Seacoast Banking Corporation of Florida (SBCF) 8-K/A Completion of Acquisition or Disposition of Assets

Exhibit 99.3

CONDENSED CONSOLIDATED BALANCE SHEETS

The BANKshares, INC. AND SUBSIDIARIES

	June 30,			December 31,
	2014			2013
	(unaudited)			(audited)
Assets
Cash and due from banks	$	42,537		$	17,138
Interest-earnings demand deposits in other banks		10,490			9,846
Total cash and cash equivalents		53,027			26,984
Time deposits with other banks		249			249
Loans held for sale		235			69
Securities available for sale		146,234			150,892
Loans Before allowance for loan losses		380,550			366,806
Less allowance for loan losses		(5,550	)		(6,136	)
Loans, net of allowance for loan losses		375,000			360,670
Federal Home Loan Bank stock, at cost		610			817
Premises and equipment, net		22,397			22,696
Bank-owned life insurance		5,422			5,340
Goodwill		72,595			72,595
Core deposit intangible, net		2,693			3,497
Accrued interest receivable		1,803			1,926
Foreclosed real estate, net		3,551			4,935
Deferred income taxes		2,270			3,336
Other assets		1,901			2,022
Total assets	$	687,987		$	656,028
Liabilities and Stockholders' Equity
Liabilities:
Noninterest-bearing demand deposits	$	203,384		$	182,375
Savings, NOW and money-market deposits		218,491			213,857
Time deposits under $100,000		41,659			42,518
Time deposits $100,000 and over		52,129			52,001
Total deposits		515,663			490,751
Other borrowings		22,943			18,160
Junior subordinated debentures		14,434			14,434
Other liabilities		2,492			3,087
Total liabilities		555,532			526,432
Stockholders' equity:
Series A Preferred stock, $.01 par value, 10,000,000 shares authorized; 1,476,666 shares issued and outstanding at June 30, 2014 and December 31, 2013		15			15
Common stock, $.01 par value, 30,000,000 shares authorized, 12,550,103 shares issued and outstanding at June 30, 2014 and 12,542,655 outstanding at December 31, 2013		126			125
Additional paid-in capital		135,286			135,083
Accumulated deficit		(3,413	)		(4,699	)
Accumulated other comprehensive (loss) income		441			(928	)
Total stockholders' equity		132,455			129,596
Total liabilities and stockholders' equity	$	687,987		$	656,028

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

The BANKshares, INC. AND SUBSIDIARIES

	Three months ended						Six months ended
	June 30,						June 30,
	2014			2013			2014		2013
Interest income:
Interest and fees on loans	$	5,252		$	5,061		$	10,330	$	10,031
Interest and dividends on securities		776			585			1,552		1,128
Other		7			22			13		38
Total interest income		6,035			5,668			11,895		11,197
Interest expense:
Deposits		288			318			577		651
Borrowings		109			115			217		234
Total interest expense		397			433			794		885
Net interest income		5,638			5,235			11,101		10,312
Provision for loan losses		230			802			363		1,136
Net interest income after provision for loan losses		5,408			4,433			10,738		9,176
Noninterest income:
Service charges and fees on deposit accounts		321			336			632		700
Broker fees		31			89			37		151
Earnings on bank-owned life insurance		53			54			105		109
Gain (loss) on sale of securities available for sale		(0	)		2			9		51
Gain (loss) on loan sales		-			(3	)		-		2
Other		344			789			667		1,092
Total noninterest income		749			1,267			1,450		2,105
Noninterest expense:
Salaries and employee benefits		2,429			2,416			4,955		4,753
Occupancy		499			477			987		957
Equipment		246			325			534		605
Core deposit intangible amortization		375			493			805		1,042
Foreclosed real estate, net		129			118			230		385
Other general and administrative		1,391			1,136			2,610		2,277
Total noninterest expense		5,069			4,965			10,121		10,019
Earnings before income taxes		1,088			735			2,067		1,262
Income taxes		465			237			780		400
Net earnings	$	623		$	498		$	1,287	$	862
Basic and diluted earnings per common share	$	0.05		$	0.04		$	0.10	$	0.07
Cash dividends declared	$	-		$	-		$	-	$	-
Weighted-average number of common shares outstanding		12,768,029			12,673,341			12,768,739		12,663,289

See notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

The BANKshares, INC. AND SUBSIDIARIES

	Three months ended					Six months ended
	June 30,					June 30,
	2014		2013			2014		2013
Net earnings	$	623	$	498		$	1,287	$	862
Other comprehensive income
Change in unrealized gain on securities:
Unrealized gain (loss) arising during the year		988		(2,809	)		2,186		2,623
Reclassification adjustment for realized gains		-		2			9		51
Net change in unrealized gain (loss)		988		(2,807	)		2,195		2,674
Deferred income tax benefit on above change		372		(1,056	)		826		1,006
Total other comprehensive gain (loss)		616		(1,751	)		1,369		1,668
Comprehensive income	$	1,239	$	(1,253	)	$	2,656	$	2,530

See notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

The BANKshares, INC. AND SUBSIDIARIES

	Period Ended June 30,			Period Ended June 30,
	2014			2013
Cash flows from operating activities
Net income		1,287			862
Adjustments to reconcile net earnings to net cash provided by operating activities:
Provision for loan losses		364			1,134
Stock based compensation		203			21
Gain on sale of loans		(37	)		(12	)
Gain on sale of securities available for sale		(9	)		(51	)
Provision for losses on foreclosed real estate		207			267
Depreciation and amortization		474			550
Deferred income taxes		243			355
Net amortization of loan fees and costs		347			299
Net amortization of securities premiums/discounts		1,298			2,123
Net amortization of core deposit intangibles		804			1,042
Net earnings on bank-owned life insurance		(82	)		(87	)
Gain on sale of foreclosed assets		(118	)		(68	)
Loans funded for sale		(2,753	)		(10,108	)
Proceeds from sale of loans		2,624			9,420
Changes in period-end balances of:
Interest receivable		123			(249	)
Other assets		121			1,404
Other liabilities		(595	)		(307	)
Net cash provided by operating activities		4,501			6,595
Cash flows from investing activities:
Purchase of securities available for sale		(9,131	)		(31,747	)
Sale of securities available for sale		2,203			12,952
Maturities and principal repayments of securities available for sale		12,489			30,833
Net increase in loans		(16,777	)		(21,055	)
Net purchase of premises and equipment		(175	)		(111	)
Net decrease in Federal Home Loan Bank stock		207			238
Proceeds from the sale of foreclosed assets		3,031			1,519
Net cash used in investing activities		(8,153	)		(7,371	)
Cash flows from financing activities:
Net increase in deposits		24,912			9,384
Net increase (decrease) in other borrowings		4,783			2,141
Net cash provided by financing activities		29,695			11,525
Net increase in cash and cash equivalents		26,043			10,749
Cash and cash equivalents:
Beginning of period		26,984			35,895
End of period		53,027			46,644

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

THE BANKSHARES, INC. AND SUBSIDIARIES

NOTE A — BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U. S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U. S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 2014, are not necessarily indicative of the results that may be expected for the year ending December 31, 2014 or any other period. For further information, refer to the audited consolidated financial statements for the year ended December 31, 2013 and 2012 (together with Independent Auditors’ Report).

Use of Estimates

The preparation of these condensed consolidated financial statements required the use of certain estimates by management in determining the Company’s assets, liabilities, revenues and expenses. Actual results could differ from those estimates.

Specific areas, among others, requiring the application of management’s estimates include determination of the allowance for loan losses, the valuation of investment securities available for sale, fair value of impaired loans, contingent liabilities, fair value of other real estate owned, and the valuation of deferred tax assets. Actual results could differ from those estimates.

NOTE B — RECENTLY ISSUED ACCOUNTING STANDARDS, Not adopted as of June 30, 2014

Accounting Standards Update No. 2014-01-Accounting for Investments in Qualified Affordable Housing Projects– In January 2014, FASB issued ASU 2014-01. This update provides guidance to investors in affordable housing projects that qualify for the low-income housing credit. The ASU will allow investors, in certain cases, to qualify for the use of the effective yield method of accounting in lieu of the equity method or the cost method. The new standard deems that investors should disclose information which allows users of its financial statements to understand this type of investment and the risks involved, including the related tax credits.

The amendments in this Update are effective for fiscal years beginning after December 15, 2014. Early adoption is permitted. The Company will adopt the methodologies prescribed by this ASU by the date required, and adoption is not expected to impact our consolidated financial statements.

Accounting Standards Update No. 2014-04-Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure –In January 2014, FASB issued ASU 2014-04. This amendment is intended to reduce diversity in practice by clarifying when an in substance repossession or foreclosure occurs, and when a creditor should be considered to have received physical possession of residential real estate property. The Update also defines when the accounting change for the loan should take place.

The amendments in this Update are effective for fiscal years beginning after December 15, 2014. Early adoption is permitted. The Company will adopt the methodologies prescribed by this ASU by the date required, and adoption is not expected to impact our consolidated financial statements.

Accounting Standards Update No. 2014-09- Revenue from Contracts with Customers (Topic 606). In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09. The ASU is a converged standard between the FASB and the IASB that provides a single comprehensive revenue recognition model for all contracts with customers across transactions and industries. The primary objective of the ASU is revenue recognition that represents the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU is effective for interim and annual reporting periods beginning after December 15, 2016. The Company is currently assessing the impact of adoption of ASU 2014-09.

Accounting Standards Update No. 2014-11- Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. In June 2014, the FASB issued ASU No. 2014-11. This ASU requires secured borrowing accounting treatment for repurchase-to-maturity transactions and provides guidance on accounting for repurchase financing arrangements. This ASU is effective for interim and annual reporting periods beginning after December 15, 2014. The adoption of this ASU will result in additional disclosures, but is not expected to impact significantly the Company’s consolidated financial position or results of operations.

Accounting Standards Update No. 2014-12- Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could be Achieved after the Requisite Service Period. In June 2014, the FASB issued ASU No. 2014-12. This ASU requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition and should not be reflected in estimating the grant-date fair value of the award. This ASU is effective for interim and annual reporting periods beginning after December 15, 2015 with earlier adoption permitted. The adoption of this ASU is not expected to impact significantly the Company’s consolidated financial position or results of operations.

NOTE C — BASIC AND DILUTED EARNINGS PER COMMON SHARE

Basic and diluted earnings per common share is calculated by dividing net earnings by the weighted-average number of shares of common stock outstanding during the reporting period. Nonvested share grants are deemed to be issued and outstanding. The following is the calculation of the basic and diluted earnings per share computations for the periods presented:

	Three months ended				Six months ended
	June 30,				June 30,
	2014		2013		2014		2013
Basic and Diluted:
Net earnings available to common shareholders	$	623	$	498	$	1,287	$	862
Average basic and diluted shares outstanding		12,768,029		12,673,341		12,768,739		12,663,289
Basic and diluted earnings per share	$	0.05	$	0.04	$	0.10	$	0.07

NOTE D — SECURITIES

All securities have been classified as available for sale by management. The carrying amounts of securities available for sale and their approximate fair values are as follows:

	June 30, 2014
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Mortgage-backed securities	$	86,208	$	710	$	(622	)	$	86,296
Municipal securities		30,963		815		(464	)		31,314
SBA pool securities		24,432		356		-			24,788
Asset-backed securities		3,924		-		(88	)		3,836
	$	145,527	$	1,881	$	(1,174	)	$	146,234

	December 31, 2013
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Mortgage-backed securities	$	88,517	$	688	$	(1,009	)	$	88,196
Municipal securities		33,359		525		(2,029	)		31,855
SBA pool securities		26,554		476		-			27,030
Asset-backed securities		3,949		-		(138	)		3,811
	$	152,379	$	1,689	$	(3,176	)	$	150,892

The following schedule shows those securities with gross unrealized losses at June 30, 2014 and December 31, 2013, aggregated by investment category and length of time that the securities have been in a continuous loss position, as well as their fair value:

	June 30, 2014
	Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Mortgage-backed securities	$	17,561	$	(91	)	$	24,820	$	(531	)	$	42,381	$	(622	)
Municipal securities		-		-			19,146		(464	)		19,146		(464	)
SBA pool securities		-		-			0		0			0		0
Asset-backed securities		-		-			3,835		(88	)		3,835		(88	)
Total	$	17,561	$	(91	)	$	47,801	$	(1,083	)	$	65,362	$	(1,174	)

	December 31, 2013
	Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Mortgage-backed securities	$	27,442	$	(385	)	$	18,038	$	(624	)	$	45,480	$	(1,009	)
Municipal securities		21,303		(1,915	)		1,112		(114	)		22,415		(2,029	)
Asset-backed securities		3,811		(138	)		-		-			3,811		(138	)
Total	$	52,556	$	(2,438	)	$	19,150	$	(738	)	$	71,706	$	(3,176	)

At June 30, 2014, none of the securities had an aggregate unrealized loss of 15% or more of its amortized cost. The unrealized losses that exist are considered by management to be principally attributable to changes in market rates and credit spreads, and not to credit risk or deterioration on the part of the issuer. Accordingly, if rates and credit spreads were to decline, much or all of the current unrealized loss could be recovered through market appreciation. Since the Company has the intent and ability to hold their investments until a market price recovery or maturity, these investments are not considered other than temporarily impaired.

Amortized cost and estimated fair value of securities at December 31, 2013, by contractual maturity, are as follows:

	June 30, 2014
	1 Year		1-5		5-10		After 10
	Or Less		Years		Years		Years		Total
AMORTIZED COST
Mortgage-backed securities	$	-	$	2,892	$	6,979	$	76,337	$	86,208
Municipal securities		-		1,034		9,252		20,677		30,963
SBA pool securities		-		-		11,074		13,358		24,432
Asset-backed securities		-		-		3,924		-		3,924
Total	$	-	$	3,926	$	31,229	$	110,372	$	145,527
FAIR VALUE
Mortgage-backed securities	$	-	$	2,975	$	7,091	$	76,230	$	86,296
Municipal securities		-		1,102		9,503		20,709		31,314
SBA pool securities		-		-		11,193		13,595		24,788
Asset-backed securities		-		-		3,836		-		3,836
Total	$	-	$	4,077	$	31,623	$	110,534	$	146,234

Proceeds from sales of securities during the three and six month periods ended June 30, 2014 were $0 and $2,203,000 respectively, with gross gains of $0 and $9,000 respectively, and no gross losses in either period. Proceeds from sales of securities during the three and six month periods ended June 30, 2013 were $10,726,000 and $12,952,000 respectively, with gross gains of $29,000 and gross losses of $26,000 in the three months ended June 30, 2014 and gross gains of $114,000 and gross losses of $63,000 in the six months ended June 30, 2014.

Securities available for sale with a carrying amount of $31.9 million were pledged at June 30, 2014 to collateralize the Company's repurchase agreements, Treasury, Tax and Loan account and public funds deposits.

NOTE E — LOANS

Information relating to loans is summarized as follows:

	June 30			December 31,
	2014			2013
Commercial real estate:
Construction	$	30,297		$	26,169
Nonfarm nonresidential		234,025			224,227
Residential Real Estate:
1-4 Family, Adjustable		34,409			35,890
Multifamily, Adjustable		1,613			1,758
Construction		772			1,448
Commercial and Industrial:
Secured		55,756			52,703
Unsecured		1,067			1,348
Consumer:
Home equity		17,379			18,372
Installment and other		4,309			3,904
Total Loans		379,627			365,819
Add (deduct):
Allowance for loan losses		(5,550	)		(6,136	)
Deferred loan costs, net		924			987
Loans, net	$	375,000		$	360,670

The following table presents the contractual aging of the recorded investment in past due loans by class of loans as of June 30, 2014 and December 31, 2013:

	30-59 Days Past Due		60-89 Days  Past Due		Greater than 90  Days Past Due		Total Past Due		Current		Total		Past Due Ninety  Days or More, but Still Accruing		Nonaccrual Loans
At June 30, 2014:
Commercial real estate:
Construction	$	-	$	-	$	1,564	$	1,564	$	28,732	$	30,296	$	-	$	1,564
Nonfarm nonresidential		203		-		426		629		233,397		234,026		-		943
Residential real estate:
1-4 Family		-		-		869		869		33,540		34,409		-		944
Multi-family		-		-		-		-		1,613		1,613		-		-
Construction		-		-		-		-		772		772		-		-
Commercial:
Secured		-		25		117		142		55,613		55,755		-		142
Unsecured		-		-		-		-		1,067		1,067		-		-
Consumer:
Home Equity		-		-		125		125		17,254		17,379		-		159
Installment		44		-		-		44		4,266		4,310		-		-
Total	$	247	$	25	$	3,101	$	3,373	$	376,254	$	379,627	$	-	$	3,752

	30-59 Days Past Due		60-89 Days  Past Due		Greater than 90  Days Past Due		Total Past Due		Current		Total		Past Due Ninety Days or More, but Still Accruing		Nonaccrual Loans
At December 31, 2013:
Commercial real estate:
Construction	$	301	$	-	$	1,400	$	1,701	$	24,468	$	26,169	$	-	$	1,654
Nonfarm nonresidential		875		515		2,562		3,952		220,275		224,227		-		2,892
Residential real estate:
1-4 Family		700		579		114		1,393		34,497		35,890		-		121
Multi-family		-		-		-		-		1,758		1,758		-		-
Construction		-		-		-		-		1,448		1,448		-		-
Commercial:
Secured		288		134		-		422		52,281		52,703		-		25
Unsecured		-		-		-		-		1,348		1,348		-		-
Consumer:
Home Equity		70		-		59		129		18,243		18,372		-		59
Installment		10		-		-		10		3,894		3,904		-		-
Total	$	2,244	$	1,228	$	4,135	$	7,607	$	358,212	$	365,819	$	-	$	4,751

The Company utilizes an internal asset classification system as a means of reporting problem and potential problem loans. Under the Company’s risk rating system, the Company classifies problem and potential problem loans as “Special Mention,” “Substandard,” and “Doubtful” and these loans are monitored on an ongoing basis. Substandard loans include those characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loans classified as substandard may require a specific allowance, but generally that allowance does not exceed 30% of the principal balance. Loans classified as Doubtful, have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The principal balance of loans classified as doubtful are generally charged off. Loans that do not currently expose the Company to sufficient risk to warrant classification in one of the aforementioned categories, but possess weaknesses that deserve management’s close attention are deemed to be Special Mention. Risk ratings are updated any time the situation warrants.

Loans not meeting the criteria above are considered to be pass-rated loans, and risk grades are recalculated at least annually by the loan relationship manager. The following tables present the risk category of loans by class of loans based on the most recent analysis performed as of June 30, 2014 and December 31, 2013:

	Commercial Real Estate				Residential Real Estate						Commercial				Consumer
	Construction		Nonfarm Nonresidential		1-4 Family		Multi-Family		Construction		Secured		Unsecured		Home Equity		Installment		Total
Credit Risk Profile by Internally Assigned Grade:
At June 30, 2014:
Grade:
Pass	$	24,932	$	212,103	$	32,054	$	1,613	$	772	$	51,758	$	1,025	$	16,117	$	4,165	$	344,539
Watch		596		9,129		1,063		-		-		1,537		-		430		48		12,803
Special Mention		839		6,333		-		-		-		100		-		202		-		7,474
Substandard		2,365		6,034		349		-		-		2,208		42		471		92		11,561
Doubtful		1,565		426		943		-		-		153		-		159		4		3,250
	$	30,297	$	234,025	$	34,409	$	1,613	$	772	$	55,756	$	1,067	$	17,379	$	4,309	$	379,627
At December 31, 2013:
Grade:
Pass	$	19,953	$	200,071	$	33,402	$	1,758	$	1,448	$	48,953	$	1,303	$	17,104	$	3,846	$	327,838
Watch		612		9,198		1,733		-		-		1,858		-		475		49		13,925
Special Mention		1,561		6,778		-		-		-		567		-		207		3		9,116
Substandard		2,389		5,288		634		-		-		1,300		45		527		2		10,185
Doubtful		1,654		2,892		121		-		-		25		-		59		4		4,755
Total	$	26,169	$	224,227	$	35,890	$	1,758	$	1,448	$	52,703	$	1,348	$	18,372	$	3,904	$	365,819

NOTE F —IMPAIRED LOANS AND ALLOWANCE FOR LOAN LOSSES

During the six months ending June 30, 2014 and 2013, there were no newly identified troubled debt restructurings (“TDRs”). Loans that are modified, but where full collection under the modified terms is doubtful, are classified as nonaccrual loans from the date of modification.

The Company’s TDR concessions granted generally do not include forgiveness of principal balances. Loan modifications are not reported in calendar years after modification if the loans were modified at an interest rate equal to the yields of new loan originations with comparable risk and the loans are performing based on the terms of the restructuring agreements.

When a loan is modified as a TDR, there is not a direct, material impact on the loans within the Consolidated Balance Sheet, as principal balances are generally not forgiven. Most loans prior to modification were classified as impaired loans and the allowance for loan losses is determined in accordance with Company policy.

No accruing loans that were restructured within the twelve months preceding June 30, 2014 defaulted during the six months ended June 30, 2014. The Company considers a loan to have defaulted when it becomes 60 days or more delinquent under the modified terms, has been transferred to nonaccrual status, or has been transferred to other real estate owned. A defaulted TDR is generally placed on nonaccrual and a specific allowance for loan loss is assigned in accordance with the Company’s policy.

As of June 30, 2014 and December 31, 2013, the company’s recorded investment in impaired loans and the related valuation allowance were as follows:

At June 30, 2014:	Recorded Investment		Unpaid Contractual Principal Balance		Related Allowance
With No Related Allowance Recorded:
Commercial Real Estate:
Construction	$	503	$	591	$	-
Non-farm, Non-residential		2,765		4,039		-
Residential Real Estate:
1-4 family		1,150		1,929		-
Commercial:
Secured		1,191		1,202		-
Consumer:
Home Equity		309		473		-
Total	$	5,918	$	8,234	$	-
With an allowance recorded:
Commercial Real Estate:
Construction		1,913		2,842		294
Non-farm, Non-residential		744		967		224
Consumer:
Home Equity		204		311		106
Installment		56		86		9
Total	$	2,917	$	4,206	$	633
Total:
Commercial Real Estate:
Construction	$	2,416	$	3,433	$	294
Non-farm, Non-residential		3,509		5,006		224
Residential Real Estate:
1-4 family		1,150		1,929		-
Commercial:
Secured		1,191		1,202		-
Consumer:
Home Equity		513		784		106
Installment		56		86		9
Total	$	8,835	$	12,440	$	633

At December 31, 2013:	Recorded Investment		Unpaid Contractual Principal Balance		Related Allowance
With No Related Allowance Recorded:
Commercial Real Estate:
Construction	$	343	$	343	$	-
Non-farm, Non-residential		3,455		4,730		-
Residential Real Estate:
1-4 family		99		107		-
Commercial:
Secured		558		568		-
Consumer:
Home Equity		193		357		-
Installment		2		10		-
Total	$	4,650	$	6,115	$	-
With an allowance recorded:
Commercial Real Estate:
Construction	$	2,173	$	3,344	$	549
Non-farm, Non-residential		2,246		3,031		444
Residential Real Estate:
1-4 family		240		695		39
Consumer:
Home Equity		319		511		172
Installment		4		8		4
Total	$	4,982	$	7,589	$	1,208
Total:
Commercial Real Estate:
Construction	$	2,516	$	3,687	$	549
Non-farm, Non-residential		5,701		7,761		444
Residential Real Estate:
1-4 family		339		802		39
Commercial:
Secured		558		568		-
Consumer:
Home Equity		512		868		172
Installment		6		18		4
Total	$	9,632	$	13,704	$	1,208

For the six months ended June 30, 2014 and 2013, the Company’s average recorded investments in impaired loans and related interest income were as follows:

	For the Period Ended June 30,
	2014				2013
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial Real Estate:
Construction	$	1,018	$	19	$	1,753	$	21
Non-farm, Non-residential		4,986		66		4,298		61
Residential Real Estate:
1-4 family		1,385		10		541		10
Multi-family		-		-		233		-
Commercial:		896		18		648		20
Consumer:
Home Equity		404		8		262		9
Installment		58		1		8		1
Total	$	8,747	$	122	$	7,743	$	122

Impaired loans also include loans that have been modified in troubled debt restructurings where concessions to borrowers who experienced financial difficulties have been granted. At June 30, 2014 and December 31, 2013, accruing TDRs totaled $5.0 million and $4.9 million, respectively.

Interest payments received on impaired loans are recorded as interest income unless collection of the remaining recorded investment is doubtful in which case payments received are recorded as reductions to principal. For the three and six months ended June 30, 2014 the Company recorded $46,000 and $122,000, respectively, and for the three and six months ended June 30,2013, the Company recorded $64,000 and $122,000, respectively, in interest income on impaired loans.

For impaired loans whose impairment is measured based on the present value of expected future cash flows, a total of $40,000 and $44,000, respectively, was included in interest income for the six months ended June 30, 2014 and 2013, and represents the change in present value attributable to the passage of time.

Activity in the allowance for loan losses for the three month and six month periods ended June 30, 2014 and 2013 is summarized as follows:

	Allowance for Loan Losses for the Three Months Ended June 30, 2014
	Beginning Balance		Provision (Credit) for Loan Losses			Charge-Offs		Recoveries		Net Charge-Offs		Ending Balance
Commercial Real Estate	$	3,798	$	164		$	95	$	21	$	74	$	3,888
Residential Real Estate		604		23			255		16		239		388
Commercial		906		57			19		6		13		950
Consumer		396		(14	)		64		6		58		324
	$	5,704	$	230		$	433	$	49	$	384	$	5,550

	Allowance for Loan Losses for the Six Months Ended June 30, 2014
	Beginning Balance		Provision (Credit) for Loan Losses			Charge-Offs		Recoveries		Net Charge-Offs		Ending Balance
Commercial Real Estate	$	4,461	$	(36	)	$	577	$	40	$	537	$	3,888
Residential Real Estate		412		333			390		33		357		388
Commercial		765		190			19		14		5		950
Consumer		498		(124	)		73		23		50		324
	$	6,136	$	363		$	1,059	$	110	$	949	$	5,550

	Allowance for Loan Losses for the Three Months Ended June 30, 2013
	Beginning Balance		Provision (Credit) for Loan Losses			Charge-Offs		Recoveries		Net Charge-Offs			Ending Balance
Commercial Real Estate	$	2,415	$	1,164		$	475	$	66	$	409		$	3,170
Residential Real Estate		1,721		(543	)		194		18		176			1,002
Commercial		958		230			66		32		34			1,154
Consumer		477		(51	)		-		16		(16	)		442
	$	5,571	$	800		$	735	$	132	$	603		$	5,768

	Allowance for Loan Losses for the Six Months Ended June 30, 2013
	Beginning Balance		Provision (Credit) for Loan Losses			Charge-Offs		Recoveries		Net Charge-Offs		Ending Balance
Commercial Real Estate	$	2,901	$	1,132		$	975	$	112	$	863	$	3,170
Residential Real Estate		1,414		(28	)		417		33		384		1,002
Commercial		965		254			173		108		65		1,154
Consumer		683		(224	)		44		27		17		442
	$	5,963	$	1,134		$	1,609	$	280	$	1,329	$	5,768

The allowance for loan losses is composed of specific allowances for certain impaired loans and general allowances grouped into loan pools based on similar characteristics. The Company’s loan portfolio and related allowance at June 30, 2014 and 2013 are shown in the following tables:

	At June 30, 2014
	Individually Evaluated for Impairment				Collectively Evaluated for Impairment				Total
	Carrying Value		Associated Allowance		Carrying Value		Associated Allowance		Carrying Value		Associated Allowance
Commercial Real Estate	$	5,925	$	518	$	258,397	$	3,503	$	264,322	$	4,021
Residential Real Estate		1,150		-		35,644		388		36,794		388
Commercial		1,191		-		55,631		818		56,822		818
Consumer		569		115		21,120		208		21,689		323
	$	8,835	$	633	$	370,792	$	4,917	$	379,627	$	5,550

	At June 30, 2013
	Individually Evaluated for Impairment				Collectively Evaluated for Impairment				Total
	Carrying Value		Associated Allowance		Carrying Value		Associated Allowance		Carrying Value		Associated Allowance
Commercial Real Estate	$	10,927	$	591	$	230,707	$	2,579	$	241,634	$	3,170
Residential Real Estate		654		55		36,279		947		36,933		1,002
Commercial		892		124		48,559		1,030		49,451		1,154
Consumer		571		129		27,381		313		27,952		442
	$	13,044	$	899	$	342,926	$	4,869	$	355,970	$	5,768

NOTE G — INCOME TAXES

At June 30, 2014, the Company had net operating loss carryforwards of approximately $4.7 million for Federal and $3.5 million for Florida available to offset future taxable income. These carryforwards are attributable to the East Coast Community Bank acquisition in 2012 and are subject to an annual limitation. The carryforwards will begin to expire in 2029.

With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2010.

NOTE H — EQUITY CAPITAL / REGULATORY MATTERS

Banking regulations place certain restrictions on dividends and loans or advances made by the subsidiary bank, BankFIRST (the “Bank”) to the BANKshares, Inc. (the “Company”). The amount of cash dividends that may be paid is based on the Bank's net earnings of the current year combined with the Bank's retained earnings of the preceding two years, as defined by state banking regulations. However, for any dividend declaration, the Bank must consider additional factors such as the amount of current period net earnings, liquidity, asset quality, capital adequacy and economic conditions. It is likely that these factors would further limit the amount of dividend which the Bank could declare. In addition, bank regulators have the authority to prohibit banks from paying dividends if they deem such payment to be an unsafe or unsound practice.

The Company and the Bank are subject to various regulatory capital requirements administered by various regulatory authorities. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company's and the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company's and the Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

As of June 30, 2014, the Company and the Bank are considered well capitalized for regulatory purposes. To be categorized as well capitalized, the Company and the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios.

NOTE I — CONTINGENCIES

Various legal claims also arise from time to time in the normal course of business which, in the opinion of management of the Company will not have a material effect on the Company's consolidated financial statements.

Concentrations of Credit Risk. The Company originates residential and commercial real estate loans, and other consumer and commercial loans in its Central Florida market area. In addition, the Company occasionally purchases loans, primarily in Florida. Although the Company has a diversified loan portfolio, a substantial portion of its borrowers' ability to repay their loans is dependent upon economic conditions in the Company's market area.

NOTE J — FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not active; and model-driven valuations whose inputs are observable or whose significant value drivers are observable. Valuations may be obtained from, or corroborated by, third-party pricing services.

Level 3: Unobservable inputs to measure fair value of assets and liabilities for which there is little, if any market activity at the measurement date, using reasonable inputs and assumptions based upon the best information at the time, to the extent that inputs are available without undue cost and effort.

The following describes valuation methodologies used for assets measured at fair value:

Securities Available for Sale. Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid government bonds, certain mortgage products and exchange-traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Examples of such instruments, which would generally be classified within Level 2 of the valuation hierarchy, include certain collateralized mortgage and debt obligations and certain high-yield debt securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy. Securities classified within Level 3 include certain residual interests in securitizations and other less liquid securities.

Impaired Loans.The Company's impaired loans are normally collateral dependent and, as such, are carried at the lower of the Company's net recorded investment in the loan or the estimated fair value of the collateral less estimated selling costs. Estimates of fair value are determined based on a variety of information, including the use of available appraisals, estimates of market value by licensed appraisers or local real estate brokers and the knowledge and experience of the Company's senior lending officers related to values of properties in the Company's market areas. These officers take into consideration the type, location and occupancy of the property as well as current economic conditions in the area the property is located in assessing estimates of fair value. Accordingly, fair value estimates for impaired loans are classified as Level 3.

Foreclosed Real Estate.Estimates of fair values are determined based on a variety of information, including the use of available appraisals, estimates of market value by licensed appraisers or local real estate brokers and the knowledge and experience of the Company's senior lending officers related to values of properties in the Company's market areas. These officers take into consideration the type, location and occupancy of the property as well as current economic conditions in the area the property is located in assessing estimates of fair value. Accordingly, the fair values estimates for foreclosed real estate are classified as Level 3.

Acquired Assets and Assumed Liabilities.All assets acquired and liabilities assumed were recorded at estimated fair value at the date of acquisition. Estimates of fair values were determined based on a variety of information. Acquired assets and assumed liabilities were valued based on estimated cash flows and other unobservable inputs and are classified as Level 3, with the exception of acquired securities which were classified as a Level 2.

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

Cash and Cash Equivalents. The carrying amounts of cash and cash equivalents approximate their fair value.

Time Deposits. Fair values for time deposits are estimated using discounted cash flow analysis using interest rates currently being offered for time deposits with similar terms.

Securities Available for Sale. Fair values for securities are based on the framework for measuring fair values disclosed above underFair Value Measurements.

Federal Home Loan Bank Stock. Fair value of the Company's investment in Federal Home Loan Bank ("FHLB") stock is based on its redemption value.

Loans. For variable-rate loans that reprice frequently and have no significant change in credit risk, fair values are based on carrying values. Fair values for certain fixed-rate mortgage (e.g. one-to-four family residential), commercial real estate and commercial loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values for impaired loans are based on the framework for measuring fair value disclosed above underFair Value Measurements.

Loans Held for Sale. Fair values for loans held for sale are based on quoted market prices.

Deposits. The fair values disclosed for demand, NOW, money-market and savings deposits are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts). Fair values for time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered on time deposits to a schedule of aggregated expected monthly maturities of time deposits.

Junior Subordinated Debentures and Other Borrowings. The carrying amount of borrowings under customer repurchase agreements and line of credit approximate their fair value. The fair value of junior subordinated debentures are estimated using discounted cash flow analysis based on the Company's incremental borrowing rates for similar types of borrowing arrangements.

Accrued Interest. The carrying amounts of Company's accrued interest approximate their fair values.

Off-Balance-Sheet Financial Instruments. Fair values for off-balance-sheet lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing.

The following table sets forth the Company's assets that are measured at fair value on a recurring basis:

			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	Fair Value		Assets		Inputs		Inputs
	Measurements		(Level 1)		(Level 2)		(Level 3)
June 30, 2014
Mortgage-backed securities	$	86,296	$	-	$	86,296	$	-
Municipal securities		31,314		-		31,314		-
SBA pool securities		24,788		-		24,788		-
Asset-backed securities		3,836		-		3,836		-
	$	146,234	$	-	$	146,234	$	-
June 30, 2013
Mortgage-backed securities	$	90,756	$	-	$	90,756	$	-
Municipal securities		32,494		-		32,494		-
SBA pool securities		30,203		-		30,203		-
Asset-backed securities		4,021		-		4,021		-
	$	157,474	$	-	$	157,474	$	-

During the six months ended June 30, 2014 and 2013, no securities were transferred in or out of Level 1, Level 2 or Level 3.

The table which follows shows the estimated fair value and the related carrying amounts of the Company's financial instruments:

			At June 30,
			2014				2013
			Carrying		Fair		Carrying		Fair
			Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	(1	)	$	53,027	$	53,027	$	46,644	$	46,644
Time deposits	(2	)		249		249		249		250
Securities available for sale	(2	)		146,234		146,234		157,474		157,474
Federal Home Loan Bank stock, at cost	(3	)		610		610		1,058		1,058
Accrued interest receivable	(3	)		1,803		1,803		1,982		1,982
Loans, net	(3	)		375,000		366,316		351,174		348,297
Loans held for sale	(3	)		235		235		842		842
Financial liabilities:
Demand and savings deposits	(3	)	$	421,875	$	421,875	$	408,781	$	408,781
Time deposits	(3	)		93,788		94,352		99,831		100,747
Other borrowings	(3	)		22,943		22,943		20,158		20,158
Junior subordinated debentures	(3	)		14,434		8,401		14,434		8,371
Off-balance sheet financial instruments	(3	)		-		-		-		-

(1) We consider these fair value measurements to be Level 1.

(2) We consider these fair value measurements to be Level 2.

(3) We consider these fair value measurements to be Level 3.

NOTE K — PENDING ACQUISTION

On April 24, 2014, the Company signed a definitive agreement to be purchased by Seacoast Banking Corporation of Florida (“Seacoast”). Seacoast founded in 1926, is headquartered in Stuart, Florida and has approximately $2.3 billion in assets and $1.8 billion in deposits as of June 30, 2014. The all-stock transaction provides that BANKshares’ shareholders will receive 0.4975 shares of Seacoast common stock. Based on Seacoast’s closing price on April 23, 2014, the transaction would be valued at approximately $76 million, with closing to be completed in the fourth quarter of 2014, subject to regulatory approvals and customary closing conditions.