3Q14

2Q14

Earnings per share (GAAP)

$

0.08

$

0.03

Net operating income per share (Non-GAAP)

$

0.13

$

0.11

—

Loan production increased 87% compared to the previous quarter. Loans, excluding Purchase Credit Impaired (“PCI”) loans, increased by an annualized rate of 16.5% or $84,340 during the quarter. For the nine month period ending September 30, 2014 the annualized increase was approximately 8.2%.

—

First Southern Bank (“FSB”), which was acquired on June 1, 2014, was converted into the Company’s core processing system during the weekend of September 19, 2014.

—

The Company closed on its previously announced sale of branch real estate and deposits from 6 of the acquired branch offices from FSB on September 18, 2014. Approximately $170 million of deposits were sold.

—

Four additional branch offices acquired from FSB were consolidated and closed on September 19, 2014.

—

Merger and acquisition related expenses recognized during the current quarter approximated $3,450 which was higher than the estimate previously communicated. The increase was primarily due to higher than expected data processing charges related to deconversion, as well as expenses related to disposal of fixed assets and certain lease termination arrangements.

—

The Company previously announced that the total FSB tangible book value (“TBV”) accretion was estimated to approximate $0.45 per share or 6.3%. The higher than estimated merger expenses discussed above had the effect of decreasing the estimated accretion to $0.43 per share or 6.0%. We expect to recognize additional merger expenses in 4Q14, but do not expect it to be a material amount.

—

Net interest margin (“NIM”) decreased to 4.23% in the current quarter compared to 4.37% in the prior quarter primarily due to the integration of FSB for a full quarter versus only one month in 2Q14.

—

Stock Repurchase Program announced on October 20, 2014.

Quarterly Condensed Consolidated Statements of Operations (unaudited)

For the quarter ended:

9/30/14

6/30/14

3/31/14

12/31/13

9/30/13

Interest income

$

37,347

$

33,079

$

29,782

$

25,479

$

26,034

Interest expense

2,097

1,822

1,589

1,398

1,424

Net interest income

35,250

31,257

28,193

24,081

24,610

Provision (recovery) for loan losses

1,108

117

(464

)

746

(1,309

)

(Recovery) provision for loan losses- PCI loans

(153

)

(223

)

423

(563

)

36

Net interest income after loan loss provision

34,295

31,363

28,234

23,898

25,883

Correspondent banking and capital markets division- income

5,142

5,285

3,931

4,025

3,771

Gain on sale of securities available for sale

—

46

—

22

—

FDIC- IA amortization (negative accretion) (1)

(4,953

)

(5,006

)

(5,185

)

(4,500

)

(3,836

)

FDIC- revenue (2)

213

421

1,268

185

3,333

All other non-interest income

6,157

5,626

5,746

5,465

5,339

Total non interest income

6,559

6,372

5,760

5,197

8,607

Credit related expenses

624

1,239

523

510

821

FDIC credit related expenses

(209

)

1,136

1,301

1,310

4,934

Correspondent banking and capital markets division-expense

5,036

5,063

4,378

4,683

4,377

Merger and acquisition related expenses

3,450

4,897

2,347

539

183

Branch closure and efficiency initiatives

(6

)

29

3,158

—

—

All other non-interest expense

26,639

23,789

20,696

19,407

19,535

Total non interest expense

35,534

36,153

32,403

26,449

29,850

Income before income tax

5,320

1,582

1,591

2,646

4,640

Income tax provision

1,727

545

538

846

1,531

NET INCOME

$

3,593

$

1,037

$

1,053

$

1,800

$

3,109

Earnings per share (basic) (GAAP)

$

0.08

$

0.03

$

0.03

$

0.06

$

0.10

Earnings per share (diluted) (GAAP)

$

0.08

$

0.03

$

0.03

$

0.06

$

0.10

Net operating income per share (Non-GAAP) (3)

$

0.13

$

0.11

$

0.13

$

0.07

$

0.11

Average common shares outstanding (basic)

45,061

38,665

34,465

30,112

30,110

Average common shares outstanding (diluted)

45,413

39,051

34,863

30,245

30,244

Common shares outstanding at period end

45,209

45,023

35,536

30,112

30,112

note 1:

On the date of an FDIC acquisition (with loss share), the Company estimates expected future losses and the timing of those losses by loan pool. The related reimbursements from the FDIC, pursuant to the specific loss share agreement, of those losses are recorded as a receivable from the FDIC, referred to as indemnification asset or “IA.” The Company updates its estimate of future losses and the timing of the losses each quarter. To the extent management estimates that future losses are less than prior expected future losses, management adjusts its estimates of future expected cash flows and this increase is accreted to interest income over the remaining life of those specific loan pools, increasing the yield on loans. Because management no longer expects these incremental future losses on the loan pool(s), then the expected future reimbursements from the FDIC for the related percentage of loss share are also reduced. Instead of immediately charging down the IA for expected future FDIC reimbursements, the IA is written down over the shorter of the loss share period or the life of the related loan pool(s) by negative accretion (amortization) in this line item.

note 2:

Two FDIC related revenue items are included in this line item. The first item is FDIC reimbursement income from the sale of OREO. When OREO (those covered by loss share agreements) is sold for a loss, the FDIC covered portion of the loss is recognized as income and included in this line item per the coverage breakdown in the table on page 13, Selected Credit Quality Ratios. Second, when a loan pool (with loss share) is impaired, the impairment expense is included in provision for loan losses, and the percentage of the loss that is reimbursable from the FDIC is recognized as income from FDIC reimbursement, and included in this line item as well.

 note 3:

This non-gaap metric represents gaap net income excluding nonrecurring income and expense items net of the effective tax rate for the period presented. Items excluded are gains on sales of securities held for sale, acquisition and merger related expenses and one time charges related to the Company’s efficiency and profitability initiatives announced last quarter, which include impairment charges on the real estate of several of the branches closed during April 2014, divided by the average diluted common shares outstanding. A reconciliation table is presented on page 19, Explanation of Certain Unaudited Non-GAAP Financial Measures.

Quarterly Condensed Segment Information—Correspondent banking and capital markets division (unaudited)

For the quarter ended:

9/30/14

6/30/14

3/31/14

12/31/13

9/30/13

Net interest income

$

801

$

740

$

707

$

748

$

725

Total non-interest income (note 1)

5,142

5,285

3,931

4,025

3,771

Total non-interest expense (note 2)

(5,036

)

(5,063

)

(4,378

)

(4,683

)

(4,377

)

Income tax provision

(350

)

(371

)

(100

)

(35

)

(46

)

Net income

$

557

$

591

$

160

$

55

$

73

Contribution to diluted earnings per share

$

0.01

$

0.02

$

—

$

—

$

—

Allocation of indirect expense net of inter-company earnings credit, net of income tax benefit (note 3)

$

(284

)

$

(120

)

$

(150

)

$

(353

)

$

(303

)

Contribution to diluted earnings per share after deduction of allocated indirect expenses

$

0.01

$

0.01

$

—

$

(0.01

)

$

(0.01

)

note 1:

The primary component in this line item is gross commissions earned on bond sales, fees from hedging services, loan brokering fees and related consulting fees which were $4,184, $4,192, $3,148, $3,236 and $2,909 for 3Q14, 2Q14, 1Q14, 4Q13 and 3Q13 respectively. The fee income in this category is based on sales volume in any particular period and is therefore volatile between comparable periods. The remaining non interest income items in this category, which are less volatile, include fees from safe-keeping activities, bond accounting services, asset/liability consulting related activities, international wires, clearing and corporate checking account services, and other correspondent banking related revenue and fees.

note 2:

A significant portion of these expenses are variable in nature and are a derivative of the income from bond sales, hedging services, brokering loans sales and related consulting services identified in note 1 above. The variable expenses related to these fees identified in note 1 above were $2,336, $2,308, $1,713, $1,716 and $1,589 for 3Q14, 2Q14, 1Q14, 4Q13 and 3Q13 respectively. Expenses in this line item do not include any indirect support allocation costs.

note 3:

A portion of the cost of the Company’s indirect departments such as human resources, accounting, deposit operations, item processing, information technology, compliance and others have been allocated to the correspondent banking and capital markets division based on management’s estimates. In addition, commencing in 1Q14, an inter-company earnings credit is allocated to the segment for services provided to the commercial bank segment, also based on management’s estimates and judgment.

PCI loans

FDIC covered loans

$

264,689

covered by FDIC loss share

$

264,689

PCI loans

44,949

not covered by FDIC

41,715

non-PCI loans

$

309,638

total PCI loan portfolio

$

306,404

total FDIC covered loans

est rem

percentage

Loss

Unpaid

life of

of losses

end of

Share

Principal

Carrying

Difference (2)

loans in

reimbursable

loss share

Term

Balance

Balance

$

%

years(1)

from FDIC

period

IA

Olde Cypress

5 yrs

$

9,974

$

7,099

($2,875

)

29

%

6.8

80%

July 2015

$

254

10 yrs

36,092

28,971

(7,121

)

20

%

7.6

80%

July 2020

10,051

Comm Bank Bartow

5 yrs

3,687

2,932

(755

)

20

%

2.7

80%

Aug 2015

332

10 yrs

15,526

11,360

(4,166

)

27

%

7.3

80%

Aug 2020

3,218

Independent Nat’l Bank

5 yrs

20,921

17,725

(3,196

)

15

%

2.0

80%

Aug 2015

982

10 yrs

20,666

16,101

(4,565

)

22

%

8.0

80%

Aug 2020

4,431

First Guaranty Bank

5 yrs

75,011

51,015

(23,996

)

32

%

3.7

80%

Jan 2017

18,896

10 yrs

44,852

34,990

(9,862

)

22

%

6.8

80%

Jan 2022

7,578

Central FL State Bank

5 yrs

14,059

8,647

(5,412

)

38

%

1.7

80%

Jan 2017

4,563

10 yrs

6,337

4,875

(1,462

)

23

%

4.8

80%

Jan 2022

1,199

First Commercial Bank

5 yrs

104,138

88,970

(15,168

)

15

%

2.4

70%/30%/75%

Jan 2016

2,080

10 yrs

6,875

5,758

(1,117

)

16

%

2.7

70%/30%/75%

Jan 2021

257

Haven Trust Bank

5 yrs

27,714

24,658

(3,056

)

11

%

2.7

70%/0%/70%

Sept 2015

—

10 yrs

4,246

3,303

(943

)

22

%

3.0

70%/0%/70%

Sept 2020

191

Total

$

390,098

$

306,404

($83,694

)

21

%

4.2

$

54,032

(1)

This represents an estimate of the weighted average life or timing of the estimated future cash flows as of September 30, 2014.

(2)

Represents the dollar amount difference between the carrying value, or book value, of the loans and the unpaid principal balance (“UPB”), and the dollar amount difference as a percentage of the UPB.

Year

Year

2014 (3 months)

$

4,666

2018

$

2,152

2015

10,605

2019

1,817

2016

6,905

2020 thru 2022

1,655

2017

2,803

Total

$

30,603

Balance at 12/31/13

$

73,877

Effect of FSB acquisition

2,636

Amortization, net

(15,097

) 

Indemnification revenue

1,864

Indemnification of foreclosure expenses

307

Proceeds received from FDIC

(9,593

) 

Impairment of loan pool(s)

38

Balance 9/30/14

$

54,032

Loan mix (unaudited)

At quarter ended:

9/30/14

6/30/14

3/31/14

12/31/13

9/30/13

Loans

Real estate loans

Residential

$

572,244

$

563,293

$

495,450

$

458,331

$

449,224

Commercial

1,136,595

1,091,660

736,406

528,710

529,172

Land, development and construction loans

78,514

78,444

60,726

62,503

60,375

Total real estate loans

1,787,353

1,733,397

1,292,582

1,049,544

1,038,771

Commercial loans

282,753

251,741

217,482

143,263

126,451

Consumer and other loans

55,527

56,191

54,205

49,547

49,065

Total loans before unearned fees and costs

2,125,633

2,041,329

1,564,269

1,242,354

1,214,287

Unearned fees and costs

856

820

565

404

135

Total Non-PCI loans (note 1)

2,126,489

2,042,149

1,564,834

1,242,758

1,214,422

PCI loans

Real estate loans

Residential

106,335

119,005

117,879

120,030

124,027

Commercial

165,006

195,157

112,558

100,012

109,285

Land, development and construction loans

26,250

27,885

11,144

6,381

5,673

Total real estate loans

297,591

342,047

241,581

226,423

238,985

Commercial loans

11,226

10,759

8,118

3,850

3,906

Consumer and other loans

821

1,064

1,101

1,148

1,259

Total PCI loans (note 2)

309,638

353,870

250,800

231,421

244,150

Total Loans

$

2,436,127

$

2,396,019

$

1,815,634

$

1,474,179

$

1,458,572

note 1:

Included in the $2,126,489 Non-PCI loans at September 30, 2014 are $41,715 that are covered by FDIC loss sharing agreements the Company acquired pursuant to its June 1, 2014 acquisition of FSB.

note 2:

Included in the $309,638 PCI loans at September 30, 2014 are $264,689 of loans that are covered by FDIC loss sharing agreements and $44,949 are not covered.

Sep 30, 2014

June 30, 2014

increase (decrease)

loan

ALLL

loan

ALLL

loan

ALLL

balance

balance

%

balance

balance

%

balance

balance

Non impaired loans

$

1,349,696

$

17,058

1.26

%

$

1,240,084

$

16,383

1.32

%

$

109,612

$

675

-6 bps

Gulfstream loans (note 1)

291,140

—

—

%

299,823

—

—

%

(8,683

)

First Southern loans (note 2)

458,958

—

—

%

474,979

—

—

%

(16,021

)

Impaired loans

26,695

1,977

7.41

%

27,263

1,857

6.81

%

(568

)

120

60 bps

Non-PCI loans

2,126,489

19,035

0.90

%

2,042,149

18,240

0.89

%

84,340

795

1 bps

PCI loans (note 3)

309,638

807

353,870

960

(44,232

)

(153

)

Total loans

$

2,436,127

$

19,842

0.81

%

$

2,396,019

$

19,200

0.80

%

$

40,108

$

642

1 bps

note 1:

Loans acquired in the Company’s January 17, 2014 acquisition of Gulfstream Business Bank that are not PCI loans. These are performing loans recorded at estimated fair value at the acquisition date. The fair value adjustment at the acquisition date was approximately $7,680, or approximately 2.3% of the outstanding aggregate loan balances. This amount is accreted into interest income over the remaining lives of the related loans on a level yield basis, but remains adequate at September 30, 2014, and therefore no provision for loan loss was recorded related to these loans at September 30, 2014.

note 2:

Loans acquired in the Company’s June 1, 2014 acquisition of FSB that are not PCI loans. These are performing loans recorded at estimated fair value at the acquisition date. The fair value adjustment at the acquisition date was approximately $9,725, or approximately 2.0% of the outstanding aggregate loan balances. This amount is accreted into interest income over the remaining lives of the related loans on a level yield basis, but remains adequate at September 30, 2014, and therefore no provision for loan loss was recorded related to these loans at September 30, 2014. Included in the $458,958 of FSB non-PCI loans are $41,715 of loans that are covered by FDIC loss sharing agreements.

note 3:

Included in the $309,638 PCI loans at September 30, 2014 are $264,689 of loans that are covered by FDIC loss sharing agreements.

Allowance for loan losses (unaudited)

as of or for the quarter ending

9/30/14

6/30/14

3/31/14

12/31/13

9/30/13

Loans, excluding PCI loans

Allowance at beginning of period

$

18,240

$

18,913

$

19,694

$

19,265

$

21,800

Charge-offs

(869

)

(902

)

(1,160

)

(774

)

(1,570

)

Recoveries

556

112

843

457

344

Net charge-offs

(313

)

(790

)

(317

)

(317

)

(1,226

)

Provision (recovery) for loan losses

1,108

117

(464

)

746

(1,309

)

Allowance at end of period for loans other than PCI loans

$

19,035

$

18,240

$

18,913

$

19,694

$

19,265

PCI loans

Allowance at beginning of period

$

960

$

1,183

$

760

$

2,056

$

2,020

Charge-offs

—

—

—

(733

)

—

Recoveries

—

—

—

—

—

Net charge-offs

—

—

—

(733

)

—

(Recovery) provision for loan losses

(153

)

(223

)

423

(563

)

36

Allowance at end of period for PCI loans

$

807

$

960

$

1,183

$

760

$

2,056

Total allowance at end of period

$

19,842

$

19,200

$

20,096

$

20,454

$

21,321

(unaudited)

For the quarter ended:

9/30/14

6/30/14

3/31/14

12/31/13

9/30/13

Troubled debt restructure (“TDRs”) (note 1)

$

15,006

$

14,940

$

14,986

$

15,447

$

15,811

Impaired loans that were not TDRs

11,689

12,323

11,569

8,663

24,069

Total impaired loans

26,695

27,263

26,555

24,110

39,880

Acquired Gulfstream loans

291,140

299,823

319,665

—

—

Acquired FSB loans

458,958

474,979

—

—

—

All other non-impaired loans

1,349,696

1,240,084

1,218,614

1,218,648

1,174,542

Total Non-PCI loans

2,126,489

2,042,149

1,564,834

1,242,758

1,214,422

Total PCI loans

309,638

353,870

250,800

231,421

244,150

Total loans

$

2,436,127

$

2,396,019

$

1,815,634

$

1,474,179

$

1,458,572

ALLL for Non-PCI loans

Specific loan loss allowance- impaired loans

$

1,977

$

1,857

$

1,919

$

1,811

$

784

General loan loss allowance- Gulfstream loans

—

—

—

n/a

n/a

General loan loss allowance- FSB loans

—

—

n/a

n/a

n/a

General loan loss allowance- non impaired

17,058

16,383

16,994

17,883

18,481

Total allowance for loan losses (note 2)

$

19,035

$

18,240

$

18,913

$

19,694

$

19,265

ALLL as a percentage of period end loans:

Impaired loans

7.41

%

6.81

%

7.23

%

7.51

%

1.97

%

Acquired Gulfstream loans

—

%

—

%

—

%

n/a

n/a

Acquired First Southern loans

—

%

—

%

n/a

n/a

n/a

All other non impaired loans

1.26

%

1.32

%

1.39

%

1.47

%

1.57

%

Total loans (note 2)

0.90

%

0.89

%

1.21

%

1.58

%

1.58

%

note 1:

The Company has approximately $15,006 of TDRs. Of this amount $11,951 are performing pursuant to their modified terms, and $3,055 are not performing and have been placed on non-accrual status and included in non performing loans (“NPLs”). Current accounting standards require TDRs to be included in our impaired loans, whether they are performing or not performing. Only non performing TDRs are included in NPLs.

note 2:

Excludes PCI loans.

Selected credit quality ratios (unaudited)

As of or for the quarter ended:

9/30/14

6/30/14

3/31/14

12/31/13

9/30/13

Non-accrual loans (note 1)

$

31,067

$

29,667

$

30,689

$

27,077

$

21,104

Past due loans 90 days or more and still accruing interest (note 1)

—

—

—

—

—

Total non-performing loans (“NPLs”) (note 1)

31,067

29,667

30,689

27,077

21,104

Other real estate owned (“OREO”) (note 2)

10,899

12,123

9,895

6,409

4,804

Repossessed assets other than real estate (note 1)

150

133

135

150

141

Total non-performing assets (“NPAs”) (note 2)

$

42,116

$

41,923

$

40,719

$

33,636

$

26,049

OREO covered by FDIC loss share agreements:

80% covered

9,732

10,423

13,892

19,111

21,633

75% covered

606

1,052

—

—

—

30% covered

12,580

16,349

—

—

—

0% covered

2,534

2,874

—

—

—

Total non-performing assets including

FDIC covered OREO

$

67,568

$

72,621

$

54,611

$

52,747

$

47,682

Non-performing loans as percentage of total loans excluding PCI loans

1.46

%

1.45

%

1.96

%

2.18

%

1.74

%

Non-performing assets as percentage of total assets

Excluding FDIC covered OREO

1.16

%

1.07

%

1.35

%

1.39

%

1.12

%

Including FDIC covered OREO

1.86

%

1.86

%

1.82

%

2.18

%

2.04

%

Non-performing assets as percentage of loans and

OREO plus other repossessed assets (note 1)

Excluding FDIC covered OREO

1.97

%

2.04

%

2.59

%

2.69

%

2.13

%

Including FDIC covered OREO

3.12

%

3.48

%

3.44

%

4.16

%

3.84

%

Loans past due 30 thru 89 days and accruing interest as a percentage of total loans (note 1)

0.55

%

0.64

%

0.77