ServisFirst Bancshares, Inc. Announces Results For Third Quarter of 2014 And Agreement to Acquire Metro Bancshares, Inc. in Atlanta, Georgia

PR Newswire

BIRMINGHAM, Ala., Oct. 20, 2014

BIRMINGHAM, Ala., Oct. 20, 2014 /PRNewswire/ — ServisFirst Bancshares, Inc. (“ServisFirst”) (NASDAQ: SFBS), the holding company for ServisFirst Bank, today announced earnings and operating results for the quarter and nine months ended September 30, 2014, and simultaneously announced today the signing of a definitive agreement and plan of merger (“Agreement”) with Metro Bancshares, Inc. As discussed below, according to the terms of the Agreement, ServisFirst will acquire all of the outstanding stock of Metro Bancshares, Inc.

THIRD QUARTER 2014 HIGHLIGHTS:

Net income for the third quarter increased 30% year over year
Third quarter annualized loan and deposit growth of 14% and 25%, respectively, on a linked quarter basis
Diluted earnings per share of $0.54 for the third quarter, a 10% increase year over year
25% growth in non-interest-bearing demand deposits year over year
Announced acquisition of Metro Bancshares, Inc. in Atlanta

Tom Broughton, President and CEO, said, “We are pleased with our loan and deposit growth rates of 14% and 25%, respectively.” Bud Foshee, CFO, stated, “Strong loan and deposit growth combined with excellent credit quality continue to drive our strong earnings performance.”

ACQUISITION OF METRO BANCSHARES, INC.:

Metro Bancshares, Inc. is the holding company for Metro Bank, which operates three banking offices in the Atlanta metropolitan area. As of September 30, 2014, Metro Bank reported approximately $223.5 million in assets, $140.6 million in loans and $195.9 million in deposits.

Tom Broughton, President and CEO of ServisFirst Bank, commented, “Ken Barber is an outstanding banker who has been a friend for many years. We look forward to Ken and his team joining our company. This will represent a strategic merger as an entry point into the Atlanta market.”

Ken Barber, President and CEO of Metro Bank, commented, “We are very excited about joining the great team that Tom has assembled at ServisFirst. The resources that will be available to us will allow our team to grow our existing business in the metro Atlanta area at a much greater rate than we could have imagined as an independent bank.”

The proposed merger of Metro Bancshares, Inc. with and into ServisFirst has been approved by the boards of directors of each company and is expected to close in the first quarter of 2015. Under the terms of the Agreement, assuming an average closing price of ServisFirst common stock of $28.83 per share, which was the closing price of ServisFirst common stock on October 17, 2014, ServisFirst would issue approximately 636,720 shares of its common stock and pay approximately $22,825,000 in cash, representing approximately $41,182,000 in aggregate consideration, which includes amounts payable to Metro option and warrant holders. The actual value of the total consideration may be greater or less than such amount, depending on the actual market value of ServisFirst common stock prior to the closing. Assuming an average closing price of $28.83 per share, the consideration to common shareholders would be approximately 52% in stock and 48% in cash, which percentages may fluctuate. Simultaneously with the closing of the transaction, Metro Bancshares, Inc. will merge with and into ServisFirst, and Metro Bank will merge with and into ServisFirst Bank. Completion of the transaction is subject to customary closing conditions, including the receipt of required regulatory approvals and the approval of Metro Bancshares, Inc.’s shareholders.

Additional information regarding the merger has been provided in a presentation available at www.sec.gov.

FINANCIAL SUMMARY
(in Thousands except share and per share amounts)

	Period Ending September 30, 2014			Period Ending June 30, 2014			% Change From Period Ending June 30, 2014 to Period Ending September 30, 2014		Period Ending September 30, 2013			% Change From Period Ending September 30, 2013 to Period Ending September 30, 2014
QUARTERLY OPERATING RESULTS
Net Income	$	14,002		$	11,585		21	%	$	10,812		30	%
Net Income Available to Common Stockholders	$	13,902		$	11,469		21	%	$	10,712		30	%
Diluted Earnings Per Share	$	0.54		$	0.46		17	%	$	0.49		10	%
Return on Average Assets		1.45	%		1.28	%				1.31	%
Return on Average Common Stockholders’ Equity		15.89	%		15.03	%				18.47	%
Average Diluted Shares Outstanding		25,952,883			24,823,590					21,965,733

Core Net Income*	$	14,002		$	12,740		10	%	$	10,812		30	%
Core Net Income Available to Common Stockholders*	$	13,902		$	12,624		10	%	$	10,712		30	%
Core Diluted Earnings Per Share*	$	0.54		$	0.51		6	%	$	0.49		10	%
Core Return on Average Assets*		1.45	%		1.41	%				1.31	%
Core Return on Average Common Stockholders’ Equity*		15.89	%		16.54	%				18.47	%

YEAR-TO-DATE OPERATING RESULTS
Net Income	$	37,345							$	29,749		26	%
Net Income Available to Common Stockholders	$	37,029							$	29,449		26	%
Diluted Earnings Per Share	$	1.51							$	1.37		10	%
Return on Average Assets		1.37	%							1.31	%
Return on Average Common Stockholders’ Equity		16.17	%							18.34	%
Average Diluted Shares Outstanding		24,598,250								21,965,733

Core Net Income*	$	38,957							$	29,749		31	%
Core Net Income Available to Common Stockholders*	$	38,641							$	29,449		31	%
Core Diluted Earnings Per Share*	$	1.57							$	1.37		15	%
Core Return on Average Assets*		1.43	%							1.31	%
Core Return on Average Common Stockholders’ Equity*		16.88	%							18.34	%

BALANCE SHEET
Total Assets	$	3,952,799		$	3,762,684		5	%	$	3,396,153		16	%
Loans		3,159,772			3,053,989		3	%		2,731,973		16	%
Non-interest-bearing Demand Deposits		794,553			729,163		9	%		635,153		25	%
Total Deposits		3,352,766			3,157,642		6	%		2,919,217		15	%
Stockholders’ Equity		393,136			380,074		3	%		276,300		42	%

* Core measures exclude non-routine expenses in the first and second quarter of 2014 resulting from a correction of our accounting for vested stock options previously granted to members of our advisory boards in our markets. For a reconciliation of these non-GAAP measures to the most comparable GAAP measure, see “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” below.

DETAILED FINANCIALS

ServisFirst Bancshares, Inc. reported net income of $14.0 million and net income available to common stockholders of $13.9 million for the quarter ended September 30, 2014, compared to net income of $10.8 million and net income available to common stockholders of $10.7 million for the same quarter in 2013. Basic and diluted earnings per common share were $0.56 and $0.54, respectively, for the third quarter of 2014, compared to $0.51 and $0.49, respectively, for the third quarter of 2013.

Return on average assets was 1.45% and return on average common stockholders’ equity was 15.89% for the third quarter of 2014, compared to 1.31% and 18.47%, respectively, for the third quarter of 2013.

Net interest income was $33.3 million for the third quarter of 2014, compared to $32.0 million for the second quarter of 2014 and $29.0 million for the third quarter of 2013. The net interest margin in the third quarter of 2014 was 3.65%, a 9 basis point decrease from the second quarter of 2014 and 4 basis point decrease from the third quarter of 2013. The increase in net interest income on a linked quarter basis is attributable to a $99.1 million increase in average loans outstanding, a $76.7 million increase in average non-interest-bearing deposits and a $41.0 million increase in average stockholders’ equity, all resulting in a positive mix change in our balance sheet. The lower net interest margin is primarily the result of higher balances in federal funds at other banks, which earn a lower interest rate.

Average loans for the third quarter of 2014 were $3.09 billion, an increase of $99.1 million, or 3%, over average loans of $2.99 billion for the second quarter of 2014, and an increase of $450.6 million, or 17%, over average loans of $2.64 billion for the third quarter of 2013.

Average total deposits for the third quarter of 2014 were $3.21 billion, an increase of $154.4 million, or 5%, over average total deposits of $3.06 billion for the second quarter of 2014, and an increase of $393.8 million, or 14%, over average total deposits of $2.82 billion for the third quarter of 2013.

The Company’s asset quality remained strong in the third quarter of 2014. At September 30, 2014, non-performing assets to total assets were 0.61%, an increase of 0.08% compared to the first two quarters of 2014. Net credit charge-offs to average loans were 0.17%, a 0.01% increase from the second quarter of 2014 and unchanged compared to the first quarter of 2014. We recorded a $2.7 million provision for loan losses in the third quarter of 2014 compared to $2.4 million in the second quarter of 2014 and $3.0 million in the third quarter of 2013. Growth in loans and improving credit quality has resulted in our loan loss reserve as a percent of loans remaining relatively stable, increasing one basis point to 1.09% at September 30, 2014 as compared to 1.08% for June 30 and March 31, 2014. In management’s opinion, the reserve is adequate and was determined by consistent application of ServisFirst Bank’s methodology for calculating its reserve for loan losses.

Non-interest income increased $737,000 during the third quarter of 2014, or 32%, compared to the third quarter of 2013. Deposit service charges increased by $349,000, or 42%, resulting from an increase in the number of accounts and transactions. Increases in the cash surrender value of our life insurance contracts resulted from added investments in contracts during the third quarter of 2014.

Non-interest expense for the third quarter of 2014 increased $3.2 million, or 27%, to $15.3 million from $12.1 million in the third quarter of 2013. Salary and benefit expense for the third quarter of 2014 increased $842,000, or 12%, to $7.9 million from $7.0 million in the third quarter of 2013, and decreased $1.2 million, or 13%, on a linked quarter basis. Included in salary and benefit expense for the first and second quarters of 2014 are non-routine expenses of $703,000 and $1.8 million, respectively, resulting from a correction of our accounting for vested stock options previously granted to members of our advisory boards in our markets. This expense impacted our diluted earnings per share for the first and second quarters of 2014 by $0.02 and $0.05, respectively. We historically accounted for these options under the provisions of FASB ASC 718-10, Compensation – Stock Compensation, and now have determined to recognize as an expense the fair value of these vested options in accordance with the provisions of the FASB ASC Topic 505-50, Equity-Based Payments to Non-Employees. The change in accounting treatment is a non-cash item and does not impact the Company’s operating activities or cash from operations. Other operating expense for the third quarter of 2014 increased $1.9 million, or 73%, to $4.4 million from $2.5 million in the third quarter of 2013. This was primarily the result of write downs of investments in tax credit partnerships of $1.4 million for the third quarter of 2014 compared to $53,000 in the same quarter in 2013. We recognized tax credits of $1.9 million during the third quarter of 2014 from these investments.

GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures

As discussed in more detail in the section titled “Detailed Financials,” we recorded a non-routine expense of $703,000 for the first quarter of 2014 resulting from the correction of our accounting for vested stock options previously granted to members of our advisory boards in our Dothan, Huntsville and Montgomery, Alabama markets, and we recorded a non-routine expense of $1.8 million for the second quarter of 2014 resulting from a correction of our accounting for vested stock options previously granted to members of our advisory boards in our Mobile, Alabama and Pensacola, Florida markets. This change in accounting treatment is a non-cash item and does not impact our operating activities or cash from operations. The non-GAAP financial measures included in this press release of our results for the third quarter of 2014 and the first nine months of 2014 are “core net income,” “core net income available to common stockholders,” “core diluted earnings per share,” “core return on average assets” and “core return on average common stockholders’ equity.” Each of these five core financial measures excludes the impact of the non-routine expense attributable to the correction of our accounting for vested stock options. None of the other periods included in this press release are affected by this correction.

“Core net income” is defined as net income, adjusted by the net effect of the non-routine expense.

“Core net income available to common stockholders” is defined as net income available to common stockholders, adjusted by the net effect of the non-routine expense.

“Core diluted earnings per share” is defined as net income available to common stockholders, adjusted by the net effect of the non-routine expense, divided by weighted average diluted shares outstanding.

“Core return on average assets” is defined as net income, adjusted by the net effect of the non-routine expense, divided by average total assets.

“Core return of average common stockholders’ equity” is defined as net income, adjusted by the net effect of the non-routine expense, divided by average common stockholders’ equity.

We believe these non-GAAP financial measures provide useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP; however, we acknowledge that these non-GAAP financial measures have a number of limitations. As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies, including those in our industry, use. The following reconciliation table provides a more detailed analysis of the non-GAAP financial measures for the nine months ended September 30, 2014 and the three month period ended June 30, 2014. Dollars are in thousands, except share and per share data.

(Dollars in Thousands)
		For the Nine Months Ended September 30, 2014			For the Three Months Ended June 30, 2014
Provision for income taxes – GAAP		$	14,965		$	5,476
	Adjustments:
	Adjustment for non-routine expense		865			619
Core provision for income taxes		$	15,830		$	6,095

Return on average assets – GAAP			1.37	%		1.28	%
Net income – GAAP		$	37,345		$	11,585
	Adjustments:
	Adjustment for non-routine expense		1,612			1,155
Core net income		$	38,957		$	12,740
Average assets		$	3,653,777		$	3,635,506
Core return on average assets			1.43	%		1.41	%

Return on average common stockholders’ equity			16.17	%		15.03	%
Net income available to common stockholders – GAAP		$	37,029		$	11,469
	Adjustments:
	Adjustment for non-routine expense		1,612			1,155
Core net income available to common stockholders		$	38,641		$	12,624
Average common stockholders’ equity		$	306,144		$	306,050
Core return on average common stockholders’ equity			16.88	%		16.54	%

Earnings per share – diluted – GAAP		$	1.51		$	0.46
Weighted average shares outstanding, diluted			24,598,250			24,823,590
Core diluted earnings per share		$	1.57		$	0.51

About ServisFirst Bancshares, Inc.

ServisFirst Bancshares, Inc. is a bank holding company based in Birmingham, Alabama. Through its subsidiary ServisFirst Bank, ServisFirst Bancshares, Inc. provides business and personal financial services from locations in Birmingham, Huntsville, Montgomery, Mobile and Dothan, Alabama, Pensacola, Florida and Nashville, Tennessee.

ServisFirst Bancshares, Inc. files periodic reports with the U.S. Securities and Exchange Commission (SEC). Copies of its filings may be obtained through the SEC’s website at www.sec.gov or at http://servisfirstbancshares.investorroom.com/.

About Metro Bancshares, Inc.

Metro Bancshares, Inc. operates as the bank holding company for Metro Bank, which provides general banking business in Douglasville, Georgia. It offers a range of interest bearing and non-interest bearing accounts, including commercial and retail checking accounts, money market accounts, individual retirement accounts, regular interest bearing statement savings accounts, and certificates of deposit. The company also provides commercial loans, real estate loans, home equity loans, and consumer/installment loans. In addition, it offers consumer services, such as cashier’s checks, Internet banking services, and direct deposit services. The company was founded in 2007 and is based in Douglasville, Georgia.

Webcast

As previously announced, ServisFirst will host a live audio webcast to discuss third quarter results beginning at 5 p.m. ET on October 20, 2014. The webcast can be accessed at www.servisfirstbancshares.com in the “Events and Webcasts” section. A replay of the call will be available until October 31, 2014.

Additional Information

This release contains, and the remarks by ServisFirst’s management on the live audio webcast may contain, forward-looking statements within the meaning of the securities laws giving ServisFirst’s expectations or predictions of future financial or business performance or conditions. Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “target,” “estimate,” “continue,” “positions,” “prospects” or “potential,” by future conditional verbs such as “will,” “would,” “should,” “could” or “may”, or by variations of such words or by similar expressions. These forward-looking statements are not guarantees of future performance and are subject to numerous assumptions, risks and uncertainties, many of which are outside of ServisFirst’s control and which may change over time and cause actual results to differ materially from those expressed or implied by the forward-looking statements. For discussion of these and other risks that may cause actual results to differ from expectations, please refer to “Cautionary Note Regarding Forward-looking Statements” and “Risk Factors” in our most recent Annual Report on Form 10-K/A and to our other filings with the U.S. Securities and Exchange Commission (“SEC”). Forward-looking statements speak only as of the date they are made, and ServisFirst assumes no duty to update forward-looking statements.

In addition to factors previously disclosed in ServisFirst’s reports filed with the SEC and those identified elsewhere in this release, the following factors among others, could cause actual results to differ materially from forward-looking statements or historical performance: ability to obtain regulatory approvals and meet other closing conditions to the merger, including approval by Metro Bancshares, Inc.’s shareholders, on the expected terms and schedule; delay in closing the merger; business disruption following the merger; the attitudes and preferences of its customers; ability to successfully integrate and profitably operate acquired businesses; changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer borrowing, repayment, investment and deposit practices; competitive conditions; economic condition; and the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with mergers, acquisitions and divestitures.

In connection with the proposed merger, ServisFirst intends to file with the SEC a registration statement on Form S-4, which will include a proxy statement/prospectus, and other relevant materials in connection with the proposed merger transaction involving ServisFirst and Metro Bancshares, Inc. Investors and security holders are urged to read the proxy statement/prospectus regarding the proposed merger transaction when it becomes available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. Investors and security holders may obtain free copies of these documents and other documents filed with the SEC on the SEC’s website at http://www.sec.gov. Investors and security holders may also obtain free copies of the documents filed with the SEC by ServisFirst at http://servisfirstbancshares.investorroom.com/, or by telephone at (205) 949-0302.

ServisFirst, Metro and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from shareholders of Metro in connection with the merger transaction. Information regarding directors and executive officers of ServisFirst and Metro and their respective interests in the proposed transaction will be available in the proxy statement/prospectus of ServisFirst and Metro described above and other relevant materials to be filed with the SEC.

Contact: ServisFirst Bank
Davis Mange (205) 949-3420
dmange@servisfirstbank.com

SELECTED FINANCIAL HIGHLIGHTS (UNAUDITED)
(In thousands except share and per share data)

	3rd Quarter 2014			2nd Quarter 2014			1st Quarter 2014			4th Quarter 2013			3rd Quarter 2013
CONSOLIDATED STATEMENT OF INCOME
Interest income	$	36,857		$	35,424		$	34,281		$	33,725		$	32,499
Interest expense		3,538			3,446			3,432			3,610			3,534
Net interest income		33,319			31,978			30,849			30,115			28,965
Provision for loan losses		2,748			2,438			2,314			2,356			3,034
Net interest income after provision for loan losses		30,571			29,540			28,535			27,759			25,931
Non-interest income		3,006			2,938			2,175			2,371			2,269
Non-interest expense		15,315			15,417			13,723			12,298			12,067
Income before income tax		18,262			17,061			16,987			17,832			16,133
Provision for income tax		4,260			5,476			5,229			5,964			5,321
Net income		14,002			11,585			11,758			11,868			10,812
Preferred stock dividends		100			116			100			116			100
Net income available to common stockholders	$	13,902		$	11,469		$	11,658		$	11,752		$	10,712
Earnings per share – basic	$	0.56		$	0.49		$	0.53		$	0.55		$	0.51
Earnings per share – diluted	$	0.54		$	0.46		$	0.51		$	0.53		$	0.49

Average diluted shares outstanding		25,952,883			24,823,590			22,985,670			22,359,351			21,965,733

CONSOLIDATED BALANCE SHEET DATA
Total assets	$	3,952,799		$	3,762,684		$	3,572,914		$	3,520,699		$	3,396,153
Loans		3,159,772			3,053,989			2,937,797			2,858,868			2,731,973
Debt securities		332,351			325,432			309,475			298,494			289,515
Non-interest-bearing demand deposits		794,553			729,163			662,834			650,456			635,153
Total deposits		3,352,766			3,157,642			3,031,041			3,019,642			2,919,217
Borrowings		19,965			19,957			19,949			19,940			19,932
Stockholders’ equity	$	393,136		$	380,074		$	312,283		$	297,192		$	276,300

Shares outstanding		24,791,436			24,749,436			22,574,436			22,050,036			21,229,041
Book value per share	$	14.25		$	13.74		$	12.06		$	11.67		$	11.13
Tangible book value per share (1)	$	14.25		$	13.74		$	12.06		$	11.67		$	11.13

SELECTED FINANCIAL RATIOS
Net interest margin		3.65	%		3.74	%		3.80	%		3.67	%		3.69	%
Return on average assets		1.45	%		1.28	%		1.36	%		1.36	%		1.31	%
Return on average common stockholders’ equity		15.89	%		15.03	%		17.83	%		18.86	%		18.47	%
Efficiency ratio		42.16	%		44.15	%		41.55	%		37.86	%		38.63	%
Non-interest expense to average earning assets		1.66	%		1.78	%		1.66	%		1.48	%		1.52	%
Tangible common equity to total tangible assets (1)		8.93	%		9.04	%		7.62	%		7.31	%		6.96	%

CAPITAL RATIOS
Total Capital to Risk-Weighted Assets:		13.70	%		13.74	%		11.94	%		11.73	%		11.40	%
Tier 1 Capital to Risk-Weighted Assets:		12.02	%		12.04	%		10.22	%		10.00	%		9.66	%
Tier 1 Capital to Average Assets:		10.18	%		10.32	%		8.81	%		8.48	%		8.28	%

(1) Non-GAAP financial measures. “Tangible book value per share” and “tangible common equity to total tangible assets” are not measures of financial performance recognized by generally accepted accounting principles in the United States, or GAAP; However, because the Company has no intangible assets, there is no reconciliation of these non-GAAP financial measures.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
			September 30, 2014		September 30, 2013		% Change
ASSETS
Cash and due from banks			$	59,483	$	71,833	(17)	%
Interest-bearing balances due from depository institutions				277,984		185,657	50	%
Federal funds sold				6,566		7,923	(17)	%
	Cash and cash equivalents			344,033		265,413	30	%
Available for sale debt securities, at fair value				302,303		256,385	18	%
Held to maturity debt securities (fair value of $30,248 and $32,671 at
	September 30, 2014 and 2013, respectively)			30,048		33,130	(9)	%
Restricted equity securities				3,418		3,738	(9)	%
Mortgage loans held for sale				9,037		11,592	(22)	%
Loans				3,159,772		2,731,973	16	%
Less allowance for loan losses				(34,442)		(28,927)	19	%
	Loans, net			3,125,330		2,703,046	16	%
Premises and equipment, net				7,958		8,518	(7)	%
Accrued interest and dividends receivable				10,882		9,604	13	%
Deferred tax asset, net				15,620		9,160	71	%
Other real estate owned and repossessed assets				6,940		14,258	(51)	%
Bank owned life insurance contracts				85,639		68,460	25	%
Other assets				11,591		12,849	(10)	%
	Total assets		$	3,952,799	$	3,396,153	16	%
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits:
	Non-interest-bearing		$	794,553	$	635,153	25	%
	Interest-bearing			2,558,213		2,284,064	12	%
		Total deposits		3,352,766		2,919,217	15	%
Federal funds purchased				178,230		170,090	5	%
Other borrowings				19,965		19,932	0	%
Accrued interest payable				2,204		4,553	(52)	%
Other liabilities				6,498		6,061	7	%
	Total liabilities			3,559,663		3,119,853	14	%
Stockholders’ equity:
	Preferred stock, Series A Senior Non-Cumulative Perpetual, par value $0.001
		(liquidation preference $1,000), net of discount; 40,000 shares authorized,
		40,000 shares issued and outstanding at September 30, 2014 and 2013		39,958		39,958	–	%
	Preferred stock, par value $0.001 per share; 1,000,000 authorized and 960,000 currently undesignated			–		–	–	%
	Common stock, par value $0.0003 per share; 50,000,000 shares authorized;
		24,791,436 shares issued and outstanding at September 30, 2014 and
		21,229,041 shares issued and outstanding at September 30, 2013		25		21	19	%
	Additional paid-in capital			184,797		113,441	63	%
	Retained earnings			163,414		118,377	38	%
	Accumulated other comprehensive income			4,690		4,503	4	%
	Noncontrolling interest			252		–	100	%
		Total stockholders’ equity		393,136		276,300	42	%
	Total liabilities and stockholders’ equity		$	3,952,799	$	3,396,153	16	%

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands except per share data)

		Three Months Ended September 30,				Nine Months Ended September 30,
		2014		2013		2014		2013
Interest income:
	Interest and fees on loans	$	34,662	$	30,475	$	100,164	$	86,667
	Taxable securities		1,131		980		3,354		2,851
	Nontaxable securities		877		858		2,618		2,537
	Federal funds sold		38		44		118		77
	Other interest and dividends		149		142		308		224
	Total interest income		36,857		32,499		106,562		92,356
Interest expense:
	Deposits		3,123		3,131		9,164		8,628
	Borrowed funds		415		403		1,252		1,381
	Total interest expense		3,538		3,534		10,416		10,009
	Net interest income		33,319		28,965		96,146		82,347
Provision for loan losses			2,748		3,034		7,500		10,652
	Net interest income after provision for loan losses		30,571		25,931		88,646		71,695
Non-interest income:
	Service charges on deposit accounts		1,172		823		3,097		2,391
	Mortgage banking		582		402		1,540		2,154
	Securities gains		3		–		3		131
	Increase in cash surrender value life insurance		549		491		1,631		1,446
	Other operating income		700		553		1,848		1,517
	Total non-interest income		3,006		2,269		8,119		7,639
Non-interest expense:
	Salaries and employee benefits		7,890		7,048		24,685		19,783
	Equipment and occupancy expense		1,437		1,272		4,212		3,852
	Professional services		829		443		1,877		1,329
	FDIC and other regulatory assessments		533		405		1,578		1,263
	Other real estate owned expense		220		357		1,005		951
	Other operating expense		4,406		2,542		11,098		8,013
	Total non-interest expense		15,315		12,067		44,455		35,191
	Income before income tax		18,262		16,133		52,310		44,143
Provision for income tax			4,260		5,321		14,965		14,394
	Net income		14,002		10,812		37,345		29,749
	Dividends on preferred stock		100		100		316		300
	Net income available to common stockholders	$	13,902	$	10,712	$	37,029	$	29,449
Basic earnings per common share		$	0.56	$	0.51	$	1.64	$	1.45
Diluted earnings per common share		$	0.54	$	0.49	$	1.57	$	1.37

LOANS BY TYPE
(UNAUDITED)
(In thousands)
		3rd Quarter 2014		2nd Quarter 2014		1st Quarter 2014		4th Quarter 2013		3rd Quarter 2013
Commercial, financial and agricultural		$	1,382,607	$	1,362,757	$	1,306,058	$	1,278,649	$	1,222,953
Real estate – construction			194,506		178,033		157,127		151,868		156,595
Real estate – mortgage:
	Owner-occupied commercial		773,432		708,294		711,067		710,372		667,401
	1-4 family mortgage		314,778		296,220		285,368		278,621		262,144
	Other mortgage		443,245		457,845		428,391		391,396		379,490
Subtotal: Real estate – mortgage			1,531,455		1,462,359		1,424,826		1,380,389		1,309,035
Consumer			51,204		50,840		49,786		47,962		43,390
Total loans		$	3,159,772	$	3,053,989	$	2,937,797	$	2,858,868	$	2,731,973

SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in thousands)
			3rd Quarter 2014			2nd Quarter 2014			1st Quarter 2014			4th Quarter 2013			3rd Quarter 2013
Reserve for loan losses:
Beginning balance			$	32,984		$	31,728		$	30,663		$	28,927		$	28,757
Loans charged off:
	Commercial financial and agricultural			531			142			1,222			95			849
	Real estate – construction			610			325			23			557			394
	Real estate – mortgage:			149			890			4			25			1,746
	Consumer			131			18			58			38			42
		Total charge off		1,421			1,375			1,307			715			3,031
Recoveries:
	Commercial financial and agricultural			–			1			45			16			13
	Real estate – construction			97			180			8			70			124
	Real estate – mortgage:			14			10			4			9			24
	Consumer			20			2			1			–			6
		Total recoveries		131			193			58			95			167
	Net charge-off			1,290			1,182			1,249			620			2,864
	Provision for loan losses			2,748			2,438			2,314			2,356			3,034
	Ending balance		$	34,442		$	32,984		$	31,728		$	30,663		$	28,927

	Reserve for loan losses to total loans			1.09	%		1.08	%		1.08	%		1.07	%		1.06	%
	Reserve for loan losses to total average
		loans		1.11	%		1.10	%		1.09	%		1.11	%		1.09	%
	Net charge-offs to total average loans			0.17	%		0.16	%		0.17	%		0.09	%		0.43	%
	Provision for loan losses to total average
		loans		0.35	%		0.33	%		0.32	%		0.34	%		0.46	%
	Nonperforming assets:
		Nonaccrual loans	$	16,078		$	13,193		$	9,084		$	9,621		$	9,396
		Loans 90+ days past due and accruing		1,190			–			110			115			–
		Other real estate owned and
		repossessed assets		6,940			6,739			9,752			12,861			14,258
	Total		$	24,208		$	19,932		$	18,946		$	22,597		$	23,654

	Nonperforming loans to total loans			0.55	%		0.43	%		0.31	%		0.35	%		0.34	%
	Nonperforming assets to total assets			0.61	%		0.53	%		0.53	%		0.64	%		0.70	%
	Nonperforming assets to earning assets			0.62	%		0.54	%		0.55	%		0.66	%		0.72	%
	Reserve for loan losses to nonaccrual loans			214.22	%		250.01	%		349.27	%		318.71	%		307.87	%

	Restructured accruing loans		$	2,067		$	7,030		$	9,411		$	9,689		$	6,233

	Restructured accruing loans to total loans			0.07	%		0.23	%		0.32	%		0.35	%		0.23	%

TROUBLED DEBT RESTRUCTURINGS (TDRs)
(In thousands)

		3rd Quarter 2014		2nd Quarter 2014		1st Quarter 2014		4th Quarter 2013		3rd Quarter 2013
Beginning balance:		$	9,217	$	13,478	$	14,168	$	8,433	$	9,406
	Additions		–		1,409		–		7,996		–

	Net (paydowns) / advances		(802)		(5,080)		235		(2,261)		(52)
	Charge-offs		(483)		(590)		(925)		–		(921)
		$	7,932	$	9,217	$	13,478	$	14,168	$	8,433

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands except per share data)

		3rd Quarter 2014		2nd Quarter 2014		1st Quarter 2014		4th Quarter 2013		3rd Quarter 2013
Interest income:
	Interest and fees on loans	$	34,662	$	33,250	$	32,252	$	31,618	$	30,475
	Taxable securities		1,131		1,126		1,097		1,052		980
	Nontaxable securities		877		870		871		870		858
	Federal funds sold		38		43		42		51		44
	Other interest and dividends		149		135		19		134		142
	Total interest income		36,857		35,424		34,281		33,725		32,499
	Deposits		3,123		3,027		3,014		3,202		3,131
	Borrowed funds		415		419		418		408		403
	Total interest expense		3,538		3,446		3,432		3,610		3,534
	Net interest income		33,319		31,978		30,849		30,115		28,965
Provision for loan losses			2,748		2,438		2,314		2,356		3,034
	Net interest income after provision for loan losses		30,571		29,540		28,535		27,759		25,931
Non-interest income:
	Service charges on deposit accounts		1,172		1,057		868		837		823
	Mortgage banking		582		674		284		344		402
	Securities gains		3		–		–		–		–
	Increase in cash surrender value life insurance		549		546		536		548		491
	Other operating income		700		661		487		642		553
	Total non-interest income		3,006		2,938		2,175		2,371		2,269
	Salaries and employee benefits		7,890		9,098		7,697		6,541		7,048
	Equipment and occupancy expense		1,437		1,409		1,366		1,350		1,272
	Professional services		829		532		516		480		443
	FDIC and other regulatory assessments		533		528		517		536		405
	Other real estate owned expense		220		298		487		475		357
	Other operating expense		4,406		3,552		3,140		2,916		2,542
	Total non-interest expense		15,315		15,417		13,723		12,298		12,067
	Income before income tax		18,262		17,061		16,987		17,832		16,133
Provision for income tax			4,260		5,476		5,229		5,964		5,321
	Net income		14,002		11,585		11,758		11,868		10,812
	Dividends on preferred stock		100		116		100		116		100
	Net income available to common stockholders	$	13,902	$	11,469	$	11,658	$	11,752	$	10,712
Basic earnings per common share		$	0.56	$	0.49	$	0.53	$	0.55	$	0.51
Diluted earnings per common share		$	0.54	$	0.46	$	0.51	$	0.53	$	0.49

AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS – UNAUDITED
ON A FULLY TAXABLE-EQUIVALENT BASIS
(Dollars in thousands)


				3rd Quarter 2014				2nd Quarter 2014				1st Quarter 2014				4th Quarter 2013				3rd Quarter 2013

				Average Balance		Yield / Rate		Average Balance		Yield / Rate		Average Balance		Yield / Rate		Average Balance		Yield / Rate		Average Balance		Yield / Rate
Assets:
Interest-earning assets:
	Loans, net of unearned income (1)
		Taxable		$	3,081,435	4.44	%	$	2,978,631	4.46	%	$	2,892,433	4.52	%	$	2,754,955	4.54	%	$	2,640,444	4.56	%
		Tax-exempt (2)			12,043	4.95			15,803	3.24			14,550	3.30			5,669	4.37			2,483	5.96
	Mortgage loans held for sale				6,861	3.64			8,048	3.24			4,496	2.80			5,956	3.66			12,531	2.66
	Debt securities:
		Taxable			195,220	2.31			188,148	2.40			174,842	2.54			166,027	2.49			152,135	2.56
		Tax-exempt (2)			126,512	4.08			123,897	4.11			122,686	4.13			120,161	4.11			118,001	4.13
			Total securities (3)		321,732	3.01			312,045	3.08			297,528	3.20			286,188	3.17			270,136	3.24
	Federal funds sold				57,625	0.27			41,388	0.37			54,895	0.31			68,710	0.25			62,192	0.28
	Restricted equity securities				3,418	3.83			3,446	7.57			3,738	–			3,738	2.55			3,738	2.65
	Interest-bearing balances with banks				185,716	0.25			121,532	0.25			82,279	0.09			173,521	0.29			161,169	0.29
	Total interest-earning assets				3,668,830	4.03	%		3,480,893	4.13	%		3,349,919	4.21	%		3,298,737	4.11	%		3,152,693	4.14	%
Non-interest-earning assets:
	Cash and due from banks				58,340				57,387				56,082				53,062				45,314
	Net premises and equipment				8,310				8,377				8,724				8,944				9,052
	Allowance for loan losses,
		accrued interest and
		other assets			86,901				88,849				85,532				98,586				76,477
			Total assets	$	3,822,381			$	3,635,506			$	3,500,257			$	3,459,329			$	3,283,536

Interest-bearing liabilities:
	Interest-bearing deposits:
	Checking			$	484,291	0.26	%	$	482,115	0.27	%	$	478,678	0.27	%	$	472,751	0.27	%	$	432,453	0.28	%
	Savings				26,584	0.28			25,406	0.28			25,081	0.27			21,755	0.27			21,602	0.29
	Money market				1,555,091	0.44			1,472,346	0.44			1,416,645	0.45			1,420,771	0.47			1,356,197	0.47
	Time deposits				394,158	1.05			402,613	1.08			412,622	1.10			412,254	1.13			408,600	1.16
	Federal funds purchased				187,629	0.28			195,809	0.28			195,967	0.28			176,967	0.28			168,121	0.28
	Other borrowings				19,961	5.62			19,953	5.69			19,945	5.75			19,936	5.63			19,928	5.63
	Total interest-bearing liabilities				2,667,714	0.53	%		2,598,242	0.53	%		2,548,938	0.55	%		2,524,434	0.57	%		2,406,901	0.58	%
Non-interest-bearing liabilities:
	Non-interest-bearing
		demand			751,831				675,098				641,450				640,476				599,379
	Other liabilities				15,838				16,158				4,724				7,226				7,250
	Stockholders’ equity				382,025				341,120				300,512				282,549				266,427
	Unrealized gains on securities and
		derivatives			4,973				4,888				4,634				4,644				3,580
			Total liabilities and
			stockholders’ equity	$	3,822,381			$	3,635,506			$	3,500,257			$	3,459,329			$	3,283,536
Net interest spread						3.51	%			3.60	%			3.67	%			3.54	%			3.56	%
Net interest margin						3.65	%			3.74	%			3.80	%			3.67	%			3.69	%

(1)	Average loans include loans on which the accrual of interest has been discontinued.
(2)	Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 35%.
(3)	Unrealized gains on available-for-sale debt securities are excluded from the yield calculation.