourage persons seeking to acquire control of us to consult with our board, and which enable the board to negotiate and give consideration on behalf of us and our shareholders and other constituencies to the merits of any offer made. Such provisions, as well as supermajority voting and quorum requirements and a staggered board of directors, may make any takeover attempts and other acquisitions of interests in us, by means of a tender offer, open market purchase, a proxy fight or otherwise, that have not been approved by our board of directors more difficult and more expensive. These provisions may discourage possible business combinations that a majority of our shareholders may believe to be desirable and beneficial. As a result, our board of directors may decide not to pursue transactions that would otherwise be in the best interests of holders of our common stock.

Hurricanes or other adverse weather events would negatively affect our local economies or disrupt our operations, which would have an adverse effect on our business or results of operations.

Our market areas in Florida are susceptible to hurricanes and tropical storms and related flooding and wind damage. Such weather events can disrupt operations, result in damage to properties and negatively affect the local economies in the markets where they operate. We cannot predict whether or to what extent damage that may be caused by future hurricanes will affect our operations or the economies in our current or future market areas, but such weather events could result in a decline in loan originations, a decline in the value or destruction of properties securing our loans and an increase in the delinquencies, foreclosures or loan losses. Our business or results of operations may be adversely affected by these and other negative effects of future hurricanes or tropical storms, including flooding and wind damage. Many of our customers have incurred significantly higher property and casualty insurance premiums on their properties located in our markets, which may adversely affect real estate sales and values in our markets.

Future acquisitions and expansion activities may disrupt our business, dilute existing shareholders and adversely affect our operating results.

We regularly evaluate potential acquisitions and expansion opportunities. To the extent that we grow through acquisitions, we cannot assure you that we will be able to adequately or profitably manage this growth. Acquiring other banks, branches or businesses, as well as other geographic and product expansion activities, involve various risks including:

•  risks of unknown or contingent liabilities;

•  unanticipated costs and delays;

•  risks that acquired new businesses do not perform consistent with our growth and profitability expectations;

•  risks of entering new markets or product areas where we have limited experience;

•  risks that growth will strain our infrastructure, staff, internal controls and management, which may require additional personnel, time and expenditures;

•  exposure to potential asset quality issues with acquired institutions;

•  difficulties, expenses and delays of integrating the operations and personnel of acquired institutions, and start-up delays and costs of other expansion activities;

•  potential disruptions to our business;

•  possible loss of key employees and customers of acquired institutions;

•  potential short-term decreases in profitability; and

•  diversion of our management’s time and attention from our existing operations and business.

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We may engage in FDIC-assisted transactions, which could present additional risks to our business.

We may have opportunities to acquire the assets and liabilities of failed banks in FDIC-assisted transactions, which present the risks of acquisitions, although generally, as well as some risks specific to these transactions. Although these FDIC-assisted transactions typically provide for FDIC assistance to an acquiror to mitigate certain risks, which may include loss-sharing, where the FDIC absorbs most losses on covered assets and provides some indemnity, we would be subject to many of the same risks we would face in acquiring another bank in a negotiated transaction, without FDIC assistance, including risks associated with pricing such transactions, the risks of loss of deposits and maintaining customer relationships and failure to realize the anticipated acquisition benefits in the amounts and within the timeframes we expect. In addition, because these acquisitions provide for limited diligence and negotiation of terms, these transactions may require additional resources and time, servicing acquired problem loans and costs related to integration of personnel and operating systems, the establishment of processes to service acquired assets, require us to raise additional capital, which may be dilutive to our existing shareholders. If we are unable to manage these risks, FDIC-assisted acquisitions could have a material adverse effect on our business, financial condition and results of operations.

Attractive acquisition opportunities may not be available to us in the future.

While we seek continued organic growth, as our earnings and capital position improve, we may consider the acquisition of other businesses. We expect that other banking and financial companies, many of which have significantly greater resources, will compete with us to acquire financial services businesses. This competition could increase prices for potential acquisitions that we believe are attractive. Also, acquisitions are subject to various regulatory approvals. If we fail to receive the appropriate regulatory approvals, we will not be able to consummate an acquisition that we believe is in our best interests. Among other things, our regulators consider our capital, liquidity, profitability, regulatory compliance and levels of goodwill and intangibles when considering acquisition and expansion proposals. Any acquisition could be dilutive to our earnings and shareholders’ equity per share of our common stock.

Risks Related to our Common Stock

We may issue additional shares of common or preferred stock securities, which may dilute the interests of our shareholders and may adversely affect the market price of our common stock.

We are currently authorized to issue up to 130 million shares of common stock, of which 58,877,646 shares were outstanding as of March 9, 2010, and up to 4 million shares of preferred stock, of which 2,000 shares are outstanding. Our board of directors has authority, without action or vote of the shareholders, to issue all or part of the authorized but unissued shares and to establish the terms of any series of preferred stock. These authorized but unissued shares could be issued on terms or in circumstances that could dilute the interests of other shareholders.

The Series A Preferred Stock diminishes the net income available to our common shareholders and earnings per common share, and the Warrant we issued to Treasury may be dilutive to holders of our common stock.

The dividends accrued and the accretion on discount on the Series A Preferred Stock reduce the net income available to common shareholders and our earnings per common share. The Series A Preferred Stock is cumulative, which means that any dividends not declared or paid will accumulate and will be payable when we resume paying dividends. Shares of Series A Preferred Stock will also receive preferential treatment in the event of liquidation, dissolution or winding up of Seacoast. Additionally, the ownership interest of the existing holders of our common stock will be diluted to the extent the Warrant is exercised. The shares of common stock underlying the Warrant represent approximately 1.0 percent of the shares of our common stock outstanding as of December 31, 2009 (including the shares issuable upon exercise of the Warrant in our total outstanding shares). Although Treasury has agreed not to vote any of the shares of common stock it receives

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upon exercise of the Warrant, a transferee of any portion of the Warrant or of any shares of common stock acquired upon exercise of the Warrant is not bound by this restriction.

Holders of the Series A Preferred Stock have certain voting rights that may adversely affect our common shareholders, and the holders of shares of our Series A Preferred Stock may have different interests from, and vote their shares in a manner deemed adverse to, our common shareholders.

In the event that we fail to pay dividends on the Series A Preferred Stock for an aggregate of at least six quarterly dividend periods (whether or not consecutive) the Treasury will have the right to appoint two directors to our board of directors until all accrued but unpaid dividends have been paid; otherwise, except as required by law, holders of the Series A Preferred Stock have limited voting rights. So long as shares of the Series A Preferred Stock are outstanding, in addition to any other vote or consent of shareholders required by law or our amended and restated charter, the vote or consent of holders owning at least 662/3 percent of the shares of Series A Preferred Stock outstanding is required for:

•  any authorization or issuance of shares ranking senior to the Series A Preferred Stock;

•  any amendment to the rights of the Series A Preferred Stock so as to adversely affect the rights, preferences, privileges or voting power of the Series A Preferred Stock; or

•  consummation of any merger, share exchange or similar transaction unless the shares of Series A Preferred Stock remain outstanding, or if we are not the surviving entity in such transaction, are converted into or exchanged for preference securities of the surviving entity and the shares of Series A Preferred Stock remaining outstanding or such preference securities have such rights, preferences, privileges and voting power as are not materially less favorable to the holders than the rights, preferences, privileges and voting power of the shares of Series A Preferred Stock. Holders of Series A Preferred Stock could block the foregoing transitions, even where considered desirable by, or in the best interests of, holders of our common stock.

The holders of Series A Preferred Stock, including the Treasury, may have different interests from the holders of our common stock, and could vote to disapprove transactions that are favored by, or are in the best interests of, our common shareholders.

The anti-takeover provisions in our articles of incorporation and under Florida law may make it more difficult for takeover attempts that have not been approved by our board of directors.

Florida law and our articles of incorporation include anti-takeover provisions, such as provisions that encourage persons seeking to acquire control of us to consult with our board, and which enable the board to negotiate and give consideration on behalf of us and our shareholders and other constituencies to the merits of any offer made. Such provisions, as well as supermajority voting and quorum requirements and a staggered board of directors, may make any takeover attempts and other acquisitions of interests in us that have not been approved by our board of directors more difficult and more expensive. These provisions may discourage possible business combinations that a majority of our shareholders may believe to be desirable and beneficial.

Item 1B.   Unresolved Staff Comments

None.

Item 2.   Properties

We and Seacoast National’s main office occupies approximately 62,000 square feet of a 68,000 square foot building in Stuart, Florida. This building, together with an adjacent 10-lane drive-through banking facility and an additional 27,000-square foot office building, are situated on approximately eight acres of land in the center of Stuart that is zoned for commercial use. The building and land are owned by Seacoast National, which leases out portions of the building not utilized by our company and Seacoast National to unaffiliated third parties.

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Adjacent to the main office, Seacoast National leases approximately 21,400 square feet of office space to house operational departments, consisting primarily of information systems and retail support. Seacoast National owns its equipment, which is used for servicing bank deposits and loan accounts as well as on-line banking services, and providing tellers and other customer service personnel with access to customers’ records. In addition, Seacoast National acquired Big Lake’s operations center as a result of the acquisition of Big Lake on April 1, 2006. The operations center is situated on 3.25 acres in a 4,939 square foot building in Okeechobee, Florida, all of which are owned by Seacoast National. Our PGA Blvd. branch is utilized as a disaster recovery site should natural disasters or other events preclude use of Seacoast National’s primary operations center.

In February 2000, Seacoast National opened a lending office in Ft. Lauderdale, Florida for its Seacoast Marine Finance Division. In November 2002, additional office space was acquired for the Seacoast Marine Finance Division in Alameda, California (430 square feet of leased space), and Newport Beach, California (1,200 square feet of leased space). Since January 2005, the Ft. Lauderdale, Florida office has been in a 2,009 square feet leased facility. The furniture and equipment at these locations is owned by Seacoast National.

In June 2004, Seacoast National also opened a loan production office in Melbourne, Florida. Located in a three story waterfront office building, this office occupies 1,533 square feet of leased space on the third floor. This office was closed in February 2007 coinciding with the opening of our Viera branch location in Brevard County. Personnel at the loan production office now occupy space in the new branch office.

As of December 31, 2009, the net carrying value of branch offices of Seacoast National (excluding the main office) was approximately $30.6 million. Seacoast National’s branch offices are described as follows:

Jensen Beach, opened in 1977, is a free-standing facility located in the commercial district of a residential community contiguous to Stuart. The 1,920 square foot bank building and land are owned by Seacoast National. Improvements include three drive-in teller lanes and one drive-up ATM, as well as a parking lot and landscaping.

East Ocean Boulevard, was originally opened in 1978 and relocated in 1995. This office is located on the main thoroughfare between downtown Stuart and Hutchinson Island’s beachfront residential developments. This branch is housed in a four-story office condominium. The 2,300 square foot branch area on the first floor operates as a full service branch including five drive-in lanes and a drive-up ATM. The remaining 2,300 square feet on the ground floor was sold in June 1996, the third floor was sold in December 1995, and the second floor was sold in December 1998.

Cove Road, opened in late 1983, is conveniently located close to housing developments in the residential areas south of Stuart known as Port Salerno and Hobe Sound. South Branch Building, Inc., a subsidiary of Seacoast National, is a general partner in a partnership that entered into a long-term land lease for approximately four acres of property on which it constructed a 7,500 square foot building. Seacoast National leases the building and utilizes 3,450 square feet of the available space. Remaining space is sublet by Seacoast National to other business tenants. Seacoast National has improved the premises with three drive-in lanes, bank equipment, and furniture and fixtures, all of which are owned by Seacoast National. A drive-up ATM was added in early 1997.

Hutchinson Island, opened on December 31, 1984, is in a shopping center located on a coastal barrier island, close to numerous oceanfront condominium developments. In 1993, the branch was expanded from 2,800 square feet to 4,000 square feet and is under a long-term lease to Seacoast National. Seacoast National has improved the premises with bank equipment, a walk-up ATM and three drive-in lanes, all owned by Seacoast National.

Rivergate, opened October 28, 1985, originally occupied 1,700 square feet of leased space in the Rivergate Shopping Center, Port St. Lucie, Florida. Seacoast National moved the branch to larger facilities in the shopping center in April 1999. Furniture and bank equipment located in the prior facilities were moved to the new facility, which occupied approximately 3,400 square feet, with three drive-in lanes and a drive-up ATM. This office closed in the second quarter of 2008, simultaneous with the opening of

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Seacoast National’s new Westmoreland branch office (across the street from Rivergate). The Westmoreland office is situated in a stand alone building owned by Seacoast National with 4,468 square feet of space (2,821 square feet to be occupied by the branch, the remainder to be leased to tenants) on leased land, with three drive-in lanes, a drive-up ATM, and furniture and equipment, all owned by Seacoast National. Located on the corner of a heavily traversed thoroughfare, the new location is more prominent than the existing store front location in the shopping plaza.

Wedgewood Commons, opened in April 1988, is located on an out-parcel under long term ground lease in the Wedgewood Commons Shopping Center, south of Stuart on U.S. Highway 1. The property consists of a 2,800 square foot building that houses four drive-in lanes, a walk-up ATM and various bank equipment, all of which are owned by Seacoast National. This office closed simultaneously in January 2009, with its relocation to a new stand alone building on a leased out parcel in the same shopping center, but with a greater presence on the corner of U.S. 1 and offering better ingress and egress. The new building owned by Seacoast National contains 5,477 square feet of space (2,836 square feet to be occupied by the branch, the remainder to be leased to tenants), with four drive-in lanes, a drive-up ATM, and furniture and equipment, all of which are owned by Seacoast National.

Bayshore, opened in September 1990, occupies 3,520 square feet of a 50,000 square foot shopping center located in Port St. Lucie. Seacoast National has leased the premises under a long-term lease agreement and has made improvements to the premises, including the addition of three drive-in lanes and a walk-up ATM, all of which are owned by Seacoast National.

Hobe Sound, acquired in December 1991 from the Resolution Trust Corporation, is a two-story facility containing 8,000 square feet and is centrally located in Hobe Sound. Of 2,800 square feet on the second floor, 1,225 square feet is utilized by local community organizations. Improvements include two drive-in teller lanes, a drive-up ATM, and equipment and furniture, all of which are owned by Seacoast National.

Fort Pierce, acquired in December 1991, is a 2,895 square foot facility owned by Seacoast National in the heart of Fort Pierce that has three drive-in lanes and a drive-up ATM. Equipment and furniture at this location are all owned by Seacoast National. In August 2007, Seacoast National sold this building, realizing a gain of $280,000. Under the terms of the sales agreement, Seacoast National obtained an accommodation whereby it could continue to occupy the location until construction of its new Ft. Pierce location was completed. The new location on U.S. 1 is situated on leased land with 5,477 square feet of space (2,836 square feet to be occupied by the branch, the remainder to be leased to tenants), with three drive-in lanes, a drive-up ATM, and furniture and equipment, all of which are owned by Seacoast National. The new location opened in October 2008.

Martin Downs, acquired in February 1992, is a 3,960 square foot bank building owned by Seacoast National located at a high traffic intersection in Palm City, an emerging commercial and residential community west of Stuart. Improvements include three drive-in teller lanes, a drive-up ATM, equipment and furniture.

Tiffany, acquired in May 1992 and owned by Seacoast National, is a two-story facility containing 8,250 square feet and is located on a corner of U.S. Highway 1 in Port St. Lucie offering excellent exposure in one of the fastest growing residential areas in the region. Seacoast National uses the second story space to house brokerage and loan origination personnel, a training facility and conference area. Three drive-in teller lanes, a walk-up ATM, equipment and furniture are utilized and owned by Seacoast National.

Vero Beach, acquired in February 1993 and owned by Seacoast National, is a 3,300 square foot bank building located in Vero Beach on U.S. Highway 1 at the intersection with 12th Street. Seacoast National holds a long-term ground lease on the property. Improvements include three drive-in teller lanes, a walk-up ATM, equipment and furniture, all of which are owned by Seacoast National.

Beachland, opened in February 1993, consists of 4,150 square feet of leased space located in a three-story commercial building on Beachland Boulevard, the main beachfront thoroughfare in Vero

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Beach, Florida. This facility has 2 drive-in teller lanes, a drive-up ATM, and furniture and equipment, all owned by Seacoast National. In November 2008, Seacoast National closed this location and relocated branch personnel, as well as furniture and equipment, to a separate leased facility in close proximity on Cardinal Drive.

Sandhill Cove, opened in September 1993, is a leased facility in an upscale life-care retirement community. The 135 square foot office is located within the community facilities on a 36-acre development in Palm City, Florida. This community contains approximately 168 private residences.

St. Lucie West, opened in November 1994 in a different location, was moved to the Renar Centre, located at 1100 SW St. Lucie West Blvd., Port St. Lucie, Florida, in June 1997, where Seacoast National leases 4,320 square feet on the first floor. The facility includes three drive-in teller lanes, a drive-up ATM, and furniture and equipment.

Mariner Square, acquired in April 1995, was a 3,600 square foot leased space located on the ground floor of a three-story office building located on U.S. Highway 1 between Hobe Sound and Port Salerno. Approximately 700 square feet of the space was sublet to a third party. The space occupied by Seacoast National had been improved to be a full service branch with two drive-in lanes, one serving as a drive-up ATM lane as well as a drive-in teller lane, all owned by Seacoast National. Seacoast National closed this location in March 2008.

Sebastian, opened in May 1996, is located within a 174,000 square foot Wal-Mart Superstore on U.S. Highway 1 in northern Indian River County. The leased space occupied by Seacoast National totals 865 square feet. The facility has a walk-up ATM, owned by Seacoast National.

South Vero Square, opened in May 1997 in a 3,150 square foot building owned by Seacoast National on South U.S. Highway 1 in Vero Beach. The facility includes three drive-in teller lanes, a drive-up ATM, and furniture and equipment, all owned by Seacoast National.

Oak Point, opened in June 1997, occupies 5,619 square feet of leased space on the first floor of a 19,700 square foot three-story building in Indian River County. The office is in close proximity to Indian River Memorial Hospital and the peripheral medical community adjacent to the hospital. The facility includes three drive-in teller lanes, a walk-up ATM, and furniture and equipment, all owned by Seacoast National. Seacoast National sublets 2,030 square feet of space on the first floor to a third party.

Route 60 Vero, opened in July 1997. Similar to the Sebastian office, this facility is housed in a Wal-Mart Superstore in western Vero Beach in Indian River County. The branch occupies 750 square feet of leased space and includes a walk-up ATM.

Sebastian West, opened in March 1998 in a 3,150 square foot building owned by Seacoast National. It is located at the intersection of Fellsmere Road and Roseland Road in Sebastian. The facility includes three drive-in teller lanes, a drive-up ATM, and furniture and equipment, all owned by Seacoast National.

Jensen West, opened in July 2000, is located on an out parcel under a long-term ground lease on U.S. Highway 1 in northern Martin County. The facility consists of a 3,930 square foot building, with four drive-up lanes, a drive-up ATM and furniture and equipment, all of which are owned by Seacoast National and are located on the leased property. This office replaced Seacoast National’s U.S. Highway 1 and Port St. Lucie Boulevard office, one-half mile north of this location, which originally opened in June 1997.

Ft. Pierce Wal-Mart, opened in June 2001, was another Wal-Mart Superstore location. The branch occupied 540 square feet of leased space and included a walk-up ATM, a night depository, and furniture and equipment, all owned by Seacoast National. This location was closed at the end of February 2008.

Port St. Lucie Wal-Mart, opened in October 2002, occupied 695 square feet of leased space in a Wal-Mart Superstore on U.S. Highway 1 in southern Port St. Lucie. The branch included a walk-up ATM, a night depository, and furniture and equipment, all owned by Seacoast National. This location was closed at the end of December 2007.

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Jupiter, located on U.S. Highway 1 in Jupiter, Florida, this office opened as a loan production office in August 2002 and converted to a full-service branch during 2003. Commercial and residential lending personnel as well as certain executive offices were maintained at this location until May 2006 when our PGA Blvd. location opened. In May 2006 this office was closed. Seacoast National’s obligation for 3,718 square feet of leased space under lease expired at the end of July 2007. No ATM or night depository existed for this location.

Tequesta, opened in January 2003, is a 3,500 square foot building acquired and owned by Seacoast National located on U.S. Highway 1 on property subject to a long term ground lease. The Tequesta location has two drive-up lanes, a drive-up ATM, a night depository, and furniture and equipment, all owned by Seacoast National.

Jupiter Indiantown, opened in December 2004, is a free standing office located on Indiantown Road, a prime thoroughfare in Jupiter, Florida. Seacoast National owns the building and leases the land. The building is 2,881 square feet and includes three drive-up lanes, a drive-up ATM, a night depository, and furniture and equipment, all owned by Seacoast National.

Juno Beach was acquired during 2004. Seacoast National’s Jupiter Bluff’s branch was relocated to this facility at the end of December 2004, following renovation of the building. The building is 2,891 square feet, located on U.S. Highway 1 in Juno Beach, and includes three drive-up lanes, a drive-up ATM, a night depository, and furniture and equipment, all owned by Seacoast National. We closed this location at the end of March 2008.

60 West was acquired in January 2005 from another financial institution. Seacoast National owns the land and the 2,500 square foot building at this location on Route 60 in Vero Beach. The office has three drive-up lanes, a drive-up ATM, a night depository, and furniture and equipment, all owned by Seacoast National.

Northlake, is a 2,881 square foot location built on land owned by Seacoast National and opened in February 2005. Located on a bustling east / west thoroughfare in northern Palm Beach County, the facility includes 3 drive-up lanes, a drive-up ATM, a night depository, and furniture and equipment, all owned by Seacoast National. This location was closed in June 2009.

Downtown Orlando, acquired in April 2005, is a 6,752 square foot leased facility occupying the ground floor of a six floor 62,100 square foot commercial office building on Orange Avenue in the heart of downtown Orlando. The location includes a walk-up ATM, a night depository, and furniture and equipment, all owned by Seacoast National.

Maitland/Winter Park, acquired in April 2005, occupies 4,536 square feet of leased space on the first floor of a three-story 32,975 square foot office building on Orlando Avenue. The location includes 3 drive-up lanes, a drive-up ATM, a night depository, and furniture and equipment, all owned by Seacoast National.

Longwood, acquired in April 2005, occupies 4,596 square feet of leased space on the first floor of a three-story 35,849 square foot office building on North State Road 434. The location includes 3 drive-up lanes, a drive-up ATM, a night depository, and furniture and equipment, all owned by Seacoast National.

PGA Blvd., a signature Palm Beach County headquarters office opened in May 2006 in Palm Beach Gardens in northern Palm Beach County. Located across the street from the Gardens Mall on PGA Blvd., this leased office is in a high-rise office building. Seacoast National occupies a total of 13,454 square feet: 5,600 square feet on the first floor and 7,854 square feet on the second floor. The office has three drive-up lanes, a drive-up ATM and night depository.

Offices acquired from Big Lake include branches in eight locations in central Florida. Some locations are leased, others owned. The eight locations are as follows:

South Parrott, acquired in April 2006, located in Okeechobee County, this office is comprised of an 8,232 square foot two-story building on approximately 3 acres of land, all owned by Seacoast National.

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The office was constructed in 1986 and has eight drive-up lanes, a drive-up ATM, a night depository, and furniture and equipment, all owned by Seacoast National.

North Parrott, acquired in April 2006, located in Okeechobee County, is a 3,920 square foot one-story building built in 2004 on 2 acres of land. The office and land are owned by Seacoast National. The office has 4 drive-up lanes, a drive-up ATM, a night depository, and furniture and equipment, all owned by Seacoast National.

Arcadia, acquired in April 2006, located in DeSoto County, originally was a 1,681 square foot one-story branch on approximately 1.5 acres, all owned by Seacoast National. Built in 1984, the office has 3 drive-up lanes, a walk-up ATM, a night depository, and furniture and equipment, all owned by Seacoast National. An expansion of this office adding 1,575 square feet was completed in April 2008.

Moore Haven, acquired in April 2006, located in Glades County, is a 640 square foot office. The office is under a lease, the initial term of which expired in 2003 and now is renewed annually in November. The office is a storefront location, with a walk-up ATM, and furniture and equipment, all owned by Seacoast National.

Wauchula, acquired in April 2006, located in Hardee County, is a 4,278 square foot office. It is leased under a 10-year lease that expired in 2008, but with a renewal option that extends the lease for an additional five years to 2013. The office has 2 drive-up lanes, a walk-up ATM, a night depository, and furniture and equipment, all owned by Seacoast National.

Clewiston, acquired in April 2006, located in Hendry County, consists of a 5,661 square foot building that is 32 years old on 2 plus acres. The land and building are owned. It has 4 drive-up lanes, a drive-up ATM, a night depository, and furniture and equipment, all owned by Seacoast National.

LaBelle, acquired in April 2006, located in Hendry County, is a one-story building consisting of 2,361 square feet on approximately one acre of land. The land and building are owned by Seacoast National. The building is 21 years old. The office has three drive-up lanes, a drive-up ATM, a night depository, and furniture and equipment, all owned by Seacoast National.

Lake Placid, acquired in April 2006, located in Highlands County, is a 2,125 square foot building. The building and land (approximately one-half acre) are owned by Seacoast National. It has a drive-up window, a walk-up ATM, a night depository, and furniture and equipment, all owned by Seacoast National.

Viera-The Avenues, which opened in February 2007, is Seacoast National’s first branch location in Brevard County, located in the Viera area. The branch is 5,999 square feet in size, with 3 drive-up lanes, a drive-up ATM, night depository, and furniture and equipment, all owned by Seacoast National. This location is under a ground lease.

Middle River was opened in October 2007 in Ft. Lauderdale, Florida on U.S. 1. The location occupies 2,350 square feet of leased space on the first floor of a brand new one-story building. The location has a night depository, and furniture and equipment, all owned by Seacoast National. The location replaced 1,089 square feet of space acquired on a short term lease in early 2007 in Boca Raton, Florida, temporarily housing a new loan production office. All personnel were relocated to the Middle River site. This location was closed in early December 2009.

Murrell Road, located in Brevard County, is Seacoast National’s second office in this market. The branch is a two-story office owned by Seacoast National with 9,041 square feet, of which 4,307 square feet on the first floor houses banking and loan offices and 4,264 square feet on the second floor is leased to outside parties. The branch has 3 drive-up lanes, a drive-up ATM, a night depository, and furniture and equipment, all owned by Seacoast National. This location is under a ground lease and opened in April 2008.

Gatlin Boulevard, located in St. Lucie County, opened in March 2008 on an out parcel directly in front of a Sam’s Club and adjacent to a Wal-Mart. The office is two stories, with 2,782 square feet on the first floor occupied by Seacoast National and 2,518 square feet on the second floor available for leasing

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to outside parties. Seacoast National owns the land and building. The branch has 4 drive-up lanes, a drive-up ATM, a night depository, and furniture and equipment, all owned by Seacoast National.

For additional information regarding our properties, please refer to Notes G and K of the Notes to Consolidated Financial Statements in our 2009 Annual Report, certain portions of which are incorporated herein by reference pursuant to Part II, Item 8 of this report.

No new and planned offices are projected to open over the remainder of 2010.

Item 3.   Legal Proceedings

We and our subsidiaries are subject, in the ordinary course, to litigation incident to the businesses in which we are engaged. Management presently believes that none of the legal proceedings to which we are a party are likely to have a material adverse effect on our consolidated financial position, operating results or cash flows, although no assurance can be given with respect to the ultimate outcome of any such claim or litigation.

Item 4.   Submission of Matters to a Vote of Security Holders

A special shareholders’ meeting was held on December 3, 2009. Information regarding the special shareholders’ meeting is incorporated herein by reference to the current report on Form 8-K filed with the SEC on December 3, 2009.

Part II

Item 5.   Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Holders of our common stock are entitled to one vote per share on all matters presented to shareholders as provided in our Amended and Restated Articles of Incorporation.

Our common stock is traded under the symbol “SBCF” on the Nasdaq Global Select Market which is a national securities exchange (“Nasdaq”). As of March 9, 2010 there were 58,887,646 shares of our common stock outstanding, held by approximately 1,428 record holders.

The table below sets forth the high and low sale prices per share of our common stock on Nasdaq and the dividends paid per share of our common stock for the indicated periods.

	Sale Price Per Share of
	Seacoast Common				Quarterly Dividends
	Stock				Declared Per Share of
	High		Low		Seacoast Common Stock
2008
First Quarter	$	12.460	$	7.670	$	0.16
Second Quarter		11.200		7.760		0.16
Third Quarter		12.570		7.310		0.01
Fourth Quarter		11.000		4.370		0.01
2009
First Quarter	$	6.870	$	2.170	$	0.01
Second Quarter		4.350		2.150		0.00
Third Quarter		2.840		1.910		0.00
Fourth Quarter		2.620		1.180		0.00

Dividends from Seacoast National are our primary source of funds to pay dividends on our common stock. Under the National Bank Act, national banks may in any calendar year, without the approval of the OCC, pay dividends to the extent of net profits for that year, plus retained net profits for the preceding two

39

years (less any required transfers to surplus). The need to maintain adequate capital in Seacoast National also limits dividends that may be paid to us. Beginning in the third quarter of 2008, we reduced our dividend per share of common stock to de minimis $0.01. On May 19, 2009, the Company’s board of directors voted to suspend quarterly dividends on common stock. Additional information regarding restrictions on the ability of Seacoast National to pay dividends to us is contained in Note C of the “Notes to Consolidated Financial Statements” in our 2009 Annual Report, portions of which are incorporated by reference herein, including in Part II, Item 8 of this report. See “Item 1. Business- Payments of Dividends” for information with respect to the regulatory restrictions on dividends. We do not expect to pay dividends in the foreseeable future and expect to retain all earnings, if any, to support our capital adequacy and growth.

Outstanding Warrants

Pursuant to the Purchase Agreement between us and the Treasury on December 19, 2008, we sold the Warrant to acquire 1,179,245 shares of our common stock to the U.S. Treasury and the exercise price of the Warrant is $6.36. As a result of the Company’s public offering in the third quarter of 2009, the number of shares under the Warrant was reduced by 50 percent to 589,623 shares. The Warrant will expire on December 19, 2018.

Securities Authorized for Issuance Under Equity Compensation Plans

See the information included under Part III, Item 12, which is incorporated in response to this item by reference.

Performance Graph

See the information referred to as “Performance Graph”, included under Part III, Item 11, which is incorporated in response to this item by reference.

Recent Sales of Unregistered Securities

During 2008, we did not issue or sell any of our securities in transactions not registered under the Securities Act of 1933, as amended except for shares of Series A Preferred Stock and the Warrant to purchase shares of our common stock sold to the Treasury as a result of our participation in the TARP CPP disclosed in our Current Report on Form 8-K, dated December 23, 2008. We subsequently filed a Form S-3, which was declared effective on January 30, 2009 to register the resale of those securities.

On December 17, 2009, Seacoast sold 6,000,000 shares of its common stock to CapGen Capital Group III LP (“CapGen”), a Delaware limited partnership, pursuant to the definitive Stock Purchase Agreement dated as of October 23, 2009 between the Company and CapGen, a copy of which was filed with the SEC on October 29, 2009 as Exhibit 10.1 of the Company’s Current Report on Form 8-K. Fox-Pitt Kelton Cochran Caronia Waller (USA) LLC, and its successor, Macquarie Capital (USA) Inc. acted as placement agent.

The Company received total gross proceeds of $13.5 million from the sale, and paid $540,000 of fees to the placement agent, in addition to the reimbursement of reasonable expenses in connection with the placement. The private placement was made pursuant to exemptions from registration under the Securities Act of 1933, as amended and Regulation D thereunder.

Item 6.   Selected Financial Data

Selected financial data of the Company is set forth under the caption “Financial Highlights” in the 2009 Annual Report and is incorporated herein by reference.

Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations is set forth under the caption “Financial Review — 2009 Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2009 Annual Report and is incorporated herein by reference.

40

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk

The narrative under the heading of “Market Risk” in the 2009 Annual Report is incorporated herein by reference. Table 19, “Interest Rate Sensitivity Analysis”, the narrative under the heading of “Securities”, and the narrative under the heading of “Interest Rate Sensitivity” in the 2009 Annual Report are incorporated herein by reference. The information regarding securities owned by us set forth in Table 15, “Securities Held for Sale” and Table 16, “Securities Held for Investment,” in the 2009 Annual Report is incorporated herein by reference.

Item 8.   Financial Statements and Supplementary Data

The report of KPMG LLP, an independent registered public accounting firm, and the Consolidated Financial Statements are included in the 2009 Annual Report and are incorporated herein by reference. and “Quarterly Consolidated Income Statements” are included in the 2009 Annual Report and are incorporated herein by reference.

Item 9.   Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A.   Controls and Procedures

Disclosure Controls and Procedures.  We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, as defined in SEC Rule 13a-15 under the Exchange Act, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

In connection with the preparation of this Annual Report on Form 10-K, as of the end of the period covered by this report, an evaluation was performed, with the participation of the CEO and CFO, of the effectiveness of our disclosure controls and procedures, as required by Rule 13a-15 of the Exchange Act. Based upon that evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Internal Control over Financial Reporting.  Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes.

Management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2009. This assessment was based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework. Based on this assessment, management believes that, as of December 31, 2009, our internal control over financial reporting was effective.

Our independent registered public accounting firm, KPMG LLP, has issued an attestation report on our internal control over financial reporting which is included in Exhibit 23 to this report.

Change in Internal Control Over Financial Reporting — There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.   Other Information.

None.

41

Part III

Item 10.   Directors, Executive Officers and Corporate Governance

Information concerning our directors and executive officers is set forth under the headings “Proposal 1 — Election of Directors” and “Corporate Governance” in the 2010 Proxy Statement, as well as under the heading “Section 16(a) Beneficial Ownership Reporting Compliance” in the 2010 Proxy Statement, incorporated herein by reference.

Item 11.   Executive Compensation

Information regarding the compensation paid by us to our directors and executive officers is set forth under the headings “Executive Compensation,” “Compensation Discussion & Analysis,” “Salary and Benefits Committee Report,” “Director Compensation” and “Performance Graph” in the 2010 Proxy Statement which are incorporated herein by reference.

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

The following table sets forth information about our common stock that may be issued under all of our existing compensation plans as of December 31, 2009.

Equity Compensation Plan Information

December 31, 2009

	Number of				Number of Securities
	Securities to be		Weighted Average		Remaining Available for
	Issued Upon		Exercise Price		Future Issuance
	Exercise of		of Outstanding		Under Equity
	Outstanding		Options,		Compensation Plans
	Options, Warrants		Warrants and		(Excluding Securities
Plan category	and Rights		Rights		Reflected in Column (a))
Equity compensation plans approved by shareholders:
1996 Plan(1)		7,840	$	7.46		—
2000 Plan(2)		550,005		21.40		523,278
2008 Plan(3)		—		—		1,500,000
Employee Stock Purchase Plan(4)		—		—		31,777
TOTAL		557,845	$	21.20		2,055,055

(1)	Seacoast Banking Corporation of Florida 1996 Long-Term Incentive Plan. Shares reserved under this plan are available for issuance pursuant to the exercise of stock options and stock appreciation rights granted under the plan, and may be granted as awards of restricted stock, performance shares, or other stock-based awards, including unrestricted stock.
(2)	Seacoast Banking Corporation of Florida 2000 Long-Term Incentive Plan. Shares reserved under this plan are available for issuance pursuant to the exercise of stock options and stock appreciation rights granted under the plan and may be granted as awards of performance shares, and awards of restricted stock or stock-based awards.
(3)	Seacoast Banking Corporation of Florida 2008 Long-Term Incentive Plan. Shares reserved under this plan are available for issuance pursuant to the exercise of stock options and stock appreciation rights granted under the plan, and may be granted as awards of restricted stock, performance shares, or other stock-based awards.
(4)	Seacoast Banking Corporation of Florida Employee Stock Purchase Plan, as amended.

42

Additional information regarding the ownership of our common stock is set forth under the headings “Proposal 1 — Election of Directors” and “Principal Shareholders” in the 2010 Proxy Statement, and is incorporated herein by reference.

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

Information regarding certain relationships and transactions between us and our officers, directors and significant shareholders is set forth under the heading “Salary and Benefits Committee Interlocks and Insider Participation” and “Certain Transactions and Business Relationships” and “Corporate Governance” in the 2010 Proxy Statement and is incorporated herein by reference.

Item 14.   Principal Accountant Fees and Services

Information concerning our principal accounting fees and services is set forth under the heading “Independent Auditors” in the 2010 Proxy Statement, and is incorporated herein by reference.

Part IV

Item 15.   Exhibits, Financial Statement Schedules

(a)(1) List of all financial statements

The following consolidated financial statements and reports of independent registered public accounting firm of Seacoast, included in the 2009 Annual Report, are incorporated by reference into Part II, Item 8 of this Annual Report on Form 10-K.

Reports of Independent Registered Public Accounting Firms

Consolidated Balance Sheets as of December 31, 2009 and 2008

Consolidated Statements of Income for the years ended December 31, 2009, 2008 and 2007

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2009, 2008 and 2007

Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007

Notes to Consolidated Financial Statements

(a)(2) List of financial statement schedules

All schedules normally required by Form 10-K are omitted, since either they are not applicable or the required information is shown in the financial statements or the notes thereto.

(a)(3) Listing of Exhibits

PLEASE NOTE: It is inappropriate for readers to assume the accuracy of, or rely upon any covenants, representations or warranties that may be contained in agreements or other documents filed as Exhibits to, or incorporated by reference in, this report. Any such covenants, representations or warranties may have been qualified or superseded by disclosures contained in separate schedules or exhibits not filed with or incorporated by reference in this report, may reflect the parties’ negotiated risk allocation in the particular transaction, may be qualified by materiality standards that differ from those applicable for securities law purposes, may not be true as of the date of this report or any other date, and may be subject to waivers by any or all of the parties. Where exhibits and schedules to agreements filed or incorporated by reference as Exhibits hereto are not included in these Exhibits, such exhibits and schedules to agreements are not included or incorporated by reference herein.

43

The following Exhibits are attached hereto or incorporated by reference herein (unless indicated otherwise, all documents referenced below were filed pursuant to the Exchange Act by Seacoast Banking Corporation of Florida, Commission File No. 0-13660):

Exhibit 3.1 Amended and Restated Articles of Incorporation
Incorporated herein by reference from the Company’s Quarterly Report of Form 10-Q, dated May 10, 2006.

Exhibit 3.2 Amended and Restated By-laws of the Corporation
Incorporated herein by reference from the Company’s Form 8-K, dated December 18, 2007.

Exhibit 3.3 Articles of Amendment to the Amended and Restated Articles of Incorporation
Incorporated herein by reference from the Company’s Form 8-K, dated December 23, 2008.

Exhibit 3.4 Articles of Amendment to the Amended and Restated Articles of Incorporation
Incorporated herein by reference from the Company’s Form S-1, dated June 22, 2009.

Exhibit 3.5 Articles of Amendment to the Amended and Restated Articles of Incorporation
Incorporated herein by reference from the Company’s Form 8-K, dated July 20, 2009.

Exhibit 3.6 Articles of Amendment to the Amended and Restated Articles of Incorporation
Incorporated herein by reference from the Company’s Form 8-K, dated December 3, 2009.

Exhibit 4.1 Specimen Common Stock Certificate
Incorporated herein by reference from the Company’s Form 8-K, dated December 18, 2007.

Exhibit 4.2 Junior Subordinated Indenture
Dated as of March 31, 2005, between the Company and Wilmington Trust Company, as Trustee (including the form of the Floating Rate Junior Subordinated Note, which appears in Section 2.1 thereof), incorporated herein by reference from the Company’s Form 8-K dated March 31, 2005.

Exhibit 4.3 Guarantee Agreement
Dated as of March 31, 2005 between the Company, as Guarantor, and Wilmington Trust Company, as Guarantee Trustee, incorporated herein by reference from the Company’s Form 8-K dated March 31, 2005.

Exhibit 4.4 Amended and Restated Trust Agreement
Dated as of March 31, 2005, among the Company, as Depositor, Wilmington Trust Company, as Property Trustee, Wilmington Trust Company, as Delaware Trustee and the Administrative Trustees named therein, as Administrative Trustees (including exhibits containing the related forms of the SBCF Capital Trust I Common Securities Certificate and the Preferred Securities Certificate), incorporated herein by reference from the Company’s Form 8-K dated March 31, 2005.

Exhibit 4.5 Indenture
Dated as of December 16, 2005, between the Company and U.S. Bank National Association, as Trustee (including the form of the Junior Subordinated Debt Security, which appears as Exhibit A to the Indenture), incorporated herein by reference from the Company’s Form 8-K dated December 16, 2005.

Exhibit 4.6 Guarantee Agreement
Dated as of December 16, 2005, between the Company, as Guarantor, and U.S. Bank National Association, as Guarantee Trustee, incorporated herein by reference from the Company’s Form 8-K dated December 16, 2005.

Exhibit 4.7 Amended and Restated Declaration of Trust
Dated as of December 16, 2005, among the Company, as Sponsor, Dennis S. Hudson, III and William R. Hahl, as Administrators, and U.S. Bank National Association, as Institutional Trustee (including exhibits containing the related forms of the SBCF Statutory Trust II Common Securities Certificate and the Capital Securities Certificate), incorporated herein by reference from the Company’s Form 8-K dated December 16, 2005.

44

Exhibit 4.8 Indenture
Dated June 29, 2007, between the Company and LaSalle Bank, as Trustee (including the form of the Junior Subordinated Debt Security, which appears as Exhibit A to the Indenture), incorporated herein by reference from the Company’s Form 8-K dated June 29, 2007.

Exhibit 4.9 Guarantee Agreement
Dated June 29, 2007, between the Company, as Guarantor, and LaSalle Bank, as Guarantee, incorporated herein by reference from the Company’s Form 8-K dated June 29, 2007.

Exhibit 4.10 Amended and Restated Declaration of Trust
Dated June 29, 2007, among the Company, as Sponsor, Dennis S. Hudson, III and William R. Hahl, as Administrators, and LaSalle Bank, as Institutional Trustee (including exhibits containing the related forms of the SBCF Statutory Trust III Common Securities Certificate and the Capital Securities Certificate), incorporated herein by reference from the Company’s Form 8-K dated June 29, 2007.

Exhibit 4.11 Trust Agreement of SBCF Capital Trust IV
Dated May 16, 2008, among the Company, as Depositor and Wilmington Trust Company, a Delaware banking corporation, as Trustee (including exhibits containing the related forms of Junior Subordinated Indenture, Subordinated Indenture, Senior Indenture, Guarantee Agreement and the Amended and Restated Trust Agreement of SBCF Capital Trust IV), incorporated herein by reference from the Company’s Form S-3 dated May 23, 2008.

Exhibit 4.12 Trust Agreement of SBCF Capital Trust V
Dated May 16, 2008, among the Company, as Depositor and Wilmington Trust Company, a Delaware banking corporation, as Trustee (including exhibits containing the related forms of Junior Subordinated Indenture, Subordinated Indenture, Senior Indenture, Guarantee Agreement and the Amended and Restated Trust Agreement of SBCF Capital Trust V), incorporated herein by reference from the Company’s Form S-3 dated May 23, 2008.

Exhibit 4.13 Specimen Preferred Stock Certificate
Incorporated herein by reference from the Company’s Form 8-K, dated December 23, 2008.

Exhibit 4.14 Warrant for Purchase of Shares of Common Stock
Incorporated herein by reference from the Company’s Form 8-K, dated December 23, 2008.

Exhibit 4.15 Stock Purchase Agreement
Dated October 23, 2009, between the Company and CapGen Capital Group III, L.P., incorporated herein by reference from the Company’s Form 8-K, dated October 29, 2009.

Exhibit 4.16 Registration Rights Agreement
Dated October 23, 2009, between the Company and CapGen Capital Group III, L.P., incorporated herein by reference from the Company’s Form 8-K, dated October 29, 2009.

Exhibit 10.1 Amended and Restated Retirement Savings Plan, with Amendments*
Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 28, 2003.

Exhibit 10.2 Amended and Restated Employee Stock Purchase Plan*
Incorporated by reference to Exhibit A to the Company’s Definitive Proxy Statement on Schedule 14A, filed with the Commission on April 27, 2009.

Exhibit 10.3 Executive Employment Agreement*
Dated January 18, 1994 between Dennis S. Hudson, III and the Bank, incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 28, 1995.

Exhibit 10.4 Executive Employment Agreement*
Dated January 2, 2007 between Harry R. Holland, III and the Bank, incorporated herein by reference from the Company’s Form 8-K, dated January 2, 2007.

45

Exhibit 10.5 1996 Long Term Incentive Plan*
Incorporated herein by reference from the Company’s Registration Statement on Form S-8 File No. 333-91859, dated December 1, 1999.

Exhibit 10.6 2000 Long Term Incentive Plan as Amended*
Incorporated herein by reference from the Company’s Registration Statement on Form S-8 File No. 333-49972, dated November 15, 2000.

Exhibit 10.7 Executive Deferred Compensation Plan*
Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 30, 2001.

Exhibit 10.8 Change of Control Employment Agreement*
Dated December 24, 2003 between Dennis S. Hudson, III and the Registrant, incorporated herein by reference from the Company’s Form 8-K, dated December 24, 2003.

Exhibit 10.9 Change of Control Employment Agreement*
Dated December 24, 2003 between William R. Hahl and the Company, incorporated herein by reference from the Company’s Form 8-K, dated December 24, 2003.

Exhibit 10.10 Change of Control Employment Agreement*
Dated July 18, 2006 between Richard A. Yanke and the Registrant, incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 15, 2007.

Exhibit 10.11 Directors Deferred Compensation Plan*
Dated June 15, 2004, but effective July 1, 2004, incorporated herein by reference from the Company’s Annual Report on Form 10-K, filed on March 17, 2005.

Exhibit 10.12 Executive Employment Agreement*
Dated March 26, 2008 between O. Jean Strickland and the Bank and Company, incorporated herein by reference from the Company’s Annual Report on Form 8-K, dated March 26, 2008.

Exhibit 10.13 2008 Long-Term Incentive Plan*
Incorporated herein by reference from the Company’s Proxy Statement on Form DEF 14A as Exhibit A, dated March 18, 2008.

Exhibit 10.14 Letter Agreement
Dated December 19, 2008, between the Company and the United States Department of the Treasury incorporated herein by reference from the Company’s Form 8-K, dated December 23, 2008.

Exhibit 10.15 Formal Agreement
Dated December 16, 2008, between the Company and the Office of the Comptroller of the Currency incorporated herein by reference from the Company’s Form 8-K, dated December 23, 2008

Exhibit 10.16 Waiver of Senior Executive Officers*
Dated December 19, 2008, issued to the United Stated Department of the Treasury incorporated herein by reference from the Company’s Form 8-K, dated December 23, 2008.

Exhibit 10.17 Consent of Senior Executive Officers*
Dated December 19, 2008, issued to the United States Department of the Treasury incorporated herein by reference from the Company’s Form 8-K, dated December 23, 2008.

Exhibit 10.18 Form of 409A Amendment to Employment Agreements with Dennis S. Hudson, III, William R. Hahl, A. Douglas Gilbert, O. Jean Strickland and H. Russell Holland, III*
Incorporated herein by reference from the Company’s Form 8-K, dated January 5, 2009.

46

Exhibit 13 2009 Annual Report.  The following portions of the 2009 Annual Report are incorporated herein by reference:

Financial Highlights

Financial Review — Management’s Discussion and Analysis

Selected Quarterly Information — Quarterly Consolidated Income Statements

Consolidated Financial Statements

Notes to Consolidated Financial Statements

Financial Statements — Reports of Independent Certified Public Accountants

Exhibit 21 Subsidiaries of Registrant

Exhibit 23 Consent of Independent Registered Public Accounting Firm

Exhibit 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32.1** Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 111 the Emergency Economic Stability Act, as amended

Exhibit 32.2** Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 111 the Emergency Economic Stability Act, as amended

Exhibit 99.1 31 C.F.R. § 30.15 Certification of Chief Executive Officer

Exhibit 99.2 31 C.F.R. § 30.15 Certification of Chief Financial Officer

*	Management contract or compensatory plan or arrangement.
**	The certifications attached as Exhibits 32.1 and 32.2 accompany this Annual Report on Form 10-K and are “furnished” to the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company for purposes of Section 18 of the Exchange Act.

(b) Exhibits

The response to this portion of Item 15 is submitted above.

(c) Financial Statement Schedules

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stuart, State of Florida, as of the 23rd day of March 2010.

SEACOAST BANKING CORPORATION OF FLORIDA

(Registrant)

By:  /s/  Dennis S. Hudson, III

Dennis S. Hudson, III

Chairman of the Board and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned being a director of Seacoast Banking Corporation of Florida, a Florida corporation (the “Company”), constitutes and appoints each of Dennis S. Hudson, III, O. Jean Strickland and William R. Hahl, as agent, with full power of substitution, for his and in his name, place and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, to this annual report on Form 10-K, and to file the same, therewith, with the Securities and Exchange Commission, and to make any and all state securities law filings, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying the confirming all that said attorney-in-fact and agent, or any substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

	Date
/s/  Dennis S. Hudson, IIIDennis S. Hudson, III, Chairman of the Board, Chief Executive Officer and Director (principal executive officer)	March 23, 2010
/s/  Dale M. Hudson Dale M. Hudson, Vice-Chairman of the Board and Director	March 23, 2010
/s/  William R. Hahl William R. Hahl, Executive Vice President and Chief Financial Officer (principal financial and accounting officer)	March 23, 2010
/s/  Stephen E. Bohner Stephen E. Bohner, Director	March 23, 2010

48

	Date
/s/  John H. Crane John H. Crane, Director	March 23, 2010
/s/  T. Michael Crook T. Michael Crook, Director	March 23, 2010
/s/  H. Gilbert Culbreth, Jr. H. Gilbert Culbreth, Jr., Director	March 23, 2010
/s/  Christopher E. Fogal Christopher E. Fogal, Director	March 23, 2010
/s/  Jeffrey S. Furst Jeffrey S. Furst, Director	March 23, 2010
/s/  A. Douglas Gilbert A. Douglas Gilbert	March 23, 2010
/s/  Robert B. Goldstein Robert B. Goldstein, Director	March 23, 2010
/s/  Dennis S. Hudson, Jr. Dennis S. Hudson, Jr., Director	March 23, 2010
/s/  Thomas E. Rossin Thomas E. Rossin, Director	March 23, 2010
/s/  Thomas H. Thurlow, Jr. Thomas H. Thurlow, Jr., Director	March 23, 2010
/s/  Edwin E. Walpole, III Edwin E. Walpole, III, Director	March 23, 2010

49

EX-13

Exhibit 13

FINANCIAL HIGHLIGHTS

	2009			2008			2007			2006			2005
	(Dollars in thousands, except per share data)
FOR THE YEAR
Net interest income	$	73,589		$	77,231		$	84,469		$	89,040		$	72,185
Provision for loan losses		124,767			88,634			12,745			3,285			1,317
Noninterest income:
Securities gains (losses)		5,399			355			(5,048	)		(157	)		128
Other		19,015			22,241			24,964			24,260			20,517
Noninterest expenses		131,747			78,890			77,477			73,045			59,100
Income (loss) before income taxes		(158,511	)		(67,697	)		14,163			36,813			32,413
Provision (benefit) for income taxes		(11,825	)		(22,100	)		4,398			12,959			11,654
Net income (loss)		(146,686	)		(45,597	)		9,765			23,854			20,759
Per Share Data
Net income (loss) available to common shareholders:
Diluted		(4.74	)		(2.41	)		0.51			1.28			1.24
Basic		(4.74	)		(2.41	)		0.52			1.30			1.27
Cash dividends declared		0.01			0.34			0.64			0.61			0.58
Book value per share common		1.82			8.98			11.22			11.20			8.94
Dividends to net income		n/m	(1)		n/m	(1)		124.80	%		47.10	%		46.30	%
AT YEAR END
Assets	$	2,151,315		$	2,314,436		$	2,419,874		$	2,389,435		$	2,132,174
Securities		410,735			345,901			300,729			443,941			543,024
Net loans		1,352,311			1,647,340			1,876,487			1,718,196			1,280,989
Deposits		1,779,434			1,810,441			1,987,333			1,891,018			1,784,219
Shareholders’ equity		151,935			216,001			214,381			212,425			152,720
Performance ratios:
Return on average assets		(6.58	)%		(1.97	)%		0.42	%		1.03	%		1.07	%
Return on average equity		(73.79	)		(22.25	)		4.46			12.06			14.95
Net interest margin(2)		3.55			3.58			3.92			4.15			3.97
Average equity to average assets		8.92			8.87			9.41			8.55			7.17

1.	Not meaningful
2.	On a fully taxable equivalent basis

FINANCIAL SECTION
CONTENTS

Management’s Discussion & Analysis of Financial Condition and Results of Operations	2
Financial Tables
Reports of Independent Registered Public Accounting Firm	48
Audited Consolidated Financial Statements	50

1

MANAGEMENT’S DISCUSSION & ANALYSIS

For purposes of the following discussion, the words the “Company,” “we,” “us” and “our” refer to the combined entities of Seacoast Banking Corporation of Florida and its direct and indirect wholly owned subsidiaries. “Seacoast National” refers to Seacoast National Bank, our principal subsidiary.

Overview and Outlook

Our Business

The Company is a single-bank holding company located on Florida’s southeast coast (ranging from Palm Beach County in the south to Brevard County in the north) as well as Florida’s interior around Lake Okeechobee and up through Orlando. The Company has 40 full service offices.

The coastal markets in which the Company operates have had population growth rates over the past 10 years of over 20 percent, and while the recession has adversely affected these markets, we expect these markets will resume their growth in the future. Prospectively, the Company will consider strategic acquisitions as part of the Company’s overall future growth plans where these are in complementary and attractive markets within the State of Florida.

Seacoast National has consolidated, improved and opened a number of branch offices during 2009 and 2008. A new branch office was opened on January 20, 2009 in the same shopping plaza as our existing Wedgewood branch in Martin County and the old branch office was closed on the same day. Compared to the old branch office, this new office has better ingress and egress on a corner of U.S. Highway One. Our office on Northlake Boulevard in northern West Palm Beach was closed on June 2, 2009 and our Middle River office in Ft. Lauderdale was closed on December 1, 2009, to reduce overhead and rationalize cost with future growth opportunities. The customers of these two offices are now served by our PGA Boulevard office. During 2008, we consolidated three branch locations in the first quarter; opened a new branch in western Port St. Lucie, Florida in an area with major retail development on Gatlin Boulevard in March 2008; upgraded our Arcadia branch location in DeSoto County, significantly increasing this location’s size in April 2008; opened a second branch in Brevard County on Murrell Road on April 28, 2008, and opened a new, more accessible office replacing the Rivergate branch in St. Lucie County on June 9, 2008; opened a new, more visible Ft. Pierce branch on October 22, 2008, replacing our prior location in Ft. Pierce that was sold; and moved branch personnel at our Beachland location in Indian River to a separate, leased facility on Cardinal Avenue in close proximity in November 2008. We closed our Ft. Lauderdale office on December 1, 2009.

Additions to bank premises and equipment over the past 12 months have been more than offset by depreciation of $3.5 million over the same period and $1.7 million for closed offices (net of $0.9 million in write-downs in fair value) transferred to other assets, resulting in a net decrease of $5,190,000 in bank premises and equipment at December 31, 2009, compared to December 31, 2008.

Strategic Review

The Company operates both a full retail banking strategy in its core markets which are some of Florida’s wealthiest, as well as a complete commercial banking strategy. These core markets are comprised of Martin, St. Lucie and Indian River counties located on Florida’s southeast coast and Okeechobee County which is contiguous to these coastal counties and contain 26 of the 40 retail locations including four private banking centers. Because of the branch coverage in these markets, the Company has a significant presence providing convenience to customers, and a larger deposit market share. The Company’s deposit mix is favorable with 61 percent of average deposit balances comprised of NOW, savings, money market and noninterest bearing transaction customer accounts. The cost of deposits averaged 1.39 percent for 2009 (compared to 2.30 percent for 2008), which the Company believes ranks among the lowest when compared to the Company’s peer group of similar asset size banks operating in the Company’s market. As part of the Company’s complete retail product and service offerings, customers are provided wealth management services through its full service broker dealer and trust wealth management divisions.

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During the last two years, the Company has improved its acquisition, retention and mix of deposits. This has resulted in lower funding costs, and improved profitability, customer satisfaction and liquidity. The Company intends to utilize similar strategies utilized for retail deposits to improve the acquisition of small business deposits in 2010. In addition, new strategies are being implemented and new resources are being committed to improve our wealth management business’ performance in the future.

During 2009 and 2008, the Company had limited commercial/commercial real estate loan production of $14 million and $117 million, respectively, reflecting the unprecedented housing and commercial real estate market decline and recessionary environment generally, as well as the Company’s efforts which began in 2007 and continued during the last two years to reduce its concentration in commercial real estate and construction and land development loans. In 2009, the Company closed $145 million in residential loans, an improvement over 2008’s result of $105 million and 2007’s $135 million, but lower than the $172 million and $195 million closed in 2006 and 2005, respectively. A slower residential real estate market and uncertain economic conditions severely dampened residential home sales and residential loan production in 2008. Stabilizing home values and lower interest rates improved the Company’s residential loan production in 2009.

At the end of 2009, our commercial real estate, or “CRE”, loans were $709.2 million, down 20.9 percent from one year earlier. Under regulatory guidelines for commercial real estate concentrations, Seacoast National’s total commercial real estate loans outstanding at December 31, 2009 (as defined in the guideline) represent 274 percent of risk-based capital at December 31, 2009, below the regulatory threshold for extra scrutiny. Our construction and land development loans were $162.9 million, down 58.8 percent from December 31, 2008. The size of our average commercial construction and land development loans were down from $1,494,000 to $939,000, also.

The Company’s net interest margin has been declining from 4.15 percent in 2006 to 3.92 percent in 2007, 3.58 percent in 2008 and 3.55 percent in 2009. During 2009, a further decline in loans of 16.7 percent, lower loan yields and higher nonaccrual loans were largely offset by reduced deposit costs. The Board of Governors of the Federal Reserve System (the “Federal Reserve”) has made a historic effort in 2009 and 2008 to rejuvenate the economy and limit the effect of the recession by lowering interest rates to 0 to 25 basis points and expanding various liquidity programs. Fourth quarter 2009’s net interest margin was 3.37 percent, reflecting an increase of five basis points from last year’s fourth quarter, a result of lower deposit rates. The net interest margin is likely to remain under pressure until economic conditions stabilize and lower levels of outstanding nonaccrual loans occurs. Opportunities for margin improvement include further improvements in deposit mix and increased loan growth. In February 2010, the Federal Reserve boosted rates 25 basis points, and has begun winding down its liquidity and other stabilization programs.

Loan Growth and Lending Policies

In the last several years, the economic environment in Florida has weakened and the Company increased its focus and monitoring of the Company’s exposure to residential land, acquisition and development loans. These activities resulted in greater loan pay-downs, guarantor performance, and the obtaining of additional collateral. The Company also strengthened its loan sales to better control the level of these assets and other commercial real estate loans, with $82 million in loan sales during 2009 and $68 million in loan sales during the last half of 2008. Overall, the Company’s exposure to residential land, acquisition and development loans was reduced from $352 million or 20.2 percent of total loans in early 2007 to $48 million or 3.4 percent at December 31, 2009.

For 2009 and 2008, balances in the loan portfolio declined 16.7 percent and 11.7 percent, respectively, reflecting the recessionary climate, significantly lower loan demand and loan sales. While higher mortgage rates and a slowdown in new and existing home sales in the Company’s markets reduced demand for residential mortgages and construction lending for new homes in 2007, the Federal Reserve’s interest rate and monetary actions during 2008 and 2009 were oriented to reinvigorate growth prospectively and stabilize housing prices by adding liquidity and reducing interest rates. While anticipated loan pay-downs in 2010 and a winding down of the Federal Reserve’s monetary stimulus and special economic recovery programs may limit loan growth, loan growth opportunities next year include 1-4 family agency conforming residential mortgages.

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Deposit Growth, Mix and Costs

The Company’s focus on high quality customer service and convenient branch locations supports its strategy to provide stable, low cost deposit funding growth over the long term. Over the past two years, the Company has strengthened its retail deposit franchise using new strategies and product offerings, while maintaining its focus on building customer relationships.

Interest rates decreased dramatically during 2008 and 2009 as the economic climate worsened and the Federal Reserve implemented interest rate reduction strategies. As a result, during 2008 customers deposited more funds into certificates of deposit (“CDs”), while maintaining lower average balances in savings and other liquid deposits that pay no interest or a lower interest rate. Also, while CDs declined $60.6 million during 2009, the decline was driven by a decline of $61.8 million in brokered CDs. During 2009, low cost NOW, savings and money market deposits increased 4.5 percent, after decreasing 24.0 percent during 2008, and increasing 13.6 percent in 2007. The Company’s overall deposit mix remains favorable and its average cost of deposits, including noninterest bearing demand deposits, remains low. The average cost of deposits for 2009 was 1.39 percent, decreasing 91 basis points from the prior year, after decreasing 60 basis points to 2.30 percent during 2008 from 2007. Over the past three years, noninterest bearing demand deposits decreased 2.4 percent, 16.0 percent and 16.4 percent, respectively.

A deteriorating residential real estate market reduced average noninterest bearing balances in customer deposit accounts, particularly the accounts of title companies, attorneys and others who service the real estate industry. During 2009 and 2008, total deposits declined $31 million or 1.7 percent and $177 million or 8.9 percent, year over year, respectively, and sweep repurchase agreements decreased $52 million or 32.9 percent in 2009, after increasing $69 million or 78.8 percent year over year during 2008. A decline of $61.8 million in brokered CDs was the primary cause for the overall decline in deposits during 2009, while 2008’s total deposits decline was impacted by the Company’s central Florida region’s deposit loss of $195 million, attributable to the real estate related economic decline affecting our commercial customers’ business activities, and competition from former officials of our offices in that region. Most of the decrease in sweep repurchase agreements of $52 million during 2009 was in public funds, principally from lower tax collector receipts. As reported throughout 2008 and 2009, the Company has been executing a retail strategy and has experienced strong growth in core deposit relationships when compared to prior results. While total deposits declined in the central Florida region, deposit growth in the Company’s other markets was stronger. New personal checking relationships have increased, which has improved market share, increased average services per household and decreased customer attrition.

Noninterest Income Sources

In addition to fee income from mortgage banking activities, the Company derives fees from service charges on deposit accounts, investment management, trust and brokerage services, as well as fees from originating and selling large yacht loans. In 2009 and 2008, the Company collected approximately 21 percent and 22 percent of total revenues (net interest income and noninterest income), respectively, from its fee-based business activities. Consumer activity and spending has been adversely affected by economic conditions and directly affects many of the Company’s fee-based business activities, including fees from debit card use.

Critical Accounting Policies and Estimates

The Company’s consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles, (“GAAP”), including prevailing practices within the financial services industry. The preparation of consolidated financial statements requires management to make judgments in the application of certain of its accounting policies that involve significant estimates and assumptions. These estimates and assumptions, which may materially affect the reported amounts of certain assets, liabilities, revenues and expenses, are based on information available as of the date of the financial statements, and changes in this information over time and the use of revised estimates and assumptions could materially affect amounts reported in subsequent financial statements. After consultation with the Company’s Audit Committee, we

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believe the most critical accounting estimates and assumptions that may affect the Company’s financial status and that involve the most difficult, subjective and complex assessments are:

• the provision and the allowance for loan losses;

• the fair value and other than temporary impairment of securities;

• realization of deferred tax assets;

• goodwill; and

• contingent liabilities.

The following is a brief discussion of the critical accounting policies intended to facilitate a reader’s understanding of the judgments, estimates and assumptions underlying these accounting policies and the possible or likely events or uncertainties known to us that could have a material effect on our reported financial information. For more information regarding management’s judgments relating to significant accounting policies and recent accounting pronouncements, see “Notes to Consolidated Financial Statements, Note A-Significant Accounting Policies.”

Allowance and Provision for Loan Losses

Management determines the provision for loan losses charged to operations by continually analyzing and monitoring delinquencies, nonperforming loans and the level of outstanding balances for each loan category, as well as the amount of net charge-offs, and by estimating losses inherent in its portfolio. While the Company’s policies and procedures used to estimate the provision for loan losses charged to operations are considered adequate by management, factors beyond the control of the Company, such as general economic conditions, both locally and nationally, make management’s judgment as to the adequacy of the provision and allowance for loan losses necessarily approximate and imprecise (see “Nonperforming Assets”).

The provision for loan losses is the result of a detailed analysis estimating an appropriate and adequate allowance for loan losses. The analysis includes the evaluation of impaired loans as prescribed under FASB Accounting Standards Codification (“ASC”) 310 (formerly SFAS No. 114) as well as, an analysis of homogeneous loan pools not individually evaluated as prescribed under ASC 450 (formerly SFAS No. 5). For 2009, the provision for loan losses was $124.8 million, higher than 2008’s provision for loan losses of $88.6 million, and substantially higher than 2007’s provision of $12.7 million. The provision for loan losses for 2009 was $15.8 million more than net charge-offs, which totaled $109.0 million, or 6.86 percent of average total loans, reflecting the downturn in the residential real estate markets, property value declines and deteriorated credit conditions. In comparison, net charge-offs for 2008 were $81.1 million, or 4.45 percent of average total loans.

Table 12 provides certain information concerning the Company’s allowance and provisioning for loan losses for the years indicated.

Net charge-offs during 2008 and 2009 were higher than in prior years due to higher net charge-offs of commercial construction and land development loans financing residential development. The higher charge-offs reflect collateral property valuations declining and the Company reducing its CRE loan concentrations by selling $43.9 million of loans which accounted for $20.6 million of total net charge-offs for 2009. With timely and more aggressive collection efforts, loan sales, and charge-offs, the Company’s residential construction and land development loans were reduced to $47.6 million or 3.4 percent of total loans at December 31, 2009 (see “Loan Portfolio”), down from approximately $129.9 million or 7.7 percent of total loans at December 31, 2008. Total CRE loans declined 20.9 percent from $896.9 million to $709.2 million. Under regulatory guidelines for commercial real estate concentrations, Seacoast National’s total commercial real estate loans outstanding (as defined in the guidance) represented 274 percent of total risk based capital at year end 2009. These remaining lending relationships are monitored and the value of the underlying real estate is evaluated using current appraisals, and where appropriate, discounted cash flow analysis using estimated holding periods and prospective future sales values discounted at rates that we believe appropriate. The reduction in the Company’s exposure to residential construction and development loans should reduce earnings volatility as a

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result of net charge-offs. In addition, the Company has reduced its concentrations of large individual loan relationships over the periods compared.

The following table details the Company’s reduced exposure to large residential construction and land development loans over the past five quarters, as evidenced by loans in this portfolio with balances of $4 million or more declining almost 75 percent from $50.4 million at December 31, 2008 to $12.5 million, or approximately six percent of risk-based capital, at December 31, 2009. All of the remaining $12.5 million in loans greater than $4 million are classified as nonperforming, and of the $35.1 million in loans less than $4 million, $15.6 million or 44 percent are nonperforming:

QUARTERLY TRENDS — LOANS AT END OF PERIOD

													2009
			2008		2009								Nonperforming
			4th Qtr		1st Qtr		2nd Qtr		3rd Qtr		4th Qtr		4th Qtr		No.
	(Dollars in Millions)
Residential Construction and Land Development
Condominiums	>$	4 mil	$	8.6	$	8.4	$	7.9	$	5.3	$	—	$	—		—
	<$	4 mil		8.8		7.9		8.8		3.7		6.1		6.1		3
Town homes	>$	4 mil		—		—		—		—		—		—		—
	<$	4 mil		6.1		4.2		2.3		—		—		—		—
Single family residences.	>$	4 mil		11.9		6.6		6.5		—		—		—		—
	<$	4 mil		14.9		13.9		10.3		7.1		4.1		0.9		7
Single family land & lots	>$	4 mil		22.1		21.8		21.8		5.9		5.9		5.9		1
	<$	4 mil		30.7		29.6		21.5		19.5		16.6		5.6		18
Multifamily	>$	4 mil		7.8		7.8		7.8		6.6		6.6		6.6		1
	<$	4 mil		19.0		17.0		9.8		9.5		8.3		3.0		4
TOTAL	>$	4 mil		50.4		44.6		44.0		17.8		12.5		12.5		2
TOTAL	<$	4 mil		79.5		72.6		52.7		39.8		35.1		15.6		32
GRAND TOTAL			$	129.9	$	117.2	$	96.7	$	57.6	$	47.6	$	28.1		34

The Company’s other loan portfolios related to residential real estate are amortizing loans. The Company has never offered sub-prime, Alt A, Option ARM or any negative amortizing residential loans, programs or products, although it has originated and holds residential mortgage loans from borrowers with original or current FICO credit scores that are currently less than “prime” FICO credit scores. Substantially all residential originations have been underwritten to conventional loan agency standards, including loans having balances that exceed agency value limitations.

The Company selectively adds residential mortgage loans to its portfolio, primarily loans with adjustable rates. Home equity loans (amortizing 10-year loans for home improvements) totaled $86.8 million and home equity lines totaled $60.1 million at December 31, 2009, compared to $84.8 million and $58.5 million at December 31, 2008. Each borrower’s credit was fully documented as part of the Company’s underwriting of home equity lines. The Company never promoted home equity lines using solely credit scoring, and therefore believes this portfolio of loans, primarily to customers with other relationships to Seacoast National, will perform better than portfolios of peers. Both charge-offs and past due ratios have been better than those nationally and for Florida during 2009 and 2008. Net charge-offs for the year ended 2009 totaled $2,782,000 for home equity lines, compared to $502,000 during 2008, and home equity lines past due 90 days or more or nonaccrual were $99,000 and $30,000 at the end of 2009 and 2008, respectively. Other Florida peer banks have experienced much higher losses and delinquencies for their home equity lines.

The Congress and bank regulators encouraged recipients of Troubled Asset Relief Program (“TARP”) capital to use such capital to make loans and the Company has successfully increased its residential mortgage

6

production in 2009. A total of 1,257 applications were taken for the entire year in 2009 for $268 million with $145 million closed.

Existing home sales and home mortgage loan refinancing activity in the Company’s markets have increased in 2009. However, demand for new home construction is expected to remain soft in 2010.

Management continuously monitors the quality of the loan portfolio and maintains an allowance for loan losses it believes sufficient to absorb probable losses inherent in the loan portfolio. The allowance for loan losses totaled $45,192,000 at December 31, 2009, $15,804,000 greater than at December 31, 2008. The allowance for loan losses totaled $29,388,000 at December 31, 2008, an increase of $7,486,000 from December 31, 2007. The allowance for loan losses framework has two basic elements: specific allowances for loans individually evaluated for impairment, and a formula-based component for pools of homogeneous loans within the portfolio that have similar risk characteristics, which are not individually evaluated.

The first element of the ALLL analysis involves the estimation of allowance specific to individually evaluated impaired loans including accruing and nonaccruing restructured commercial and consumer loans. In this process, a specific allowance is established for impaired loans based on an analysis of the most probable sources of repayment, including discounted cash flows, liquidation of collateral, or the market value of the loan itself. It is the Company’s policy to charge off any portion of the loan deemed a loss. Restructured consumer loans are also evaluated in this element of the estimate. As of December 31, 2009, the specific allowance related to impaired loans individually evaluated totaled $13.0 million, compared to $5.2 million as of December 31, 2008; specific reserves associated with larger commercial loans individually evaluated increased $7.3 million to $11.0 million at December 31, 2009. This increase is primarily driven by deterioration in loans to residential developers and several large commercial credits.

The second element of the ALLL, the general allowance for homogeneous loan pools not individually evaluated, is determined by applying allowance factors to pools of loans within the portfolio that have similar risk characteristics. The general allowance factors are determined using a baseline factor that is developed from an analysis of historical net charge-off experience and qualitative factors designed and intended to measure expected losses. These baseline factors are developed and applied to the various loan pools. Adjustments may be made to baseline reserves for some of the loan pools based on an assessment of internal and external influences on credit quality not fully reflected in the historical loss. These influences may include elements such as changes in concentration risk, macroeconomic conditions, and/or recent observable asset quality trends.

In addition, our analyses of the adequacy of the allowance for loan losses also takes into account qualitative factors such as credit quality, loan concentrations, internal controls, audit results, staff turnover, local market conditions and loan growth.

The Company’s independent Credit Administration Department assigns all loss factors to the individual internal risk ratings based on an estimate of the risk using a variety of tools and information. Its estimate includes consideration of the level of unemployment which is incorporated into the overall allowance. In addition, the portfolio is segregated into a graded loan portfolio, residential, installment, home equity, and unsecured signature lines, and loss factors are calculated for each portfolio. The loss factors assigned to the graded loan portfolio are based on historical migration of actual losses by grade and a range of losses over various periods. Loss factors for the other portfolios are based on historical losses over the prior 12 months and prospective factors that consider loan type, delinquencies, loan to value, purpose of the loan, and type of collateral.

Our charge-off policy meets or exceeds regulatory minimums. Losses on unsecured consumer loans are recognized at 90 days past due compared to the regulatory loss criteria of 120 days. Secured consumer loans, including residential real estate, are typically charged-off or charged down between 120 and 180 days past due, depending on the collateral type, in compliance with Federal Financial Institution Examination Council guidelines. Commercial loans and real estate loans are typically placed on nonaccrual status when principal or interest is past due for 90 days or more, unless the loan is both secured by collateral having realizable value sufficient to discharge the debt in-full and the loan is in the legal process of collection. Accordingly, secured

7

loans may be charged-down to the estimated value of the collateral with previously accrued unpaid interest reversed. Subsequent charge-offs may be required as a result of changes in the market value of collateral or other repayment prospects. Initial charge-off amounts are based on valuation estimates derived from appraisals, broker price opinions, or other market information. Generally, new appraisals are not received until the foreclosure process is completed; however, collateral values are evaluated periodically based on market information and incremental charge-offs are recorded if it is determined that collateral values have declined from their initial estimates.

Management continually evaluates the allowance for loan losses methodology seeking to refine and enhance this process as appropriate, and it is likely that the methodology will continue to evolve over time.

In general, collateral values for residential real estate have declined since 2006, with values being more stable over the last 12 months. Loans originated from 2005 through 2007 have seen property values decline approximately 50 percent from their original appraised values, more than the decline on loans originated in other years. Declining residential collateral value has affected our actual loan losses over the last two and half years, but values appear to have stabilized over the last half of 2009. Residential loans that become 90 days past due are placed on nonaccrual. A specific allowance is made for any loan that becomes 120 days past due. Residential loans are subsequently written down if they become 180 days past due and such write-downs are supported by a current appraisal, consistent with current banking regulations.

Our Loan Review unit is independent, and performs loan reviews and evaluates a representative sample of credit extensions after the fact for appropriate individual internal risk ratings. Loan Review has the authority to change internal risk ratings and is responsible for assessing the adequacy of credit underwriting. This unit reports directly to the Directors’ Loan Committee of Seacoast National’s Board of Directors.

The allowance as a percentage of loans outstanding has increased from 1.15 percent at December 31, 2007 and 1.75 percent at December 31, 2008, to 3.23 percent at December 31, 2009. The allowance for loan losses represents management’s estimate of an amount adequate in relation to the risk of losses inherent in the loan portfolio.

Table 13 summarizes the Company’s allocation of the allowance for loan losses to real estate loans, commercial and financial loans, and installment loans to individuals, and information regarding the composition of the loan portfolio at the dates indicated.

During 2009, net charge-offs totaled $8,540,000 in the first quarter, $15,109,000 in the second quarter, $40,142,000 in the third quarter and $45,172,000 in the fourth quarter, a total of $108,963,000 for the twelve-month period ended December 31, 2009. Some of the increase in charge-offs were related to loan sales to reduce risk in the loan portfolio. Although there is no assurance that we will not have elevated charge-offs in the future, we believe that we have significantly reduced the risks in our loan portfolio and that with stabilizing market conditions, future charge-offs would decline. Net charge-offs related to real estate over the twelve-month period consisted of $38,328,000 in net charge-offs related to construction and land development loans, $35,753,000 in net charge-offs for residential real estate mortgages, and $30,787,000 in net charge-offs related to commercial real estate mortgages. Remaining net charge-offs included $3,140,000 in net charge-offs for commercial and financial loans, and $955,000 in net charge-offs for installment loans to individuals. In 2008, net charge-offs of $81,148,000 were recorded, and during 2007, net charge-offs of $5,758,000 were recognized.

Concentrations of credit risk, discussed under “Loan Portfolio” of this discussion and analysis, can affect the level of the allowance and may involve loans to one borrower, an affiliated group of borrowers, borrowers engaged in or dependent upon the same industry, or a group of borrowers whose loans are predicated on the same type of collateral. The Company’s most significant concentration of credit is a portfolio of loans secured by real estate. At December 31, 2009, the Company had $1.272 billion in loans secured by real estate, representing 91.0 percent of total loans, up slightly from 90.7 percent at December 31, 2008. In addition, the Company is subject to a geographic concentration of credit because it only operates in central and southeastern Florida. Included in real estate loans, the Company has a credit exposure to commercial real estate developers and investors with total commercial real estate construction and land development loans of $125.1 million or 9.0 percent of total loans at December 31, 2009, down from $339.2 million or 20.2 percent at December 31,

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2008. The Company’s exposure to these credits is secured by project assets and personal guarantees. The exposure to this industry group, together with an assessment of current trends and expected future financial performance, are considered in our evaluation of the adequacy of the allowance for loan losses.

While it is the Company’s policy to charge off in the current period loans in which a loss is considered probable, there are additional risks of future losses that cannot be quantified precisely or attributed to particular loans or classes of loans. Because these risks include the state of the economy, borrower payment behaviors and local market conditions as well as conditions affecting individual borrowers, management’s judgment of the allowance is necessarily approximate and imprecise. It is also subject to regulatory examinations and determinations as to adequacy, which may take into account such factors as the methodology used to calculate the allowance for loan losses and the size of the allowance for loan losses in comparison to a group of peer companies identified by the regulatory agencies.

In assessing the adequacy of the allowance, management relies predominantly on its ongoing review of the loan portfolio, which is undertaken both to ascertain whether there are probable losses that must be charged off and to assess the risk characteristics of the portfolio in aggregate. This review considers the judgments of management, and also those of bank regulatory agencies that review the loan portfolio as part of their regular examination process. Our bank regulators have generally agreed with our credit assessments, however the regulators could seek additional provisions to our allowance for loan losses and additional capital in light of the risks of our markets and credits.

Seacoast National entered into a formal agreement with the OCC on December 16, 2008 to improve its asset quality. Under the formal agreement, Seacoast National’s board of directors appointed a compliance committee to monitor and coordinate Seacoast National’s performance under the formal agreement. The formal agreement provides for the development and implementation of written programs to reduce Seacoast National’s credit risk, monitor and reduce the level of criticized assets, and manage commercial real estate loan (“CRE”) concentrations in light of current adverse CRE market conditions. The Company believes it has complied with this formal agreement.

Nonperforming Assets

Table 14 provides certain information concerning nonperforming assets for the years indicated.

Nonperforming assets at December 31, 2009 totaled $123,261,000 and are comprised of $97,876,000 of nonaccrual loans and $25,385,000 of other real estate owned (“OREO”), compared to $92,005,000 at December 31, 2008 (comprised of $86,970,000 in nonaccrual loans and $5,035,000 of OREO). At December 31, 2009, virtually all nonaccrual loans were secured with real estate, including $28.0 million and $30.0 million of nonaccrual loans, respectively, that are land acquisition and development loans related to the residential and commercial real estate markets. See the table below for further details about nonaccrual loans. At December 31, 2009, nonaccrual loans have been written down by approximately $27.4 million or 23.0 percent of the original loan balance (including specific impairment reserves). OREO has increased in 2008 and 2009 as problem loans have migrated to foreclosure and then liquidation.

During 2009, loan sales totaled $82 million, at an average price of approximately 50 percent of the outstanding balance of the loan sold. During 2008 and 2007, loan sales aggregated to $90 million at an average price of approximately 84 percent of the outstanding loan balance sold, of which $68 million occurred in the second half of 2008. In the future, the Company anticipates loan sales will likely play a lesser role in connection with liquidation efforts, since we have substantially reduced our largest borrower concentrations. The Company pursues loan restructurings in selected cases where it expects to realize better values than may be expected through traditional collection activities. Also, during 2009, the Company worked with retail mortgage customers, when possible, to achieve lower payment structures in an effort to avoid foreclosure. Troubled debt restructurings (“TDRs”) are part of the Company’s loss mitigation activities and can include rate reductions, payment extensions and principal deferrals. Company policy requires TDR be classified as nonaccrual loans until (under certain circumstances) performance can be verified, which usually requires six months. Some TDRs that have never been past due continue as accruing loans. TDRs included in nonperforming loans totaled $38.6 million at

9

December 31, 2009, of which $25.8 million were performing in accordance with their restructured terms. Accruing restructured loans totaled $57.4 million at December 31, 2009

The following table provides a supplemental breakout of nonaccrual real estate, commercial and financial and installment loans to individuals and accruing restructured loans at December 31, 2009:

	Nonaccrual Loans						Accruing
	Non-						Restructured
December 31, 2009	Current		Performing		Total		Loans
	(In millions)
Construction & land development
Residential	$	14,638	$	13,387	$	28,025	$	4,867
Commercial		30,013		0		30,013		0
Individuals		1,515		256		1,771		1,056
		46,166		13,643		59,809		5,923
Residential real estate mortgages		8,944		3,846		12,790		9,833
Commercial real estate mortgages		13,503		10,361		23,864		40,678
Real estate loans		68,613		27,850		96,463		56,434
Commercial and financial		210		326		536		0
Installment loans to individuals		877		0		877		999
Total	$	69,700	$	28,176	$	97,876	$	57,433

At December 31, 2009, loans totaling $155,310,000 were considered impaired (comprised of total nonaccural and TDRs) and $13,042,000 of the allowance for loan losses was allocated for potential losses on these loans, compared to $101,424,000 and $5,152,000, respectively, at December 31, 2008.

For over a year, management has maintained an intensive focus on the commercial real estate portfolio given the general economic stress in the Company’s markets. These credits have been continuously reviewed using current financial information; and at the end of the year all but a very small number of these reviews are up-to-date. During the third and fourth quarters, a deeper look at internally classified CRE loans was conducted. This included tests of cash flows against current outlook, the borrowers’ current condition and borrower financial trends.

As a result of the reviews conducted, nonperforming loans may have peaked in the third quarter 2009, although no assurance can be given that nonperforming assets will not increase or otherwise change in the future. Nonperforming assets are subject to changes in the economy, both nationally and locally, changes in monetary and fiscal policies, changes in borrowers’ payment behaviors and changes in conditions affecting various borrowers from Seacoast National.

Fair Value and Other than Temporary Impairment of Securities

At December 31, 2009, no trading securities were outstanding and securities designated as available for sale totaled $393,648,000. The fair value of the available for sale portfolio at December 31, 2009 was more than historical amortized cost, producing net unrealized gains of $3,270,000 that have been included in other comprehensive income (loss) as a component of shareholders’ equity (net of taxes). The Company made no change to the valuation techniques used to determine the fair values of securities during 2009. The fair value of each security available for sale was obtained from independent pricing sources utilized by many financial institutions. The fair value of many state and municipal securities are not readily available through market sources, so fair value estimates are based on quoted market price or prices of similar instruments. Generally, the Company obtains one price for each security. However, actual values can only be determined in an arms-length transaction between a willing buyer and seller that can, and often do, vary from these reported values. Furthermore, significant changes in recorded values due to changes in actual and perceived economic conditions can occur rapidly, producing greater unrealized losses or gains in the available for sale portfolio.

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The credit quality of the Company’s securities holdings currently is investment grade. These securities, except for approximately $6.3 million of securities issued by states and their political subdivisions, as of December 31, 2009, generally are traded in liquid markets. U.S. Treasury and U.S. Government agency obligations totaled $319.5 million, or 81 percent of the total available for sale portfolio. The remainder of the portfolio primarily consists of super senior private label securities secured by collateral originated prior to 2005. The collateral underlying these mortgage investments are 30- and 15-year fixed rate and 10/1 adjustable rate mortgage loans. Historically, the mortgage loans serving as collateral for those investments have had minimal foreclosures and losses.

These investments are reviewed quarterly for other than temporary impairment, or “OTTI”, by considering the following primary factors: percent decline in fair value, rating downgrades, subordination, duration, amortized loan-to-value, and the ability of the issuers to pay all amounts due in accordance with the contractual terms. Prices obtained from pricing services are usually not adjusted. Based on our internal review procedures and the fair values provided by the pricing services, we believe that the fair values provided by the pricing services are consistent with the principles of ASC 820. However, on occasion pricing provided by the pricing services may not be consistent with other observed prices in the market for similar securities. Using observable market factors, including interest rate and yield curves, volatilities, prepayment speeds, loss severities and default rates, the Company may at times validate the observed prices using a discounted cash flow model and using the observed prices for similar securities to determine the fair value of its securities.

Changes in the fair values, as a result of deteriorating economic conditions and credit spread changes, should only be temporary. Further, management believes that the Company’s other sources of liquidity, as well as the cash flow from principal and interest payments from the securities portfolio, reduces the risk that losses would be realized as a result of a need to sell securities to obtain liquidity.

The Company also holds stock in the Federal Home Loan Bank of Atlanta (“FHLB”) totaling $7.1 million as of December 31, 2009, slightly less than at year-end 2008. The FHLB eliminated its dividend for the first quarter of 2009 but has since reinstated dividends. The FHLB instituted quarterly rather than daily repurchases of FHLB activity-based stock in February 2009. The Company accounts for its FHLB stock based on the industry guidance in ASC 942, Financial Services — Depository And Lending, which requires the investment to be carried at cost and evaluated for impairment based on the ultimate recoverability of the par value. We evaluated our holdings in FHLB stock at December 31, 2009 and believe our holdings in the stock are ultimately recoverable at par. We do not have operational or liquidity needs that would require redemption of the FHLB stock in the foreseeable future and, therefore, have determined that the stock is not other-than-temporarily impaired.

Realization of Deferred Tax Assets

Our wholly-owned subsidiary, Seacoast National, had a state deferred tax asset (“DTA”) of $5.5 million at December 31, 2008 reflecting the benefit of $101.3 million in net operating loss (“NOL”) carry-forwards, which will expire between 2027 and 2028. This deferred state tax asset resulted from the large provision for loan losses in 2008 related to Seacoast National’s residential construction and land development loan portfolio. Early recognition of and aggressive responses to unprecedented economic conditions have resulted in substantially higher loan loss provisions and losses for Seacoast National during 2008 and 2009. Our recognition of market conditions allowed for realignment of resources early in 2008 and significant reductions in residential construction and land development loan exposures which at December 31, 2009 have been reduced to 3.4 percent of total loans. As a result, management believes that loan loss provisions will likely be much lower during the 20-year carry-forward period. Seacoast National has been through other similar economic cycles in the past where provisioning for loan losses has been elevated followed by periods of lower risk and where little to no loan loss provisioning was needed. It is management’s opinion that Seacoast National’s future taxable income will ultimately allow for the recovery of the NOL, and the realization of its deferred tax assets.

As a result of the losses incurred in 2008, the Company was and is in a three-year cumulative pretax loss position. A cumulative loss position is considered significant negative evidence in assessing the prospective

11

realization of a DTA from a forecast of future taxable income. The use of the Company’s forecast of future taxable income was not considered positive evidence which could be used to offset the negative evidence at this time, given the uncertain economic conditions. The losses in 2008 were carried back to 2006 and 2007 and a tax benefit for federal taxes was recorded. Florida tax losses can only be carried forward. Therefore, a valuation allowance of $5.5 million was recorded related to the Company’s state deferred tax asset in 2008. During 2009, the Company supported the tax benefits recorded in the first half of the year with tax planning strategies and for the third and fourth quarter losses in 2009 a tax benefit of $29.7 million was recorded, and the Company also increased its DTA valuation allowance by the same amount. Should the economy show signs of improvement and our credit losses moderate, we anticipate that increased reliance on our forecast of future taxable earnings would result in tax benefits as the recording of valuation allowances would no longer be necessary.

At December 31, 2009, the Company has net deferred tax assets of $18.8 million which are supported by tax planning strategies that could produce gains from transactions involving bank premises, investments, and other items that could be implemented during the NOL carry forward period.

Goodwill

The amount of goodwill at December 31, 2008 totaled $49.8 million, and resulted from the acquisitions of three separate community banks whose operations were fully integrated into one operating subsidiary bank of the Company. The Company operates as a single segment bank holding company.

The Company tests goodwill for impairment on an annual basis, or more often if events or circumstances indicate there may be impairment. The Company engages external valuation specialists to assist in the Company’s goodwill assessments. The Company completed an annual test of goodwill for impairment for the year ended December 31, 2008 and updated the test for impairment of goodwill at March 31, 2009, due to the decline in the price of the Company’s common stock and net earnings in the first quarter of 2009. The results of these tests indicated that none of the Company’s goodwill was impaired. Due to a further decline in the price of the Company’s common stock and the Company’s net loss in the second quarter of 2009, we again tested for impairment of goodwill as of June 30, 2009. The fair value of the Company’s enterprise was determined using two methods, the discounted cash flow and change in control valuation methods. These two methods provided a range of valuations of $2.43 to $7.00 per share that we used in evaluating goodwill for possible impairment at June 30, 2009. As a result, the Company determined that the carrying amount of the Company exceeded its fair value and that the entire amount of goodwill was impaired based on a preliminary step two goodwill analysis at June 30, 2009, and the Company wrote-down the entire amount of its goodwill in the second quarter. At September 30, 2009, the Company completed its step two analysis of goodwill impairment which supported the conclusion reached at June 30, 2009.

Contingent Liabilities

The Company is subject to contingent liabilities, including judicial, regulatory and arbitration proceedings, and tax and other claims arising from the conduct of our business activities. These proceedings include actions brought against the Company and/or our subsidiaries with respect to transactions in which the Company and/or our subsidiaries acted as a lender, a financial advisor, a broker or acted in a related activity. Accruals are established for legal and other claims when it becomes probable the Company will incur an expense and the amount can be reasonably estimated. Company management, together with attorneys, consultants and other professionals, assesses the probability and estimated amounts involved in a contingency. Throughout the life of a contingency, the Company or our advisors may learn of additional information that can affect our assessments about probability or about the estimates of amounts involved. Changes in these assessments can lead to changes in recorded reserves. In addition, the actual costs of resolving these claims may be substantially higher or lower than the amounts reserved for those claims. At year-end 2008 and 2009 the Company had no amounts accrued for contingent liabilities.

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Results of Operations

Net Interest Income

Net interest income (on a fully taxable equivalent basis) for 2009 totaled $73,847,000, decreasing from 2008 by $3,670,000 or 4.7 percent. During 2009, unrecognized interest on loans placed on nonaccrual of $6,602,000 was a primary contributor to the decline from prior year (see “Table 14 - Nonperforming Assets”). Net interest margin on a tax equivalent basis declined three basis points over the last twelve months to 3.55 percent in 2009.

The following table details net interest income and margin results (on a tax equivalent basis) for the past five quarters:

	Net Interest		Net Interest
	Income		Margin
	(Tax Equivalent)		(Tax Equivalent)
	(Dollars in thousands)
Fourth quarter 2008	$	17,535		3.32	%
First quarter 2009		18,241		3.44
Second quarter 2009		18,987		3.65
Third quarter 2009		19,101		3.74
Fourth quarter 2009		17,518		3.37

Fully taxable equivalent net interest income is a common term and measure used in the banking industry but is not a term used under GAAP. We believe that these presentations of tax-equivalent net interest income and tax equivalent net interest margin aid in the comparability of net interest income arising from both taxable and tax-exempt sources over the periods presented. We further believe these non-GAAP measures enhance investors’ understanding of the Company’s business and performance, and facilitate an understanding of performance trends and comparisons with the performance of other financial institutions. The limitations associated with these measures are the risk that persons might disagree as to the appropriateness of items comprising these measures and that different companies might calculate these measures differently, including as a result of using different assumed tax rates. These disclosures should not be considered an alternative to GAAP. The following information is provided to reconcile GAAP measures and tax equivalent net interest income and net interest margin on a tax equivalent basis.

	Total			Fourth			Third			Second			First			Total			Fourth
	Year			Quarter			Quarter			Quarter			Quarter			Year			Quarter
	2009			2009			2009			2009			2009			2008			2008
	(Dollars in thousands)
Non-taxable interest income	$	524		$	145		$	105		$	135		$	139		$	286		$	141
Tax Rate		35	%		35	%		35	%		35	%		35	%		35	%		35	%
Net interest income (TE)	$	73,847		$	17,518		$	19,101		$	18,987		$	18,241		$	77,517		$	17,535
Total net interest income (not TE)		73,589			17,444			19,051			18,920			18,174			77,231			17,467
Net interest margin (TE)		3.55	%		3.37	%		3.74	%		3.65	%		3.44	%		3.58	%		3.32	%
Net interest margin (not TE)		3.54			3.35			3.73			3.64			3.43			3.57			3.31

During 2009, net interest income and net interest margin have stabilized despite the challenging lending environment and the reduction of interest due to nonaccrual loans. Nonaccrual loans have been the primary force that has adversely affected our net interest income and net interest margin when comparing these returns for 2009 to 2008 and prior periods.

The earning asset mix changed year over year. For 2009, average loans (the highest yielding component of earning assets) as a percentage of average earning assets totaled 76.3 percent, compared to 84.2 percent a year ago. Average securities as a percent of average earning assets increased from 13.5 percent a year ago to 17.4 percent during 2009 and federal funds sold and other investments increased to 6.3 percent from 2.3 percent in 2008. In addition to decreasing average total loans as a percentage of earning assets, the mix of loans changed, with commercial and commercial real estate volumes representing 55.1 percent of total loans at

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December 31, 2009 (compared to 58.4 percent at December 31, 2008). This reflects our reduced exposure to commercial construction and land development loans on residential and commercial properties, which declined by $82.3 million and $131.8 million, respectively, from December 31, 2008 to December 31, 2009. Lower yielding residential loan balances with individuals (including home equity loans and lines, and personal construction loans) represented 40.3 percent of total loans at December 31, 2009 (versus 37.2 percent a year ago) (see “Loan Portfolio”).

The yield on earning assets for 2009 was 4.92 percent, 97 basis points lower than for 2008, a reflection of the lower interest rate environment, as well as higher nonperforming loans (see “Nonperforming Assets”). The Federal Reserve decreased interest rates by 400 basis points during 2008. The following table details the yield on earning assets (on a tax equivalent basis) for the past five quarters:

	4th			3rd			2nd			1st			4th
	Quarter			Quarter			Quarter			Quarter			Quarter
	2009			2009			2009			2009			2008
Yield		4.51	%		4.98	%		5.03	%		5.16	%		5.45	%

The yield on loans declined 77 basis points to 5.35 percent over the last twelve months for the same reasons noted above. Nonaccrual loans totaling $97.9 million or 7.0 percent of total loans at December 31, 2009, versus $87.0 million or 5.2 percent of total loans a year ago, reduced the yield on our loan portfolio. The yield on investment securities was lower as well, decreasing 40 basis points year over year to 4.63 percent, due primarily to purchases of securities at lower yields available in current markets, which diluted the overall portfolio yield year over year. More recently, the decline in yield on investment securities was more severe, with a decline of 69 basis points for the fourth quarter of 2009 year over year, compared to year over year declines of 6 basis points for the third quarter of 2009, 22 basis points for second quarter 2009 and 64 basis points for first quarter 2009, and reflecting recent securities purchases at lower yields that reduced the overall yield for the fourth quarter by 70 basis points from third quarter 2009, third quarter 2009’s yield by 7 basis points from second quarter 2009, and second quarter 2009’s yield by 35 basis points from first quarter 2009. Federal funds sold and other investments yielded 0.51 percent for 2009, lower when compared to 2.46 percent for 2008. The dramatic reduction in interest rates during 2008, with the Federal Reserve lowering the target federal funds rate to 0 to 25 basis points and the Treasury yield curve shifting lower, is expected to continue to limit opportunities to invest at higher interest rates prospectively.

Average earning assets for the entire year of 2009 decreased $82.5 million or 3.8 percent compared to 2008. Average loan balances decreased $234.4 million or 12.9 percent to $1,587.3 million, while average investment securities were $70.9 million or 24.2 percent higher, totaling $363.3 million and average federal funds sold and other investments increased $81.0 million or 162.6 percent to $130.8 million. The decline in average earning assets is consistent with reduced funding as a result of deposit declines in the Company’s central Florida region (resulting from slower economic growth) and a planned reduction of brokered deposits.

Commercial and commercial real estate loan production for 2009 totaled $14 million. In comparison, commercial and commercial real estate loan production for 2008 totaled $117 million. Period-end total loans outstanding have declined by $279.2 or 16.7 percent in 2009, and declined similarly during 2008 by $221.7 million or 11.7 percent. Loan demand remains weak. Economic conditions in the markets the Company serves are expected to continue to be challenging, and although we continue to make loans generally, these conditions are expected to result in negative loan growth during 2010, but possibly to a lessened degree if the consensus opinion that conditions will improve in late 2010 is realized. At December 31, 2009 the Company’s total commercial and commercial real estate loan pipeline was $47 million, versus $127 million at December 31, 2008.

In addition, a total of 48 applications were received seeking restructured mortgages during the fourth quarter of 2009, compared to 93, 102 and 73 in the first, second and third quarters of 2009, respectively. The Company continues to lend, and we have expanded our mortgage loan originations. However, as consumers and businesses seek to reduce their borrowings, and the economy remains weak, opportunities to lend prudently to creditworthy borrowers are expected to be more limited in the near-term.

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During the fourth, third and second quarter of 2009, the sale of mortgage backed securities totaling approximately $33.8 million, $23.9 million and $29.5 million, respectively, resulted in securities gains of $2,188,000, $1,425,000 and $1,786,000, respectively, for each quarter. Management believed these securities had minimal opportunity to further increase in value. In addition, during 2009 maturities (principally pay-downs of $81.4 million) totaled $105.0 million and securities portfolio purchases totaled $255.7 million. Securities purchases during 2009 were conducted to reinvest proceeds from the sale of securities, as well as maturities and pay-downs, and proceeds from pooled loan sales and loan principal reductions. During 2008, maturities of securities totaled $45.5 million (including $22.9 million in pay-downs), a security sale totaling $14.0 million was transacted, and security purchases totaled $101.1 million. The sale was transacted during 2008 for a gain of $355,000. Purchases of securities during 2008 were conducted principally to provide collateral against government deposits and repurchase agreements in connection with deposit account sweep arrangements for pledging requirements and to reinvest funds from the security sale, maturities and pay-downs.

The cost of average interest-bearing liabilities in 2009 decreased 113 basis points to 1.65 percent from 2008, reflecting the lower interest rate environment. The following table details the cost of average interest bearing liabilities for the past five quarters:

	4th			3rd			2nd			1st			4th
	Quarter			Quarter			Quarter			Quarter			Quarter
	2009			2009			2009			2009			2008
Rate		1.38	%		1.50	%		1.65	%		2.05	%		2.52	%

During 2009, the Company’s retail core deposit focus produced strong growth in core deposit customer relationships when compared to 2008’s results, and resulted in increased balances which offset planned certificate of deposit runoff during all four quarters of 2009. A total of 7,045 new households were added in 2009. The improved deposit mix and lower rates paid on interest bearing deposits during 2009 reduced the overall cost of interest bearing deposits to 1.65 percent, 109 basis points lower than a year ago. Still a significant component favorably affecting the Company’s net interest margin, the average balances of lower cost interest bearing deposits (NOW, savings and money market) totaled 53.3 percent of total average interest bearing deposits for 2009, although this was lower than the average of 57.9 percent a year ago, as a result of customers shifting balances from these lower rate products to certificates in this low interest rate environment. The average rate for lower cost interest bearing deposits for 2009 was 0.75 percent, down by 113 basis points from 2008’s rate. CD rates paid were also lower compared to 2008, lower by 124 basis points and averaging 2.67 percent for 2009. Average CDs (the highest cost component of interest bearing deposits) were 46.7 percent of interest bearing deposits for 2009, compared to 42.1 percent for 2008.

Average deposits totaled $1,778.9 million during 2009, and were $109.3 million lower compared to 2008, due primarily to deposit declines in the Company’s central Florida region and a planned reduction of brokered deposits. Total average sweep repurchase agreements for 2009 were $26.0 million higher as a result of normal seasonal funding trends for public fund customers. Total average deposits plus sweep repurchase agreements of $1,896.1 million during 2009 were down $83.3 million or 4.2 percent from 2008’s average. The average aggregate amounts of NOW, savings and money market balances decreased $116.2 million or 12.7 percent to $801.4 million for 2009 compared to 2008, noninterest bearing deposits decreased $26.2 million or 8.6 percent to $276.4 million, and average CDs increased by $33.0 million or 4.9 percent to $701.1 million. As a result of the low interest rate environment, customers have deposited more funds into CDs, while maintaining lower average balances in savings and other liquid deposit products that pay no interest or a lower interest rate. In addition, Seacoast National joined the Certificate of Deposit Registry program (“CDARs”) on July 1, 2008, which allows customers to have CDs safely insured beyond the FDIC deposit insurance limits. This benefited our deposit retention efforts during the recent financial market disruption and provided a new product offering to homeowners’ associations concerned with FDIC insurance coverage.

FDIC deposit insurance has been temporarily increased from $100,000 to $250,000 per depositor from October 14, 2008 through December 31, 2013. Under the FDIC’s Temporary Liquidity Guarantee, or “TLG”, program, the entire amount in any eligible noninterest bearing transaction deposit account is guaranteed by the FDIC to the extent such balances are not covered by FDIC insurance. Seacoast National is participating in the

15

TLG program to offer the best possible FDIC coverage to its customers. The TLG program expires June 30, 2010.

Average short-term borrowings have been principally comprised of sweep repurchase agreements with customers of the Company’s bank subsidiary, which increased $26.0 million or 28.6 percent from 2008. Most of the increase in average sweep repurchase agreement balances was due to efforts to reduce FDIC insurance costs by migrating public fund deposits beginning late in the fourth quarter of 2008. During 2009, no federal funds purchased were utilized. Other borrowings were comprised of subordinated debt of $53.6 million related to trust preferred securities issued by trusts organized by the Company, and advances from the FHLB of $50.0 million. Other than the maturity of a $15.0 million FHLB advance in November 2009, no other changes have occurred to other borrowings since year-end 2007 (see “Note I-Borrowings” to the Company’s consolidated financial statements).

Company management believes its market expansion, branding efforts and retail deposit growth strategies have produced new relationships and core deposits, which have assisted in maintaining a stable net interest margin. Reductions in nonperforming assets also are expected to be accretive to the Company’s future net interest margin.

Net interest income (on a fully taxable equivalent basis) for 2008 totaled $77,517,000, lower by $7,254,000 or 8.6 percent compared to 2007. During 2008, unrecognized interest on loans placed on nonaccrual of $9,435,000 was the primary contributor to the decline from 2007’s result. Net interest margin on a tax equivalent basis decreased 34 basis points during 2008 to 3.58 percent from 2007’s margin. Similar to 2009, a more challenging lending environment with unrecognized interest on loans placed on nonaccrual and declines in interest rates contributed to weaker net interest income and net interest margin, beginning in the third and fourth quarters of 2007, as well as each quarter during 2008.

The composition or mix of earning assets was very similar for 2008 when compared to 2007. For 2008, average loans (the highest yielding component of earning assets) as a percentage of average earning assets totaled 84.2 percent, slightly lower when compared to 84.5 percent for 2007. Average securities as a percent of average earning assets decreased to 13.5 percent for 2008 compared to 14.1 percent for 2007 and federal funds sold and other investments increased to 2.3 percent from 1.4 percent for 2007. In addition to average total loans decreasing slightly as a percentage of earning assets, the mix of loans changed slightly as well, with commercial and commercial real estate volumes representing 58.4 percent of total loans at December 31, 2008 (compared to 62.2 percent at December 31, 2007) and lower yielding residential loan balances (including home equity loans and lines, and individual residential construction loans representing 37.2 percent of total loans versus 33.2 percent for 2007).

The yield on earning assets for 2008 was 5.89 percent, 106 basis points lower than for 2007, again a reflection of the declining interest rate environment and increase in nonaccrual loans. The Federal Reserve decreased interest rates 100 basis points between September 2007 and the end of 2007, and an additional 400 basis points from year-end 2007 to the end of December 2008. The yield on loans declined 118 basis points to 6.12 percent over 2008, when compared to 2007’s result, but the yield on investment securities was nominally higher, increasing 1 basis point year over year to 5.03 percent. The investment portfolio at the beginning of the second quarter of 2007 was restructured when approximately $225 million in securities with an average yield of 3.87 percent were sold and reinvested at higher rates. With interest rates declining since the restructuring, and principal pay-downs and maturities reinvested at lower rates, the overall yield on securities was nominally higher for 2008. Federal funds sold (and other investments) yielded 2.46 percent for 2008, lower when compared to 5.47 percent for 2007.

Average earning assets for 2008 decreased nominally, by $0.2 million compared to 2007. Average loan balances over the same period decreased $6.9 million, or 0.4 percent to $1,821.7 million, average federal funds sold and other investments increased $20.0 million to $49.8 million, and average investment securities were lower, decreasing $13.3 million or 4.4 percent to $292.4 million. However, period end loan growth during 2008 was much slower and in fact declined from the prior year, with total loans outstanding decreasing year over year by $221.7 million, or 11.7 percent, compared with an increase of $165.3 million, or 9.5 percent for the year ended December 31, 2007. Loan demand weakened during 2008. Commercial and commercial real

16

estate loan production for 2008 totaled $117 million, with $8 million in the fourth quarter of 2008, $33 million in the third quarter of 2008, $19 million in the second quarter of 2008 and $57 million in the first quarter of 2008. Closed residential mortgage loan production for 2008 totaled $105 million, with production by quarter as follows: fourth quarter 2008 production of $23 million, of which $10 million was sold servicing released, third quarter 2008 production of $22 million, of which $8 million was sold servicing released, second quarter 2008 production of $30 million, with $18 million sold servicing released, and first quarter 2008 production of $30 million, with $14 million sold servicing released.

For 2008, average total deposits increased $17.5 million, or 0.9 percent, compared to 2007’s average balance. Deposit growth during 2008 was particularly difficult given the economic environment. While deposit growth during the summer and fall is historically challenging due to seasonal declines, deposit growth was stronger than expected due to the Company instituting a focused retail deposit growth strategy earlier in 2008. Consumer deposit growth in most of the Company’s markets was stronger than expected, with a total of 7,387 new households for the year, an increase of 11.6 percent compared to 2007. Services per household increased as well, by 17 percent compared to 2007, which management believes will improve customer retention prospectively. Offsetting this success, business deposit growth was weaker due to the economic slowdown and deposit declines in the Company’s central Florida region, and lower deposit balances for local municipalities and governmental agencies that maintain significantly higher balances from November to April each year. In total, ending deposit balances at December 31, 2008 were lower year over year by $176.9 million, or 8.9 percent, of which $195.5 million was attributable to business deposit declines in the Central Florida region and another $137 million was transferred from public fund deposits to sweep repurchase agreements in an effort to reduce FDIC insurance costs.

As a result of retail promotional efforts, the average balance for lower cost interest bearing deposits (NOW, savings and money market) continued to represent a significant component in 2008, favorably affecting the Company’s net interest margin. These deposits totaled 57.9 percent of average total interest bearing deposits during 2008, versus 59.6 percent for 2007. Average certificates of deposit (CDs) (a higher cost component of interest bearing deposits) increased to 42.1 percent of interest bearing deposits from 40.4 percent a year ago. Seacoast National’s decision to participate in the CDARs program in mid-2008 benefited deposit retention efforts during the latter half of 2008.

During 2008, slowing activity in the residential real estate market (resulting in declining title company, law firm and escrow deposits), as well as completed commercial real estate construction projects (and associated escrow deposits being depleted at the end of construction), contributed to a decline in noninterest bearing deposits. Average CDs (a higher cost component of interest bearing deposits) increased as a percentage of interest bearing deposits during 2008, reflecting customers depositing more funds into CDs while maintaining lower average balances in savings and other liquid deposits that pay no interest or a lower interest rate. Average balances for CDs increased by $121 million to $738 million for the fourth quarter of 2008 compared to the same period in 2007. Offsetting the impact of this trend, the average rate paid in the fourth quarter of 2008 for CDs was 3.59 percent, 123 basis points lower than the rate paid for the same period in 2007.

Overall, average short-term borrowings (including federal funds purchased, but principally sweep repurchase agreements with customers of Seacoast National) of $91.1 million over 2008 were lower at 5.1 percent of interest bearing liabilities, versus 8.6 percent for 2007. The Company did not rely on federal funds purchased during 2008 because of better deposit growth, particularly during the second and third quarters of 2008 when the Company utilized federal funds purchased in prior years. During 2008, federal funds purchased comprised a nominal amount of short-term borrowings, averaging only $4.0 million.

Average other borrowings for 2008 increased by $41.6 million, or 53.9 percent, to $118.8 million when compared to the average balance for 2007. The increase in the average balances reflected two advances from the FHLB of $25 million each added on September 25, 2007 and November 27, 2007, respectively, with fixed rates of 3.64 percent and 2.70 percent. The borrowings are convertible to a variable rate on a quarterly basis at the discretion of the FHLB, and the Company has the option to repay the borrowing without penalty or charges if the FHLB elects to convert.

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The cost of interest-bearing liabilities in 2008 decreased 100 basis points to 2.78 percent from 2007, primarily as a result of the Federal Reserve’s decreases in short-term interest rates in 2007 and 2008. During 2008, approximately $529 million of the Company’s CDs matured, re-pricing to a lower rate. The average aggregate balances for NOW, savings and money market deposits increased $15.8 million, or 1.8 percent, to $917.6 million for 2008 compared to 2007, noninterest bearing deposits decreased $56.0 million or 15.6 percent to $302.6 million, and average CDs increased $57.6 million or 9.4 percent to $668.1 million.

Noninterest Income

Noninterest income, excluding gains and losses from the sale of securities, totaled $19,015,000 for 2009, $3,226,000, or 14.5 percent, lower than for 2008. For 2008, noninterest income of $22,241,000 was $2,723,000 or 10.9 percent lower than for 2007 (excluding the gains and losses from the sale of securities). Noninterest income, as defined above, accounted for 20.5 percent of total revenue (net interest income plus noninterest income, excluding securities gains or losses) in 2009 compared to 22.4 percent a year ago.

Table 6 provides detail regarding noninterest income components for the past three years.

For 2009, revenues from the Company’s wealth management services businesses (trust and brokerage) decreased year over year, by $927,000 or 20.9 percent, and were lower in 2008 than for 2007 by $1,069,000 or 19.4 percent. Of the $927,000 decrease, trust revenue was lower by $246,000 or 10.5 percent and brokerage commissions and fees were lower by $681,000 or 32.5 percent. Included in the $681,000 decline in brokerage commissions and fees was a decline of $410,000 in revenue from insurance annuity sales year over year reflecting the lower interest rate environment, and a $229,000 reduction in mutual fund commissions. Lower inter vivos trust and agency fees were the primary cause for the decline in trust income, as these decreased $48,000 and $241,000, respectively, from 2008, as well as lower testamentary fee income, which decreased $26,000. Estate income was partially offsetting, increasing by $94,000 from 2008’s results. In comparison, for 2008, trust revenue was lower by $231,000 or 9.0 percent, and brokerage commissions and fees were lower by $838,000, or 28.6 percent, compared to 2007’s performance. Economic uncertainty and declines in asset values were the primary issue affecting clients of the Company’s wealth management services during 2008 and 2009.

Service charges on deposits for 2009 were $898,000 or 12.2 percent lower year over year versus 2008, and were $325,000 or 4.2 percent lower in 2008 year over year versus 2007. Overdraft income was the primary cause, as this declined $826,000 in 2009 compared to 2008 and decreased $257,000 in 2008 compared to 2007. Overdraft fees represented approximately 76 percent of total service charges on deposits for 2009, compared to 78 percent for all of 2008 and 2007. Growth rates for remaining service charge fees on deposits have been nominal or declining, as the trend over the past few years is for customers to prefer deposit products which have no fees or where fees can be avoided by maintaining higher deposit balances. Recent new regulations for overdraft service charges will likely have negative impacts on this source of revenue.

For 2009, fees from the non-recourse sale of marine loans originated by our Seacoast Marine Division of Seacoast National decreased $1,151,000, or 50.0 percent, compared to 2008, and were lower by $561,000 or 19.6 percent for 2008 compared to 2007. The Seacoast Marine Division originated $20 million in loans during the first and second quarters of 2009, $15 million during the third quarter of 2009, and $15 million during the fourth quarter of 2009 (a total of $70 million for the year), compared to $44 million, $55 million, $24 million and $20 million in each of the first, second, third and fourth quarters of 2008, respectively, or $143 million for the entire year of 2008. This compares to loan production of $186 million during 2007. Of the loans originated, $68 million (97.1 percent), $142 million (99.3 percent), and $160 million (86.0 percent) were sold during 2009, 2008 and 2007. As economic conditions deteriorated significantly during 2008, attendance at boat shows by consumers, manufacturers, and marine retailers was lower than in prior years, and as a result marine sales and loan volumes were lower and are expected to continue to be lower in 2010. The boating industry is contracting, with a number of manufacturers consolidating or predicted to consolidate. The Seacoast Marine Division is headquartered in Ft. Lauderdale, Florida with lending professionals in Florida and California. The California office serves California, Washington and Oregon.

Greater usage of check or debit cards over the past several years by core deposit customers and an increased cardholder base has increased our interchange income. For 2009, debit card income increased

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$160,000 or 6.5 percent from 2008, and was $147,000 or 6.4 percent higher for 2008, compared to 2007’s income. Other deposit-based electronic funds transfer (“EFT”) income decreased $28,000 or 7.8 percent in 2009 compared to 2008, after decreasing $92,000 or 20.4 percent from in 2008 compared to 2007’s revenue. Debit card and other deposit-based EFT revenue is dependent upon business volumes transacted, as well as the fees permitted by VISA^® and MasterCard^®. During 2009 and 2008, our other deposit-based EFT income was adversely affected by lower fees from non-customers utilizing Seacoast National’s automatic teller machines (“ATMs”) which likely reflected the economic recession and decreased tourist and vacation activity.

Merchant income was $635,000 or 26.5 percent lower for 2009, compared to one year earlier, and was $442,000 or 15.6 percent lower for 2008 versus 2007’s result. Merchant income as a source of revenue is dependent upon the volume of credit card transactions that occur with merchants who have business demand deposits with Seacoast National. Over the past few years, expansion into new markets favorably impacted our merchant income, but continued economic weakness and related effects on consumer spending have more than offset our geographic expansion. Merchant income historically has been highest in the first quarter each year, reflecting seasonal sales activity.

The Company originates residential mortgage loans in its markets, with loans processed by commissioned employees of Seacoast National. Many of these mortgage loans are referred by the Company’s branch personnel. Mortgage banking fees in 2009 increased $628,000 or 56.2 percent from 2008, after decreasing $291,000 or 20.7 percent for 2008 from 2007. Mortgage banking revenue as a component of overall noninterest income improved to 9.2 percent of noninterest income for 2009, compared to 5.2 percent for 2008 and 5.7 percent for 2007. Mortgage banking revenue as a component of overall noninterest income was diminished during 2008 and 2007, reflecting the real estate driven recession. Sales of residential loans in 2009 totaled $91 million, versus $50 million in 2008 and $56 million in 2007. Mortgage revenues are dependent upon favorable interest rates, as well as good overall economic conditions, including the volume of new and used home sales. We are beginning to see some signs of stability for residential real estate sales and activity in our markets, with transactions increasing, prices firming and affordability improving. The Company has had more opportunities in markets it serves during 2009 and hopes to continue to take advantage in 2010 of tighter credit and reduced capital limiting the ability of some of our competitors. The Company also began offering FHA loans during the second quarter of 2009, a product previously not offered.

Other income for 2009 decreased $375,000 or 21.1 percent compared to a year ago, and was nominally lower for 2008, by $90,000 or 4.8 percent when compared to 2007’s result. Most line items in other income were slightly lower year over year, including research fees, wire transfer fees, letter of credit fees, foreign exchange fees, late fees, and miscellaneous other fees. The comparison of other income between 2009 and 2008 was affected by $305,000 of additional income realized upon the redemption of Visa^® Inc. shares in the first quarter of 2008 as part of Visa’s initial public offering.

Noninterest Expenses

The Company’s overhead ratio has typically been in the low 60’s in recent years. However, lower earnings in 2009, 2008 and 2007 resulted in this ratio increasing to 86.9 percent, 77.8 percent and 69.4 percent, respectively. When compared to 2008, total noninterest expenses for 2009 increased by $52,857,000 to $131,747,000, however, excluding the write-down of goodwill of $49,813,000, noninterest expenses were $3,044,000 or 3.9 percent higher versus a year ago, totaling $81,934,000. In comparison, noninterest expenses for 2008 were $1,413,000 or 1.8 percent higher than 2007’s expenses. Noninterest expenses for 2009 also include a special assessment imposed by the Federal Deposit Insurance Corporation (“FDIC”) in the second quarter totaling $996,000, and deposit insurance premiums that were $1,928,000 higher due to the FDIC’s deposit insurance premium rates more than doubling. Noninterest expenses in 2009 have been in line with our expectations and have included $5.0 million of annual expense reductions implemented and effective as of January 1, 2009. Salaries, wages and benefits (excluding one-time severance payments) were $4,909,000 or 13.2 percent lower for 2009 compared to the same period in 2008, reflecting the elimination of bonus compensation for most positions and profit sharing contributions for all associates, reductions in matching contributions associated with salary savings plans, lower credit related costs, executive retirements, job eliminations, branch consolidation(s), freezing of executive salaries, and reduced salary increases for other

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associates. Executive cash incentive compensation was not paid in 2009 or 2008. Cost reductions were also achieved in data processing, furniture and equipment expenses, and marketing, all of which declined during 2009 when compared to 2008.

Table 7 provides detail of noninterest expense components for the years ending December 31, 2009, 2008 and 2007.

Salaries and wages for 2009 decreased by $3,466,000 or 11.5 percent to $26,693,000 compared to the prior year, and for 2008 were $1,416,000 or 4.5 percent lower when compared to 2007’s salary costs. Reduced headcount (including the branch consolidations in 2008) and limited accruals for incentive payments due to lower revenues generated from wealth management and weak lending production were the primary causes of decreases in 2009 compared to 2008. Severance payments during 2009 totaled $582,000, which were $379,000 more than in 2008. Base salaries for 2009 were $2,563,000 or 9.3 percent lower year over year compared to 2008, and were $669,000 or 2.4 percent lower during 2008 versus 2007’s result. Full-time equivalent employees (“FTEs”) totaled 409 at December 31, 2009, compared to 446 FTEs at December 31, 2008 and 464 FTEs at December 31, 2007.

As a recipient of funding from the U.S. Treasury’s TARP Capital Purchase Program (“CPP”), the Company is subject to various limitations on senior executive officers’ compensation pursuant the U.S. Treasury’s standards for executive compensation and corporate governance for the period during which the U.S. Treasury holds equity pursuant to the TARP CPP, including common stock which may be issued pursuant to the Warrant issued by the Company to the U.S. Treasury. These standards generally apply to the Company’s chief executive officer, chief financial officer and the three next most highly compensated senior executive officers (see “The TARP CPP, the ARRA and other proposed rules impose certain executive compensation and corporate governance requirements that may adversely affect us and our business, including our ability to recruit and retain qualified employees” under “Part II Other Information, Item 1A. Risk Factors” on the Company’s Form 10K filed for December 31, 2009).

Employee benefit costs for 2009 decreased $1,064,000 or 14.8 percent to $6,109,000 from 2008, and during 2008 were $164,000 or 2.2 percent lower when compared to 2007. The Company recognized higher claims experience in the first six months of 2009 for its self-funded health care plan compared to 2008, with the expectation that these costs would be lower in future periods due to lower FTE’s resulting in fewer participants in the plan for 2009 and larger discounts on services under a more comprehensive network of providers. During the third and fourth quarters of 2009, the Company had improved experience, with group health care costs declining $385,000 or 19.6 percent compared to 2008’s third and fourth quarters (combined). In addition, the Company achieved a $141,000 reduction in payroll taxes year over year compared to 2008 and profit sharing accruals for the Company’s 401K plan were reduced by $945,000 during 2009, versus 2008. For 2008, group health insurance costs and payroll taxes were lower when compared to 2007, by $197,000 and $135,000, respectively, however salary matches during 2008 for the Company’s 401K plan were $175,000 above 2007’s due to increased participation.

Outsourced data processing costs totaled $7,143,000 for 2009, a decrease of $469,000 or 6.2 percent from a year ago, versus a nominal increase in 2008 of only $31,000, compared to 2007’s costs. Seacoast National utilizes third parties for its core data processing systems and merchant services processing. Outsourced data processing costs are directly related to the number of transactions processed. Merchant income and merchant services processing costs were lower year over year, with fewer transactions occurring at local businesses reflecting the poor economy (see “Noninterest Income”). Merchant services processing expenses were $531,000 lower than a year ago for 2008. Outsourced data processing costs can be expected to increase as the Company’s business volumes grow and new products such as bill pay, internet banking, etc. become more popular. Telephone and data line expenditures, including electronic communications with customers and between branch locations and personnel, as well as third party data processors, have been relatively stable costs, decreasing by $61,000 in 2009 to $1,835,000 after decreasing $9,000 for 2008 when compared to 2007.

Total occupancy, furniture and equipment expenses for 2009 decreased $224,000 or 2.0 percent to $10,909,000, year over year, versus a $593,000 or 5.6 percent increase in 2008. Included in the $224,000 decrease during 2009 were lease payments for bank premises decreasing $138,000 and repair and maintenance

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costs declining $117,000. For 2008, lease payments for bank premises increased $310,000 compared to 2007 and depreciation increased $267,000, reflecting the addition of newer offices, as well as furniture and equipment acquired during 2008, and higher utilities (electricity and water) and real estate taxes aggregating to $88,000 contributed to the increase in 2008 expenses, compared to 2007. Partially offsetting, expenses in 2008 were affected by the sale of certain assets (including leasehold improvements) at closed WalMart locations, which netted the Company approximately $90,000 more than the carrying value of assets sold in 2008.

Marketing expenses, including sales promotion costs, ad agency production and printing costs, newspaper and radio advertising, and other public relations costs associated with the Company’s efforts to market products and services, decreased by $547,000 or 20.9 percent to $2,067,000 when compared to 2008, and were $461,000 or 15.0 percent lower for 2008 versus 2007. Agency production, printing and media costs (including newspaper, radio and television) were $273,000 lower for 2009, compared to 2008. Public relations, business meals and donations were lower by $116,000, $92,000 and $67,000, respectively, compared to 2008. For 2008, in comparison to 2007, media advertising costs, public relations expenditures, and donations, were $191,000, $115,000 and $121,000 lower, respectively, and market research, direct mail and business meals and entertainment expenditures were less than the prior year by $34,000, $37,000 and $54,000, respectively. Partially offsetting, aggregate production and printing costs increased $82,000 during 2008 from 2007.

Legal and professional fees increased $1,322,000 or 23.3 percent, to $6,984,000 for 2009, compared to a $1,592,000 or 39.1 percent increase in 2008, compared to 2007. Legal fees were $1,221,000 higher in 2009 year over year and were $2,029,000 higher in 2008 than in 2007, primarily due to higher problem assets. Compared to 2008, regulatory examination fees and CPA fees on an aggregate basis were $126,000 lower for 2009, but professional fees were $227,000 higher reflecting strategic planning assistance. For 2008, fees paid to the OCC, Seacoast National’s primary regulator, were $164,000 higher than in 2007, but professional fees were lower by $612,000, most of which was attributable to additional costs in 2007 for consulting activities related to a review of processes, operations and costs. Professional fees have generally been higher during this period of increased regulatory compliance. The Company also uses the consulting services of a former bank regulator who also serves as a director of Seacoast National to assist it with its compliance with the formal agreement and recent regulatory examinations. For 2009, 2008 and 2007, Seacoast National paid $410,000, $211,000 and $59,000, respectively, for these services. We expect legal fees will be lower for 2010 as a result of fewer new nonperforming loans.

The FDIC one-time credit for insurance premiums issued in 2007 was applied to reduce insurance assessments during the first quarter of 2008. As a result, FDIC assessments for the first quarter of 2008 totaled only $59,000 and for the second quarter, third quarter and fourth quarter of 2008 totaled $392,000, $543,000 and $1,034,000, respectively, whereas FDIC assessments for the first, second, third and fourth quarters of 2009 totaled $877,000, $2,026,000, $1,007,000 and $1,042,000, respectively. The second quarter 2009 assessment included a special assessment of $976,000, based upon 5 basis points of total assets less Tier 1 risk-based capital. In addition, on April 1, 2009 a higher base assessment went into effect as well as the FDIC’s implementation of a more complex risk-based formula to calculate assessments. FDIC assessments were mitigated to some degree by Seacoast National working with public fund depositors to move deposits into sweep repurchase agreements, lessening the amount of deposits subject to the higher FDIC assessment rates approved for 2009. The FDIC also mandated the prepayment of assessments for the next three years plus fourth quarter 2009’s assessment that was remitted on December 30, 2009. The amount of the prepayment totaled $14.8 million. The Company anticipates that FDIC insurance costs are likely to remain elevated, with assessments possibly increasing even more depending on the severity of bank failures and their impact to the FDIC’s Deposit Insurance Fund.

Net losses on other real estate owned and other asset dispositions totaled $6,327,000 for 2009, and totaled $1,424,000 for 2008, compared to $288,000 for 2007. Included in the increase year over year were losses on closed branch facilities of $905,000 principally write-downs to fair value on closed branch locations. Other real estate owned increased during 2009 and while the pace of growth in nonaccrual loans is expected to moderate, costs associated with the management of other real estate owned and other repossessed assets will likely continue to increase in 2010 as problem assets migrate toward liquidation. The loan sales completed over the latter part of 2009 should result in lower collection costs prospectively.

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Other expenses decreased $274,000 in 2009 or 3.5 percent to $7,656,000, and were lower in 2008 by $1,692,000 or 17.6 percent, at $7,930,000. Benefiting 2008’s first quarter was a $130,000 reversal of an accrual for the Company’s portion of Visa^® litigation and settlement costs, as a result of Visa’s successful IPO. Increasing year over year for 2009 were correspondent bank clearing charges (up $174,000, because lower analysis credits provided for compensating balances in the current lower interest rate environment make the payment of charges more sensible), directors’ fees (up $185,000, reflecting more frequent meetings than a year ago), employee placement fees (up $129,000, principally headhunter fees), and higher losses associated with robbery and customer fraud (up $142,000). More than offsetting were decreases in expenditures for stationery, printing and supplies (down $204,000), postage and courier costs (down $97,000, primarily overnight services), insurance costs (down $106,000, including property and casualty as well as other liability coverage), education (down $37,000, with fewer education programs offered internally), travel related costs (down $172,000, including mileage reimbursement, airline and hotel costs), bank paid closing costs (down $108,000, as home equity line closing costs paid by Seacoast National have been limited), and origination fees for marine loan production (down $148,000). Also decreasing year over year for 2008 compared to 2007 were postage, courier and delivery (down $157,000), stationery, printing and supplies (down $85,000), bank paid closing costs (down $523,000), subcontractor/broker fees for marine loan production (down $262,000), employment placement costs (down $354,000 as a result of reduced headhunter fees), reduced charge-offs related to robbery and customer fraud (down $237,000), education, tuition and conference expenses (down $105,000), and certain other expenses deemed non-recurring (down $333,000, including a reduction in the Company’s reserve for unfunded commitments). Partially offsetting these declines during 2008 were increases year over year compared to 2007 for appraisal fees (up $263,000 as a result of value assessments) and correspondent bank clearing charges (up $189,000).

Interest Rate Sensitivity

Fluctuations in interest rates may result in changes in the fair value of the Company’s financial instruments, cash flows and net interest income. This risk is managed using simulation modeling to calculate the most likely interest rate risk utilizing estimated loan and deposit growth. The objective is to optimize the Company’s financial position, liquidity, and net interest income while limiting their volatility.

Senior management regularly reviews the overall interest rate risk position and evaluates strategies to manage the risk. The Company has determined that an acceptable level of interest rate risk would be for net interest income to fluctuate no more than 6 percent given a parallel change in interest rates (up or down) of 200 basis points. The Company’s most recent Asset and Liability Management Committee (“ALCO”) model simulation indicates net interest income would increase 0.7 percent if interest rates gradually rise 200 basis points over the next 12 months and 0.3 percent if interest rates gradually rise 100 basis points.

The Company had a negative gap position based on contractual and prepayment assumptions for the next 12 months, with a negative cumulative interest rate sensitivity gap as a percentage of total earning assets of 24.7 percent at December 31, 2009 (see “Table 19 — Interest Rate Sensitivity Analysis”), compared to a negative gap of 19.0 percent a year ago.

The computations of interest rate risk do not necessarily include certain actions management may undertake to manage this risk in response to changes in interest rates. Derivative financial instruments, such as interest rate swaps, options, caps, floors, futures and forward contracts may be utilized as components of the Company’s risk management profile.

Market Risk

Market risk refers to potential losses arising from changes in interest rates, and other relevant market rates or prices.

Interest rate risk, defined as the exposure of net interest income and Economic Value of Equity, or “EVE,” to adverse movements in interest rates, is the Company’s primary market risk, and mainly arises from the structure of the balance sheet (non-trading activities). The Company is also exposed to market risk in its investing activities. The Company’s Asset/Liability Committee, or “ALCO,” meets regularly and is responsible

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for reviewing the interest rate sensitivity position of the Company and establishing policies to monitor and limit exposure to interest rate risk. The policies established by the ALCO are reviewed and approved by the Company’s Board of Directors. The primary goal of interest rate risk management is to control exposure to interest rate risk, within policy limits approved by the Board. These limits reflect the Company’s tolerance for interest rate risk over short-term and long-term horizons.

The Company also performs valuation analyses, which are used for evaluating levels of risk present in the balance sheet that might not be taken into account in the net interest income simulation analyses. Whereas net interest income simulation highlights exposures over a relatively short time horizon, valuation analysis incorporates all cash flows over the estimated remaining life of all balance sheet positions. The valuation of the balance sheet, at a point in time, is defined as the discounted present value of asset cash flows minus the discounted value of liability cash flows, the net result of which is the EVE. The sensitivity of EVE to changes in the level of interest rates is a measure of the longer-term re-pricing risks and options risks embedded in the balance sheet. In contrast to the net interest income simulation, which assumes interest rates will change over a period of time, EVE uses instantaneous changes in rates. EVE values only the current balance sheet, and does not incorporate the growth assumptions that are used in the net interest income simulation model. As with the net interest income simulation model, assumptions about the timing and variability of balance sheet cash flows are critical in the EVE analysis. Particularly important are the assumptions driving prepayments and the expected changes in balances and pricing of the indeterminate life deposit portfolios. Based on our most recent modeling, an instantaneous 100 basis point increase in rates is estimated to increase the EVE 1.0 percent versus the EVE in a stable rate environment, while a 200 basis point increase in rates is estimated to decrease the EVE 4.4 percent.

While an instantaneous and severe shift in interest rates is used in this analysis to provide an estimate of exposure under an extremely adverse scenario, a gradual shift in interest rates would have a much more modest impact. Since EVE measures the discounted present value of cash flows over the estimated lives of instruments, the change in EVE does not directly correlate to the degree that earnings would be impacted over a shorter time horizon, i.e., the next fiscal year. Further, EVE does not take into account factors such as future balance sheet growth, changes in product mix, change in yield curve relationships, and changing product spreads that could mitigate the adverse impact of changes in interest rates.

Liquidity Risk Management

Liquidity risk involves the risk of being unable to fund assets with the appropriate duration and rate-based liability, as well as the risk of not being able to meet unexpected cash needs. Liquidity planning and management are necessary to ensure the ability to fund operations cost effectively and to meet current and future potential obligations such as loan commitments and unexpected deposit outflows.

In the table that follows, all deposits with indeterminate maturities such as demand deposits, NOW accounts, savings accounts and money market accounts are presented as having a maturity of one year or less.

Contractual Commitments

	December 31, 2009
					Over One		Over Three
					Year		Years
			One Year		Through		Through		Over Five
	Total		or Less		Three Years		Five Years		Years
	(In thousands)
Deposit maturities	$	1,779,434	$	1,555,543	$	214,097	$	9,643	$	151
Short-term borrowings		105,673		105,673		—		—		—
Borrowed funds		50,000		—		—		—		50,000
Subordinated debt		53,610		—		—		—		53,610
Operating leases		32,015		3,578		5,945		4,531		17,961
	$	2,020,732	$	1,664,794	$	220,042	$	14,174	$	121,722

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Funding sources primarily include customer-based core deposits, collateral-backed borrowings, cash flows from operations, and asset securitizations and sales.

Cash flows from operations are a significant component of liquidity risk management and consider both deposit maturities and the scheduled cash flows from loan and investment maturities and payments. Deposits are a primary source of liquidity. The stability of this funding source is affected by numerous factors, including returns available to customers on alternative investments, the quality of customer service levels, safety and competitive forces.

We routinely use securities and loans as collateral for secured borrowings. In the event of severe market disruptions, we have access to secured borrowings through the FHLB and the Federal Reserve Bank of Atlanta.

Contractual maturities for assets and liabilities are reviewed to meet current and expected future liquidity requirements. Sources of liquidity, both anticipated and unanticipated, are maintained through a portfolio of high quality marketable assets, such as residential mortgage loans, securities held for sale and federal funds sold. The Company also has access to borrowed funds such as FHLB lines of credit and the Federal Reserve Bank of Atlanta under its borrower-in-custody program. The Company is also able to provide short term financing of its activities by selling, under an agreement to repurchase, United States Treasury and Government agency securities not pledged to secure public deposits or trust funds. At December 31, 2009, Seacoast National had available lines of credit under current lendable collateral value, which are subject to change, of $293 million. Seacoast National had $24 million of United States Treasury and Government agency securities and mortgage backed securities not pledged and available for use under repurchase agreements, and had an additional $237 million in residential and commercial real estate loans available as collateral. At December 31, 2008, the Company had available lines of credit of $564 million, and had $28 million of Treasury and Government agency securities and mortgage backed securities not pledged and available for use under repurchase agreements, as well as an additional $152 million in residential and commercial real estate loans available as collateral.

Liquidity, as measured in the form of cash and cash equivalents (including federal funds sold and interest bearing deposits), totaled $215,100,000 on a consolidated basis at December 31, 2009 as compared to $151,192,000 at December 31, 2008. The composition of cash and cash equivalents has changed from a year ago. Over the past twelve months, cash and due from banks declined $13,802,000 or 30.0 percent to $32,200,000 and federal funds sold decreased by $4,605,000 to zero, while interest bearing deposits increased to $182,900,000 from $100,585,000. The interest bearing deposits are maintained in Seacoast National’s account at the Federal Reserve Bank of Atlanta. Cash and cash equivalents vary with seasonal deposit movements and are generally higher in the winter than in the summer, and vary with the level of principal repayments and investment activity occurring in Seacoast National’s securities and loan portfolios.

The Company is a legal entity separate and distinct from Seacoast National and its other subsidiaries. Various legal limitations, including Section 23A of the Federal Reserve Act and Federal Reserve Regulation W, restrict Seacoast National from lending or otherwise supplying funds to the Company or its non-bank subsidiaries. The Company has traditionally relied upon dividends from Seacoast National and securities offerings to provide funds to pay the Company’s expenses, to service the Company’s debt and to pay dividends upon Company common stock. In 2008 and 2007, Seacoast National paid dividends to the Company that exceeded its earnings in those years. Seacoast National cannot currently pay dividends to the Company without prior OCC approval. At December 31, 2009, the Company had cash and cash equivalents at the parent of approximately $13.1 million, comprised of remaining funds provided through a common stock offering consummated in August 2009. In comparison, at December 31, 2008, the Company held cash and short-term securities of $39.2 million, reflecting funding from the U.S. Treasury’s TARP CPP received in December 2008. All of the TARP CPP funds have been contributed as additional capital to Seacoast National. The Company has suspended all dividends upon its Series A preferred stock and its common stock, and has deferred distributions on its subordinated debt related to trust preferred securities issued through affiliated trusts. Additional losses could prolong Seacoast National’s inability to pay dividends to its parent without regulatory approval. See “Capital Resources”.

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Off-Balance Sheet Transactions

In the normal course of business, we engage in a variety of financial transactions that, under generally accepted accounting principles, either are not recorded on the balance sheet or are recorded on the balance sheet in amounts that differ from the full contract or notional amounts. These transactions involve varying elements of market, credit and liquidity risk.

The two primary off-balance sheet transactions the Company has engaged in are:

•  to manage exposure to interest rate risk (derivatives); and

•  to facilitate customers’ funding needs or risk management objectives (commitments to extend credit and standby letters of credit).

Derivative transactions are often measured in terms of a notional amount, but this amount is not recorded on the balance sheet and is not, when viewed in isolation, a meaningful measure of the risk profile of the instruments. The notional amount is not usually exchanged, but is used only as the basis upon which interest or other payments are calculated.

The derivatives the Company uses to manage exposure to interest rate risk are interest rate swaps. All interest rate swaps are recorded on the balance sheet at fair value with realized and unrealized gains and losses included either in the results of operations or in other comprehensive income, depending on the nature and purpose of the derivative transaction.

The credit risk of these transactions is managed by establishing a credit limit for counterparties and through collateral agreements. The fair value of interest rate swaps recorded in the balance sheet at December 31, 2009 included derivative product assets of $24,000. In comparison, at December 31, 2008 net derivative product assets of $336,000 were outstanding.

Lending commitments include unfunded loan commitments and standby and commercial letters of credit. A large majority of loan commitments and standby letters of credit expire without being funded, and accordingly, total contractual amounts are not representative of our actual future credit exposure or liquidity requirements. Loan commitments and letters of credit expose the Company to credit risk in the event that the customer draws on the commitment and subsequently fails to perform under the terms of the lending agreement.

Loan commitments to customers are made in the normal course of our commercial and retail lending businesses. For commercial customers, loan commitments generally take the form of revolving credit arrangements. For retail customers, loan commitments generally are lines of credit secured by residential property. These instruments are not recorded on the balance sheet until funds are advanced under the commitment. For loan commitments, the contractual amount of a commitment represents the maximum potential credit risk that could result if the entire commitment had been funded, the borrower had not performed according to the terms of the contract, and no collateral had been provided. Loan commitments were $97 million at December 31, 2009, and $165 million at December 31, 2008 (see “Note P-Contingent Liabilities and Commitments with Off-Balance Sheet Risk” to the Company’s consolidated financial statements).

Income Taxes

The income tax benefit for 2009 was 7.5 percent of loss before taxes, compared to 32.6 percent for 2008, and a provision for income taxes representing 31.1 percent of income before taxes for 2007. The lower benefit for 2009 resulted primarily from no tax benefit on the goodwill impairment of $49.8 million and a valuation allowance that offset the tax benefit for the third and fourth quarters of 2009.

The tax benefit for the net loss for the third and fourth quarters of 2009 totaled $29.7 million. The deferred tax valuation allowance was increased by a like amount, and therefore there was no change in the carrying value of deferred tax assets which are supported by tax planning strategies. Should the economy show signs of improvement and our credit losses moderate, we anticipate that we could place increased reliance on

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our forecast of future taxable earnings, which would result in realization of additional future tax benefits (see “Note L — Income Taxes” to the Company’s consolidated financial statements).

Financial Condition

Total assets decreased $163,121,000 or 7.0 percent to $2,151,315,000 at December 31, 2009, after decreasing $105,438,000 or 4.4 percent to $2,314,436,000 in 2008.

Capital Resources

Table 8 summarizes the Company’s capital position and selected ratios. The Company’s ratio of shareholders’ equity to period end total assets was 7.06 percent at December 31, 2009, compared with 9.33 percent at December 31, 2008. Seacoast’s management uses certain “non-GAAP” financial measures in its analysis of the Company’s performance. Seacoast’s management uses this measure to assess the quality of capital and believes that investors may find it useful in their analysis of the Company. This capital measure is not necessarily comparable to similar capital measures that may be presented by other companies. The Company and its banking subsidiary, Seacoast National, are subject to various general regulatory policies and requirements relating to the payment of dividends, including requirements to maintain adequate capital above regulatory minimums. As a result, the Company’s capital position remains strong, meeting the general definition of “well capitalized”, with a total risk-based capital ratio of 15.16 percent at December 31, 2009, higher than December 31, 2008’s ratio of 14.00 percent and higher than 12.17 percent at December 31, 2007 (see “Note N — Shareholders’ Equity” to the consolidated financial statements). The OCC and Seacoast National agreed by letter agreement that Seacoast National shall maintain specific minimum capital ratios by March 31, 2009 and subsequent periods, including a total risk-based capital ratio of 12.00 percent and a Tier 1 leverage ratio of 7.50 percent. Recently, the minimum Tier 1 capital ratio was revised by the OCC and Seacoast National to 8.50 percent for periods after January 31, 2010. The minimum total risk-based capital ratio was left unchanged. The agreement with the OCC as to minimum capital ratios does not change the Bank’s status as “well-capitalized” for bank regulatory purposes, which the Bank is currently in compliance with the requirement.

The Company is a legal entity separate and distinct from Seacoast National and its other subsidiaries, and the Company’s primary source of cash and liquidity are securities offerings, borrowings, and dividends from its bank subsidiary.

Securities Offerings

In December 2008, the Company sold $50.0 million of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, par value $0.10 per share, the “Series A Preferred Stock”) and warrants (the “Warrant”) to acquire 1,179,245 shares of common stock to the U.S. Treasury (the “Treasury”). The shares of Series A Preferred Stock qualify as Tier 1 capital for regulatory capital purposes and pay cumulative dividends at a rate of 5 percent per annum for the first five years, and thereafter at a rate of 9 percent per annum. The Series A Preferred Stock may be redeemed by the Company after three years without restrictions. As a result of the public issuance of common stock the Company has notified Treasury to reduce the Warrant it holds to purchase common stock by 50 percent to 589,623 shares.

During the third quarter of 2009, the Company enhanced capital by selling 33,675,000 shares of its common stock at a price to the public of $2.25 per share for total gross proceeds of approximately $75.8 million. On December 17, 2009, Seacoast sold of 6,000,000 shares of its common stock at $2.25 per share to CapGen Capital Group III LP (“CapGen”), a Delaware limited partnership, pursuant to the definitive Stock Purchase Agreement dated as of October 23, 2009 between the Company and CapGen. The Company received total gross proceeds of $13.5 million from the sale, and paid $540,000 of fees paid to the placement agent.

As of December 31, 2009, the Company’s equity capital was $151.9 million, or 7.06 percent of its total assets.

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Beginning in the third quarter of 2008, we reduced our dividend per share of our common stock to $0.01 and, as of May 19, 2009, we suspended the payment of dividends on both our common stock and Series A Preferred Stock as described below, as well as all distributions on our trust preferred securities.

Borrowings

The Company has two wholly owned trust subsidiaries, SBCF Capital Trust I and SBCF Statutory Trust II that were formed in 2005, and in 2007, the Company formed an additional wholly owned trust subsidiary, SBCF Statutory Trust III. The 2005 trusts each issued $20.0 million (totaling $40.0 million) of trust preferred securities and the 2007 trust issued an additional $12.0 million in trust preferred securities. All trust preferred securities are guaranteed by the Company on a junior subordinated basis. The Federal Reserve’s rules permit qualified trust preferred securities and other restricted capital elements to be included as Tier 1 capital up to 25 percent of core capital, net of goodwill and intangibles. The Company believes that its trust preferred securities qualify under these revised regulatory capital rules and expects that it will be able to treat $50.0 million of trust preferred securities as Tier 1 capital and $2.0 million as Tier 2 capital. For regulatory purposes, the trust preferred securities are added to the Company’s tangible common shareholders’ equity to calculate Tier I capital. The Company also formed SBCF Capital Trust IV and SBCF Capital Trust V in 2008 which are currently inactive.

The weighted average interest rate of our outstanding subordinated debt related to trust preferred securities was 2.53 percent during 2009.

As described above, our average short-term borrowings were comprised entirely of sweep repurchase agreements with customers of the Company’s bank subsidiary of $117.2 million in 2009. During 2009, no federal funds were purchased. At December 31, 2009, other borrowings were comprised of subordinated debt of $53.6 million related to trust preferred securities issued by trusts organized by the Company, and advances from the FHLB of $50.0 million. A $15.0 million FHLB advance matured in November 2009 and the remaining $50.0 million matures in 2017. In 2009, the weighted average cost of our short-term borrowings was 0.37 percent and the weighted average interest rate of our FLHB advances was 3.25 percent.

Dividends From Seacoast National

Seacoast National has not paid a dividend to the Company since June 30, 2008. Prior OCC approval presently is required for any payments of dividends from Seacoast National to the Company.

Under the National Bank Act, national banks may in any calendar year, without the approval of the OCC, pay dividends to the extent of net profits for that year, plus retained net profits for the preceding two years (less any required transfers to surplus). The need to maintain adequate capital in Seacoast National also limits dividends that may be paid to us. As of December 31, 2009 Seacoast National cannot pay us any dividends without prior OCC approval, and must maintain appropriate capital that meets regulatory requirements applicable to us.

The OCC and the Federal Reserve have policies that encourage banks and bank holding companies to pay dividends from current earnings, and have the general authority to limit the dividends paid by national banks and bank holding companies, respectively, if such payment may be deemed to constitute an unsafe or unsound practice. If, in the particular circumstances, either of these federal regulators determined that the payment of dividends would constitute an unsafe or unsound banking practice, either the OCC or the Federal Reserve may, among other things, issue a cease and desist order prohibiting the payment of dividends by Seacoast National or us, respectively. Under a recently adopted Federal Reserve policy, the board of directors of a bank holding company must consider different factors to ensure that its dividend level is prudent relative to the organization’s financial position and is not based on overly optimistic earnings scenarios such as any potential events that may occur before the payment date that could affect its ability to pay, while still maintaining a strong financial position. As a general matter, the Federal Reserve has indicated that the board of directors of a bank holding company, such as Seacoast, should consult with the Federal Reserve and eliminate, defer, or significantly reduce the bank holding company’s dividends if: (i) its net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends; (ii) its prospective rate of earnings retention is not consistent with the its capital needs and overall

27

current and prospective financial condition; or (iii) it will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios.

Beginning in the third quarter of 2008, we reduced our dividend per share of our common stock to $0.01 and, as of May 19, 2009, we suspended the payment of dividends, as described below. On May 19, 2009, our board of directors decided to suspend regular quarterly cash dividends on our outstanding common stock and Series A Preferred Stock pursuant to a request from the Federal Reserve as a result of recently adopted Federal Reserve policies related to dividends and other distributions. Dividends will be suspended until such time as dividends are allowed by the Federal Reserve. We also suspended our interest payment on our subordinated debt related to trust preferred securities on the same day.

As of December 31, 2009, our accumulated deferred interest payments on Series A Preferred Stock was $2,188,000 and our accumulated deferred interest payment on trust preferred securities was $944,000.

Loan Portfolio

Table 9 shows total loans (net of unearned income) for real estate, commercial and financial and installment loans to individuals outstanding. Supplemental trend schedules with detail regarding line items in the above table have been added to show changes in the composition of loans outstanding by quarter since the end of 2007.

The Company defines commercial real estate in accordance to the guidance on “Concentrations in Commercial Real Estate Lending” (the “Guidance”) issued by the federal bank regulatory agencies in 2006, which defines commercial real estate (“CRE”) loans as exposures secured by land development and construction (including 1-4 family residential construction), multi-family property, and non-farm nonresidential property where the primary or a significant source of repayment is derived from rental income associated with the property (that is, loans for which 50 percent or more of the source of repayment comes from third party, non-affiliated, rental income) or the proceeds of the sale, refinancing, or permanent financing of the property. Loans to REITs and unsecured loans to developers that closely correlate to the inherent risks in CRE markets would also be considered CRE loans under the Guidance. Loans on owner occupied CRE are generally excluded.

Overall loan growth was negative when comparing outstanding balances at December 31, 2009 to December 31, 2008, as a result of the economic recession, including lower demand for commercial loans, and the Company’s successful divestiture of specific problem loans (including residential construction and land development loans) through loan sales. Total problem loans sold in 2009 and 2008 totaled $82 million and $68 million, respectively. By reducing the Company’s exposure to construction and land development loans, the Company’s overall risk profile has improved.

Total loans (net of unearned income and excluding the allowance for loan losses) were $1,397,503,000 at December 31, 2009, which was $279,225,000 or 16.7 percent lower than at December 31, 2008. At December 31, 2008, total loans of $1,676,728,000 were $221,661,000 or 11.7 percent lower than at December 31, 2007.

As shown in the supplemental trend tables, commercial real estate mortgage loans increased $26.4 million or 4.7 percent from December 31, 2008 to $584.1 million at December 31, 2009. More than offsetting the increase in commercial real estate mortgages were declines from December 31, 2008 in residential construction and land development loans of $82.3 million or 63.4 percent to $47.6 million at December 31, 2009, commercial construction and land development loans of $131.8 million or 63.0 percent to $77.5 million, residential construction and lot loans to individuals of $18.2 million or 32.5 percent to $37.8 million, residential mortgage loans combined of $42.9 million or 7.6 percent to $524.9 million, commercial and financial loans of $21.7 million or 26.2 percent to $61.1 million, and installment loans to individuals of $8.9 million or 12.2 percent to $64.0 million at December 31, 2009.

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Construction and land development loans, including loans secured by commercial real estate, were comprised of the following types of loans at December 31, 2009 and 2008:

	December 31
	2009						2008
	Funded		Unfunded		Total		Funded		Unfunded		Total
	(In millions)
Construction and land development*
Residential:
Condominiums	$	6.1	$	—	$	6.1	$	17.4	$	0.5	$	17.9
Town homes		—		—		—		6.1		—		6.1
Single family residences		4.1		1.1		5.2		26.8		5.8		32.6
Single family land & lots		22.6		0.3		22.9		52.8		0.5		53.3
Multifamily		14.8		—		14.8		26.8		0.6		27.4
		47.6		1.4		49.0		129.9		7.4		137.3
Commercial:
Office buildings		13.9		—		13.9		17.3		0.7		18.0
Retail trade		3.9		—		3.9		68.7		4.8		73.5
Land		45.6		0.1		45.7		73.3		10.9		84.2
Industrial		2.5		0.1		2.6		13.3		0.4		13.7
Healthcare		4.8		1.5		6.3		—		—		—
Churches & educational facilities		—		—		—		—		—		—
Lodging		—		—		—		—		—		—
Convenience stores		—		—		—		—		—		—
Marina		6.8		—		6.8		30.7		3.7		34.4
Other		—		—		—		6.0		0.3		6.3
		77.5		1.7		79.2		209.3		20.8		230.1
		125.1		3.1		128.2		339.2		28.2		367.4
Individuals:
Lot loans		29.3		—		29.3		35.7		—		35.7
Construction		8.5		4.9		13.4		20.3		9.6		29.9
		37.8		4.9		42.7		56.0		9.6		65.6
Total	$	162.9	$	8.0	$	170.9	$	395.2	$	37.8	$	433.0

* Reassessment of collateral assigned to a particular loan over time may result in amounts being reassigned to a more appropriate loan type representing the loan’s intended purpose, and for comparison purposes prior period amounts deemed significant have been restated to reflect the change.

The Company’s ten largest commercial real estate funded and unfunded loan relationships at December 31, 2009 aggregated to $173.2 million (versus $180.9 million a year ago) and for the top 41 commercial real estate relationships in excess of $5 million the aggregate funded and unfunded totaled $405.5 million (compared to 51 relationships aggregating to $586.6 million a year ago).

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Commercial real estate mortgage loans were comprised of the following loan types at December 31, 2009 and 2008:

	December 31
	2009						2008
	Funded		Unfunded		Total		Funded		Unfunded		Total
	(In millions)
Office buildings	$	132.3	$	1.2	$	133.5	$	146.4	$	2.0	$	148.4
Retail trade		164.6		—		164.6		111.9		0.9		112.8
Industrial		88.4		1.7		90.1		94.7		1.9		96.6
Healthcare		24.7		—		24.7		29.2		0.6		29.8
Churches & educa- tional facilities		29.6		—		29.6		35.2		—		35.2
Recreation		3.0		0.5		3.5		1.7		0.4		2.1
Multifamily		29.7		0.7		30.4		27.2		0.7		27.9
Mobile home parks		5.4		—		5.4		3.0		—		3.0
Lodging		25.5		—		25.5		26.6		—		26.6
Restaurant		4.7		—		4.7		6.2		—		6.2
Agriculture		11.7		0.7		12.4		8.5		0.5		9.0
Convenience stores		22.1		—		22.1		23.5		—		23.5
Other		42.4		0.3		42.7		43.6		0.5		44.1
Total	$	584.1	$	5.1	$	589.2	$	557.7	$	7.5	$	565.2

Fixed rate and adjustable rate loans secured by commercial real estate, excluding construction loans, totaled approximately $344 million and $240 million, respectively, at December 31, 2009, compared to $335 million and $223 million, respectively, a year ago.

Residential mortgage lending is an important segment of the Company’s lending activities. The Company has never offered sub-prime, Alt A, Option ARM or any negative amortizing residential loans, programs or products, although we have originated and hold residential mortgage loans from borrowers with original or current FICO scores that are less than “prime” FICO credit scores. Substantially all residential originations have been underwritten to conventional loan agency standards, including loans having balances that exceed agency value limitations. The Company selectively adds residential mortgage loans to its portfolio, primarily loans with adjustable rates. The Company reduced the size of the residential loan portfolio over the period from 2004 to 2007 and increased the size of the commercial and commercial real estate loan portfolios.

Exposure to market interest rate volatility with respect to long-term fixed rate mortgage loans held for investment is managed by attempting to match maturities and re-pricing opportunities and through loan sales of most fixed rate product. Closed residential mortgage loan production for 2009 totaled $145 million, with production by quarter as follows: fourth quarter 2009 production totaled $36 million, of which $19 million was sold servicing released, third quarter 2009 production was $28 million, all of it sold servicing-released, $43 million in residential loans closed in the second quarter of 2009, of which $24 million was sold servicing-released, and first quarter 2009 production totaled $38 million, with $20 million sold servicing-released.

At December 31, 2009, approximately $289 million or 55 percent of the Company’s residential mortgage loan balances were adjustable, compared to $329 million or 58 percent a year ago. Loans secured by residential properties having fixed rates totaled approximately $89 million at December 31, 2009, of which 15-and 30-year mortgages totaled approximately $30 million and $59 million, respectively. The remaining fixed rate balances were comprised of home improvement loans, most with maturities of 10 years or less. The Company also has a small home equity line portfolio totaling approximately $60 million at December 31, 2009, compared to $59 million at December 31, 2008. In comparison, loans secured by residential properties having fixed rates totaled approximately $180 million at December 31, 2008, with 15- and 30-year fixed rate residential mortgages totaling approximately $35 million and $60 million, respectively.

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Commercial loans decreased and totaled $61.1 million at December 31, 2009, compared to $82.8 million a year ago. Commercial lending activities are directed principally towards businesses whose demand for funds are within the Company’s lending limits, such as small- to medium-sized professional firms, retail and wholesale outlets, and light industrial and manufacturing concerns. Such businesses are smaller and subject to the risks of lending to small to medium sized businesses, including, but not limited to, the effects of a downturn in the local economy, possible business failure, and insufficient cash flows.

The Company also provides consumer loans (including installment loans, loans for automobiles, boats, and other personal, family and household purposes, and indirect loans through dealers to finance automobiles) which totaled $64.0 million (versus $72.9 million a year ago), real estate construction loans to individuals secured by residential properties which totaled $8.5 million (versus $20.3 million a year ago), and residential lot loans to individuals which totaled $29.3 million (versus $35.7 million a year ago).

At December 31, 2009, the Company had commitments to make loans of $97.3 million, compared to $164.5 million at December 31, 2008 (see “Note P — Contingent Liabilities and Commitments with Off-Balance Sheet Risk” to the Company’s consolidated financial statements).

Loan Concentrations

Over the past two years, the Company has been pursuing an aggressive program to reduce exposure to loan types that have been most impacted by stressed market conditions in order to achieve lower levels of credit loss volatility. The program included aggressive collection efforts, loan sales and early stage loss mitigation strategies focused on the Company’s largest loans. Successful execution of this program has significantly reduced our exposure to larger balance loan relationships (relationships may include multiple loans to a single borrower or borrower group). Commercial loan relationships greater than $10 million were reduced by $392.1 million to $205.5 million at year-end 2009 compared with year-end 2007.

Commercial Relationships Greater than $10 Million (dollars in thousands)

	2009		2008		2007
Performing	$	145,797	$	374,241	$	592,408
Performing TDR*		31,152		—		—
Nonaccrual		28,525		14,873		5,152
Total	$	205,474	$	389,114	$	597,560
Top 10 Customer Loan Relationships	$	173,162	$	228,800	$	266,702

* TDR = Troubled debt restructures

Commercial loan relationships greater than $10 million as a percent of tier 1 capital and the allowance for loan losses was reduced to 85.9 percent at year-end 2009, compared with 162.1 percent at the end of 2008 and 258.1 percent at the end of 2007.

Concentrations in total construction and development loans and total commercial real estate (CRE) loans have also been substantially reduced. As shown in the table below, under regulatory guidance for construction and land development and commercial real estate loan concentrations as a percentage of total risk based capital, Seacoast National’s loan portfolio in these categories (as defined in the guidance) have improved.

	2009			2008			2007
Construction and Development Loans to Total Risk Based Capital		81	%		206	%		265	%
CRE Loans to Total Risk Based Capital		274	%		389	%		390	%

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The following is the geographic location of the Company’s construction and land development loans (excluding loans to individuals) totaling $125.1 million and $339.2 million at December 31, 2009 and 2008, respectively:

	% of Total Construction and
	Land Development Loans
Florida County	2009		2008
Palm Beach		23.5		15.1
St. Lucie		16.6		18.2
Indian River		13.6		11.7
Brevard		9.7		6.7
Volusia		9.0		7.4
Miami-Dade		6.9		2.8
Martin		6.0		10.6
Broward		3.6		2.1
Okeechobee		2.3		1.9
Orange		2.8		6.6
Collier		1.9		0.9
Marion		1.1		0.9
Hendry		1.1		0.4
Charlotte		0.7		0.8
Lake		0.4		0.2
Pinellas		0.4		0.0
Highlands		0.2		4.6
Osceola		0.0		3.4
Dade		0.0		3.1
Lee		0.0		1.4
Bradford		0.0		0.8
Other		0.2		0.4
Total		100.0		100.0

Deposits and Borrowings

Total deposits decreased $31,007,000 or 1.7 percent to $1,779,434,000 at December 31, 2009 compared to one year earlier, reflecting declining brokered deposits. Since December 31, 2008, interest bearing deposits (NOW, savings and money markets deposits) increased $36,087,000 or 4.5 percent to $838,288,000, noninterest bearing demand deposits decreased $6,473,000 or 2.4 percent to $268,789,000, and CDs decreased $60,621,000 or 8.3 percent to $672,357,000. Included in CDs, brokered time deposits decreased $61,807,000 to $38,656,000 at December 31, 2009 from prior year, of which $11,451,000 are attributable to CDARs. Funds deposited under the CDARs program are required to be classified as brokered deposits. With interest rates higher on CDs, shifts from lower cost (or no cost) deposit products to CDs occurred during 2008 as local competitors with higher loan to deposit ratios aggressively increased rates seeking needed funding for their institutions. During this period of time, the Company was more cautious with regards to the pricing of CDs and has continued to follow this strategy. Also declining year over year were higher rate money market accounts. The Company continues to utilize a focused retail deposit growth strategy that has successfully generated core deposit relationships and increased services per household since its implementation in the first quarter of 2008.

Total deposits decreased $176,893,000 or 8.9 percent to $1,810,441,000 at December 31, 2008, compared to one year earlier. A decrease in business accounts in the central Florida market and a transfer of public fund

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deposits to sweep repurchase agreements were the cause for a decline in total deposits. Excluding the central Florida region and public fund deposits, new deposits increased $157 million during 2008 from December 31, 2007, better reflecting the successful new retail deposit growth plan.

Securities sold under repurchase agreements decreased over the past twelve months by $51,823,000 or 32.9 percent to $105,673,000 at December 31, 2009. In comparison, repurchase agreements increased $69,396,000 or 78.8 percent to $157,496,000 during 2008. Repurchase agreements are offered by Seacoast National to select customers who wish to sweep excess balances on a daily basis for investment purposes. At December 31, 2009, the number of sweep repurchase accounts was 196, compared to 243 a year ago.

Effects of Inflation and Changing Prices

The consolidated financial statements and related financial data presented herein have been prepared in accordance with U.S. generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money, over time, due to inflation.

Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant impact on a financial institution’s performance than the general level of inflation. However, inflation affects financial institutions by increasing their cost of goods and services purchased, as well as the cost of salaries and benefits, occupancy expense, and similar items. Inflation and related increases in interest rates generally decrease the market value of investments and loans held and may adversely affect liquidity, earnings, and shareholders’ equity. Mortgage originations and re-financings tend to slow as interest rates increase, and higher interest rates likely will reduce the Company’s earnings from such activities and the income from the sale of residential mortgage loans in the secondary market.

Securities

Information related to yields, maturities, carrying values and unrealized gains (losses) of the Company’s securities is set forth in Tables 15-18.

At December 31, 2009, the Company had no trading securities, $393,648,000 in securities available for sale (representing 95.8 percent of total securities), and securities held for investment carried at $17,087,000 (4.2 percent of total securities). The Company’s securities portfolio increased $64,834,000 or 18.7 percent from December 31, 2008.

The Company manages its interest rate risk by targeting an average duration for the securities portfolio and through the acquisition of securities returning principal monthly that can be reinvested. Mortgage backed securities and collateralized mortgage obligations comprise $397,717,000 of total securities, almost 97 percent of the portfolio. Remaining securities are largely comprised of U.S. Treasury, U.S. Government agency securities and tax-exempt bonds issued by states, counties and municipalities.

The duration of the investment portfolio at December 31, 2009 was 25 months, compared to a year ago when the duration was 40 months.

Federal funds sold and interest bearing deposits (aggregated) totaled $182,900,000 and $105,190,000 at December 31, 2009 and 2008, respectively, which reflects the decline in the loan portfolio and the funds from the capital raising transactions during August 2009 and funds through the TARP CPP in December 2008. The Company has maintained additional liquidity during the low interest rate environment and intends to make additional loans or investments as the economy improves.

At December 31, 2009, available for sale securities totaling $393,648,000 had gross losses of $3,288,000 and gross gains of $6,558,000, compared to gross losses of $2,838,000 and gross gains of $6,178,000 at December 31, 2008. All of the securities with unrealized losses are reviewed for other-than-temporary impairment at least quarterly. As a result of these reviews during 2009 and 2008, it was determined that no impairment charges related to securities owned with unrealized losses were deemed other than temporarily

33

impaired since the Company had the present intent and ability to retain these securities until recovery over the periods presented (see additional discussion under “Critical Accounting Policies and Estimates — Fair Value and Other than Temporary Impairment of Securities”).

Company management considers the overall quality of the securities portfolio to be high. The Company has no exposure to securities with subprime collateral and had no Fannie Mae or Freddie Mac preferred stock when these entities were placed in conservatorship. The Company holds no interests in trust preferred securities.

Fourth Quarter Review

During the fourth quarter of 2009, the Company’s earnings were impacted by an elevated provision for loan losses. The fourth quarter net loss was $39.1 million, or $0.73 per average common share diluted, compared to a $41.7 million or $1.21 diluted loss per common share in the third quarter of 2009, and a $22.6 million or $1.19 diluted loss per share in the fourth quarter of 2008.

During the fourth quarter of 2009, the Company’s nonperforming assets (excluding restructured loans that are performing) decreased $57.5 million to $123.3 million, or 8.66 percent of loans and OREO. Net loan charge-offs in the fourth quarter totaled $45.2 million, compared to $109.0 million for the total year 2009. The provision for loan losses in the fourth quarter totaled $41.5 million, compared to $30.7 million a year ago and $45.4 million in the third quarter of 2009. The Company aggressively collected, charged-off and reduced its concentration in problem loans, including sales of these loans of $62 million in the fourth quarter of 2009. Although significant losses were incurred during 2008 and 2009, as a result of the Company’s response to deteriorating market conditions, internally criticized loans have declined since June 30, 2009 and actions taken should reduce earnings volatility in the future.

Net interest income on a fully tax equivalent basis for the fourth quarter of 2009 was $17,518,000, $1,583,000 or 8.3 percent lower than for the third quarter of 2009 and $17,000, or 0.1 percent lower than a year ago for the same quarter. The net interest margin for the fourth quarter was 3.37 percent, an increase from the 3.32 percent achieved in last year’s fourth quarter and a 37 basis point decrease from the 3.74 percent for the third quarter of 2009. The decline in net interest margin from the third quarter of 2009 resulted from lower yielding securities and short term investments (interest bearing deposits earning only 25 basis points) increasing as a percentage of earning assets as well as lower loan yields in general, partially offset by reduced deposit costs. Deposit costs during the fourth quarter of 2009 were slightly lower and totaled 1.15 percent compared to 1.24 percent for the third quarter of 2009. The total cost of interest bearing liabilities declined 12 basis points to 1.38 percent in the fourth quarter from the third quarter of 2009 and compared to 2.52 percent in the fourth quarter a year ago.

Net interest income will continue to be impacted by nonaccrual loans and OREO during 2010, but to a lesser degree. The effect of a slower housing market will continue to negatively impact the Company’s loan pipelines prospectively and loan growth for 2010. In the fourth quarter of 2009, total loans outstanding declined $107.1 million from the end of the third quarter of 2009, while period-end deposits increased $18.1 million from the end of the third quarter of 2009. As previously noted, the Company is confident that its retail growth strategy is providing favorable results and should continue to do so.

For the fourth quarter of 2009, noninterest income (excluding securities gains and losses) were similar to results for the third quarter of 2009, declining just $26,000. Noninterest income was $229,000 lower than the fourth quarter a year ago, reflecting decreased revenue from service charges on deposits, merchant income, marine finance fees, and wealth management fees. Mortgage banking revenue was 129.3 percent higher year over year. The tight credit markets were responsible for much lower marine finance activity, although mortgage applications for residential loans are expected to increase with mortgage rates again dipping lower recently. Merchant income, wealth management, and other revenue tied to transaction volumes were all lower as a result of the economic recession. The Company expects these revenue sources to be weaker until the economy begins to improve later in 2010.

34

Noninterest expenses in the fourth quarter of 2009 totaled $20.9 million, higher by $135,000 than the fourth quarter of 2008 and $362,000 above third quarter 2009’s result. In comparison, noninterest expenses for the fourth quarter of 2008 were $598,000 higher than 2007’s fourth quarter. Legal and professional fees associated with loan collection efforts and nonrecurring expenses accounted for much of the increase in 2009’s fourth quarter over 2008’s, and 2008’s fourth quarter over 2007’s. Professional fees associated with strategic planning assistance and losses on closed branch facilities in the fourth quarter 2009 added $832,000 and $905,000, respectively, to expenses compared to a year ago. The Company believes legal costs should decline during 2010, as loans which have accounted for most of the increase are further along in the collection process, sold or transferred to OREO. FDIC insurance costs were higher for 2009 as well and are expected to remain at current levels next year. Executive cash incentives were not paid at year-end 2009 or 2008, and no executive bonus compensation, lower incentive payouts to sales personnel, and reduced profit sharing compensation are anticipated to remain in place during 2010 and prospectively, until the Company produces meaningful earnings improvements.

Table 1 — Condensed Income Statement*

	2009			2008			2007
	(Tax equivalent basis)
Net interest income		3.31	%		3.35	%		3.65	%
Provision for loan losses		5.60			3.84			0.55
Noninterest income
Securities gains (losses)		0.24			0.02			(0.22	)
Other		0.85			0.96			1.07
Noninterest expenses
Goodwill impairment		2.24			—			—
Other		3.67			3.42			3.33
(Loss) income before income taxes		(7.11	)		(2.93	)		0.62
(Benefit) provision for income taxes including tax equivalent adjustment		(0.53	)		(0.96	)		0.20
Net (loss) income		(6.58	)%		(1.97	)%		0.42	%

* As a Percent of Average Assets

Table 2 — Changes in Average Earning Assets

	Increase/(Decrease)					Increase/(Decrease)
	2009 vs 2008					2008 vs 2007
	(Dollars in thousands)
Securities:
Taxable	$	72,049		25.3	%	$	(13,135	)	(4.4	)%
Nontaxable		(1,138	)	(14.1	)		(182	)	(2.2	)
Federal funds sold and other short term investments		81,007		162.6			20,013		67.1
Loans, net		(234,406	)	(12.9	)		(6,858	)	(0.4	)
TOTAL	$	(82,488	)	(3.8	)	$	(162	)	0.0

35

Table 3 — Rate/Volume Analysis (on a Tax Equivalent Basis)

	2009 vs 2008									2008 vs 2007
	Due to Change in:									Due to Change in:
	Volume			Rate			Total			Volume			Rate			Total
	(Dollars in thousands)
	Amount of increase (decrease)
EARNING ASSETS
Securities
Taxable	$	3,452		$	(1,293	)	$	2,159		$	(655	)	$	41		$	(614	)
NonTaxable		(74	)		17			(57	)		(12	)		(7	)		(19	)
		3,378			(1,276	)		2,102			(667	)		34			(633	)
Federal funds sold and other short term investments		1,201			(1,765	)		(564	)		794			(1,200	)		(406	)
Loans		(13,444	)		(13,001	)		(26,445	)		(460	)		(21,539	)		(21,999	)
TOTAL EARNING ASSETS		(8,865	)		(16,042	)		(24,907	)		(333	)		(22,705	)		(23,038	)
INTEREST BEARING LIABILITIES
NOW		(151	)		(693	)		(844	)		(1,232	)		(825	)		(2,057	)
Savings deposits		(9	)		(333	)		(342	)		(99	)		(10	)		(109	)
Money market accounts		(1,463	)		(8,615	)		(10,078	)		2,250			(7,089	)		(4,839	)
Time deposits		1,088			(8,456	)		(7,368	)		2,524			(5,987	)		(3,463	)
		(535	)		(18,097	)		(18,632	)		3,443			(13,911	)		(10,468	)
Federal funds purchased and other short term borrowings		257			(1,292	)		(1,035	)		(1,749	)		(3,441	)		(5,190	)
Other borrowings		(73	)		(1,497	)		(1,570	)		2,245			(2,371	)		(126	)
TOTAL INTEREST BEARING LIABILITIES		(351	)		(20,886	)		(21,237	)		3,939			(19,723	)		(15,784	)
NET INTEREST INCOME	$	(8,514	)	$	4,844		$	(3,670	)	$	(4,272	)	$	(2,982	)	$	(7,254	)

(a) Changes attributable to rate/volume are allocated to rate and volume on an equal basis.

Table 4 — Changes in Average Interest Bearing Liabilities

	Increase/(Decrease)					Increase/(Decrease)
	2009 vs 2008					2008 vs 2007
	(Dollars in thousands)
NOW	$	(13,473	)	(20.4	)%	$	(57,667	)	(46.6	)%
Savings deposits		(1,646	)	(1.6	)		(14,099	)	(12.0	)
Money market accounts		(101,104	)	(13.5	)		87,606		13.3
Time deposits		33,042		4.9			57,647		9.4
Federal funds purchased and other short term borrowings		26,037		28.6			(57,476	)	(38.7	)
Other borrowings		(2,044	)	(1.7	)		41,579		53.9
TOTAL	$	(59,188	)	(3.3	)	$	57,590		3.3

36

Table 5 — Three Year Summary

Average Balances, Interest Income and Expenses, Yields and Rates(1)

	2009								2008								2007
	Average					Yield/			Average					Yield/			Average					Yield/
	Balance			Interest		Rate			Balance			Interest		Rate			Balance			Interest		Rate
	(Dollars in thousands)
EARNING ASSETS
Securities
Taxable	$	356,394		$	16,357		4.59	%	$	284,345		$	14,198		4.99	%	$	297,480		$	14,812		4.98	%
Nontaxable		6,953			460		6.62			8,091			517		6.39			8,273			536		6.48
		363,347			16,817		4.63			292,436			14,715		5.03			305,753			15,348		5.02
Federal funds sold and other short term investments		130,828			661		0.51			49,821			1,225		2.46			29,808			1,631		5.47
Loans(2)		1,587,273			84,985		5.35			1,821,679			111,430		6.12			1,828,537			133,429		7.30
TOTAL EARNING ASSETS		2,081,448			102,463		4.92			2,163,936			127,370		5.89			2,164,098			150,408		6.95
Allowance for loan losses		(36,951	)							(28,719	)							(16,842	)
Cash and due from banks		32,336								41,273								60,322
Bank premises and equipment		42,997								43,107								38,886
Other assets		108,588								91,455								77,745
	$	2,228,418							$	2,311,052							$	2,324,209
INTEREST BEARING LIABILITIES
NOW	$	52,710			283		0.54	%	$	66,183			1,127		1.70	%	$	123,850			3,184		2.57	%
Savings deposits		101,736			381		0.37			103,382			723		0.70			117,481			832		0.71
Money market accounts		646,978			5,367		0.83			748,082			15,445		2.06			660,476			20,284		3.07
Time deposits		701,095			18,749		2.67			668,053			26,117		3.91			610,406			29,580		4.85
Federal funds purchased and other short term borrowings		117,171			431		0.37			91,134			1,466		1.61			148,610			6,656		4.48
Other borrowings		116,720			3,405		2.92			118,764			4,975		4.19			77,185			5,101		6.61
TOTAL INTEREST BEARING LIABILITIES		1,736,410			28,616		1.65			1,795,598			49,853		2.78			1,738,008			65,637		3.78
Demand deposits		276,412								302,577								358,597
Other liabilities		16,798								7,944								8,876
		2,029,620								2,106,119								2,105,481
Shareholders’ equity		198,798								204,933								218,728
	$	2,228,418							$	2,311,052							$	2,324,209
Interest expense as% of earning assets							1.37	%							2.30	%							3.03	%
Net interest income/yield on earning assets				$	73,847		3.55	%				$	77,517		3.58	%				$	84,771		3.92	%

(1)	The tax equivalent adjustment is based on a 35% tax rate.
(2)	Nonperforming loans are included in average loan balances. Fees on loans are included in interest on loans.

37

Table 6 — Noninterest Income

	Year Ended							% Change
	2009		2008		2007			09/08			08/07
	(Dollars in thousands)
Service charges on deposit accounts	$	6,491	$	7,389	$	7,714			(12.2	)%		(4.2	)%
Trust fees		2,098		2,344		2,575			(10.5	)		(9.0	)
Mortgage banking fees		1,746		1,118		1,409			56.2			(20.7	)
Brokerage commissions and fees		1,416		2,097		2,935			(32.5	)		(28.6	)
Marine finance fees		1,153		2,304		2,865			(50.0	)		(19.6	)
Debit card income		2,613		2,453		2,306			6.5			6.4
Other deposit based EFT fees		331		359		451			(7.8	)		(20.4	)
Merchant income		1,764		2,399		2,841			(26.5	)		(15.6	)
Other		1,403		1,778		1,868			(21.1	)		(4.8	)
		19,015		22,241		24,964			(14.5	)		(10.9	)
Securities gains (losses)		5,399		355		(5,048	)		n/m			n/m
TOTAL	$	24,414	$	22,596	$	19,916			8.0			13.5

n/m = not meaningful

Table 7 — NonInterest Expense

	Year Ended						% Change
	2009		2008		2007		09/08			08/07
	(Dollars in thousands)
Salaries and wages	$	26,693	$	30,159	$	31,575		(11.5	)%		(4.5	)%
Employee benefits		6,109		7,173		7,337		(14.8	)		(2.2	)
Outsourced data processing costs		7,143		7,612		7,581		(6.2	)		0.4
Telephone /data lines		1,835		1,896		1,905		(3.2	)		(0.5	)
Occupancy		8,260		8,292		7,677		(0.4	)		8.0
Furniture and equipment		2,649		2,841		2,863		(6.8	)		(0.8	)
Marketing		2,067		2,614		3,075		(20.9	)		(15.0	)
Legal and professional fees		6,984		5,662		4,070		23.3			39.1
FDIC assessments		4,952		2,028		225		144.2			801.3
Amortization of intangibles		1,259		1,259		1,259		—			—
Net loss on other real estate owned and other asset dispositions		6,327		1,424		288		344.3			394.4
Goodwill impairment		49,813		—		—		n/m			n/m
Other		7,656		7,930		9,622		(3.5	)		(17.6	)
TOTAL	$	131,747	$	78,890	$	77,477		67.0			1.8

n/m = not meaningful

38

Table 8 — Capital Resources

	December 31
	2009			2008			2007
	(Dollars in thousands)
TIER 1 CAPITAL
Common stock	$	5,887		$	1,928		$	1,920
Preferred stock		44,999			43,787			—
Warrant for purchase of common stock		3,123			6,245			—
Additional paid in capital		174,973			93,543			90,924
Accumulated deficit or retained earnings		(78,200	)		70,278			122,396
Treasury stock		(855	)		(1,839	)		(1,193	)
Qualifying trust preferred securities		49,950			52,000			52,000
Intangibles		(4,121	)		(55,193	)		(56,452	)
Other		(1,712	)		(115	)		60
TOTAL TIER 1 CAPITAL		194,044			210,634			209,655
TIER 2 CAPITAL
Qualifying trust preferred securities		2,050			—			—
Allowance for loan losses, as limited(1)		17,981			20,755			22,425
TOTAL TIER 2 CAPITAL		20,031			20,755			22,425
TOTAL RISK-BASED CAPITAL	$	214,075		$	231,389		$	232,080
Risk weighted assets	$	1,411,202		$	1,651,685		$	1,907,470
Tier 1 risk based capital ratio		13.75	%		12.75	%		10.99	%
Total risk based capital ratio		15.16	%		14.00			12.17
Regulatory minimum		8.00			8.00			8.00
Tier 1 capital to adjusted total assets		8.88	%		9.58			9.10
Regulatory minimum		4.00			4.00			4.00
Shareholder’s equity to assets		7.06			9.33			8.86
Average shareholders’ equity to average total assets		8.92			8.87			9.41

(1) Includes reserve for unfunded commitments of $65,000, $65,000, and $523,000 at December 31, 2009, 2008, and 2007, respectively.

Table 9 — Loans Outstanding

	December 31
	2009		2008		2007		2006		2005
	(In thousands)
Commercial real estate	$	709,285	$	896,901	$	1,054,862	$	917,237	$	676,536
Residential real estate		562,660		623,807		629,519		603,720		431,557
Commercial and financial		61,058		82,765		126,695		128,101		98,653
Consumer		64,024		72,908		86,362		83,428		82,942
Other loans		476		347		951		625		307
TOTAL	$	1,397,503	$	1,676,728	$	1,898,389	$	1,733,111	$	1,289,995

39

Table 10 — Loan Maturity Distribution

	December 31, 2009
	Commercial and		Construction and
	Financial		Land Development		Total
			(In thousands)
In one year or less	$	15,148	$	78,562	$	93,710
After one year but within five years:
Interest rates are floating or adjustable		2,573		24,172		26,745
Interest rates are fixed		12,193		30,981		43,174
In five years or more:
Interest rates are floating or adjustable		795		20,303		21,098
Interest rates are fixed		30,349		8,850		39,199
TOTAL	$	61,058	$	162,868	$	223,926

Table 11 — Maturity of Certificates of Deposit of $100,000 or More

	December 31
			% of					% of
	2009		Total			2008		Total
	(Dollars in thousands)
Maturity Group:
Under 3 Months	$	106,655		31.1	%	$	159,436		45.2	%
3 to 6 Months		68,293		19.9			66,165		18.8
6 to 12 Months		54,583		15.9			76,704		21.7
Over 12 Months		113,335		33.1			50,502		14.3
TOTAL	$	342,866		100.0	%	$	352,807		100.0	%

40

Table 12 — Summary of Loan Loss Experience

	Year Ended December 31
	2009			2008			2007			2006			2005
	(Dollars in thousands)
Beginning balance	$	29,388		$	21,902		$	14,915		$	9,006		$	6,598
Provision for loan losses		124,767			88,634			12,745			3,285			1,317
Carryover of allowance for loan losses		—			—			—			2,518			1,225
Charge offs:
Commercial real estate		67,246			73,000			3,780			—			—
Residential real estate		36,687			4,675			240			—			—
Commercial and financial		3,197			2,289			1,072			16			254
Consumer		3,696			3,415			858			295			161
TOTAL CHARGE OFFS		110,826			83,379			5,950			311			415
Recoveries:
Commercial real estate		868			1,851			—			—			5
Residential real estate		567			54			—			—			—
Commercial and financial		195			222			57			161			125
Consumer		233			104			135			256			151
TOTAL RECOVERIES		1,863			2,231			192			417			281
Net loan charge offs (recoveries)		108,963			81,148			5,758			(106	)		134
ENDING BALANCE	$	45,192		$	29,388		$	21,902		$	14,915		$	9,006
Loans outstanding at end of year*	$	1,397,503		$	1,676,728		$	1,898,389		$	1,733,111		$	1,289,995
Ratio of allowance for loan losses to
loans outstanding at end of year		3.23	%		1.75	%		1.15	%		0.86	%		0.70	%
Daily average loans outstanding*	$	1,587,273		$	1,821,679		$	1,828,537		$	1,560,673		$	1,116,107
Ratio of net charge offs (recoveries) to average loans outstanding		6.86	%		4.45	%		0.31	%		(0.01	)%		0.01	%

* Net of unearned income.

41

Table 13 — Allowance for Loan Losses

	December 31
	2009			2008			2007			2006			2005
	(Dollars in thousands)
ALLOCATION BY LOAN TYPE
Commercial real estate loans	$	30,955		$	17,569		$	11,884		$	9,996		$	5,441
Residential real estate loans		9,667			6,437			6,058			1,077			887
Commercial and financial loans		1,099			2,782			3,070			3,199			1,794
Consumer loans		3,471			2,600			890			643			884
TOTAL	$	45,192		$	29,388		$	21,902		$	14,915		$	9,006
YEAR END LOAN TYPES AS A PERCENT OF TOTAL LOANS
Commercial real estate loans		50.7	%		53.5	%		55.6	%		52.9	%		52.4	%
Residential real estate loans		40.3			37.2			33.1			34.9			33.5
Commercial and financial loans		4.4			5.0			6.7			7.4			7.7
Concumer loans		4.6			4.3			4.6			4.8			6.4
TOTAL		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Table 14 — Nonperforming Assets

	December 31
	2009			2008			2007			2006			2005
	(Dollars in thousands)
Nonaccrual loans(1)	$	97,876		$	86,970		$	67,834		$	12,465		$	372
Other real estate owned		25,385			5,035			735			—			—
TOTAL NONPERFORMING ASSETS	$	123,261		$	92,005		$	68,569		$	12,465		$	372
Amount of loans outstanding at end of year(2)	$	1,397,503		$	1,676,728		$	1,898,389		$	1,733,111		$	1,289,995
Ratio of total nonperforming assets to loans outstanding and other real estate owned at end of period		8.66	%		5.47	%		3.61	%		0.72	%		0.03	%
Accruing loans past due 90 days or more	$	156		$	1,838		$	25		$	64		$	465
Loans restructured and in compliance with modified terms(3)		57,433			12,616			11			728			762

(1)	Interest income that could have been recorded during 2009, 2008 and 2007 related to nonaccrual loans was $6,602,000, $9,435,000 and $2,206,000, respectively, none of which was included in interest income or net income. All nonaccrual loans are secured.
(2)	Net of unearned income.
(3)	Interest income that would have been recorded based on original contracted terms was $3,856,000 and $1,037,000, respectively, for 2009 and 2008. The amount included in interest income under the modified terms for 2009 and 2008 was $2,958,000 and $611,000, respectively.

42

Table 15 — Securities Available For Sale

	December 31
	Amortized		Fair		Unrealized		Unrealized
	Cost		Value		Gains		Losses
	(In thousands)
U.S. Treasury securities and obligations of U.S. Government Sponsored Entities
2009	$	3,689	$	3,688	$	2	$	(3	)
2008		22,094		22,380		286		—
Mortgage-backed securities of U.S. Government Sponsored Entities
2009		60,154		60,548		719		(325	)
2008		59,500		60,529		1,035		(6	)
Collateralized mortgage obligations of U.S. Government Sponsored Entities
2009		250,762		255,248		5,219		(733	)
2008		200,812		205,440		4,806		(178	)
Private collateralized mortgage obligations
2009		70,719		69,068		569		(2,220	)
2008		27,106		24,454		—		(2,652	)
Obligations of state and political subdivisions
2009		2,021		2,063		49		(7	)
2008		2,021		2,070		51		(2	)
Other
2009		3,033		3,033		—		—
2008		3,157		3,157		—		—
Total Securities Available For Sale
2009	$	390,378	$	393,648	$	6,558	$	(3,288	)
2008		314,690		318,030		6,178		(2,838	)

43

Table 16 — Securities Held For Investment

	December 31
	Amortized		Fair		Unrealized		Unrealized
	Cost		Value		Gains		Losses
	(In thousands)
Collateralized mortgage obligations of U.S. Government Sponsored Entities
2009	$	288	$	289	$	1	$	—
2008		1,960		1,913		—		(47	)
Private collateralized mortgage obligations
2009		12,565		12,637		73		(1	)
2008		20,288		18,530		—		(1,758	)
Obligations of states and political subdivisions
2009		4,234		4,284		55		(5	)
2008		5,623		5,666		49		(6	)
Total Securities Held For Investment
2009	$	17,087	$	17,210	$	129	$	(6	)
2008		27,871		26,109		49		(1,811	)

Table 17 — Maturity Distribution of Securities Held For Investment

	December 31, 2009
																Average
	1 Year			1-5			5-10			After						Maturity
	or Less			Years			Years			10 Years			Total			In Years
				(Dollars in thousands)
AMORTIZED COST
Collateralized mortgage obligations of U.S. Government Sponsored Entities	$	288		$	—		$	—		$	—		$	288			0.08
Private collateralized mortgage obligations		—			12,565			—			—			12,565			2.90
Obligations of state and political subdivisions		—			1,673			2,122			439			4,234			6.62
Total Securities Held For Investment	$	288		$	14,238		$	2,122		$	439		$	17,087			3.77
FAIR VALUE
Collateralized mortgage obligations of U.S. Government Sponsored Entities	$	289		$	—		$	—		$	—		$	289
Private collateralized mortgage obligations		—			12,637			—			—			12,637
Obligations of state and political subdivisions		—			1,684			2,146			454			4,284
Total Securities Held For Investment	$	289		$	14,321		$	2,146		$	454		$	17,210
WEIGHTED AVERAGE YIELD (FTE)
Collateralized mortgage obligations of U.S. Government Sponsored Entities		1.54	%		—			—			—			1.54	%
Private collateralized mortgage obligations		—			5.27	%		—			—			5.27	%
Obligations of state and political subdivisions		—			7.32	%		6.77	%		6.66	%		6.97	%
Total Securities Held For Investment		1.54	%		5.51	%		6.77	%		6.66	%		5.63	%

44

Table 18 — Maturity Distribution of Securities Available For Sale

	December 31, 2009
													No						Average
	1 Year			1-5			5-10			After			Contractual						Maturity
	or Less			Years			Years			10 Years			Maturity			Total			In Years
	(Dollars in thousands)
AMORTIZED COST
U.S. Treasury securities and obligations of U.S. Government Sponsored Entities	$	3,689		$	—		$	—		$	—		$	—		$	3,689			0.81
Mortgage-backed securities of U.S. Government Sponsored Entities		—			41,097			17,508			1,549			—			60,154			5.49
Collateralized mortgage obligations of U.S. Government Sponsored Entities		16,950			202,060			31,752			—			—			250,762			3.52
Private collateralized mortgage obligations		—			47,251			23,468			—			—			70,719			4.21
Obligations of state and political subdivisions		—			—			1,094			927			—			2,021			9.30
Other		—			—			—			—			3,033			3,033			*
Total Securities Available For Sale	$	20,639		$	290,408		$	73,822		$	2,476		$	3,033		$	390,378			3.96
FAIR VALUE
U.S. Treasury securities and obligations of U.S. Government Sponsored Entities	$	3,688		$	—		$	—		$	—		$	—		$	3,688
Mortgage-backed securities of U.S. Government Sponsored Entities		—			41,386			17,619			1,543			—			60,548
Collateralized mortgage obligations of U.S. Government Sponsored Entities		17,282			206,472			31,494			—			—			255,248
Private collateralized mortgage obligations		—			46,967			22,101			—			—			69,068
Obligations of state and political subdivisions		—			—			1,134			929			—			2,063
Other		—			—			—			—			3,033			3,033
Total Securities Available For Sale	$	20,970		$	294,825		$	72,348		$	2,472		$	3,033		$	393,648
WEIGHTED AVERAGE YIELD (FTE)
U.S. Treasury securities and obligations of U.S. Government Sponsored Entities		0.38	%		—			—			—			—			0.38	%
Mortgage-backed securities of U.S. Government Sponsored Entities		—			3.76	%		3.26	%		4.48	%		—			3.63	%
Collateralized mortgage obligations of U.S. Government Sponsored Entities		3.27	%		3.37	%		1.05	%		—			—			3.07	%
Private collateralized mortgage obligations		—			6.10	%		6.58	%		—			—			6.26	%
Obligations of state and political subdivisions		—			—			6.61	%		6.90	%		—			6.75	%
Other		—			—			—			—			0.07	%		0.07	%
Total Securities Available For Sale		2.75	%		3.87	%		3.42	%		5.39	%		0.07	%		3.70	%

* Other Securities excluded from calculated average for total securities

45

Table 19 — Interest Rate Sensitivity Analysis(1)

	December 31, 2009
	0-3			4-12			1-5			Over
	Months			Months			Years			5 Years		Total
	(Dollars in thousands)
Federal funds sold and interest bearing deposits	$	182,900		$	—		$	—		$	—	$	182,900
Securities(2)		161,492			60,256			133,627			52,090		407,465
Loans(3)		374,062			196,395			520,073			227,509		1,318,039
Earning assets		718,454			256,651			653,700			279,599		1,908,404
Savings deposits(4)		838,288			—			—			—		838,288
Certificates of deposit		191,308			257,158			223,740			151		672,357
Borrowings		159,283			—			—			50,000		209,283
Interest bearing liabilities		1,188,879			257,158			223,740			50,151		1,719,928
Interest sensitivity gap	$	(470,425	)	$	(507	)	$	429,960		$	229,448	$	188,476
Cumulative gap	$	(470,425	)	$	(470,932	)	$	(40,972	)	$	188,476
Cumulative gap to total earning assets(%)		(24.7	)		(24.7	)		(2.1	)		9.9
Earning assets to interest bearing liabilities(%)		60.4			99.8			292.2			557.5

(1)	The repricing dates may differ from maturity dates for certain assets due to prepayment assumptions.
(2)	Securities are stated at amortized cost.
(3)	Excludes nonaccrual loans.
(4)	This category is comprised of NOW, savings and money market deposits. If NOW and savings deposits (totaling $158,358) were deemed repriceable in “4-12 months”, the interest sensitivity gap and cumulative gap would be ($312,067) or 16.4% of total earning assets and an earning assets to interest bearing liabilities for the 0-3 months category of 69.7%

46

SELECTED QUARTERLY INFORMATION

QUARTERLY CONSOLIDATED INCOME STATEMENTS (UNAUDITED)

	2009 Quarters												2008 Quarters
	Fourth			Third			Second			First			Fourth			Third			Second			First
	(Dollars in thousands, except per share data)
Net interest income:
Interest income	$	23,423		$	25,348		$	26,122		$	27,312		$	28,680		$	30,976		$	32,273		$	35,155
Interest expense		5,979			6,297			7,202			9,138			11,213			11,859			12,111			14,670
Net interest income		17,444			19,051			18,920			18,174			17,467			19,117			20,162			20,485
Provision for loan losses		41,514			45,374			26,227			11,652			30,656			10,241			42,237			5,500
Net interest (loss) income after provision for loan losses		(24,070	)		(26,323	)		(7,307	)		6,522			(13,189	)		8,876			(22,075	)		14,985
Noninterest income:
Service charges on deposit accounts		1,612			1,732			1,562			1,585			1,833			1,894			1,812			1,850
Trust fees		543			517			480			558			574			597			591			582
Mortgage banking fees		422			337			488			499			184			216			350			368
Brokerage commissions and fees		321			326			388			381			447			452			515			683
Marine finance fees		228			249			331			345			318			371			930			685
Debit card income		658			674			673			608			574			620			648			611
Other deposit based EFT fees		79			73			85			94			83			82			86			108
Merchant income		409			371			448			536			487			510			667			735
Other income		329			348			350			376			330			418			357			673
Securities gains		2,188			1,425			1,786			—			—			—			355			—
Total noninterest income		6,789			6,052			6,591			4,982			4,830			5,160			6,311			6,295
Noninterest expenses:
Salaries and wages		6,446			6,598			6,761			6,888			7,083			7,713			7,428			7,935
Employee benefits		1,228			1,362			1,737			1,782			1,664			1,770			1,714			2,025
Outsourced data processing costs		1,741			1,705			1,806			1,891			1,812			1,803			1,983			2,014
Telephone/data lines		420			472			459			484			498			471			489			438
Occupancy		1,977			2,072			2,057			2,154			2,256			2,112			2,081			1,843
Furniture and equipment		645			675			678			651			706			700			747			688
Marketing		519			639			421			488			600			545			871			598
Legal and professional fees		2,336			1,653			1,603			1,392			2,117			1,687			932			926
FDIC assessments		1,042			1,007			2,026			877			1,034			543			392			59
Amortization of intangibles		315			315			314			315			315			315			314			315
Net loss on other real estate owned and other asset dispositions		2,320			2,065			1,440			502			583			255			401			185
Goodwill impairment		—			—			49,813			—			—			—			—			—
Other		1,879			1,943			1,923			1,911			2,065			2,072			2,002			1,791
Total noninterest expenses		20,868			20,506			71,038			19,335			20,733			19,986			19,354			18,817
(Loss) income before income taxes		(38,149	)		(40,777	)		(71,754	)		(7,831	)		(29,093	)		(5,950	)		(35,118	)		2,463
(Benefit) provision for income taxes		—			—			(8,754	)		(3,071	)		(6,496	)		(2,502	)		(13,802	)		700
Net (loss) income	$	(38,149	)	$	(40,777	)	$	(63,000	)	$	(4,760	)	$	(22,597	)	$	(3,448	)	$	(21,316	)	$	1,763
PER COMMON SHARE DATA
Net (loss) income diluted	$	(0.73	)	$	(1.21	)	$	(0.74	)	$	(0.30	)	$	(1.19	)	$	(0.18	)	$	(1.12	)	$	0.09
Net (loss) income basic		(0.73	)		(1.21	)		(0.74	)		(0.30	)		(1.19	)		(0.18	)		(1.12	)		0.09
Cash dividends declared:
Common stock		—-			—			—			0.01			0.01			0.01			0.16			0.16
Market price common stock:
Low close		1.18			1.91			2.15			2.17			4.37			7.31			7.76			7.67
High close		2.62			2.84			4.35			6.87			11.00			12.57			11.20			12.46
Bid price at end of period		1.63			2.52			2.43			3.03			6.60			10.73			7.76			10.95

47

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Seacoast Banking Corporation of Florida:

We have audited Seacoast Banking Corporation of Florida and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying report. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit 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 effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s 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 generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2009 and 2008, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2009, and our report dated March 23, 2010 expressed an unqualified opinion on those consolidated financial statements.

Miami, Florida

March 23, 2010

Certified Public Accountants

48

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Seacoast Banking Corporation of Florida:

We have audited the accompanying consolidated balance sheets of Seacoast Banking Corporation of Florida and subsidiaries (the Company) as of December 31, 2009 and 2008, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2009. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 Seacoast Banking Corporation of Florida and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 23, 2010 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Miami, Florida

March 23, 2010

Certified Public Accountants

49

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Year Ended December 31
	2009			2008			2007
	(Dollars in thousands, except share data)
INTEREST INCOME
Interest on securities
Taxable	$	16,357		$	14,198		$	14,812
Nontaxable		305			348			364
Interest and fees on loans		84,882			111,313			133,299
Interest on federal funds sold and interest bearing deposits		661			1,225			1,631
Total interest income		102,205			127,084			150,106
INTEREST EXPENSE
Interest on savings deposits		6,031			17,295			24,300
Interest on time certificates		18,749			26,117			29,580
Interest on short term borrowings		431			1,466			6,656
Interest on subordinated debt		1,354			2,551			3,229
Interest on other borrowings		2,051			2,424			1,872
Total interest expense		28,616			49,853			65,637
NET INTEREST INCOME		73,589			77,231			84,469
Provision for loan losses		124,767			88,634			12,745
NET INTEREST (LOSS) INCOME AFTER PROVISION FOR LOAN
LOSSES		(51,178	)		(11,403	)		71,724
NONINTEREST INCOME
Securities gains (losses)		5,399			355			(5,048	)
Other		19,015			22,241			24,964
Total noninterest income		24,414			22,596			19,916
NONINTEREST EXPENSE
Goodwill impairment		49,813			—			—
Other noninterest expenses		81,934			78,890			77,477
		131,747			78,890			77,477
(LOSS) INCOME BEFORE INCOME TAXES		(158,511	)		(67,697	)		14,163
(Benefit) provision for income taxes		(11,825	)		(22,100	)		4,398
NET (LOSS) INCOME		(146,686	)		(45,597	)		9,765
Preferred stock dividends and accretion on preferred stock discount		3,748			115			—
NET (LOSS) INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	(150,434	)	$	(45,712	)	$	9,765
SHARE DATA
Net (loss) income per share of common stock
Diluted	$	(4.74	)	$	(2.41	)	$	0.51
Basic		(4.74	)		(2.41	)		0.52
Average common shares outstanding
Diluted		31,733,260			18,997,757			19,157,597
Basic		31,733,260			18,997,757			18,936,541

See notes to consolidated financial statements.

50

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31
	2009			2008
	(Dollars in thousands, except share data)
ASSETS
Cash and due from banks	$	32,200		$	46,002
Interest bearing deposits with other banks		182,900			100,585
Federal funds sold		—			4,605
Total cash and cash equivalents		215,100			151,192
Securities available for sale (at fair value)		393,648			318,030
Securities held for investment (fair values: $17,210 in 2009 and $26,109 in 2008)		17,087			27,871
Total securities		410,735			345,901
Loans available for sale		18,412			2,165
Loans, net of deferred costs of $393 in 2009 and $270 in 2008		1,397,503			1,676,728
Less: Allowance for loan losses		(45,192	)		(29,388	)
Net loans		1,352,311			1,647,340
Bank premises and equipment, net		38,932			44,122
Other real estate owned		25,385			5,035
Goodwill		—			49,813
Other intangible assets		4,121			5,380
Other assets		86,319			63,488
TOTAL ASSETS	$	2,151,315		$	2,314,436
LIABILITIES
Demand deposits (noninterest bearing)	$	268,789		$	275,262
Savings deposits		838,288			802,201
Other time deposits		326,070			326,473
Brokered time certificates		38,656			100,463
Time certificates of $100,000 or more		307,631			306,042
Total deposits		1,779,434			1,810,441
Federal funds purchased and securities sold under agreement to repurchase, maturing within 30 days		105,673			157,496
Borrowed funds		50,000			65,302
Subordinated debt		53,610			53,610
Other liabilities		10,663			11,586
		1,999,380			2,098,435
Commitments and Contingencies (Notes K and P)
SHAREHOLDERS’ EQUITY
Series A preferred stock, par value $0.10 per share — authorized 4,000,000 shares, issued and outstanding 2,000 shares		44,999			43,787
Warrant for purchase of 589,623 shares of common stock at $6.36 per share in 2009 and 1,179,245 in 2008		3,123			6,245
Common stock, par value $.10 per share authorized 130,000,000 shares, issued 58,921,668 and outstanding 58,867,229 shares in 2009 and authorized 35,000,000 shares, issued 19,283,841 and outstanding 19,171,779 shares in 2008		5,887			1,928
Additional paid-in capital		174,973			93,543
(Accumulated deficit) Retained earnings		(78,200	)		70,278
Less: Treasury stock (54,439 shares in 2009 and 112,062 shares in 2008), at cost		(855	)		(1,839	)
		149,927			213,942
Accumulated other comprehensive income, net		2,008			2,059
TOTAL SHAREHOLDERS’ EQUITY		151,935			216,001
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,151,315		$	2,314,436

See notes to consolidated financial statement.

51

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

	For the Year Ended December 31
	2009			2008			2007
	(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received	$	102,138		$	127,591		$	148,171
Fees and commissions received		19,181			22,262			24,953
Interest paid		(28,507	)		(50,166	)		(65,395	)
Cash paid to suppliers and employees		(86,868	)		(71,834	)		(72,386	)
Income taxes received (paid)		3,423			(1,907	)		(10,681	)
Trading securities activity		—			14,000			(9,270	)
Origination of loans designated held for sale		(165,561	)		(190,337	)		(214,432	)
Sale of loans designated held for sale		158,628			191,832			216,660
Net change in other assets		548			232			(872	)
Net cash provided by operating activities		2,982			41,673			16,748
CASH FLOWS FROM INVESTING ACTIVITIES
Maturities of securities available for sale		94,202			27,438			67,233
Maturities of securities held for investment		10,800			4,017			10,511
Proceeds from sale of securities available for sale		92,686			13,964			148,453
Proceeds from sale of securities held for investment		—			—			85,551
Purchases of securities available for sale		(255,681	)		(101,086	)		(158,871	)
Net new loans and principal payments		91,395			63,483			(170,636	)
Proceeds from sale of loans		40,484			69,569			—
Proceeds from the sale of other real estate owned		5,582			3,435			32
Proceeds from sale of Federal Home Loan Bank and Federal Reserve Bank Stock		181			—			10,125
Purchase of Federal Home Loan Bank and Federal Reserve Bank Stock		(2,270	)		(182	)		(12,380	)
Additions to bank premises and equipment		(814	)		(6,621	)		(6,799	)
Net cash provided by (used in) investing activities		76,565			74,017			(26,781	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits		(30,994	)		(176,877	)		96,307
Net increase (decrease) in federal funds purchased and repurchase agreements		(51,823	)		69,396			(118,376	)
Increase (decrease) in borrowings and subordinated debt		(15,000	)		—			50,000
Proceeds from issuance of preferred stock and warrant		—			50,000			—
Issuance of common stock, net of related expense		82,553			—			—
Stock based employee benefit plans		174			908			450
Dividend reinvestment plan		31			89			92
Dividends paid		(580	)		(6,489	)		(12,180	)
Net cash provided by (used in) financing activities		(15,639	)		(62,973	)		16,293
Net increase in cash and cash equivalents		63,908			52,717			6,260
Cash and cash equivalents at beginning of year		151,192			98,475			92,215
Cash and cash equivalents at end of year	$	215,100		$	151,192		$	98,475

See notes to consolidated financial statements.

52

SEACOAST BANKING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY

										Paid-in									Accumulated
										Capital									Other
	Common Stock					Preferred Stock				and			Retained			Treasury			Comprehensive
(Dollars in thousands)	Shares			Amount		Shares		Amount		Warrant			Earnings			Stock			Income (Loss), Net			Total
BALANCE AT DECEMBER 31, 2006		18,974		$	1,899		—	$	—	$	88,380		$	124,811		$	(310	)	$	(2,355	)	$	212,425
Comprehensive Income:
Net income		—			—		—		—		—			9,765			—			—			9,765
Net unrealized gain on securities		—			—		—		—		—			—			—			516			516
Net reclassification adjustment		—			—		—		—		—			—			—			2,173			2,173
Comprehensive income		—			—		—		—		—			—			—			—			12,454
Cash dividends at $0.64 per common share		—			—		—		—		—			(12,180	)		—			—			(12,180	)
Treasury stock acquired		(161	)		—		—		—		—			—			(2,659	)		—			(2,659	)
Stock based compensation expense		—			—		—		—		423			—			—			—			423
Common stock issued for stock based employee benefit plans		291			21		—		—		2,127						1,678			—			3,826
Dividend reinvestment plan		6			—		—		—		(6	)		—			98			—			92
BALANCE AT DECEMBER 31, 2007		19,110			1,920		—		—		90,924			122,396			(1,193	)		334			214,381
Comprehensive loss:
Net loss		—			—		—		—		—			(45,597	)		—			—			(45,597	)
Net unrealized gain on securities		—			—		—		—		—			—			—			1,863			1,863
Net reclassification adjustment		—			—		—		—		—			—			—			(138	)		(138	)
Comprehensive loss		—			—		—		—		—			—			—			—			(43,872	)
Cash dividends at $0.34 per common share		—			—		—		—		—			(6,489	)		—			—			(6,489	)
Stock based compensation expense		—			—		—		—		463			—			—			—			463
Common stock issued for stock based employee benefit plans		52			8		—		—		2,191			—			(770	)		—			1,429
Dividend reinvestment plan		10			—		—		—		(35	)		—			124			—			89
Proceeds from issuance of preferred stock and warrant		—			—		2		43,755		6,245			—			—			—			50,000
Accretion on preferred stock discount		—			—		—		32		—			(32	)		—			—			—
BALANCE AT DECEMBER 31, 2008		19,172			1,928		2		43,787		99,788			70,278			(1,839	)		2,059			216,001
Comprehensive loss:
Net loss		—			—		—		—		—			(146,686	)		—			—			(146,686	)
Net unrealized gain on securities		—			—		—		—		—			—			—			1,399			1,399
Net reclassification adjustment		—			—		—		—		—			—			—			(1,450	)		(1,450	)
Comprehensive loss		—			—		—		—		—			—			—			—			(146,737	)
Cash dividends at $0.01 per common share		—			—		—		—		—			(191	)		—			—			(191	)
Cash dividends on preferred shares		—			—		—		—		—			(389	)		—			—			(389	)
Stock based compensation expense		—			—		—		—		401			—			—			—			401
Common stock issued for stock based employee benefit plans		10			—		—		—		(505	)		—			771			—			266
Dividend reinvestment plan		10			—		—		—		(182	)		—			213			—			31
Issuance of common stock		39,675			3,959		—		—		81,717			—			—			—			85,676
Clawback of one-half of warrants		—			—		—		—		(3,123	)		—			—			—			(3,123	)
Accretion on preferred stock discount		—			—		—		1,212		—			(1,212	)		—			—			—
BALANCE AT DECEMBER 31, 2009		58,867		$	5,887		2	$	44,999	$	178,096		$	(78,200	)	$	(855	)	$	2,008		$	151,935

See notes to consolidated financial statements.

53

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note A   Significant Accounting Policies

General:  Seacoast Banking Corporation of Florida (“Company”) is a single segment bank holding company with one operating subsidiary bank, Seacoast National Bank (“Seacoast National”, together the “Company”). Seacoast National’s service area includes Okeechobee, Highlands, Hendry, Hardee, Glades, DeSoto, Palm Beach, Martin, St. Lucie, Brevard, Indian River, Broward, Orange and Seminole counties, which are located in central and southeast Florida. The bank operates full service branches within its markets.

The consolidated financial statements include the accounts of Seacoast and all its majority-owned subsidiaries but exclude five trusts created for the issuance of trust preferred securities. In consolidation, all significant intercompany accounts and transactions are eliminated.

The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States of America, and they conform to general practices within the applicable industries.

Certain reclassifications have been made to prior years’ financial statements to conform to the current year presentation.

Cash and Cash Equivalents:  Cash and cash equivalents include cash and due from banks, interest-bearing bank balances and federal funds sold and securities purchased under resale agreements. Cash and cash equivalents have original maturities of three months or less, and accordingly, the carrying amount of these instruments is deemed to be a reasonable estimate of fair value.

Securities Purchased and Sold Agreements:  Securities purchased under resale agreements and securities sold under repurchase agreements are generally accounted for as collateralized financing transactions and are recorded at the amount at which the securities were acquired or sold plus accrued interest. It is the Company’s policy to take possession of securities purchased under resale agreements, which are primarily U.S. Government and Government agency securities. The fair value of securities purchased and sold is monitored and collateral is obtained from or returned to the counterparty when appropriate.

Use of Estimates:  The preparation of these consolidated financial statements requires the use of certain estimates by management in determining the Company’s assets, liabilities, revenues and expenses, and contingent liabilities. Specific areas, among others, requiring the application of management’s estimates include determination of the allowance for loan losses, deferred tax assets, the valuation of investment securities available for sale, fair value of impaired loans, contingent liabilities, other real estate owned and goodwill. Actual results could differ from those estimates.

Securities:  Securities are classified at date of purchase as trading, available for sale or held to maturity. Securities that may be sold as part of the Company’s asset/liability management or in response to, or in anticipation of changes in interest rates and resulting prepayment risk, or for other factors are stated at fair value with unrealized gains or losses reflected as a component of shareholders’ equity net of tax or included in noninterest income as appropriate. The estimated fair value of a security is determined based on market quotations when available or, if not available, by using quoted market prices for similar securities, pricing models or discounted cash flow analyses, using observable market data where available. Debt securities that the Company has the ability and intent to hold to maturity are carried at amortized cost.

Realized gains and losses, including other than temporary impairments, are included in noninterest income as investment securities gains (losses). Interest and dividends on securities, including amortization of premiums and accretion of discounts, is recognized in interest income on an accrual basis using the interest method. The Company anticipates prepayments of principal in the calculation of the effective yield for collateralized mortgage obligations and mortgage backed securities by obtaining estimates of prepayments from independent third parties. The adjusted cost of each specific security sold is used to compute realized gains or losses on the sale of securities on a trade date basis.

54

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On a quarterly basis, the Company makes an assessment to determine whether there have been any events or economic circumstances to indicate that a security is impaired on an other-than-temporary (“OTTI”) basis. Management considers many factors including the length of time the security has had a fair value less than the cost basis; our intent and ability to hold the security for a period of time sufficient for a recovery in value; recent events specific to the issuer or industry; and for debt securities, external credit ratings and recent downgrades. Securities on which there is an unrealized loss that is deemed to be other-than temporary are written down to fair value with the write-down recorded as a realized loss.

Based on updated guidance issued in April 2009, the Company determines whether it has the intent to sell the debt security or whether it is more likely than not it will be required to sell the debt security before the recovery of its amortized cost basis. If either condition is met, the Company will recognize a full impairment and write the debt security down to fair value. For all other debt securities for which the Company does not expect to recover the entire amortized cost basis of the security and do not meet either condition, an OTTI loss is considered to have occurred, and the Company records the credit loss portion of impairment in earnings and the temporary impairment related to all other factors on other comprehensive income (“OCI”).

For securities which are transferred into held to maturity from available for sale the unrealized gain or loss at the date of transfer is reported as a component of shareholders’ equity and is amortized over the remaining life as an adjustment of yield using the interest method.

Seacoast National is a member of the Federal Home Loan Bank system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

Loans:  Loans are recognized at the principal amount outstanding, net of unearned income and amounts charged off. Unearned income includes discounts, premiums and deferred loan origination fees reduced by loan origination costs. Unearned income on loans is amortized to interest income over the life of the related loan using the effective interest rate method. Interest income is recognized on an accrual basis.

Fees received for providing loan commitments and letters of credit that may result in loans are typically deferred and amortized to interest income over the life of the related loan, beginning with the initial borrowing. Fees on commitments and letters of credit are amortized to noninterest income as banking fees and commissions on a straight-line basis over the commitment period when funding is not expected.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are considered held for investment.

The Company accounts for loans in accordance with ASC topics 310 and 470, when due to a deterioration in a borrower’s financial position, the Company grants concessions that would not otherwise be considered. Troubled debt restructured loans are tested for impairment and placed in non-accrual status. If borrowers perform pursuant to the modified loan terms for at least six months and the remaining loan balances are considered collectible, the loans are returned to accrual status. When the Company modifies the terms of an existing loan that is not considered a troubled debt restructuring, the Company follows the provisions of ASC 310 “Creditor’s Accounting for a Modification or Exchange of Debt Instruments”.

A loan is considered to be impaired when based on current information, it is probable the Company will not receive all amounts due in accordance with the contractual terms of a loan agreement. The fair value is measured based on either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. A loan is also considered impaired if its terms are modified in a troubled debt restructuring. When the ultimate collectibility of the principal balance of an impaired loan is in doubt, all cash receipts are applied to principal. Once the recorded principal balance has been reduced to zero, future cash receipts are applied to

55

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

interest income, to the extent any interest has been forgone, and then they are recorded as recoveries of any amounts previously charged off.

The accrual of interest is generally discontinued on loans and leases, except consumer loans, that become 90 days past due as to principal or interest unless collection of both principal and interest is assured by way of collateralization, guarantees or other security. Generally, loans past due 90 days or more are placed on nonaccrual status regardless of security. When interest accruals are discontinued, unpaid interest is reversed against interest income. Consumer loans that become 120 days past due are generally charged off. When borrowers demonstrate over an extended period the ability to repay a loan in accordance with the contractual terms of a loan classified as nonaccrual, the loan is returned to accrual status. Interest income on nonaccrual loans is either recorded using the cash basis method of accounting or recognized after the principal has been reduced to zero, depending on the type of loan.

Derivatives Used for Risk Management:  The Company may designate a derivative as either a hedge of the fair value of a recognized fixed rate asset or liability or an unrecognized firm commitment (“fair value” hedge), a hedge of a forecasted transaction or of the variability of future cash flows of a floating rate asset or liability (“cash flow” hedge). All derivatives are recorded as other assets or other liabilities on the balance sheet at their respective fair values with unrealized gains and losses recorded either in other comprehensive income or in the results of operations, depending on the purpose for which the derivative is held. Derivatives that do not meet the criteria for designation as a hedge at inception, or fail to meet the criteria thereafter, are carried at fair value with unrealized gains and losses recorded in the results of operations.

To the extent of the effectiveness of a cash flow hedge, changes in the fair value of a derivative that is designated and qualifies as a cash flow hedge are recorded in other comprehensive income. The net periodic interest settlement on derivatives is treated as an adjustment to the interest income or interest expense of the hedged assets or liabilities.

At inception of a hedge transaction, the Company formally documents the hedge relationship and the risk management objective and strategy for undertaking the hedge. This process includes identification of the hedging instrument, hedged item, risk being hedged and the methodology for measuring ineffectiveness. In addition, the Company assesses both at the inception of the hedge and on an ongoing quarterly basis, whether the derivative used in the hedging transaction has been highly effective in offsetting changes in fair value or cash flows of the hedged item, and whether the derivative as a hedging instrument is no longer appropriate.

The Company discontinues hedge accounting prospectively when either it is determined that the derivative is no longer highly effective in offsetting changes in the fair value or cash flows of a hedged item; the derivative expires or is sold, terminated or exercised; the derivative is de-designated because it is unlikely that a forecasted transaction will occur; or management determines that designation of the derivative as a hedging instrument is no longer appropriate.

When a fair value hedge is discontinued, the hedged asset or liability is no longer adjusted for changes in fair value and the existing basis adjustment is amortized or accreted as an adjustment to yield over the remaining life of the asset or liability. When a cash flow hedge is discontinued but the hedged cash flows or forecasted transaction are still expected to occur, unrealized gains and losses that are accumulated in other comprehensive income are included in the results of operations in the same period when the results of operations are also affected by the hedged cash flow. They are recognized in the results of operations immediately if the cash flow hedge was discontinued because a forecasted transaction is not expected to occur.

Certain commitments to sell loans are derivatives. These commitments are recorded as a freestanding derivative and classified as an other asset or liability.

Loans Held for Sale:  Loans are classified as held for sale based on management’s intent to sell the loans, either as part of a core business strategy or related to a risk mitigation strategy. Loans held for sale and

56

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

any related unfunded lending commitments are recorded at the lower of cost (which is the carrying amount net of deferred fees and costs and applicable allowance for loan losses and reserve for unfunded lending commitments) or fair market value less costs to sell. At the time of the transfer to loans held for sale, if the fair market value is less than cost, the difference is recorded as additional provision for credit losses in the results of operations. Fair market value is determined based on quoted market prices for the same or similar loans, outstanding investor commitments or discounted cash flow analyses using market assumptions.

At December 31, 2009 fair market value for substantially all the loans in loans held for sale were obtained by reference to prices for the same or similar loans from recent transactions. For a relationship that includes an unfunded lending commitment, the cost basis is the outstanding balance of the loan net of the allowance for loan losses and net of any reserve for unfunded lending commitments. This cost basis is compared to the fair market value of the entire relationship including the unfunded lending commitment.

Individual loans or pools of loans are transferred from the loan portfolio to loans held for sale when the intent to hold the loans has changed and there is a plan to sell the loans within a reasonable period of time. Loans held for sale are reviewed quarterly. Subsequent declines or recoveries of previous declines in the fair market value of loans held for sale are recorded in other fee income in the results of operations. Fair market value changes occur due to changes in interest rates, the borrower’s credit, the secondary loan market and the market for a borrower’s debt. If an unfunded lending commitment expires before a sale occurs, the reserve associated with the unfunded lending commitment is recognized as a credit to other fee income in the results of operations.

Fair Value Measurements:  The Company measures or monitors many of its assets and liabilities on a fair value basis. Certain assets and liabilities are measured on a recurring basis. Examples of these include derivative instruments, available for sale and trading securities, loans held for sale and long-term debt. Additionally, fair value is used on a non-recurring basis to evaluate assets or liabilities for impairment or for disclosure purposes. Examples of these non-recurring uses of fair value include certain loans held for sale accounted for on a lower of cost or fair value, goodwill, and long-lived assets. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, the Company uses various valuation techniques and assumptions when estimating fair value.

The Company applied the following fair value hierarchy:

Level 1 — Assets or liabilities for which the identical item is traded on an active exchange, such as publicly-traded instruments or futures contracts.

Level 2 — Assets and liabilities valued based on observable market data for similar instruments.

Level 3 — Assets and liabilities for which significant valuation assumptions are not readily observable in the market; instruments valued based on the best available data, some of which is internally-developed, and considers risk premiums that a market participant would require.

When determining the fair value measurements for assets and liabilities required or permitted to be recorded at and/or marked to fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability. When possible, the Company looks to active and observable markets to price identical assets or liabilities. When identical assets and liabilities are not traded in active markets, the Company looks to market observable data for similar assets and liabilities. Nevertheless, certain assets and liabilities are not actively traded in observable markets and the Company must use alternative valuation techniques to derive a fair value measurement.

Other Real Estate Owned:  Other real estate owned (“OREO”) consists of real estate acquired in lieu of unpaid loan balances. These assets are carried at an amount equal to the loan balance prior to foreclosure plus

57

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

costs incurred for improvements to the property, but no more than the estimated fair value of the property less estimated selling costs. Any valuation adjustments required at the date of transfer are charged to the allowance for loan losses. Subsequently, unrealized losses and realized gains and losses are included in other noninterest income. Operating results from OREO are recorded in other noninterest expense.

Bank Premises and Equipment:  Bank premises and equipment are stated at cost, less accumulated depreciation and amortization. Premises and equipment include certain costs associated with the acquisition of leasehold improvements. Depreciation and amortization are recognized principally by the straight-line method, over the estimated useful lives as follows: buildings — 25-40 years, leasehold improvements — 5-25 years, furniture and equipment — 3-12 years. Premises and equipment and other long-term assets are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.

Goodwill and Other Intangible Assets:  Goodwill and intangible assets with indefinite lives are not subject to amortization. Rather they are subject to impairment tests at least annually, or more often if events or circumstances indicate there may be impairment Intangible assets with finite lives continue to be amortized over the period the Company expects to benefit from such assets and are periodically reviewed to determine whether there have been any events or circumstances to indicate the recorded amount is not recoverable from projected undiscounted net operating cash flows. A loss is recognized to reduce the carrying amount to fair value, where appropriate.

Revenue Recognition:  Revenue is recognized when the earnings process is complete and collectibility is assured. Brokerage fees and commissions are recognized on a trade date basis. Asset management fees, measured by assets at a particular date, are accrued as earned. Commission expenses are recorded when the related revenue is recognized.

Allowance for Loan Losses and Reserve for Unfunded Lending Commitments: The Company has developed policies and procedures for assessing the adequacy of the allowance for loan losses and reserve for unfunded lending commitments that reflect the evaluation of credit risk after careful consideration of all available information. Where appropriate this assessment includes monitoring qualitative and quantitative trends including changes in levels of past due, criticized and nonperforming loans. In developing this assessment, the Company must necessarily rely on estimates and exercise judgment regarding matters where the ultimate outcome is unknown such as economic factors, developments affecting companies in specific industries and issues with respect to single borrowers. Depending on changes in circumstances, future assessments of credit risk may yield materially different results, which may result in an increase or a decrease in the allowance for loan losses.

The allowance for loan losses and reserve for unfunded lending commitments is maintained at a level the Company believes is adequate to absorb probable losses inherent in the loan portfolio and unfunded lending commitments as of the date of the consolidated financial statements. The Company employs a variety of modeling and estimation tools in developing the appropriate allowance for loan losses and reserve for unfunded lending commitments. The allowance for loan losses and reserve for unfunded lending commitments consists of formula-based components for commercial residential and consumer loans, allowance for impaired commercial loans and allowance related to additional factors that are believed indicative of current trends and business cycle issues.

The Company monitors qualitative and quantitative trends in the loan portfolio, including changes in the levels of past due, criticized and nonperforming loans. The distribution of the allowance for loan losses and reserve for unfunded lending commitments between the various components does not diminish the fact that the entire allowance for loan losses and reserve for unfunded lending commitments is available to absorb credit losses in the loan portfolio. The principal focus is, therefore, on the adequacy of the total allowance for loan losses and reserve for unfunded lending commitments.

58

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s bank subsidiary’s allowance for loan losses and reserve for unfunded lending commitments. These agencies may require such subsidiaries to recognize changes to the allowance for loan losses and reserve for unfunded lending commitments based on their judgments about information available to them at the time of their examination.

Income Taxes:  The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are determined based on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and their related tax bases and are measured using the enacted tax rates and laws that are in effect. A valuation allowance is recognized for a deferred tax asset if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. The effect on deferred tax assets and liabilities of a change in rates is recognized as income or expense in the period in which the change occurs. See Note L, Income Taxes for related disclosures.

Earnings per Share:  Basic earnings per share are computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share are based on the weighted-average number of common shares outstanding during each period, plus common share equivalents calculated for stock options and performance restricted stock outstanding using the treasury stock method.

Stock-Based Compensation:  The three stock option plans are accounted for under ASC Topic 718 and the fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with market assumptions. This amount is amortized on a straight-line basis over the vesting period, generally five years. (See Note J)

For restricted stock awards, which generally vest based on continued service with the Company, the deferred compensation is measured as the fair value of the shares on the date of grant, and the deferred compensation is amortized as salaries and employee benefits in accordance with the applicable vesting schedule, generally straight-line over five years. Some shares vest based upon the Company achieving certain performance goals and salary amortization expense is based on an estimate of the most likely results on a straight line basis.

Federal Home Loan Bank Stock:  The Bank is a member of the FHLB system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

Recently Issued Accounting Standards, Not Adopted As of December 31, 2009

Accounting Standards Update (ASU) 2010-6 — Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements.  The ASU amends Subtopic 820-10 with new disclosure requirements and clarification of existing disclosure requirements. New disclosures required include the amount of significant transfers in and out of levels 1 and 2 fair value measurements and the reasons for the transfers. In addition, the reconciliation for level 3 activity will be required on a gross rather than net basis. The ASU provides additional guidance related to the level of disaggregation in determining classes of assets and liabilities and disclosures about inputs and valuation techniques. The amendments are effective for annual or interim reporting periods beginning after December 15, 2009, except for the requirement to provide the reconciliation for level 3 activity on a gross basis which will be effective for fiscal years beginning after December 15, 2010.

59

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note B   Subsequent Events

In preparing these consolidated financial statements, subsequent events were evaluated through the time the consolidated financial statements were issued. The consolidated financial statements are considered issued when they are widely distributed to all shareholders and other financial statement users, or filed with the Securities and Exchange Commission. In conjunction with applicable accounting standards, all material subsequent events have been either recognized in the consolidated financial statements or disclosed in the notes to the consolidated financial statements.

Note C   Cash, Dividend and Loan Restrictions

In the normal course of business, the Company and Seacoast National enter into agreements, or are subject to regulatory agreements that result in cash, debt and dividend restrictions. A summary of the most restrictive items follows:

Seacoast National is required to maintain average reserve balances with the Federal Reserve Bank. The average amount of those reserve balances was nominal for 2009 and 2008.

Under Federal Reserve regulation, Seacoast National is limited as to the amount it may loan to their affiliates, including the Company, unless such loans are collateralized by specified obligations. At December 31, 2009, the maximum amount available for transfer from Seacoast National to the Company in the form of loans approximated $30.0 million.

The approval of the Office of the Comptroller of the Currency (“OCC”) is required if the total of all dividends declared by a national bank in any calendar year exceeds the bank’s profits, as defined, for that year combined with its retained net profits for the preceding two calendar years. Under this restriction Seacoast National cannot distribute any dividends to the Company as of December 31, 2009, without prior approval of the OCC.

Note D   Securities

The amortized cost and fair value of securities at December 31, 2009, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or repay obligations with or without call or prepayment penalties.

	Held for Investment				Available for Sale
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In thousands)
Due in less than one year	$	—	$	—	$	3,689	$	3,688
Due after one year through five years		1,673		1,684		—		—
Due after five years through ten years		2,122		2,146		1,094		1,134
Due after ten years		439		454		927		929
		4,234		4,284		5,710		5,751
Mortgage-backed securities of U.S. Government Sponsored Entities		—		—		60,154		60,548
Collateralized mortgage obligations of U.S. Government Sponsored Entities		288		289		250,762		255,248
Private collateralized mortgage obligations		12,565		12,637		70,719		69,068
No contractual maturity		—		—		3,033		3,033
	$	17,087	$	17,210	$	390,378	$	393,648

60

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Proceeds from sales of securities available for sale during 2009 were $92,686,000 with gross gains of $5,399,000.

Proceeds from sales of securities available for sale during 2008, were $13,964,000 with gross gains of $355,000.

Securities with a carrying value of $320,768,000 and a fair value of $320,775,000 at December 31, 2009, were pledged as collateral for repurchase agreements, United States Treasury deposits, other public and trust deposits.

Proceeds from sales of securities available for sale during 2007, were $148,453,000 with gross gains of $120,000 and gross losses of $2,885,000. Proceeds from sales of securities held for investment during 2007 were $85,551,000 with gross losses of $2,283,000. Securities were sold as part of the securities portfolio restructuring during the first quarter of 2007.

	December 31, 2009
	Gross		Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
SECURITIES AVAILABLE FOR SALE
U.S. Treasury securities and obligations of U.S. Government Sponsored Entities	$	3,689	$	2	$	(3	)	$	3,688
Mortgage-backed securities of U.S. Government Sponsored Entities		60,154		719		(325	)		60,548
Collateralized mortgage obligations of U.S. Government Sponsored Entities		250,762		5,219		(733	)		255,248
Private collateralized mortgage obligations		70,719		569		(2,220	)		69,068
Obligations of state and political subdivisions		2,021		49		(7	)		2,063
Other		3,033		—		—			3,033
	$	390,378	$	6,558	$	(3,288	)	$	393,648
SECURITIES HELD FOR INVESTMENT
Collateralized mortgage obligations of U.S. Government Sponsored Entities	$	288	$	1	$	—			289
Private collateralized mortgage obligations		12,565		73		(1	)		12,637
Obligations of state and political subdivisions		4,234		55		(5	)		4,284
	$	17,087	$	129	$	(6	)	$	17,210

61

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	December 31, 2008
	Gross		Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
SECURITIES AVAILABLE FOR SALE
U.S. Treasury securities and obligations of U.S. Government Sponsored Entities	$	22,094	$	286	$	—		$	22,380
Mortgage-backed securities of U.S. Government Sponsored Entities		59,500		1,035		(6	)		60,529
Collateralized mortgage obligations of U.S. Government Sponsored Entities		200,812		4,806		(178	)		205,440
Private collateralized mortgage obligations		27,106		—		(2,652	)		24,454
Obligations of state and political subdivisions		2,021		51		(2	)		2,070
Other		3,157		—		—			3,157
	$	314,690	$	6,178	$	(2,838	)	$	318,030
SECURITIES HELD FOR INVESTMENT
Collateralized mortgage obligations of U.S. Government Sponsored Entities	$	1,960	$	—	$	(47	)	$	1,913
Private collateralized mortgage obligations		20,288		—		(1,758	)		18,530
Obligations of state and political subdivisions		5,623		49		(6	)		5,666
	$	27,871	$	49	$	(1,811	)	$	26,109

The estimated fair value of a security is determined based on market quotations when available or, if not available, by using quoted market prices for similar securities, pricing models or discounted cash flows analyses, using observable market data where available. The tables below indicate the amount of securities with unrealized losses and period of time for which these losses were outstanding at December 31, 2009 and 2008, respectively.

	December 31, 2009
	Less Than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
	(In thousands)
U.S. Treasury securities and obligations of U.S. Government Sponsored Entities	$	2,489	$	(3	)	$	—	$	—		$	2,489	$	(3	)
Mortgage-backed securities of U.S. Government Sponsored Entities		32,519		(325	)		—		—			32,519		(325	)
Collateralized mortgage obligations of U.S. Government Sponsored Entities		57,438		(733	)		—		—			57,438		(733	)
Private collateralized mortgage obligations		18,211		(115	)		18,498		(2,106	)		36,709		(2,221	)
Obligations of state and political subdivisions		—		—			1,542		(12	)		1,542		(12	)
Total temporarily impaired securities	$	110,657	$	(1,176	)	$	20,040	$	(2,118	)	$	130,697	$	(3,294	)

62

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	December 31, 2008
	Less Than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
	(In thousands)
U.S. Treasury securities and obligations of U.S. Government Sponsored Entities	$	—	$	—		$	—	$	—		$	—	$	—
Mortgage-backed securities of U. S. Government Sponsored Entities		7,714		(6	)		—		—			7,714		(6	)
Collateralized mortgage obligations of U.S. Government Sponsored Entities		12,450		(176	)		1,914		(49	)		14,364		(225	)
Private collateralized mortgage obligations		—		—			42,983		(4,410	)		42,983		(4,410	)
Obligations of state and political subdivisions		503		(1	)		1,517		(7	)		2,020		(8	)
Total temporarily impaired securities	$	20,667	$	(183	)	$	46,414	$	(4,466	)	$	67,081	$	(4,649	)

The Company owned individual investment securities of $130.7 million with aggregate gross unrealized losses at December 31, 2009. Based on a review of each of the securities in the investment securities portfolio at December 31, 2009, the Company concluded that it expected to recover the amortized cost basis of its investment.

Approximately $2.2 million of the unrealized losses pertain to super senior private label securities secured by collateral originated prior to 2005 with a fair value of $36.7 million and were attributable to a combination of factors, including relative changes in interest rates since the time of purchase and decreased liquidity for investment securities in general. The collateral underlying these mortgage investments are 30- and 15-year fixed and 10/1 adjustable rate mortgage loans with low loan to values, subordination and historically have had minimal foreclosures and losses. Based on its assessment of these factors, management believes that the unrealized losses on these debt security holdings are a function of changes in investment spreads and interest rate movements and not changes in credit quality.

At December 31, 2009, the Company also had $1.1 million of unrealized losses on mortgage backed securities of government sponsored entities having a fair value of $90.0 million that were attributable to a combination of factors, including relative changes in interest rates since the time of purchase and decreased liquidity for investment securities in general. The contractual cash flows for these securities are guaranteed by U.S. government agencies and U.S. government-sponsored enterprises. Based on its assessment of these factors, management believes that the unrealized losses on these debt security holdings are a function of changes in investment spreads and interest movements and not changes in credit quality. Management expects to recover the entire amortized cost basis of these securities.

The unrealized losses on debt securities issued by states and political subdivisions amounted to $12,000 at December 31, 2009. The unrealized losses on state and municipal holdings included in this analysis are attributable to a combination of factors, including a general decrease in liquidity and an increase in risk premiums for credit-sensitive securities since the time of purchase. Based on its assessment of these factors, management believes that unrealized losses on these debt security holdings are a function of changes in investment spreads and liquidity and not changes in credit quality. Management expects to recover the entire amortized cost basis of these securities.

63

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of December 31, 2009, the Company does not intend to sell nor is it anticipated that it would be required to sell any of its investment securities that have losses. Therefore, management does not consider any investment to be other-than-temporarily impaired at December 31, 2009.

Included in other assets is $14.9 million and $12.8 million at December 31, 2009 and December 31, 2008, respectively, of Federal Home Loan Bank and Federal Reserve Bank stock stated at par value. At December 31, 2009, the Company has not identified events or changes in circumstances which may have a significant adverse effect on the fair value of the $14.9 million of cost method investment securities.

Note E   Loans

Information relating to loans at December 31 is summarized as follows:

	2009		2008
	(In thousands)
Real estate mortgage	$	1,109,077	$	1,125,465
Construction and land development		162,868		395,243
Commercial and financial		61,058		82,765
Installment loans to individuals		64,024		72,908
Other		476		347
TOTAL	$	1,397,503	$	1,676,728

One of the sources of the Company’s business is loans to directors and executive officers. The aggregate dollar amount of these loans was approximately $6,075,000 and $11,426,000 at December 31, 2009 and 2008, respectively. During 2009, $693,000 of new loans were made and reductions totaled $6,044,000.

At December 31, 2009 and 2008, participations of loans sold totaled $7,514,000 and $21,789,000, respectively, while loans purchased totaled $29,081,000 and $35,968,000, respectively. At December 31, 2009 and 2008, loan syndications sold were zero and totaled $10,326,000, while loan syndications purchased totaled $16,023,000 and $22,375,000, respectively.

At December 31, 2009 and December 31, 2008, loans pledged as collateral for borrowings totaled $55.0 million and $71.5 million, respectively. At December 31, 2009, an additional $83.6 million in loans was pledged as collateral for letters of credit with the FHLB utilized to satisfy Seacoast National’s requirements as a qualified public depository within the state of Florida, whereas no pledging of this nature was outstanding at December 31, 2008.

Note F   Impaired Loans and Allowance for Loan Losses

At December 31, 2009 and 2008, the Company’s recorded investment in impaired loans and related valuation allowance was as follows:

	2009				2008
	Recorded		Valuation		Recorded		Valuation
	Investment		Allowance		Investment		Allowance
	(In thousands)
Impaired loans without an allowance	$	63,674	$	—	$	62,031	$	—
Impaired loans with an allowance		91,636		13,042		39,393		5,152
	$	155,310	$	13,042	$	101,424	$	5,152

64

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Impaired loans also include loans that have been modified in troubled debt restructurings (“TDRs”) where concessions to borrowers who experienced financial difficulities have been granted. At December 31, 2009 and 2008, accruing TDRs totaled $57.4 million and $12.6 million, respectively.

The valuation allowance for impaired loans is included in the allowance for loan losses. The average recorded investment in impaired loans for the years ended December 31, 2009, 2008 and 2007 was $137,295,000, $74,287,000 and $22,238,000, respectively. The impaired loans were measured for impairment based primarily on the value of underlying collateral.

Interest payments received on impaired loans are recorded as interest income unless collection of the remaining recorded investment is doubtful at which time payments received are recorded as reductions to principal. For the years ended December 31, 2009 and 2008, the Company recorded $708,000 and $673,000, respectively in interest income on impaired loans. No interest income on impaired loans was recorded in the year ended December 31, 2007.

The nonaccrual loans and accruing loans past due 90 days or more for the year ended December 31, 2009 were $97,876,000 and $156,000, respectively, were $86,970,000 and $1,838,000, respectively, at the end of 2008, and were $67,834,000 and $25,000, respectively, at year end 2007.

Transactions in the allowance for loan losses for the three years ended December 31, are summarized as follows:

	2009			2008			2007
	(In thousands)
Balance, beginning of year	$	29,388		$	21,902		$	14,915
Provision charged to operating expense		124,767			88,634			12,745
Charge offs		(110,826	)		(83,379	)		(5,950	)
Recoveries		1,863			2,231			192
Balance, end of year	$	45,192		$	29,388		$	21,902

Note G   Bank Premises and Equipment

Bank premises and equipment are summarized as follows:

			Accumulated			Net
			Depreciation &			Carrying
	Cost		Amortization			Value
	(In thousands)
December 31, 2009
Premises (including land of $9,262)	$	48,347	$	(15,745	)	$	32,602
Furniture and equipment		20,922		(14,592	)		6,330
	$	69,269	$	(30,337	)	$	38,932
December 31, 2008
Premises (including land of $10,162)	$	51,342	$	(14,865	)	$	36,477
Furniture and equipment		20,964		(13,319	)		7,645
	$	72,306	$	(28,184	)	$	44,122

In accordance with the provisions of the impairment or disposal of long-lived assets ASC 360-10, two closed branches held for sale with a carrying amount of $2.4 million were written down to their fair value of $1.7 million resulting in a loss of $753,000, which was included in the consolidated statement of operations as “net loss on other real estate owned and other asset dispositions”.

65

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note H   Goodwill and Other Intangible Assets

Goodwill for the Company’s single reporting unit has been tested annually for impairment, unless an event occurs or circumstances change that more likely than not reduce the fair value of the reporting unit.

Impairment exists when a reporting unit’s carrying value of goodwill exceeds its fair value, which is determined through a two step impairment test. Step 1 includes a determination of the carrying value of the reporting unit, including existing goodwill and intangible assets, and estimating the fair value of the reporting unit. The fair value of the reporting unit is compared to its carrying amount and, if the carrying amount exceeds its fair value, we are required to perform a step 2 analysis to the impairment test.

During 2009, we performed an impairment test prior to the annual impairment testing date due to the uncertainty in the interest rate environment, continued softness in the real estate market and the market volatility of the financial services industry. This impairment test indicated that the step 2 analysis was necessary. A step 2 analysis of the goodwill impairment test was performed to measure the impairment loss. The step 2 analysis requires that the implied fair value of the reporting unit goodwill be compared to the carrying amount of that goodwill. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. After performing the step 2 analysis it was determined that the implied value of goodwill was less than its carrying cost, resulting in an impairment charge of $49,813,000.

Changes in the carrying amount of goodwill for the years ended December 31, 2009, and 2008 are presented below.

	(In thousands)
Balance, December 31, 2007	$	49,813
Additions to goodwill, net		—
Balance, December 31, 2008		49,813
Impairment of goodwill		(49,813	)
Balance, December 31, 2009	$	—

The gross carrying amount and accumulated amortization for each of the Company’s identified intangible assets subject to amortization at December 31, 2009 and 2008, are presented below.

	December 31, 2009					December 31, 2008
	Gross					Gross
	Carrying		Accumulated			Carrying		Accumulated
	Amount		Amortization			Amount		Amortization
	(In thousands)
Deposit base intangible	$	9,494	$	(5,373	)	$	9,494	$	(4,114	)
	$	9,494	$	(5,373	)	$	9,494	$	(4,114	)

Intangible amortization expense related to identified intangible assets for each of the years in the three-year period ended December 31, 2009, is presented below.

	Year Ended December 31
	2009		2008		2007
	(In thousands)
Intangible Amortization
Identified intangible assets
Deposit base	$	1,259	$	1,259	$	1,259

66

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The estimated annual amortization expense for identified intangible assets determined using the straight line method in each of the five years subsequent to December 31, 2009, is as follows (in thousands): 2010, $985; 2011, $847; 2012, $788; 2013, $783 and 2014, $718.

Note I   Borrowings

All of the Company’s short-term borrowings were comprised of federal funds purchased and securities sold under agreements to repurchase with maturities primarily from overnight to seven days:

	2009			2008			2007
	(In thousands)
Maximum amount outstanding at any month end	$	158,815		$	157,496		$	220,940
Weighted average interest rate at end of year		0.26	%		0.38	%		3.12	%
Average amount outstanding	$	117,171		$	91,134		$	148,610
Weighted average interest rate		0.37	%		1.61	%		4.48	%

On July 31, 1998, the Company obtained an advance of $15,000,000 from the FHLB, with interest payable quarterly at a fixed rate of 6.10 percent. During 2007, the Company obtained additional advances of $25,000,000 each on September 25, 2007 and November 27, 2007, increasing total borrowings from the FHLB to $65,000,000 at December 31, 2007 and 2008, respectively. The original $15,000,000 advance matured on November 12, 2009, thereby reducing total borrowings to $50,000,000 at December 31, 2009. The two remaining advances mature on September 15, 2017 and November 27, 2017, respectively, and have fixed rates of 3.64 percent and 2.70 percent at December 31, 2009, respectively, payable quarterly; the FHLB has a perpetual three-month option to convert the interest rate on either advance to an adjustable rate and the Company has the option to prepay the advance should the FHLB convert the interest rate.

Seacoast National has unused secured lines of credit of $316,671,000 at December 31, 2009.

The Company issued $20,619,000 in junior subordinated debentures on March 31 and December 16, 2005, an aggregate of $41,238,000. These debentures were issued in conjunction with the formation of a Delaware and Connecticut trust subsidiary, SBCF Capital Trust I, and II (“Trusts I and II”) which each completed a private sale of $20.0 million of floating rate preferred securities. On June 29, 2007, the Company issued an additional $12,372,000 in junior subordinated debentures which was issued in conjunction with the formation of a Delaware trust subsidiary, SBCF Statutory Trust III (“Trust III”), which completed a private sale of $12.0 million of floating rate trust preferred securities. The rates on the trust preferred securities are the 3-month LIBOR rate plus 175 basis points, the 3-month LIBOR rate plus 133 basis points, and the 3-month LIBOR rate plus 135 basis points, respectively. The rates, which adjust every three months, are currently 2.00 percent, 1.58 percent, and 1.60 percent, respectively, per annum. The trust preferred securities have original maturities of thirty years, and may be redeemed without penalty on or after June 10, 2010, March 15, 2011, and September 15, 2012, respectively, upon approval of the Federal Reserve or upon occurrence of certain events affecting their tax or regulatory capital treatment. Distributions on the trust preferred securities are payable quarterly in March, June, September and December of each year. The Trusts also issued $619,000, $619,000 and $372,000, respectively, of common equity securities to the Company. The proceeds of the offering of trust preferred securities and common equity securities were used by Trusts I and II to purchase the $41.2 million junior subordinated deferrable interest notes issued by the Company, and by Trust III to purchase the $12.4 million junior subordinated deferrable interest notes issued by the Company, all of which have terms substantially similar to the trust preferred securities.

The Company has the right to defer payments of interest on the notes at any time or from time to time for a period of up to twenty consecutive quarterly interest payment periods. Under the terms of the notes, in the event that under certain circumstances there is an event of default under the notes or the Company has elected to defer interest on the notes, the Company may not, with certain exceptions, declare or pay any

67

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

dividends or distributions on its capital stock or purchase or acquire any of its capital stock. The Company executed its right to defer interest payments on the notes beginning May 19, 2009 and as a result no common or preferred stock dividends can be paid.

The Company has entered into agreements to guarantee the payments of distributions on the trust preferred securities and payments of redemption of the trust preferred securities. Under these agreements, the Company also agrees, on a subordinated basis, to pay expenses and liabilities of the Trusts other than those arising under the trust preferred securities. The obligations of the Company under the junior subordinated notes, the trust agreement establishing the Trusts, the guarantees and agreements as to expenses and liabilities, in aggregate, constitute a full and conditional guarantee by the Company of the Trusts’ obligations under the trust preferred securities.

Despite the fact that the accounts of the Trusts are not included in the Company’s consolidated financial statements, the $50.0 million in trust preferred securities issued by the Trusts are included in the Tier 1 capital of the Company and $2.0 million in Tier 2 capital, as allowed by Federal Reserve guidelines.

During 2009, Seacoast National utilized $76.0 million in letters of credit issued by the FHLB to satisfy a portion of its pledging requirement to transact business as a qualified public depository within the state of Florida. The letters of credit have a term of one year with an annual fee equivalent of five basis points, or $38,000, amortized over the one year term of the letters. No interest cost is associated with the letters of credit.

Note J   Employee Benefits and Stock Compensation

The Company’s profit sharing and retirement plan covers substantially all employees after one year of service includes a matching benefit feature for employees electing to defer the elective portion of their profit sharing compensation. In addition, amounts of compensation contributed by employees are matched on a percentage basis under the plan. The profit sharing and retirement contributions charged to operations were $417,000 in 2009, $1,362,000 in 2008, and $1,187,000 in 2007.

The Company’s stock option and stock appreciation rights plans were approved by the Company’s shareholders on April 25, 1991, April 25, 1996, April 20, 2000 and May 8, 2008. The number of shares of common stock that may be granted pursuant to the 1991 and 1996 plans shall not exceed 990,000 shares for each plan, pursuant to the 2000 plan shall not exceed 1,320,000 shares, and pursuant to the 2008 plan, shall not exceed 1,500,000 shares. The Company has granted options and stock appreciation rights (“SSARs”) on 826,000, 933,000, and 791,000 shares for the 1991, 1996 and 2000 plans, respectively, through December 31, 2009; no options or SSARs have been issued under the 2008 plan. Under the 2000 plan the Company issued 21,000 shares of restricted stock awards at $10.92 per share during 2008 and granted SSARs of $306,000 shares at a weighted average fair value of $4.21 per share and issued 58,000 shares of restricted stock awards at $22.14 per share during 2007. Under the plans, the option or SSARs exercise price equals the common stock’s market price on the date of the grant. All options issued prior to December 31, 2002 have a vesting period of four years and a contractual life of ten years. All options or SSARs issued after that have a vesting period of five years and a contractual life of ten years. To the extent the Company has treasury shares available, stock options exercised or stock grants awarded may be issued from treasury shares or, if treasury shares are insufficient, the Company can issue new shares. The Company has a single share repurchase program in place, approved on September 18, 2001, authorizing the repurchase of up to 825,000 shares; the maximum number of shares that may yet be purchased under this program is 156,000. Under TARP and Federal Reserve policy, the Company’s stock repurchases are limited.

The Company did not grant any stock options or SSARS in 2009 or 2008. Stock option fair value is measured on the date of grant using the Black-Scholes option pricing model with market assumptions. Option pricing models require the use of highly subjective assumptions, including expected price volatility, which

68

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

when changed can materially affect fair value estimates. Accordingly, the model does not necessarily provide a reliable single measure of the fair value of the Company’s stock options or SSARs. The more significant assumptions used in estimating the fair value of stock options and SSARs include risk-free interest rates of 4.50 percent in 2007; dividend yield of 2.72 percent in 2007; weighted average expected lives of the stock options of 5 years in 2007; and volatility of the Company’s common stock of 19 percent in 2007. Additionally, the estimated fair value of stock options and SSARs was reduced, as applicable, by an estimate of forfeiture experience of 10 percent in 2007.

The following table presents a summary of stock option and SSARs activity for the year ended December 31, 2009:

				Option or				Aggregate
	Number of			SSAR Price		Weighted Average		Intrinsic
	Shares			Per Share		Exercise Price		Value
Dec. 31, 2006		750,000		$	6.59 — 27.36	$	16.03	$	6,577,000
Granted		306,000			22.16 — 22.22		22.22
Exercised		(178,000	)		7.73 — 22.40		11.68
Cancelled		(34,000	)		17.08 — 26.72		23.53
Dec. 31, 2007		844,000			7.46 — 27.36		18.89	$	277,000
Granted		0			0		0
Exercised		(71,000	)		8.79		8.79
Expired		(86,000	)		8.79		8.79
Cancelled		(76,000	)		17.08 — 26.72		22.26
Dec. 31, 2008		611,000			7.46 — 27.36		21.06	$	0
Granted		0			0		0
Exercised		0			0		0
Cancelled		(53,000	)		8.22 — 26.72		19.60
Dec. 31, 2009		558,000			7.46 — 27.36		21.21	$	0

No stock options were exercised during 2009. No windfall tax benefits were realized from the exercise of stock options and no cash was utilized to settle equity instruments granted under stock option awards.

The following table summarizes information about stock options outstanding and exercisable at December 31, 2009:

Options / SSARs Outstanding		Options / SSARs Exercisable (Vested)
	Weighted Average		Weighted	Weighted Average
Number of	Remaining	Number of	Average	Remaining	Aggregate
Shares	Contractual Life	Shares	Exercise	Contractual Life	Intrinsic
Outstanding	in Years	Exercisable	Price	in Years	Value
558,000	5.81	334,000	19.75	4.8	$0

Since December 31, 2007 no new stock options or SSARs were issued, stock options and SSARs totaling 129,000 shares were cancelled.

69

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Adjusting for potential forfeiture experience, non-vested stock options and SSARs for 197,000 shares were outstanding at December 31, 2009 and are as follows:

	Weighted			Weighted
Number of	Average		Remaining	Average
Non-Vested	Remaining	Weighted	Unrecognized	Remaining
Stock Options	Contractual Life	Average	Compensation	Recognition
and SSARs	In Years	Fair Value	Cost	Period in Years
197,000	7.09	4.49	$694,000	2.09

The total intrinsic value of stock options exercised in 2008 and 2007 was $144,000 and $1.9 million, respectively.

Since December 31, 2008, no restricted stock awards were issued, 13,000 awards have vested and 63,000 awards were cancelled. Non-vested restricted stock awards for a total of 32,000 shares were outstanding at December 31, 2009, 76,000 less than at December 31, 2008, and are as follows:

Number of
Non-Vested	Remaining	Weighted Average
Restricted Stock	Unrecognized	Remaining Recognition
Award Shares	Compensation Cost	Period in Years
32,000	$384,312	2.43

In 2009, 2008 and 2007 the Company recognized $580,000 ($357,000 after tax), $1,095,000 ($673,000 after tax) and $735,000 ($452,000 after tax), respectively of non-cash compensation expense.

No cash was utilized to settle equity instruments granted under restricted stock awards. No compensation cost has been capitalized and no significant modifications have occurred with regard to the contractual terms for stock options, SSARs or restricted stock awards.

Note K   Lease Commitments

The Company is obligated under various noncancellable operating leases for equipment, buildings, and land. Minimum rent payments under operating leases are recognized on a straight-line basis over the term of the lease. At December 31, 2009, future minimum lease payments under leases with initial or remaining terms in excess of one year are as follows:

	(In thousands)
2010	$	3,578
2011		3,213
2012		2,732
2013		2,301
2014		2,230
Thereafter		17,961
	$	32,015

Rent expense charged to operations was $4,257,000 for 2009, $4,402,000 for 2008 and $4,092,000 for 2007. Certain leases contain provisions for renewal and change with the consumer price index.

Certain property is leased from related parties of the Company. Lease payments to these individuals were $312,000 in 2009, $326,000 in 2008 and $308,000 in 2007.

70

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note L   Income Taxes

The provision (benefit) for income taxes is as follows:

	Year Ended December 31
	2009			2008			2007
	(In thousands)
Current
Federal	$	812		$	(22,217	)	$	9,036
State		(4	)		(76	)		(4	)
Deferred
Federal		(10,488	)		(246	)		(3,465	)
State		(2,145	)		439			(1,169	)
	$	(11,825	)	$	(22,100	)	$	4,398

The difference between the total expected tax expense (benefit) (computed by applying the U.S. Federal tax rate of 35% to pretax income in 2009, 2008 and 2007) and the reported income tax expense (benefit) relating to income (loss) before income taxes is as follows:

	Year Ended December 31
	2009			2008			2007
	(In thousands)
Tax rate applied to income (loss) before income taxes	$	(55,479	)	$	(23,694	)	$	4,957
Increase (decrease) resulting from the effects of:
Goodwill impairment		17,435			—			—
Tax exempt interest on obligations of states and political subdivisions		(168	)		(186	)		(197	)
State income taxes		1,868			1,726			410
Stock compensation		179			162			148
Other		1,108			(471	)		253
Federal tax provision (benefit) before valuation allowance		(35,057	)		(22,463	)		5,571
State tax provision (benefit) before valuation allowance		(6,419	)		(5,213	)		(1,173	)
Total income tax (benefit) expense		(41,476	)		(27,676	)		4,398
Change in valuation allowance		29,651			5,576			—
Income tax (benefit) expense	$	(11,825	)	$	(22,100	)	$	4,398

71

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The net deferred tax assets (liabilities) are comprised of the following:

	December 31
	2009			2008
	(In thousands)
Allowance for loan losses	$	18,329		$	11,911
Accrued interest and fee income		—			104
Other real estate owned		557			24
Capital losses		386			386
Accrued stock compensation		311			299
Federal tax loss carryforward		31,416			—
State tax loss carryforward		7,038			3,765
Deferred compensation		1,201			1,153
Other		194			—
Gross deferred tax assets		59,432			17,642
Less: Valuation allowance		(35,227	)		(5,576	)
Deferred tax assets net of valuation allowance		24,205			12,066
Depreciation		(2,386	)		(2,453	)
Deposit base intangible		(1,557	)		(2,052	)
Net unrealized securities gains		(1,262	)		(1,286	)
Accrued interest and fee income		(159	)		—
Other		—			(91	)
Gross deferred tax liabilities		(5,364	)		(5,882	)
Net deferred tax assets	$	18,841		$	6,184

Although realization is not assured, the Company believes that the realization of the recognized net deferred tax asset of $18.8 million is more likely than not based on expectations as to future taxable income and available tax planning strategies, as defined in ASC 740, that could be implemented if necessary to prevent a carryforward from expiring. The Company’s net deferred tax asset (DTA) of $18.8 million consists of approximately $41.0 million of net U.S. federal DTAs, $13.0 million of net state DTAs, a $25.4 million federal DTA valuation allowance, and a $9.8 million state DTA valuation allowance.

As a result of the losses incurred in 2008, the Company reached a three-year cumulative pretax loss position at December 31, 2008. Losses in 2009 added to this cumulative loss position that is considered significant negative evidence in assessing the realizability of a DTA. The positive evidence that can be used to offset this negative evidence can include forecasts of sufficient taxable income in the carryforward period, exclusive of tax planning strategies and sufficient tax planning strategies that could produce income sufficient to fully realize the DTAs. In general, the Company would need to generate approximately $117 million of taxable income during the respective carryforward periods to fully realize its federal DTAs, and $236 million to realize state DTAs. The Company believes only a portion of the federal and state DTAs can be realized from tax planning strategies and therefore a valuation allowance of $25.4 million and $9.8 million was recorded, respectively, for federal and state DTAs. The use of the Company’s forecast of future taxable income was not considered sufficient positive evidence at this time given the uncertain economic conditions. The amount of the DTA considered realizable, however, could be reduced if estimates of future taxable income from tax planning strategies during the carryforward period are lower than forecasted due to further deterioration in market conditions.

72

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The federal and state net operating loss carryforwards expire in annual installments beginning in 2019 and run through 2029.

The Company recognizes interest and penalties related, as appropriate, as part of the provisioning for income taxes. Interest of $4,000, $7,000 and $13,000 was accrued during 2009, 2008 and 2007, respectively, and is outstanding at December 31, 2009. The Internal Revenue Service (IRS) examined the federal income tax return for the year 2003. The IRS did not propose any material adjustments related to this examination. The following are the major tax jurisdictions in which the Company operates and the earliest tax year subject to examination:

Jurisdiction	Tax Year
United States of America		2006
Florida		2006

The Company filed for a federal tax refund for taxes paid in 2006 and 2007. As a result, the IRS has notified the Company that they will examine the 2008 tax return, as well as, 2006 and 2007 for carryback purposes.

The Company has unrecognized income tax benefits of $99,000 related to uncertain income tax positions related to year end 2006. The positions will be monitored prospectively and the benefit recorded should unambiguous interpretation of law and regulation, a review by the taxing authority, or relevant circumstances, including expiration of the statute of limitation, deem recognition of the benefit. The Company expects no changes in the gross balance of unrecognized tax benefits within the next 12 months.

Income taxes (benefit) related to securities transactions were $2,083,000, $137,000 and $(1,795,000) in 2009, 2008 and 2007, respectively. Of the amount recorded for 2007, a tax benefit of $(1,822,000) was recorded for losses related to the securities portfolio restructuring during the first quarter. The Company sold approximately $225 million in low yielding securities and recorded other-than-temporary impairment of $5.1 million during the first quarter of 2007.

73

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note M   Noninterest Income and Expenses

Details of noninterest income and expense follow:

	Year Ended December 31
	2009		2008		2007
	(In thousands)
Noninterest income
Service charges on deposit accounts	$	6,491	$	7,389	$	7,714
Trust fees		2,098		2,344		2,575
Mortgage banking fees		1,746		1,118		1,409
Brokerage commissions and fees		1,416		2,097		2,935
Marine finance fees		1,153		2,304		2,865
Debit card income		2,613		2,453		2,306
Other deposit based EFT fees		331		359		451
Merchant income		1,764		2,399		2,841
Other		1,403		1,778		1,868
		19,015		22,241		24,964
Securities gains (losses), net		5,399		355		(5,048	)
TOTAL	$	24,414	$	22,596	$	19,916
Noninterest expense
Salaries and wages	$	26,693	$	30,159	$	31,575
Employee benefits		6,109		7,173		7,337
Outsourced data processing costs		7,143		7,612		7,581
Telephone / data lines		1,835		1,896		1,905
Occupancy		8,260		8,292		7,677
Furniture and equipment		2,649		2,841		2,863
Marketing		2,067		2,614		3,075
Legal and professional fees		6,984		5,662		4,070
FDIC assessments		4,952		2,028		225
Amortization of intangibles		1,259		1,259		1,259
Net loss on other real estate owned and other asset dispositions		6,327		1,424		288
Other		7,656		7,930		9,622
TOTAL	$	81,934	$	78,890	$	77,477

Note N    Shareholders’ Equity

The Company has reserved 730,000 common shares for issuance in connection with an employee stock purchase plan and 742,500 common shares for issuance in connection with an employee profit sharing plan. At December 31, 2009 an aggregate of 373,442 shares and 172,949 shares, respectively, have been issued as a result of employee participation in these plans.

In December 2008, in connection with the Troubled Asset Relief Program (TARP) Capital Purchase Program, established as part of the Emergency Economic Stabilization Act of 2008, the Company issued to the U.S. Treasury Department (U.S. Treasury) 2,000 shares of Fixed Rate Cumulative Perpetual Preferred

74

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Stock, Series A (“Series A Preferred Stock”) with a par value of $0.10 per share and a 10-year warrant to purchase approximately 589,623 shares of common stock at an exercise price of $6.36 per share. The proceeds received were allocated to the preferred stock and additional paid-in-capital based on their relative fair values. The Series A Preferred Stock initially pays quarterly dividends at a five percent annual rate that increases to nine percent after five years on a liquidation preference of $25,000 per share. Upon the request of the U.S. Treasury, at any time, the Company has agreed to enter into a deposit arrangement pursuant to which the Series A Preferred Stock may be deposited and depository shares may be issued. The Corporation has registered the Series A Preferred Stock, the warrant, the shares of common stock underlying the warrant and the depository shares, if any, for resale under the Securities Act of 1933.

The fair value of the warrants were calculated using the following assumptions:

Risk free interest rate		2.17	%
Expected life of options		10 years
Expected dividend yield		0.63	%
Expected volatility		28	%
Weighted average fair value	$	5.30

Beginning in the third quarter of 2008, we reduced our dividend per share of our common stock to $0.01 and, as of May 19, 2009, we suspended the payment of dividends, as described below. On May 19, 2009, our board of directors decided to suspend regular quarterly cash dividends on our outstanding common stock and Series A Preferred Stock pursuant to a request from the Federal Reserve as a result of recently adopted Federal Reserve policies related to dividends and other distributions. Dividends will be suspended until such time as dividends are allowed by the Federal Reserve.

As of December 31, 2009, the accumulated deferred interest payments on Series A Preferred Stock was 2,188,000.

During August 2009, the Company successfully enhanced capital by selling 39,675,000 shares of Company common stock for $2.25 per share or $89.3 million, with approximately $75.8 million supplementing capital during the third quarter of 2009 and an additional $13.5 million from this sale settling during the fourth quarter of 2009. Approximately $82.6 million (net of expenses for the capital issuance) was added to shareholders’s equity.

Holders of common stock are entitled to one vote per share on all matters presented to shareholders as provided in the Company’s Articles of Incorporation. The Company implemented a dividend reinvestment plan during 2007, issuing approximately 10,000 shares from treasury stock during each of the years 2009 and 2008.

A company that participates in the TARP must adopt certain standards for executive compensation, including (a) prohibiting “golden parachute” payments as defined in the Emergency Economic Stabilization Act of 2008 (EESA) to senior executive officers; (b) requiring recovery of any compensation paid to senior executive officers based on criteria that is later proven to be materially inaccurate; (c) prohibiting incentive compensation that encourages unnecessary and excessive risks that threaten the value of the financial institution, and (d) accepting restrictions on the payment of dividends and the repurchase of common stock. As of December 31, 2009, Seacoast believes it is in compliance with all TARP standards and restrictions.

75

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Required Regulatory Capital

											Minimum To Be Well
						Minimum for Capital					Capitalized Under Prompt
						Adequacy Purpose					Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
SEACOAST BANKING CORP (CONSOLIDATED)
At December 31, 2009:
Total Capital (to risk-weighted assets)	$	214,075		15.16	%	$	112,896		³8.00	%		N/A		N/A
Tier 1 Capital (to risk-weighted assets)		194,044		13.75			56,448		³4.00	%		N/A		N/A
Tier 1 Capital (to adjusted average assets)		194,044		8.88			87,355		³4.00	%		N/A		N/A
At December 31, 2008:
Total Capital (to risk-weighted assets)	$	231,389		14.00	%	$	132,134		³8.00	%		N/A		N/A
Tier 1 Capital (to risk-weighted assets)		210,634		12.75			66,067		³4.00	%		N/A		N/A
Tier 1 Capital (to adjusted average assets)		210,634		9.58			87,803		³4.00	%		N/A		N/A
SEACOAST NATIONAL BANK (A WHOLLY OWNED BANK SUBSIDIARY)
At December 31, 2009:
Total Capital (to risk-weighted assets)	$	201,837		14.31	%	$	112,755		³8.00	%	$	140,944		³10.00	%
Tier 1 Capital (to risk-weighted assets)		183,878		13.04			56,377		³4.00	%		84,566		³6.00	%
Tier 1 Capital (to adjusted average assets)		183,878		8.43			87,283		³4.00	%		109,104		³5.00	%
At December 31, 2008:
Total Capital (to risk-weighted assets)	$	192,023		11.64	%	$	131,982		³8.00	%	$	164,977		³10.00	%
Tier 1 Capital (to risk-weighted assets)		171,292		10.38			65,991		³4.00	%		98,986		³6.00	%
Tier 1 Capital (to adjusted average assets)		171,292		7.80			87,909		³4.00	%		109,886		³5.00	%

N/A — Not Applicable

The Company is 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 consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital to average assets (as defined). Management believes, as of December 31, 2009, that the Company meets all capital adequacy requirements to which it is subject.

76

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company is well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Company must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth above. At December 31, 2009, the Company’s deposit-taking bank subsidiary met the capital and leverage ratio requirements for well capitalized banks.

The OCC and Seacoast National agreed by letter agreement that Seacoast National shall maintain specific minimum capital ratios by March 31, 2009 and subsequent periods, including a total risk-based capital ratio of 12.00 percent and a Tier 1 leverage ratio of 7.50 percent. Recently, the minimum Tier 1 capital ratio was revised by the OCC and Seacoast National to 8.50 percent for periods after January 31, 2010. The minimum total risk-based capital ratio was left unchanged. The agreement with the OCC as to minimum capital ratios does not change the Bank’s status as “well-capitalized” for bank regulatory purposes.

Note O

Seacoast Banking Corporation of Florida
(Parent Company Only) Financial Information

Balance Sheets

	December 31
	2009		2008
	(In thousands)
ASSETS
Cash	$	7,834	$	38,010
Securities purchased under agreement to resell with subsidiary bank, maturing within 30 days		5,230		1,168
Investment in subsidiaries		193,329		230,268
Other assets		135		277
		206,528	$	269,723
LIABILITIES AND SHAREHOLDERS’ EQUITY
Subordinated debt	$	53,610	$	53,610
Other liabilities		983		112
Shareholders’ equity		151,935		216,001
		206,528	$	269,723

77

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Statements of Operations

	Year Ended December 31
	2009			2008			2007
	(In thousands)
Income
Dividends from subsidiary Bank	$	—		$	6,813		$	14,223
Interest/other		12			108			390
		12			6,921			14,613
Interest expense		1,365			2,614			3,716
Other expenses		521			697			545
Income (loss) before income tax benefit and equity in undistributed income (loss) of subsidiaries		(1,874	)		3,610			10,352
Income tax benefit		656			1,121			1,355
Income (loss) before equity in undistributed income (loss) from subsidiaries		(1,218	)		4,731			11,707
Equity in undistributed loss of subsidiaries		(145,468	)		(50,328	)		(1,942	)
Net (loss) income	$	(146,686	)	$	(45,597	)	$	9,765

78

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Statement of Cash Flows

	Year Ended December 31
	2009			2008			2007
	(In thousands)
Cash flows from operating activities
Interest received	$	12		$	108		$	390
Interest paid		(440	)		(2,650	)		(3,695	)
Dividends received		—			6,813			14,223
Income taxes received		687			1,150			1,233
Other		(551	)		(629	)		255
Net cash provided by (used in) operating activities		(292	)		4,792			12,406
Cash flows from investing activities
Decrease (increase) in securities purchased under agreement to resell, maturing within 30 days, net		(4,062	)		700			2,634
Investments in subsidiaries		(108,000	)		(12,000	)		(3,402	)
Net cash used in investment activities		(112,062	)		(11,300	)		(768	)
Cash flows from financing activities
Proceeds from (repayment of) borrowing		—			—			(12,000	)
Issuance of subordinated debt		—			—			12,000
Issuance of U.S. Treasury preferred stock and warrants		—			50,000			—
Issuance of common stock, net of related expense		82,553			—			—
Stock based employment plans		174			908			450
Dividend reinvestment plan		31			89			92
Dividends paid		(580	)		(6,489	)		(12,180	)
Net cash provided by (used in) financing activities		82,178			44,508			(11,638	)
Net change in cash		(30,176	)		38,000			—
Cash at beginning of year		38,010			10			10
Cash at end of year	$	7,834		$	38,010		$	10
RECONCILIATION OF INCOME (LOSS) TO CASH PROVIDED BY OPERATING ACTIVITIES
Net (loss) income		(146,686	)	$	(45,597	)	$	9,765
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Equity in undistributed (income) loss of subsidiaries		145,468			50,328			1,942
Other, net		926			61			699
Net cash provided by (used in) operating activities	$	(292	)	$	4,792		$	12,406

Note P   Contingent Liabilities and Commitments with Off-Balance Sheet Risk

The Company and its subsidiaries, because of the nature of their business, are at all times subject to numerous legal actions, threatened or filed. Management presently believes that none of the legal proceedings to which it is a party are likely to have a materially adverse effect on the Company’s consolidated financial

79

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

condition, or operating results or cash flows, although no assurance can be given with respect to the ultimate outcome of any such claim or litigation.

The Company’s subsidiary bank is party to financial instruments with off balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit.

The subsidiary bank’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contract or notional amount of those instruments. The subsidiary bank uses the same credit policies in making commitments and standby letters of credit as they do for on balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer as 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. The subsidiary bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the bank upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, equipment, and commercial and residential real estate. Of the $97,262,000 in commitments to extend credit outstanding at December 31, 2009, $73,729,000 is secured by 1-4 family residential properties for individuals with approximately $14,562,000 at fixed interest rates ranging from 4.25% to 6.50%.

Standby letters of credit are conditional commitments issued by the subsidiary bank to guarantee the performance of a customer to a third party. These instruments have fixed termination dates and most end without being drawn; therefore, they do not represent a significant liquidity risk. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The subsidiary bank holds collateral supporting these commitments for which collateral is deemed necessary. The extent of collateral held for secured standby letters of credit at December 31, 2009 and 2008 amounted to $11,745,000 and $24,792,000 respectively.

	December 31
	2009
	(In thousands)
Contract or Notional Amount
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	$	97,262
Standby letters of credit and financial guarantees written:
Secured		3,370
Unsecured		432

80

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note Q   Supplemental Disclosures for Consolidated Statements of Cash Flows

Reconciliation of Net Income to Net Cash Provided by Operating Activities for the three years ended:

	Year Ended December 31
	2009			2008			2007
	(In thousands)
Net Income (Loss)	$	(146,686	)	$	(45,597	)	$	9,765
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Impairment of goodwill		49,813			—			—
Depreciation		3,483			3,462			3,195
Amortization of premiums and discounts on securities		(1,353	)		(512	)		(1,249	)
Other amortization and accretion		1,175			589			136
Trading securities activity		—			14,000			(9,270	)
Change in loans held for sale, net		(6,933	)		1,495			2,228
Provision for loan losses, net		124,767			88,634			12,745
Deferred tax benefit		(13,087	)		(6,773	)		(4,634	)
Loss (gain) on sale of securities		(5,399	)		(355	)		5,048
Gain on sale of loans		(73	)		(38	)		(28	)
Loss on sale or write down of foreclosed assets		3,486			677			50
Loss (gain) on disposition of equipment		841			(37	)		(119	)
Stock based employee benefit expense		580			1,095			735
Change in interest receivable		1,370			1,688			458
Change in interest payable		109			(313	)		273
Change in prepaid expenses		(13,315	)		140			(105	)
Change in accrued taxes		4,858			(17,204	)		(1,596	)
Change in other assets		548			232			(872	)
Change in other liabilities		(1,202	)		490			(12	)
Net cash provided by operating activities	$	2,982		$	41,673		$	16,748
Supplemental disclosure of non cash investing activities
Fair value adjustment to securities	$	(70	)	$	3,037		$	859
Transfers from loans to other real estate owned		29,256			8,092			817
Transfers from securities available for sale to trading securities		—			—			3,974
Transfers from loans to loans available for sale		9,314			—			—

Note R   Fair Value

Fair Value Instruments Measured at Fair Value

In certain circumstances, fair value enables the Company to more accurately align its financial performance with the market value of actively traded or hedged assets and liabilities. Fair values enable a company to mitigate the non-economic earnings volatility caused from financial assets and financial liabilities being carried at different bases of accounting, as well as to more accurately portray the active and dynamic management of a company’s balance sheet. ASC 820 provides additional guidance for estimating fair value when the volume and level of activity for an asset or liability has significantly decreased. In addition, it

81

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

includes guidance on identifying circumstances that indicate a transaction is not orderly. Under ASC 820, fair value measurements for items measured at fair value at December 31, 2009, 2008 and 2007 included:

	Fair Value		Quoted Prices in		Significant Other		Significant Other
	Measurements		Active Markets for		Observable		Unobservable
	December 31, 2009		Identical Assets*		Inputs**		Inputs***
	(Dollars in thousands)
Available for sale securities	$	393,648	$	—	$	393,648	$	—
Loans available for sale		18,412		9,314		9,098		—
Loans(2)		39,103		—		4,466		34,637
Derivative product assets		24		—		24		—
OREO(1)		25,385		—		2,838		22,547
Long lived assets held for sale(1)		1,682		—		1,682		—

	Fair Value		Quoted Prices in		Significant Other		Significant Other
	Measurements		Active Markets for		Observable		Unobservable
	December 31, 2008		Identical Assets*		Inputs**		Inputs***
	(Dollars in thousands)
Available for sale securities	$	318,030	$	—	$	318,030	$	—
Loans available for sale		2,165		—		2,165		—
Loans(2)		66,586		—		11,838	$	54,748
Derivative product assets		336		—		336		—
OREO(1)		5,035		—		5,035		—

*	Level 1 inputs
**	Level 2 inputs
***	Level 3 inputs
(1)	Fair value is measured on a nonrecurring basis in accordance with the provisions of ASC 360.
(2)	See Note F. Nonrecurring fair value adjustments to loans identified as impaired reflect full or partial write-downs that are based on the loans observable market price or current appraised value of the collateral in accordance with ASC 310.

When appraisals are used to determine fair value and the appraisals are based on a market approach, the related loan’s fair value is classified as Level 2 input. The fair value of loans based on appraisals which require significant adjustments to market-based valuation inputs or apply an income approach based on unobservable cash flows, is classified as Level 3 inputs.

For derivative product assets and loans held for sale, the realized and unrealized gains and losses are included in earnings in noninterest income or net interest income, as appropriate, and were not material for the twelve months ended December 31, 2009, 2008 and 2007.

82

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The carrying value amounts and fair values of the Company’s financial instruments at December 31 were as follows:

	At December 31
	2009				2008
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
	(In thousands)
Financial Assets
Cash and cash equivalents	$	215,100	$	215,100	$	151,192	$	151,192
Securities		410,735		410,858		345,901		344,139
Loans, net		1,352,311		1,354,545		1,647,340		1,663,408
Loans held for sale		18,412		18,412		2,165		2,165
Derivative product assets		24		24		336		336
Financial Liabilities
Deposits		1,779,434		1,789,114		1,810,441		1,819,115
Borrowings		155,673		158,563		222,798		227,585
Subordinated debt		53,610		17,200		53,610		53,610

The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value at December 31:

Cash and cash equivalents:  The carrying amount was used as a reasonable estimate of fair value.

Securities:  The fair value of U.S. Treasury and U.S. Government agency, mutual fund and mortgage backed securities are based on market quotations when available or by using a discounted cash flow approach. The fair value of many state and municipal securities are not readily available through market sources, so fair value estimates are based on quoted market price or prices of similar instruments.

Loans:  Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial, mortgage, etc. Each loan category is further segmented into fixed and adjustable rate interest terms and by performing and nonperforming categories. The fair value of loans, except residential mortgages, is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risks inherent in the loan. For residential mortgage loans, fair value is estimated by discounting contractual cash flows adjusting for prepayment assumptions using discount rates based on secondary market sources. The estimated fair value is not an exit price fair value under ASC 820 when this valuation technique is used.

Loans held for sale:  Fair values are based upon estimated values to be received from independent third party purchasers.

Deposit Liabilities:  The fair value of demand deposits, savings accounts and money market deposits is the amount payable at the reporting date. The fair value of fixed maturity certificates of deposit is estimated using the rates currently offered for funding of similar remaining maturities.

Borrowings:  The fair value of floating rate borrowings is the amount payable on demand at the reporting date. The fair value of fixed rate borrowings is estimated using the rates currently offered for borrowings of similar remaining maturities.

Subordinated debt:  The fair value of the floating rate subordinated debt is estimated using discounted cash flow analysis and the Company’s current incremental borrowing rate for similar instruments.

Derivative product assets and liabilities:  Quoted market prices or valuation models that incorporate current market data inputs are used to estimate the fair value of derivative product assets and liabilities.

83

SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note S   Earnings Per Share

Basic earnings per common share were computed by dividing net income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share were determined by including assumptions of stock option and warrant conversions.

In 2009, 2008,and 2007 options and warrants to purchase 1,147,000, 1,790,000, and 669,000 shares , respectively, were antidilutive and accordingly were excluded in determining diluted earnings per share.

	Year Ended December 31
	Net (Loss)					Per Share
	Income			Shares		Amount
	(Dollars in thousands, except per share data)
2009
Basic and Diluted Earnings Per Share
Loss available to common shareholders	$	(150,434	)		31,733,260	$	(4.74	)
2008
Basic and Diluted Earnings Per Share
Loss available to common shareholders	$	(45,712	)		18,997,757	$	(2.41	)
2007
Basic Earnings Per Share
Income available to common shareholders	$	9,765			18,936,541	$	0.52
Employee restricted stock, stock options and stock appreciation rights (SARs)(see Note J)		—			221,056		—
Diluted Earnings Per Share
Income available to common shareholders plus assumed conversions	$	9,765			19,157,597	$	0.51

Note T   Accumulated Other Comprehensive Income, Net

Comprehensive income is defined as the change in equity from all transactions other than those with stockholders, and it includes net income and other comprehensive income. Accumulated other comprehensive income, net, for each of the years in the three-year period ended December 31, 2009, is presented below.

				Income Tax
	Pre-tax			(Expense)			After-tax
	Amount			Benefit			Amount
	(In thousands)
ACCUMULATED OTHER COMPREHENSIVE INCOME, NET
Accumulated other comprehensive income, net, December 31, 2007		522			(188	)		334
Net unrealized gain on securities		3,037			(1,174	)		1,863
Reclassification adjustment for realized gains and losses on securities		(214	)		76			(138	)
Accumulated other comprehensive income, net, December 31, 2008		3,345			(1,286	)		2,059
Net unrealized gain on securities		2,287			(888	)		1,399
Reclassification adjustment for realized gains and losses on securities		(2,362	)		912			(1,450	)
Accumulated other comprehensive income, net, December 31, 2009	$	3,270		$	(1,262	)	$	2,008

84

EX-21

EXHIBIT 21

LIST OF SUBSIDIARIES

The Company had the following subsidiaries as of the date of this report:

NAME		INCORPORATED
1.	Seacoast National Bank	United States
2.	FNB Brokerage Services, Inc.	Florida
3.	FNB Insurance Services, Inc (inactive)	Florida
4.	South Branch Building, Inc	Florida
5.	TCoast Holdings, LLC	Florida
6.	BR West, LLC	Florida
7.	SBCF Capital Trust I	Delaware
8.	SBCF Statutory Trust II	Connecticut
9.	SBCF Statutory Trust III	Delaware
10	SBCF Capital Trust IV	Delaware
11	SBCF Capital Trust V	Delaware

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

The Board of Directors
Seacoast Banking Corporation of Florida:

We consent to the incorporation by reference in the registration statements (Nos. 33-22846, 33-25627, 33-61925, 33-161014, 333-91859, 333-49972, 333-151176, 333-152931, and 333-156803) on Form S-8 or Form S-3 of Seacoast Banking Corporation of Florida and subsidiaries (the Company) of our reports dated March 23, 2010, with respect to the consolidated balance sheets of the Company as of December 31, 2009 and 2008, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2009, and the effectiveness of internal control over financial reporting as of December 31, 2009, which reports appear in the December 31, 2009 annual report on Form 10-K of the Company.

Miami, Florida
March 23, 2010
Certified Public Accountants

EX-31.1

EXHIBIT 31.1

Certification Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

I, Dennis S. Hudson, III, certify that:

1.	I have reviewed this annual report on Form 10-K of Seacoast Banking Corporation of Florida;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 23, 2010

/s/ Dennis S. Hudson, III  

Dennis S. Hudson, III 

Chairman & Chief Executive Officer 

EX-31.2

EXHIBIT 31.2

Certification Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

I, William R. Hahl, certify that:

1.	I have reviewed this annual report on Form 10-K of Seacoast Banking Corporation of Florida;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 23, 2010

/s/ William R. Hahl  

William R. Hahl 

Chief Financial Officer 

EX-32.1

EXHIBIT 32.1

STATEMENT OF CHIEF EXECUTIVE OFFICER OF
SEACOAST BANKING CORPORATION OF FLORIDA
PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report on Form 10-K of Seacoast Banking Corporation of Florida (“Company”) for the period ended December 31, 2009 (“Report”), I, Dennis S. Hudson, III , President and Chief Executive Officer of the Company, do hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of The Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Dennis S. Hudson,  

Dennis S. Hudson, III 

Chairman and Chief Executive Officer 

Date: March 23, 2010

     A signed original of this written statement required by § 906 of The Sarbanes-Oxley Act of 2002, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by § 906 of The Sarbanes-Oxley Act of 2002, has been provided to Seacoast Banking Corporation of Florida and will be retained by Seacoast Banking Corporation of Florida and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

STATEMENT OF CHIEF FINANCIAL OFFICER OF
SEACOAST BANKING CORPORATION OF FLORIDA
PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report on Form 10-K of Seacoast Banking Corporation of Florida (“Company”) for the period ended December 31, 2009 (“Report”), I, William R. Hahl, Executive Vice President and Chief Financial Officer of the Company, do hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of The Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ William R. Hahl  

William R. Hahl 

Executive Vice President and
Chief Financial Officer 

Date: March 23, 2010

     A signed original of this written statement required by § 906 of The Sarbanes-Oxley Act of 2002, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by § 906 of The Sarbanes-Oxley Act of 2002, has been provided to Seacoast Banking Corporation of Florida and will be retained by Seacoast Banking Corporation of Florida and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99.1

EXHIBIT 99.1

CERTIFICATION
PURSUANT TO 31 C.F.R. § 30.15

     I, Dennis S. Hudson, III, certify, based on my knowledge, that:

     (i) The compensation committee of Seacoast Banking Corporation of Florida has discussed, reviewed, and evaluated with senior risk officers at least every six months during the period beginning on the later of September 14, 2009, or ninety days after the closing date of the agreement between the TARP recipient and Treasury and ending with the last day of the TARP recipient’s fiscal year containing that date (the applicable period), the senior executive officer (SEO) compensation plans and the employee compensation plans and the risks these plans pose to Seacoast Banking Corporation of Florida;

     (ii) The compensation committee of Seacoast Banking Corporation of Florida has identified and limited during the applicable period any features of the SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of Seacoast Banking Corporation of Florida and during that same applicable period has identified any features in the employee compensation plans that pose risks to Seacoast Banking Corporation of Florida and has limited those features to ensure that Seacoast Banking Corporation of Florida is not unnecessarily exposed to risks;

     (iii) The compensation committee has reviewed, at least every six months during the applicable period, the terms of each employee compensation plan and identified any features of the plan that could encourage the manipulation of reported earnings of Seacoast Banking Corporation of Florida to enhance the compensation of an employee, and has limited any such features;

     (iv) The compensation committee of Seacoast Banking Corporation of Florida will certify to the reviews of the SEO compensation plans and employee compensation plans required under (i) and (iii) above;

     (v) The compensation committee of Seacoast Banking Corporation of Florida will provide a narrative description of how it limited during any part of the most recently completed fiscal year that included a TARP period the features in

(a)	SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of Seacoast Banking Corporation of Florida;
(b)	Employee compensation plans that unnecessarily expose Seacoast Banking Corporation of Florida to risks; and
(c)	Employee compensation plans that could encourage the manipulation of reported earnings of Seacoast Banking Corporation of Florida to enhance the compensation of an employee;

     (vi) Seacoast Banking Corporation of Florida has required that bonus payments, as defined in the regulations and guidance established under section 111 of EESA (bonus payments), of SEOs and twenty next most highly compensated employees be subject to a recovery or “clawback” provision during any part of the most recently completed fiscal year that was a TARP period if the bonus payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria;

     (vii) Seacoast Banking Corporation of Florida has prohibited any golden parachute payment, as defined in the regulations and guidance established under section 111 of EESA, to a SEO or any of the next five most highly compensated employees during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date;

     (viii) Seacoast Banking Corporation of Florida has limited bonus payments to its applicable employees in accordance with Section 111 of EESA and the regulations and guidance established thereunder during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date;

     (ix) The board of directors of Seacoast Banking Corporation of Florida has established an excessive or luxury expenditures policy, as defined in the regulations and guidance established under section 111 of EESA, by the later of September 14, 2009, or ninety days after the closing date of the agreement between the TARP recipient and Treasury; this policy has been provided to Treasury and its primary regulatory agency; Seacoast Banking Corporation of Florida and its employees have complied with this policy during the applicable period; and any expenses that, pursuant to this policy, required approval of the board of directors, a committee of the board of directors, an SEO, or an executive officer with a similar level of responsibility, were properly approved;

     (x) Seacoast Banking Corporation of Florida will permit a non-binding shareholder resolution in compliance with any applicable federal securities rules and regulations on the disclosures provided under the federal securities laws related to SEO compensation paid or accrued during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date;

     (xi) Seacoast Banking Corporation of Florida will disclose the amount, nature, and justification for the offering during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date of any perquisites, as defined in the regulations and guidance established under section 111 of EESA, whose total value exceeds $25,000 for any employee who is subject to the bonus payment limitations identified in paragraph (viii);

     (xii) Seacoast Banking Corporation of Florida will disclose whether Seacoast Banking Corporation of Florida, the board of directors of Seacoast Banking Corporation of Florida, or the compensation committee of Seacoast Banking Corporation of Florida has engaged during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date, a compensation consultant; and the services the compensation consultant or any affiliate of the compensation consultant provided during this period;

     (xiii) Seacoast Banking Corporation of Florida has prohibited the payment of any gross-ups, as defined in the regulations and guidance established under section 111 of EESA, to the SEOs and the next twenty most highly compensated employees during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date;

     (xiv) Seacoast Banking Corporation of Florida has substantially complied with all other requirements related to employee compensation that are provided in the agreement between Seacoast Banking Corporation of Florida and Treasury, including any amendments;

     (xv) Seacoast Banking Corporation of Florida has submitted to Treasury a complete and accurate list of the SEOs and the twenty next most highly compensated employees for the current fiscal year and the most recently completed fiscal year, with the non-SEOs ranked in descending order of level of annual compensation, and with the name, title, and employer of each SEO and the most highly compensated employee identified; and

     (xvi) I understand that a knowing and willful false or fraudulent statement made in connection with this certification may be punished by fine, imprisonment, or both.

Date: March 23, 2010	/s/ Dennis S. Hudson, III
	Dennis S. Hudson, III
	Chairman and Chief Executive Officer (Principal Executive Officer)

-2-

EX-99.2

EXHIBIT 99.2

CERTIFICATION
PURSUANT TO 31 C.F.R. § 30.15

     I, William R. Hahl, certify, based on my knowledge, that:

     (i) The compensation committee of Seacoast Banking Corporation of Florida has discussed, reviewed, and evaluated with senior risk officers at least every six months during the period beginning on the later of September 14, 2009, or ninety days after the closing date of the agreement between the TARP recipient and Treasury and ending with the last day of the TARP recipient’s fiscal year containing that date (the applicable period), the senior executive officer (SEO) compensation plans and the employee compensation plans and the risks these plans pose to Seacoast Banking Corporation of Florida;

     (ii) The compensation committee of Seacoast Banking Corporation of Florida has identified and limited during the applicable period any features of the SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of Seacoast Banking Corporation of Florida, and during that same applicable period has identified any features in the employee compensation plans that pose risks to Seacoast Banking Corporation of Florida and has limited those features to ensure that Seacoast Banking Corporation of Florida is not unnecessarily exposed to risks;

     (iii) The compensation committee has reviewed, at least every six months during the applicable period, the terms of each employee compensation plan and identified any features of the plan that could encourage the manipulation of reported earnings of Seacoast Banking Corporation of Florida to enhance the compensation of an employee, and has limited any such features;

     (iv) The compensation committee of Seacoast Banking Corporation of Florida will certify to the reviews of the SEO compensation plans and employee compensation plans required under (i) and (iii) above;

     (v) The compensation committee of Seacoast Banking Corporation of Florida will provide a narrative description of how it limited during any part of the most recently completed fiscal year that included a TARP period the features in

(a)	SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of Seacoast Banking Corporation of Florida;
(b)	Employee compensation plans that unnecessarily expose Seacoast Banking Corporation of Florida to risks; and
(c)	Employee compensation plans that could encourage the manipulation of reported earnings of Seacoast Banking Corporation of Florida to enhance the compensation of an employee;

     (vi) Seacoast Banking Corporation of Florida has required that bonus payments, as defined in the regulations and guidance established under section 111 of EESA (bonus payments), of SEOs and twenty next most highly compensated employees be subject to a recovery or “clawback” provision during any part of the most recently completed fiscal year that was a TARP period if the bonus payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria;

     (vii) Seacoast Banking Corporation of Florida has prohibited any golden parachute payment, as defined in the regulations and guidance established under section 111 of EESA, to a SEO or any of the next five most highly compensated employees during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date;

     (viii) Seacoast Banking Corporation of Florida has limited bonus payments to its applicable employees in accordance with Section 111 of EESA and the regulations and guidance established thereunder during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date;

     (ix) The board of directors of Seacoast Banking Corporation of Florida has established an excessive or luxury expenditures policy, as defined in the regulations and guidance established under section 111 of EESA, by the later of March 19, 2009, or ninety days after the closing date of the agreement between the TARP recipient and Treasury; this policy has been provided to Treasury and its primary regulatory agency; Seacoast Banking Corporation of Florida and its employees have complied with this policy during the applicable period; and any expenses that, pursuant to this policy, required approval of the board of directors, a committee of the board of directors, an SEO, or an executive officer with a similar level of responsibility, were properly approved;

     (x) Seacoast Banking Corporation of Florida will permit a non-binding shareholder resolution in compliance with any applicable federal securities rules and regulations on the disclosures provided under the federal securities laws related to SEO compensation paid or accrued during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date;

     (xi) Seacoast Banking Corporation of Florida will disclose the amount, nature, and justification for the offering during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date of any perquisites, as defined in the regulations and guidance established under section 111 of EESA, whose total value exceeds $25,000 for any employee who is subject to the bonus payment limitations identified in paragraph (viii);

     (xii) Seacoast Banking Corporation of Florida will disclose whether Seacoast Banking Corporation of Florida, the board of directors of Seacoast Banking Corporation of Florida, or the compensation committee of Seacoast Banking Corporation of Florida has engaged during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date, a compensation consultant; and the services the compensation consultant or any affiliate of the compensation consultant provided during this period;

     (xiii) Seacoast Banking Corporation of Florida has prohibited the payment of any gross-ups, as defined in the regulations and guidance established under section 111 of EESA, to the SEOs and the next twenty most highly compensated employees during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date;

     (xiv) Seacoast Banking Corporation of Florida has substantially complied with all other requirements related to employee compensation that are provided in the agreement between Seacoast Banking Corporation of Florida and Treasury, including any amendments;

     (xv) Seacoast Banking Corporation of Florida has submitted to Treasury a complete and accurate list of the SEOs and the twenty next most highly compensated employees for the current fiscal year and the most recently completed fiscal year, with the non-SEOs ranked in descending order of level of annual compensation, and with the name, title, and employer of each SEO and the most highly compensated employee identified; and

     (xvi) I understand that a knowing and willful false or fraudulent statement made in connection with this certification may be punished by fine, imprisonment, or both.

Date: March 23, 2010	/s/ William R. Hahl
	William R. Hahl
	Executive Vice President and Chief Financial Officer (Principal Financial Officer)

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