UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

WASHINGTON,
D.C. 20549








FORM 10-Q





(Mark one)

| | x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ---------------------------------------------------------------------------------------

| |  | FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2012
| |  | --------------------------------------------



| |  ̈ | TRANSITION REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES 	EXCHANGE ACT OF 1934
| | - | -----------------------------------------------------------------------------------------

For the transition period from _______to_______



Commission file number 000-53149



SERVISFIRST
BANCSHARES, INC.

(Exact Name of Registrant as Specified in
Its Charter)



|Delaware                        | 26-0734029         
|------------------------------- | -------------------
|(State or Other Jurisdiction of | (I.R.S. Employer   
|Incorporation or Organization)  | Identification No.)



|850 Shades Creek Parkway, Birmingham, Alabama | 35209     
|--------------------------------------------- | ----------
|(Address of Principal Executive Offices)      | (Zip Code)



(205) 949-0302

(Registrant's Telephone Number, Including
Area Code)



Indicate by check mark whether the registrant:
(1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No  ̈



Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the  preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).

Yes  ̈
No  ̈



Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition
of “large accelerated filer”, “accelerated filer”, and small reporting company” in Rule 12b-2 of
the Exchange Act (Check one):



Large accelerated filer
 ̈ Accelerated filer x Non-accelerated
filer  ̈ Smaller reporting company  ̈



Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Act). Yes  ̈ No x



Indicate the number of shares outstanding
of each of the issuer’s classes of common stock, as of the latest practical date.



|Class                         |  | Outstanding as of July 30, 2012
|----------------------------- |  | -------------------------------
|Common stock, $.001 par value |  | 6,005,318                      


















TABLE OF CONTENTS



|PART I. FINANCIAL INFORMATION                
|---------------------------------------------
|Item 1.                                      
|Item 2.                                      
|Item 3.                                      
|Item 4.                                      
|                                             
|PART II. OTHER INFORMATION                   
|Item 1                                       
|Item 1A.                                     
|Item 2.                                      
|Item 3.                                      
|Item 4.                                      
|Item 5.                                      
|Item 6.                                      
|                                             
|EX-31.01 SECTION 302 CERTIFICATION OF THE CEO
|EX-31.02 SECTION 302 CERTIFICATION OF THE CFO
|EX-32.01 SECTION 906 CERTIFICATION OF THE CEO
|EX-32.02 SECTION 906 CERTIFICATION OF THE CFO



2







PART 1. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS



SERVISFIRST BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS JUNE 30,
2012 AND DECEMBER 31, 2011

(In thousands, except share and per share
amounts)



|                                                                                                                                                                                                                                      |  | June 30, 2012 |           |   | December 31, 2011 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | --------- | - | ----------------- | -
|                                                                                                                                                                                                                                      |  | (Unaudited)   |           |   | (Audited)         |  
|ASSETS                                                                                                                                                                                                                                |  |               |           |   |                   |  
|Cash and due from banks                                                                                                                                                                                                               |  | $             | 42,332    |   |                   | $
|Interest-bearing balances due from depository institutions                                                                                                                                                                            |  |               | 29,002    |   |                   |  
|Federal funds sold                                                                                                                                                                                                                    |  |               | 84,468    |   |                   |  
|Cash and cash equivalents                                                                                                                                                                                                             |  |               | 155,802   |   |                   |  
|Available for sale debt securities, at fair value                                                                                                                                                                                     |  |               | 296,508   |   |                   |  
|Held to maturity debt securities (fair value of $22,193 and $15,999 at June 30, 2012 and December 31, 2011, respectively)                                                                                                             |  |               | 21,011    |   |                   |  
|Restricted equity securities                                                                                                                                                                                                          |  |               | 4,018     |   |                   |  
|Mortgage loans held for sale                                                                                                                                                                                                          |  |               | 15,000    |   |                   |  
|Loans                                                                                                                                                                                                                                 |  |               | 2,022,589 |   |                   |  
|Less allowance for loan losses                                                                                                                                                                                                        |  |               | (23,239   | ) |                   |  
|Loans, net                                                                                                                                                                                                                            |  |               | 1,999,350 |   |                   |  
|Premises and equipment, net                                                                                                                                                                                                           |  |               | 6,032     |   |                   |  
|Accrued interest and dividends receivable                                                                                                                                                                                             |  |               | 8,057     |   |                   |  
|Deferred tax assets                                                                                                                                                                                                                   |  |               | 5,738     |   |                   |  
|Other real estate owned                                                                                                                                                                                                               |  |               | 9,834     |   |                   |  
|Bank owned life insurance contracts                                                                                                                                                                                                   |  |               | 41,165    |   |                   |  
|Other assets                                                                                                                                                                                                                          |  |               | 7,728     |   |                   |  
|Total assets                                                                                                                                                                                                                          |  | $             | 2,570,243 |   |                   | $
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                                                                  |  |               |           |   |                   |  
|Liabilities:                                                                                                                                                                                                                          |  |               |           |   |                   |  
|Deposits:                                                                                                                                                                                                                             |  |               |           |   |                   |  
|Noninterest-bearing                                                                                                                                                                                                                   |  | $             | 467,344   |   |                   | $
|Interest-bearing                                                                                                                                                                                                                      |  |               | 1,773,558 |   |                   |  
|Total deposits                                                                                                                                                                                                                        |  |               | 2,240,902 |   |                   |  
|Federal funds purchased                                                                                                                                                                                                               |  |               | 80,205    |   |                   |  
|Other borrowings                                                                                                                                                                                                                      |  |               | -         |   |                   |  
|Trust preferred securities                                                                                                                                                                                                            |  |               | 30,514    |   |                   |  
|Accrued interest payable                                                                                                                                                                                                              |  |               | 935       |   |                   |  
|Other liabilities                                                                                                                                                                                                                     |  |               | 2,819     |   |                   |  
|Total liabilities                                                                                                                                                                                                                     |  |               | 2,355,375 |   |                   |  
|Stockholders' equity:                                                                                                                                                                                                                 |  |               |           |   |                   |  
|Preferred stock, Series A Senior Non-Cumulative Perpetual, par value $.001 (liquidation preference $1,000), net of discount; 40,000 shares authorized, 40,000 shares issued and outstanding at June 30, 2012 and at December 31, 2011 |  |               | 39,958    |   |                   |  
|Preferred stock, par value $.001 per share; 1,000,000 authorized and 960,000 currently undesignated                                                                                                                                   |  |               | -         |   |                   |  
|Common stock, par value $.001 per share; 15,000,000 shares authorized; 6,004,318 shares issued and outstanding at June 30, 2012 and 5,932,182 shares issued and outstanding at December 31, 2011                                      |  |               | 6         |   |                   |  
|Additional paid-in capital                                                                                                                                                                                                            |  |               | 89,324    |   |                   |  
|Retained earnings                                                                                                                                                                                                                     |  |               | 77,968    |   |                   |  
|Accumulated other comprehensive income                                                                                                                                                                                                |  |               | 7,612     |   |                   |  
|Total stockholders' equity                                                                                                                                                                                                            |  |               | 214,868   |   |                   |  
|Total liabilities and stockholders' equity                                                                                                                                                                                            |  | $             | 2,570,243 |   |                   | $
|See Notes to Consolidated Financial Statements.                                                                                                                                                                                       |  |               |           |   |                   |  



3







SERVISFIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share and per share
amounts)

(Unaudited)



|                                                    |  | Three Months Ended |        |  | Six Months Ended |  
|--------------------------------------------------- |  | ------------------ | ------ |  | ---------------- | -
|                                                    |  | June 30,           |        |  | June 30,         |  
|                                                    |  | 2012               |        |  | 2011             |  
|Interest income:                                    |  |                    |        |  |                  |  
|Interest and fees on loans                          |  | $                  | 24,438 |  |                  | $
|Taxable securities                                  |  |                    | 1,302  |  |                  |  
|Nontaxable securities                               |  |                    | 814    |  |                  |  
|Federal funds sold                                  |  |                    | 42     |  |                  |  
|Other interest and dividends                        |  |                    | 58     |  |                  |  
|Total interest income                               |  |                    | 26,654 |  |                  |  
|Interest expense:                                   |  |                    |        |  |                  |  
|Deposits                                            |  |                    | 3,028  |  |                  |  
|Borrowed funds                                      |  |                    | 721    |  |                  |  
|Total interest expense                              |  |                    | 3,749  |  |                  |  
|Net interest income                                 |  |                    | 22,905 |  |                  |  
|Provision for loan losses                           |  |                    | 3,083  |  |                  |  
|Net interest income after provision for loan losses |  |                    | 19,822 |  |                  |  
|Noninterest income:                                 |  |                    |        |  |                  |  
|Service charges on deposit accounts                 |  |                    | 719    |  |                  |  
|Mortgage banking                                    |  |                    | 879    |  |                  |  
|Securities gains                                    |  |                    | -      |  |                  |  
|Increase in cash surrender value life insurance     |  |                    | 385    |  |                  |  
|Other operating income                              |  |                    | 445    |  |                  |  
|Total noninterest income                            |  |                    | 2,428  |  |                  |  
|Noninterest expenses:                               |  |                    |        |  |                  |  
|Salaries and employee benefits                      |  |                    | 5,248  |  |                  |  
|Equipment and occupancy expense                     |  |                    | 961    |  |                  |  
|Professional services                               |  |                    | 306    |  |                  |  
|FDIC and other regulatory assessments               |  |                    | 356    |  |                  |  
|OREO expense                                        |  |                    | 536    |  |                  |  
|Other operating expenses                            |  |                    | 2,488  |  |                  |  
|Total noninterest expenses                          |  |                    | 9,895  |  |                  |  
|Total interest income                               |  |                    | 12,355 |  |                  |  
|Provision for income taxes                          |  |                    | 4,024  |  |                  |  
|Net income                                          |  |                    | 8,331  |  |                  |  
|Preferred stock dividends                           |  |                    | 100    |  |                  |  
|Net income available to common stockholders         |  | $                  | 8,231  |  |                  | $
|                                                    |  |                    |        |  |                  |  
|Basic earnings per common share                     |  | $                  | 1.38   |  |                  | $
|                                                    |  |                    |        |  |                  |  
|Diluted earnings per common share                   |  | $                  | 1.21   |  |                  | $
|                                                    |  |                    |        |  |                  |  
|See Notes to Consolidated Financial Statements.     |  |                    |        |  |                  |  



4







SERVISFIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME

(In thousands)

(Unaudited)



|                                                                                                                                                                                                                                                                    |  | Three Months Ended |       |  | Six Months Ended |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ----- |  | ---------------- | -
|                                                                                                                                                                                                                                                                    |  | June 30,           |       |  | June 30,         |  
|                                                                                                                                                                                                                                                                    |  | 2012               |       |  | 2011             |  
|Net income                                                                                                                                                                                                                                                          |  | $                  | 8,331 |  |                  | $
|Other comprehensive income, net of tax:                                                                                                                                                                                                                             |  |                    |       |  |                  |  
|Unrealized holding gains arising during period from securities available for sale, net of tax of $245 and $178 for the three and six months ended June 30, 2012, respectively, and $1,550 and $1,713 for the three and six months ended June 30, 2011, respectively |  |                    | 454   |  |                  |  
|Reclassification adjustment for net gains on sale of securities in net income, net of tax of $184 and $234 for the three and six months ended June 30, 2011, respectively                                                                                           |  |                    | -     |  |                  |  
|Other comprehensive income, net of tax                                                                                                                                                                                                                              |  |                    | 454   |  |                  |  
|Comprehensive income                                                                                                                                                                                                                                                |  | $                  | 8,785 |  |                  | $
|                                                                                                                                                                                                                                                                    |  |                    |       |  |                  |  
|See Notes to Consolidated Financial Statements                                                                                                                                                                                                                      |  |                    |       |  |                  |  



5







SERVISFIRST BANCSHARES, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS'
EQUITY

SIX MONTHS ENDED JUNE 30, 2012

(In thousands, except share amounts)

(Unaudited)





|                                                                  |  |           |        |  |        |   |   |            |  |   |          |  |  | Accumulated   |        |   |               |  
|----------------------------------------------------------------- |  | --------- | ------ |  | ------ | - | - | ---------- |  | - | -------- |  |  | ------------- | ------ | - | ------------- | -
|                                                                  |  |           |        |  |        |   |   | Additional |  |   |          |  |  | Other         |        |   | Total         |  
|                                                                  |  | Preferred |        |  | Common |   |   | Paid-in    |  |   | Retained |  |  | Comprehensive |        |   | Stockholders' |  
|                                                                  |  | Stock     |        |  | Stock  |   |   | Capital    |  |   | Earnings |  |  | Income        |        |   | Equity        |  
|Balance, December 31, 2011                                        |  | $         | 39,958 |  |        | $ | 6 |            |  | $ | 87,805   |  |  | $             | 61,581 |   |               | $
|Preferred dividends paid                                          |  |           | -      |  |        |   | - |            |  |   | -        |  |  |               | (200   | ) |               |  
|Exercise 72,136 stock options and warrants, including tax benefit |  |           | -      |  |        |   | - |            |  |   | 997      |  |  |               | -      |   |               |  
|Other comprehensive income                                        |  |           | -      |  |        |   | - |            |  |   | -        |  |  |               | -      |   |               |  
|Stock-based compensation expense                                  |  |           | -      |  |        |   | - |            |  |   | 522      |  |  |               | -      |   |               |  
|Net income                                                        |  |           | -      |  |        |   | - |            |  |   | -        |  |  |               | 16,587 |   |               |  
|Balance, June 30, 2012                                            |  | $         | 39,958 |  |        | $ | 6 |            |  | $ | 89,324   |  |  | $             | 77,968 |   |               | $



See Notes to Consolidated Financial Statements



6







SERVISFIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(In thousands) (Unaudited)



|                                                                              |  | 2012 |          |   | 2011 |  
|----------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | -
|OPERATING ACTIVITIES                                                          |  |      |          |   |      |  
|Net income                                                                    |  | $    | 16,587   |   |      | $
|Adjustments to reconcile net income to net cash provided by                   |  |      |          |   |      |  
|Deferred tax benefit                                                          |  |      | (703     | ) |      |  
|Provision for loan losses                                                     |  |      | 5,466    |   |      |  
|Depreciation and amortization                                                 |  |      | 604      |   |      |  
|Net amortization of investments                                               |  |      | 529      |   |      |  
|Market value adjustment of interest rate cap                                  |  |      | 9        |   |      |  
|Decrease in accrued interest and dividends receivable                         |  |      | 136      |   |      |  
|Stock-based compensation expense                                              |  |      | 522      |   |      |  
|(Decrease) increase in accrued interest payable                               |  |      | (10      | ) |      |  
|Proceeds from sale of mortgage loans held for sale                            |  |      | 121,731  |   |      |  
|Originations of mortgage loans held for sale                                  |  |      | (117,006 | ) |      |  
|Gain on sale of securities available for sale                                 |  |      | -        |   |      |  
|Gain on sale of mortgage loans held for sale                                  |  |      | (1,866   | ) |      |  
|Net loss (gain) on sale of other real estate owned                            |  |      | 62       |   |      |  
|Write down of other real estate owned                                         |  |      | 420      |   |      |  
|Decrease in special prepaid FDIC insurance assessments                        |  |      | 626      |   |      |  
|Increase in cash surrender value of life insurance contracts                  |  |      | (775     | ) |      |  
|Loss on prepayment of other borrowings                                        |  |      | -        |   |      |  
|Net change in other assets, liabilities, and other operating activities       |  |      | (2,109   | ) |      |  
|Net cash provided by operating activities                                     |  |      | 24,223   |   |      |  
|INVESTMENT ACTIVITIES                                                         |  |      |          |   |      |  
|Purchase of securities available for sale                                     |  |      | (31,223  | ) |      |  
|Proceeds from maturities, calls and paydowns of securities available for sale |  |      | 28,544   |   |      |  
|Purchase of securities held to maturity                                       |  |      | (6,005   | ) |      |  
|Proceeds from maturities, calls and paydowns of securities held to maturity   |  |      | 203      |   |      |  
|Increase in loans                                                             |  |      | (196,384 | ) |      |  
|Purchase of premises and equipment                                            |  |      | (2,045   | ) |      |  
|Purchase of restricted equity securities                                      |  |      | (787     | ) |      |  
|Proceeds from sale of securities available for sale                           |  |      | -        |   |      |  
|Proceeds from sale of restricted equity securities                            |  |      | 270      |   |      |  
|Proceeds from sale of other real estate owned and repossessions               |  |      | 2,239    |   |      |  
|Net cash used in investing activities                                         |  |      | (205,188 | ) |      |  
|FINANCING ACTIVITIES                                                          |  |      |          |   |      |  
|Net increase in noninterest-bearing deposits                                  |  |      | 48,534   |   |      |  
|Net increase in interest-bearing deposits                                     |  |      | 48,481   |   |      |  
|Net increase in federal funds purchased                                       |  |      | 940      |   |      |  
|Proceeds from sale of common stock, net                                       |  |      | 997      |   |      |  
|Proceeds from sale of preferred stock, net                                    |  |      | -        |   |      |  
|Repayment of other borrowings                                                 |  |      | (4,918   | ) |      |  
|Dividends on preferred stock                                                  |  |      | (200     | ) |      |  
|Net cash provided by financing activities                                     |  |      | 93,834   |   |      |  
|Net decrease in cash and cash equivalents                                     |  |      | (87,131  | ) |      |  
|Cash and cash equivalents at beginning of year                                |  |      | 242,933  |   |      |  
|Cash and cash equivalents at end of year                                      |  | $    | 155,802  |   |      | $
|SUPPLEMENTAL DISCLOSURE                                                       |  |      |          |   |      |  
|Cash paid for:                                                                |  |      |          |   |      |  
|Interest                                                                      |  | $    | 7,592    |   |      | $
|Income taxes                                                                  |  |      | 8,691    |   |      |  
|NONCASH TRANSACTIONS                                                          |  |      |          |   |      |  
|Transfers of loans from held for sale to held for investment                  |  | $    | -        |   |      | $
|Other real estate acquired in settlement of loans                             |  |      | 304      |   |      |  
|Internally financed sales of other real estate owned                          |  |      | 24       |   |      |  



See Notes to Consolidated Financial Statements.



7







SERVISFIRST BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

(Unaudited)



NOTE 1 - GENERAL



The accompanying consolidated financial statements in this report
have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, including Regulation
S-X and the instructions for Form 10-Q, and have not been audited. These consolidated financial statements do not include all of
the information and footnotes required by U. S. generally accepted accounting principles (“U.S. GAAP”) for complete
financial statements. In the opinion of management, all adjustments necessary to present fairly the consolidated financial position
and the consolidated results of operations for the interim periods have been made. All such adjustments are of a normal nature.
The consolidated results of operations are not necessarily indicative of the consolidated results of operations which ServisFirst
Bancshares, Inc. (the “Company”) may achieve for future interim periods or the entire year. For further information,
refer to the consolidated financial statements and footnotes included in the Company’s Form 10-K for the year ended December
31, 2011.



All reported amounts are in thousands except share and per share
data.



NOTE 2 - CASH AND CASH EQUIVALENTS



Cash on hand, cash items in process of collection, amounts due
from banks, and federal funds sold are included in cash and cash equivalents.



NOTE 3 - EARNINGS PER COMMON SHARE



Basic earnings per common share are computed by dividing net
income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted
earnings per common share include the dilutive effect of additional potential common shares issuable under stock options and warrants,
as well as the potential common shares issuable upon possible conversion of the preferred securities described in Note 11 to the
consolidated financial statements.



8







|                                                                                                               |  | Three Months Ended June 30,                      |           |  | Six Months Ended June 30, |  
|-------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------ | --------- |  | ------------------------- | -
|                                                                                                               |  | 2012                                             |           |  | 2011                      |  
|                                                                                                               |  | (In Thousands, Except Shares and Per Share Data) |          
|Earnings per common share                                                                                      |  |                                                  |           |  |                           |  
|Weighted average common shares outstanding                                                                     |  |                                                  | 5,981,218 |  |                           |  
|Net income available to common stockholders                                                                    |  | $                                                | 8,231     |  |                           | $
|Basic earnings per common share                                                                                |  | $                                                | 1.38      |  |                           | $
|                                                                                                               |  |                                                  |           |  |                           |  
|Weighted average common shares outstanding                                                                     |  |                                                  | 5,981,218 |  |                           |  
|Dilutive effects of assumed conversions and exercise of stock options and warrants                             |  |                                                  | 952,346   |  |                           |  
|Weighted average common and dilutive potential
    common shares outstanding                                   |  |                                                  | 6,933,564 |  |                           |  
|Net income available to common stockholders                                                                    |  | $                                                | 8,231     |  |                           | $
|Effect of interest expense on covertible debt, net of tax and discretionary expenditures related to conversion |  |                                                  | 142       |  |                           |  
|Net income available to common stockholders, adjusted for effect of debt conversion                            |  | $                                                | 8,373     |  |                           | $
|Diluted earnings per common share                                                                              |  | $                                                | 1.21      |  |                           | $



NOTE 4 - SECURITIES



The amortized cost and fair value of available-for-sale and
held-to-maturity securities at June 30, 2012 and December 31, 2011 are summarized as follows:



|                                                |  |                |         |  | Gross      |   |        | Gross      |  |   |        |  
|----------------------------------------------- |  | -------------- | ------- |  | ---------- | - | ------ | ---------- |  | - | ------ | -
|                                                |  | Amortized      |         |  | Unrealized |   |        | Unrealized |  |   | Market |  
|                                                |  | Cost           |         |  | Gain       |   |        | Loss       |  |   | Value  |  
|                                                |  | (In Thousands) |        
|June 30, 2012                                   |  |                |         |  |            |   |        |            |  |   |        |  
|Securities Available for Sale                   |  |                |         |  |            |   |        |            |  |   |        |  
|U.S. Treasury and government sponsored agencies |  | $              | 86,643  |  |            | $ | 1,272  |            |  | $ | -      |  
|Mortgage-backed securities                      |  |                | 84,665  |  |            |   | 4,672  |            |  |   | (7     | )
|State and municipal securities                  |  |                | 107,733 |  |            |   | 5,766  |            |  |   | (36    | )
|Corporate debt                                  |  |                | 5,756   |  |            |   | 44     |            |  |   | -      |  
|Total                                           |  |                | 284,797 |  |            |   | 11,754 |            |  |   | (43    | )
|Securities Held to Maturity                     |  |                |         |  |            |   |        |            |  |   |        |  
|Mortgage-backed securities                      |  |                | 15,476  |  |            |   | 651    |            |  |   | (24    | )
|State and municipal securities                  |  |                | 5,535   |  |            |   | 555    |            |  |   | -      |  
|Total                                           |  | $              | 21,011  |  |            | $ | 1,206  |            |  | $ | (24    | )
|                                                |  |                |         |  |            |   |        |            |  |   |        |  
|December 31, 2011                               |  |                |         |  |            |   |        |            |  |   |        |  
|Securities Available for Sale                   |  |                |         |  |            |   |        |            |  |   |        |  
|U.S. Treasury and government sponsored agencies |  | $              | 98,169  |  |            | $ | 1,512  |            |  | $ | (59    | )
|Mortgage-backed securities                      |  |                | 88,118  |  |            |   | 4,462  |            |  |   | -      |  
|State and municipal securities                  |  |                | 95,331  |  |            |   | 5,230  |            |  |   | (35    | )
|Corporate debt                                  |  |                | 1,029   |  |            |   | 52     |            |  |   | -      |  
|Total                                           |  |                | 282,647 |  |            |   | 11,256 |            |  |   | (94    | )
|Securities Held to Maturity                     |  |                |         |  |            |   |        |            |  |   |        |  
|Mortgage-backed securities                      |  |                | 9,676   |  |            |   | 410    |            |  |   | -      |  
|State and municipal securities                  |  |                | 5,533   |  |            |   | 380    |            |  |   | -      |  
|Total                                           |  | $              | 15,209  |  |            | $ | 790    |            |  | $ | -      |  



9







All mortgage-backed securities are with
government-sponsored enterprises (GSEs) such as Federal National Mortgage Association, Government National Mortgage Association,
Federal Home Loan Bank, and Federal Home Loan Mortgage Corporation.



The following table identifies, as of June
30, 2012 and December 31, 2011, the Company’s investment securities that have been in a continuous unrealized loss position
for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months. At June 30, 2012,
none of the Company’s 553 debt securities had been in an unrealized loss position for 12 or more months. The Company does
not intend to sell these securities and it is more likely than not that the Company will not be required to sell the securities
before recovery of their amortized cost, which may be maturity; accordingly, the Company does not consider these securities to
be other-than-temporarily impaired at June 30, 2012. Further, the Company believes any deterioration in value of its current investment
securities is attributable to changes in market interest rates and not credit quality of the issuer.



|                                                    |  | Less Than Twelve Months |     |   | Twelve Months or More |   |        | Total      | 
|--------------------------------------------------- |  | ----------------------- | --- | - | --------------------- | - | ------ | ---------- | 
|                                                    |  | Gross                   |     |   |                       |   |        | Gross      | 
|                                                    |  | Unrealized              |     |   |                       |   |        | Unrealized | 
|                                                    |  | Losses                  |     |   | Fair Value            |   |        | Losses     | 
|                                                    |  | (In Thousands)          |    
|June 30, 2012                                       |  |                         |     |   |                       |   |        |            | 
|U.S. Treasury and government
    sponsored agencies |  | $                       | -   |   |                       | $ | -      |            | 
|Mortgage-backed securities                          |  |                         | (31 | ) |                       |   | 5,902  |            | 
|State and municipal securities                      |  |                         | (36 | ) |                       |   | 7,500  |            | 
|Corporate
    debt                                  |  |                         | -   |   |                       |   | -      |            | 
|Total                                               |  | $                       | (67 | ) |                       | $ | 13,402 |            | 
|                                                    |  |                         |     |   |                       |   |        |            | 
|December 31, 2011                                   |  |                         |     |   |                       |   |        |            | 
|U.S. Treasury and government
    sponsored agencies |  | $                       | (59 | ) |                       | $ | 15,074 |            | 
|State and municipal securities                      |  |                         | (35 | ) |                       |   | 4,559  |            | 
|Corporate
    debt                                  |  |                         | -   |   |                       |   | -      |            | 
|Total                                               |  | $                       | (94 | ) |                       | $ | 19,633 |            | 



10







NOTE 5 – LOANS



The following table details the Company’s
loans at June 30, 2012 and December 31, 2011:



|                                       |  | June 30,               |           |   | December 31, |  
|-------------------------------------- |  | ---------------------- | --------- | - | ------------ | -
|                                       |  | 2012                   |           |   | 2011         |  
|                                       |  | (Dollars In Thousands) |          
|Commercial, financial and agricultural |  | $                      | 856,823   |   |              | $
|Real estate - construction             |  |                        | 148,486   |   |              |  
|Real estate - mortgage:                |  |                        |           |   |              |  
|Owner-occupied commercial              |  |                        | 490,204   |   |              |  
|1-4 family mortgage                    |  |                        | 229,036   |   |              |  
|Other mortgage                         |  |                        | 254,295   |   |              |  
|Subtotal: Real estate - mortgage       |  |                        | 973,535   |   |              |  
|Consumer                               |  |                        | 43,745    |   |              |  
|Total Loans                            |  |                        | 2,022,589 |   |              |  
|Less: Allowance for loan losses        |  |                        | (23,239   | ) |              |  
|Net Loans                              |  | $                      | 1,999,350 |   |              | $
|                                       |  |                        |           |   |              |  
|Commercial, financial and agricultural |  |                        | 42.36     | % |              |  
|Real estate - construction             |  |                        | 7.34      | % |              |  
|Real estate - mortgage:                |  |                        |           |   |              |  
|Owner-occupied commercial              |  |                        | 24.24     | % |              |  
|1-4 family mortgage                    |  |                        | 11.33     | % |              |  
|Other mortgage                         |  |                        | 12.57     | % |              |  
|Subtotal: Real estate - mortgage       |  |                        | 48.14     | % |              |  
|Consumer                               |  |                        | 2.16      | % |              |  
|Total Loans                            |  |                        | 100.00    | % |              |  



The credit quality of the loan portfolio
is summarized no less frequently than quarterly using categories similar to the standard asset classification system used by the
federal banking agencies. The following table presents credit quality indicators for the loan loss portfolio segments and classes.
These categories are utilized to develop the associated allowance for loan losses using historical losses adjusted for current
economic conditions defined as follows:



| | · | Pass – loans which are well protected by the current net worth and paying capacity of the
obligor (or obligors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Special Mention – loans with potential weakness that may, if not reversed or corrected, weaken
the credit or inadequately protect the Company’s position at some future date. These loans are not adversely classified and
do not expose an institution to sufficient risk to warrant an adverse classification.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



11







| | · | Substandard – loans that exhibit well-defined weakness or weaknesses that presently jeopardize
debt repayment. These loans are characterized by the distinct possibility that the institution will sustain some loss if the weaknesses
are not corrected.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Doubtful – loans that have all the weaknesses inherent in loans classified substandard, plus
the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions,
and values highly questionable and improbable.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Loans by
credit quality indicator as of June 30, 2012 andDecember 31, 2011were as follows:



|                                      |  |                |           |  | Special |   |        |             |  |   |          |  |  |       |  
|------------------------------------- |  | -------------- | --------- |  | ------- | - | ------ | ----------- |  | - | -------- |  |  | ----- | -
|June 30, 2012                         |  | Pass           |           |  | Mention |   |        | Substandard |  |   | Doubtful |  |  | Total |  
|                                      |  | (In Thousands) |          
|Commercial, financialand agricultural |  | $              | 840,432   |  |         | $ | 10,379 |             |  | $ | 6,012    |  |  | $     | -
|Real estate - construction            |  |                | 117,852   |  |         |   | 8,295  |             |  |   | 22,339   |  |  |       | -
|Real estate - mortgage:               |  |                |           |  |         |   |        |             |  |   |          |  |  |       |  
|Owner-occupied commercial             |  |                | 477,066   |  |         |   | 7,097  |             |  |   | 6,041    |  |  |       | -
|1-4 family mortgage                   |  |                | 216,338   |  |         |   | 6,614  |             |  |   | 6,084    |  |  |       | -
|other mortgage                        |  |                | 243,987   |  |         |   | 6,884  |             |  |   | 3,424    |  |  |       | -
|Total real estate mortgage            |  |                | 937,391   |  |         |   | 20,595 |             |  |   | 15,549   |  |  |       | -
|Consumer                              |  |                | 43,393    |  |         |   | 86     |             |  |   | 266      |  |  |       | -
|Total                                 |  | $              | 1,939,068 |  |         | $ | 39,355 |             |  | $ | 44,166   |  |  | $     | -



|                                      |  |                |           |  | Special |   |        |             |  |   |          |  |  |       |  
|------------------------------------- |  | -------------- | --------- |  | ------- | - | ------ | ----------- |  | - | -------- |  |  | ----- | -
|December 31, 2011                     |  | Pass           |           |  | Mention |   |        | Substandard |  |   | Doubtful |  |  | Total |  
|                                      |  | (In Thousands) |          
|Commercial, financialand agricultural |  | $              | 780,270   |  |         | $ | 11,775 |             |  | $ | 7,419    |  |  | $     | -
|Real estate - construction            |  |                | 117,244   |  |         |   | 14,472 |             |  |   | 19,502   |  |  |       | -
|Real estate - mortgage:               |  |                |           |  |         |   |        |             |  |   |          |  |  |       |  
|Owner-occupied commercial             |  |                | 385,084   |  |         |   | 7,333  |             |  |   | 6,184    |  |  |       | -
|1-4 family mortgage                   |  |                | 194,447   |  |         |   | 4,835  |             |  |   | 5,900    |  |  |       | -
|other mortgage                        |  |                | 224,807   |  |         |   | 7,034  |             |  |   | 3,410    |  |  |       | -
|Total real estate mortgage            |  |                | 804,338   |  |         |   | 19,202 |             |  |   | 15,494   |  |  |       | -
|Consumer                              |  |                | 40,353    |  |         |   | 96     |             |  |   | 577      |  |  |       | -
|Total                                 |  | $              | 1,742,205 |  |         | $ | 45,545 |             |  | $ | 42,992   |  |  | $     | -



12







Loans by
performance status as of June 30, 2012 andDecember 31, 2011were
as follows:



|June 30, 2012                          |  | Performing     |           |  | Nonperforming |   |        | Total | 
|-------------------------------------- |  | -------------- | --------- |  | ------------- | - | ------ | ----- | 
|                                       |  | (In Thousands) |          
|Commercial, financial and agricultural |  | $              | 856,367   |  |               | $ | 456    |       | 
|Real estate - construction             |  |                | 140,971   |  |               |   | 7,515  |       | 
|Real estate - mortgage:                |  |                |           |  |               |   |        |       | 
|Owner-occupied commercial              |  |                | 487,247   |  |               |   | 2,957  |       | 
|1-4 family mortgage                    |  |                | 228,568   |  |               |   | 468    |       | 
|other mortgage                         |  |                | 253,602   |  |               |   | 693    |       | 
|Total real estate mortgage             |  |                | 969,417   |  |               |   | 4,118  |       | 
|Consumer                               |  |                | 43,709    |  |               |   | 36     |       | 
|Total                                  |  | $              | 2,010,464 |  |               | $ | 12,125 |       | 



|December 31, 2011                      |  | Performing     |           |  | Nonperforming |   |        | Total | 
|-------------------------------------- |  | -------------- | --------- |  | ------------- | - | ------ | ----- | 
|                                       |  | (In Thousands) |          
|Commercial, financial and agricultural |  | $              | 798,285   |  |               | $ | 1,179  |       | 
|Real estate - construction             |  |                | 141,155   |  |               |   | 10,063 |       | 
|Real estate - mortgage:                |  |                |           |  |               |   |        |       | 
|Owner-occupied commercial              |  |                | 397,809   |  |               |   | 792    |       | 
|1-4 family mortgage                    |  |                | 204,512   |  |               |   | 670    |       | 
|other mortgage                         |  |                | 234,558   |  |               |   | 693    |       | 
|Total real estate mortgage             |  |                | 836,879   |  |               |   | 2,155  |       | 
|Consumer                               |  |                | 40,651    |  |               |   | 375    |       | 
|Total                                  |  | $              | 1,816,970 |  |               | $ | 13,772 |       | 



13







Loans by past due status as of
June 30, 2012 andDecember 31, 2011were
as follows:



|June 30, 2012                              |  | Past Due Status (Accruing Loans) |       |  |            |   |     |          |  |   |            | 
|------------------------------------------ |  | -------------------------------- | ----- |  | ---------- | - | --- | -------- |  | - | ---------- | 
|                                           |  |                                  |       |  |            |   |     |          |  |   | Total Past | 
|                                           |  | 30-59 Days                       |       |  | 60-89 Days |   |     | 90+ Days |  |   | Due        | 
|                                           |  | (In Thousands)                   |      
|Commercial,
    financial and agricultural |  | $                                | 469   |  |            | $ | 7   |          |  | $ | -          | 
|Real estate - construction                 |  |                                  | 1,925 |  |            |   | -   |          |  |   | -          | 
|Real estate - mortgage:                    |  |                                  |       |  |            |   |     |          |  |   |            | 
|Owner-occupied commercial                  |  |                                  | -     |  |            |   | -   |          |  |   | -          | 
|1-4 family mortgage                        |  |                                  | 16    |  |            |   | 389 |          |  |   | -          | 
|Other
    mortgage                         |  |                                  | -     |  |            |   | -   |          |  |   | -          | 
|Total
    real estate - mortgage           |  |                                  | 16    |  |            |   | 389 |          |  |   | -          | 
|Consumer                                   |  |                                  | 34    |  |            |   | 2   |          |  |   | -          | 
|Total                                      |  | $                                | 2,444 |  |            | $ | 398 |          |  | $ | -          | 



|December 31, 2011                          |  | Past Due Status (Accruing Loans) |       |  |            |   |    |          |  |   |            | 
|------------------------------------------ |  | -------------------------------- | ----- |  | ---------- | - | -- | -------- |  | - | ---------- | 
|                                           |  |                                  |       |  |            |   |    |          |  |   | Total Past | 
|                                           |  | 30-59 Days                       |       |  | 60-89 Days |   |    | 90+ Days |  |   | Due        | 
|                                           |  | (In Thousands)                   |      
|Commercial,
    financial and agricultural |  | $                                | -     |  |            | $ | -  |          |  | $ | -          | 
|Real estate - construction                 |  |                                  | 2,234 |  |            |   | -  |          |  |   | -          | 
|Real estate - mortgage:                    |  |                                  |       |  |            |   |    |          |  |   |            | 
|Owner-occupied commercial                  |  |                                  | -     |  |            |   | -  |          |  |   | -          | 
|1-4 family mortgage                        |  |                                  | 2,107 |  |            |   | -  |          |  |   | -          | 
|Other
    mortgage                         |  |                                  | -     |  |            |   | -  |          |  |   | -          | 
|Total
    real estate - mortgage           |  |                                  | 2,107 |  |            |   | -  |          |  |   | -          | 
|Consumer                                   |  |                                  | -     |  |            |   | 84 |          |  |   | -          | 
|Total                                      |  | $                                | 4,341 |  |            | $ | 84 |          |  | $ | -          | 



The Company assesses the adequacy of its
allowance for loan losses prior to the end of each calendar quarter. The level of the allowance is based on management’s
evaluation of the loan portfolios, past loan loss experience, current asset quality trends, known and inherent risks in the portfolio,
adverse situations that may affect the borrower’s ability to repay (including the timing of future payment), the estimated
value of any underlying collateral, composition of the loan portfolio, economic conditions, industry and peer bank loan quality
indications and other pertinent factors, including regulatory recommendations. This evaluation is inherently subjective as it requires
material estimates including the amounts and timing of future cash flows expected to be received on impaired loans that may be
susceptible to significant change. Loan losses are charged off when management believes that the full collectability of the loan
is unlikely. A loan may be partially charged-off after a “confirming event” has occurred which serves to validate that
full repayment pursuant to the terms of the loan is unlikely. Allocation of the allowance is made for specific loans, but the entire
allowance is available for any loan that in management’s judgment deteriorates and is uncollectible. The unallocated portion
of the reserve is management’s evaluation of potential future losses that would arise in the loan portfolio should management’s
assumption about qualitative and environmental conditions materialize. The unallocated portion of the allowance for loan losses
is based on management’s judgment regarding various external and internal factors including macroeconomic trends, management’s
assessment of the Company’s loan growth prospects, and evaluations of internal risk controls.



14







The following table presents an analysis
of the allowance for loan losses by portfolio segment as of June 30, 2012 and December 31, 2011. The total allowance for loan losses
is disaggregated into those amounts associated with loans individually evaluated and those associated with loans collectively evaluated.



15







|                           |  | Commercial,                          |       |   |               |   |        |               |  |   |          |   |  |             |      |   |       |  
|-------------------------- |  | ------------------------------------ | ----- | - | ------------- | - | ------ | ------------- |  | - | -------- | - |  | ----------- | ---- | - | ----- | -
|                           |  | financial and                        |       |   | Real estate - |   |        | Real estate - |  |   |          |   |  |             |      |   |       |  
|                           |  | agricultural                         |       |   | construction  |   |        | mortgage      |  |   | Consumer |   |  | Unallocated |      |   | Total |  
|                           |  | (In Thousands)                       |      
|                           |  | Three
    Months Ended June 30, 2012 |      
|Allowance for loan losses: |  |                                      |       |   |               |   |        |               |  |   |          |   |  |             |      |   |       |  
|Balance at March 31, 2012  |  | $                                    | 6,625 |   |               | $ | 7,607  |               |  | $ | 3,893    |   |  | $           | 510  |   |       | $
|Chargeoffs                 |  |                                      | (261  | ) |               |   | (2,502 | )             |  |   | (221     | ) |  |             | (537 | ) |       |  
|Recoveries                 |  |                                      | -     |   |               |   | 8      |               |  |   | 4        |   |  |             | 3    |   |       |  
|Provision                  |  |                                      | 147   |   |               |   | 2,469  |               |  |   | (36      | ) |  |             | 309  |   |       |  
|Balance at June 30, 2012   |  | $                                    | 6,511 |   |               | $ | 7,582  |               |  | $ | 3,640    |   |  | $           | 285  |   |       | $



|                           |  | Three
    Months Ended June 30, 2011 |      
|-------------------------- |  | ------------------------------------ | -----
|Allowance for loan losses: |  |                                      |      
|Balance at March 31, 2011  |  | $                                    | 6,241
|Chargeoffs                 |  |                                      | (310 
|Recoveries                 |  |                                      | -    
|Provision                  |  |                                      | (109 
|Balance at June 30, 2011   |  | $                                    | 5,822



|                             |  | Six
    Months Ended June 30, 2012 |      
|---------------------------- |  | ---------------------------------- | -----
|Allowance for loan losses:   |  |                                    |      
|Balance at December 31, 2011 |  | $                                  | 6,627
|Chargeoffs                   |  |                                    | (548 
|Recoveries                   |  |                                    | 100  
|Provision                    |  |                                    | 332  
|Balance at June 30, 2012     |  | $                                  | 6,511



|                             |  | Six
    Months Ended June 30, 2011 |      
|---------------------------- |  | ---------------------------------- | -----
|Allowance for loan losses:   |  |                                    |      
|Balance at December 31, 2010 |  | $                                  | 5,348
|Chargeoffs                   |  |                                    | (860 
|Recoveries                   |  |                                    | -    
|Provision                    |  |                                    | 1,334
|Balance at June 30, 2011     |  | $                                  | 5,822



|                                      |  | As
    of June 30, 2012 |        
|------------------------------------- |  | ----------------------- | -------
|Individually Evaluated for Impairment |  | $                       | 372    
|Collectively Evaluated for Impairment |  |                         | 6,139  
|                                      |  |                         |        
|Loans:                                |  |                         |        
|Ending Balance                        |  | $                       | 856,823
|Individually Tested for Impairment    |  |                         | 3,960  
|Collectively Evaluated for Impairment |  | $                       | 852,863



|                                      |  | As
    of December 31, 2011 |        
|------------------------------------- |  | --------------------------- | -------
|                                      |  |                             |        
|Allowance for loan losses:            |  | $                           | 6,627  
|                                      |  |                             |        
|Individually Evaluated for Impairment |  | $                           | 1,382  
|Collectively Evaluated for Impairment |  |                             | 5,245  
|                                      |  |                             |        
|Loans:                                |  |                             |        
|Ending Balance                        |  | $                           | 799,464
|Individually Evaluated for Impairment |  |                             | 5,578  
|Collectively Evaluated for Impairment |  |                             | 793,886



16







The following table presents details of
the Company’s impaired loans as of June 30, 2012 and December 31, 2011, respectively. Loans which have been fully charged
off do not appear in the tables.



|                                           |  |                |        |  |           |   |        |           |  |   | For the three months |  |  | For the six months |       
|------------------------------------------ |  | -------------- | ------ |  | --------- | - | ------ | --------- |  | - | -------------------- |  |  | ------------------ | ------
|                                           |  |                |        |  |           |   |        |           |  |   | ended June 30,       |  |  | ended June 30,     |       
|                                           |  | June 30, 2012  |        |  | 2012      |   |        | 2012      | 
|                                           |  |                |        |  |           |   |        |           |  |   |                      |  |  | Interest           |       
|                                           |  |                |        |  | Unpaid    |   |        |           |  |   | Average              |  |  | Income             |       
|                                           |  | Recorded       |        |  | Principal |   |        | Related   |  |   | Recorded             |  |  | Recognized         |       
|                                           |  | Investment     |        |  | Balance   |   |        | Allowance |  |   | Investment           |  |  | in Period          |       
|                                           |  | (In Thousands) |       
|With
    no allowance recorded:            |  |                |        |  |           |   |        |           |  |   |                      |  |  |                    |       
|Commercial,
    financialand agricultural  |  | $              | 2,555  |  |           | $ | 2,873  |           |  | $ | -                    |  |  | $                  | 1,902 
|Real estate - construction                 |  |                | 8,772  |  |           |   | 10,234 |           |  |   | -                    |  |  |                    | 8,832 
|Real estate - mortgage:                    |  |                |        |  |           |   |        |           |  |   |                      |  |  |                    |       
|Owner-occupied commercial                  |  |                | 5,735  |  |           |   | 5,735  |           |  |   | -                    |  |  |                    | 5,752 
|1-4 family mortgage                        |  |                | 1,635  |  |           |   | 1,636  |           |  |   | -                    |  |  |                    | 1,632 
|Other
    mortgage                         |  |                | 1,456  |  |           |   | 1,456  |           |  |   | -                    |  |  |                    | 1,419 
|Total real estate - mortgage               |  |                | 8,826  |  |           |   | 8,827  |           |  |   | -                    |  |  |                    | 8,803 
|Consumer                                   |  |                | 36     |  |           |   | 610    |           |  |   | -                    |  |  |                    | 138   
|Total
    with no allowance recorded       |  |                | 20,189 |  |           |   | 22,544 |           |  |   | -                    |  |  |                    | 19,675
|                                           |  |                |        |  |           |   |        |           |  |   |                      |  |  |                    |       
|With
    an allowance recorded:            |  |                |        |  |           |   |        |           |  |   |                      |  |  |                    |       
|Commercial, financial
    and agricultural |  |                | 1,405  |  |           |   | 1,405  |           |  |   | 372                  |  |  |                    | 1,418 
|Real estate - construction                 |  |                | 10,757 |  |           |   | 11,898 |           |  |   | 1,748                |  |  |                    | 11,109
|Real estate - mortgage:                    |  |                |        |  |           |   |        |           |  |   |                      |  |  |                    |       
|Owner-occupied commercial                  |  |                | 74     |  |           |   | 74     |           |  |   | 43                   |  |  |                    | 80    
|1-4 family mortgage                        |  |                | 4,197  |  |           |   | 4,418  |           |  |   | 811                  |  |  |                    | 4,413 
|Other
    mortgage                         |  |                | 1,730  |  |           |   | 1,730  |           |  |   | 92                   |  |  |                    | 1,734 
|Total real estate - mortgage               |  |                | 6,001  |  |           |   | 6,222  |           |  |   | 946                  |  |  |                    | 6,227 
|Consumer                                   |  |                | 202    |  |           |   | 202    |           |  |   | 63                   |  |  |                    | 173   
|Total
    with allowance recorded          |  |                | 18,365 |  |           |   | 19,727 |           |  |   | 3,129                |  |  |                    | 18,927
|                                           |  |                |        |  |           |   |        |           |  |   |                      |  |  |                    |       
|Total
    Impaired Loans:                  |  |                |        |  |           |   |        |           |  |   |                      |  |  |                    |       
|Commercial, financial
    and agricultural |  |                | 3,960  |  |           |   | 4,278  |           |  |   | 372                  |  |  |                    | 3,320 
|Real estate - construction                 |  |                | 19,529 |  |           |   | 22,132 |           |  |   | 1,748                |  |  |                    | 19,941
|Real estate - mortgage:                    |  |                |        |  |           |   |        |           |  |   |                      |  |  |                    |       
|Owner-occupied commercial                  |  |                | 5,809  |  |           |   | 5,809  |           |  |   | 43                   |  |  |                    | 5,832 
|1-4 family mortgage                        |  |                | 5,832  |  |           |   | 6,054  |           |  |   | 811                  |  |  |                    | 6,045 
|Other
    mortgage                         |  |                | 3,186  |  |           |   | 3,186  |           |  |   | 92                   |  |  |                    | 3,153 
|Total real estate - mortgage               |  |                | 14,827 |  |           |   | 15,049 |           |  |   | 946                  |  |  |                    | 15,030
|Consumer                                   |  |                | 238    |  |           |   | 812    |           |  |   | 63                   |  |  |                    | 311   
|Total
    impaired loans                   |  | $              | 38,554 |  |           | $ | 42,271 |           |  | $ | 3,129                |  |  | $                  | 38,602



17







|December 31, 2011                    
|-------------------------------------
|                                     
|                                     
|                                     
|                                     
|                                     
|With no allowance recorded:          
|Commercial, financialand agricultural
|Real estate - construction           
|Owner-occupied commercial            
|1-4 family mortgage                  
|Other mortgage                       
|Total real estate - mortgage         
|Consumer                             
|Total with no allowance recorded     
|                                     
|With an allowance recorded:          
|Commercial, financialand agricultural
|Real estate - construction           
|Real estate - mortgage:              
|Owner-occupied commercial            
|1-4 family mortgage                  
|Other mortgage                       
|Total real estate - mortgage         
|Consumer                             
|Total with allowance recorded        
|                                     
|Total Impaired Loans:                
|Commercial, financialand agricultural
|Real estate - construction           
|Real estate - mortgage:              
|Owner-occupied commercial            
|1-4 family mortgage                  
|Other mortgage                       
|Total real estate - mortgage         
|Consumer                             
|Total impaired loans                 



Troubled Debt Restructurings (“TDR”)
at June 30, 2012, December 31, 2011 and June 30, 2011 totaled $8.4 million, $4.5 million and $5.8 million, respectively. At June
30, 2012, the Company had a related allowance for loan losses of $433,000 allocated to these TDRs, compared to $439,000 at December
31, 2011 and $465,000 at June 30, 2011. The Company had three TDR loans to one borrower in the amount of $2.8 million enter into
payment default status during the first quarter of 2012. All other loans classified as TDRs as of June 30, 2012 are performing
as agreed under the terms of their restructured plans. The following table presents an analysis of TDRs as of June 30, 2012 and
June 30, 2011.



18







|                                           |  | June 30, 2012  |                                                                          |  | June 30, 2011 |  
|------------------------------------------ |  | -------------- | ------------------------------------------------------------------------ |  | ------------- | -
|                                           |  |                |                                                                          |  | Pre-          |  
|                                           |  |                |                                                                          |  | Modification  |  
|                                           |  |                |                                                                          |  | Outstanding   |  
|                                           |  | Number of      |                                                                          |  | Recorded      |  
|                                           |  | Contracts      |                                                                          |  | Investment    |  
|                                           |  | (In Thousands) |                                                                         
|Troubled Debt Restructurings               |  |                |                                                                          |  |               |  
|Commercial,
    financial and agricultural |  |                | 2                                                                        |  |               | $
|Real estate - construction                 |  |                | 15                                                                       |  |               |  
|Real estate - mortgage:                    |  |                |                                                                          |  |               |  
|Owner-occupied commercial                  |  |                | 3                                                                        |  |               |  
|1-4 family mortgage                        |  |                | 5                                                                        |  |               |  
|Other
    mortgage                         |  |                | 1                                                                        |  |               |  
|Total real estate mortgage                 |  |                | 9                                                                        |  |               |  
|Consumer                                   |  |                | -                                                                        |  |               |  
|                                           |  |                | 26                                                                       |  |               | $
|                                           |  |                |                                                                          |  |               |  
|                                           |  |                | Number
                                                               of |  |               |  
|                                           |  |                | Contracts                                                                |  |               |  
|                                           |  |                |                                                                          |  |               |  
|Troubled Debt Restructurings               |  |                |                                                                          |  |               |  
|That Subsequently Defaulted                |  |                |                                                                          |  |               |  
|Commercial, financial
    andagricultural  |  |                | -                                                                        |  |               | $
|Real estate - construction                 |  |                | -                                                                        |  |               |  
|Real estate - mortgage:                    |  |                |                                                                          |  |               |  
|Owner-occupiedcommercial                   |  |                | 3                                                                        |  |               |  
|1-4 family mortgage                        |  |                | -                                                                        |  |               |  
|Other
    mortgage                         |  |                | -                                                                        |  |               |  
|Total real estate - mortgage               |  |                | 3                                                                        |  |               |  
|Consumer                                   |  |                | -                                                                        |  |               |  
|                                           |  |                | 3                                                                        |  |               | $



NOTE 6 - EMPLOYEE AND DIRECTOR BENEFITS



Stock Options



At June 30, 2012, the Company had stock-based
compensation plans, as described below. The compensation cost that has been charged to earnings for the plans was approximately
$262,000 and $522,000 for the three and six months ended June 30, 2012 and $240,000 and $465,000 for the three and six months ended
June 30, 2011.



The Company’s 2005 Amended and Restated
Stock Option Plan allows for the grant of stock options to purchase up to 1,025,000 shares of the Company’s common stock.
The Company’s 2009 Stock Incentive Plan authorizes the grant of up to 425,000 shares and allows for the issuance of Stock
Appreciation Rights, Restricted Stock, Stock Options, Non-stock Share Equivalents, Performance Shares or Performance Units. Both
plans allow for the grant of incentive stock options and non-qualified stock options, and awards are generally granted with an
exercise price equal to the estimated fair market value of the Company’s common stock at the date of grant. The maximum term
of the options granted under the plans is ten years.



19







The Company has granted non-plan options
to certain persons representing key business relationships to purchase up to an aggregate amount of 55,000 shares of the Company’s
common stock at prices between $15.00 and $20.00 per share with a term of ten years. These options are non-qualified and not part
of either plan.



The Company estimates the fair value of
each stock option award using a Black-Scholes-Merton valuation model that uses the assumptions noted in the following table. Expected
volatilities are based on an index of southeastern United States publicly traded banks. The expected term for options granted is
based on the short-cut method and represents the period of time that options granted are expected to be outstanding. The risk-free
rate for periods within the contractual life of the option is based on the U. S. Treasury yield curve in effect at the time of
grant.



|                         |  | 2012 |         |   | 2011 | 
|------------------------ |  | ---- | ------- | - | ---- | 
|Expected volatility      |  |      | 20.00   | % |      | 
|Expected dividends       |  |      | -       | % |      | 
|Expected term (in years) |  |      | 6 years |   |      | 
|Risk-free rate           |  |      | 1.02    | % |      | 



The weighted average grant-date fair value
of options granted during the six months ended June 30, 2012 and June 30, 2011 was $6.43 and $8.54, respectively.



The following table summarizes stock option
activity during the six months ended June 30, 2012 and June 30, 2011:



|                                |  |        |           |   |          |   |       | Weighted     |  |  |                | 
|------------------------------- |  | ------ | --------- | - | -------- | - | ----- | ------------ |  |  | -------------- | 
|                                |  |        |           |   | Weighted |   |       | Average      |  |  |                | 
|                                |  |        |           |   | Average  |   |       | Remaining    |  |  | Aggregate      | 
|                                |  |        |           |   | Exercise |   |       | Contractual  |  |  | Intrinsic      | 
|                                |  | Shares |           |   | Price    |   |       | Term (years) |  |  | Value          | 
|                                |  |        |           |   |          |   |       |              |  |  | (In Thousands) | 
|Six Months Ended June 30, 2012: |  |        |           |   |          |   |       |              |  |  |                | 
|Outstanding at January 1, 2012  |  |        | 1,073,800 |   |          | $ | 18.33 |              |  |  | 6.0            | 
|Granted                         |  |        | 36,500    |   |          |   | 30.00 |              |  |  | 9.7            | 
|Exercised                       |  |        | (52,136   | ) |          |   | 11.00 |              |  |  | 3.6            | 
|Outstanding at June 30, 2012    |  |        | 1,058,164 |   |          |   | 19.11 |              |  |  | 5.8            | 
|                                |  |        |           |   |          |   |       |              |  |  |                | 
|Exercisable at June 30, 2012    |  |        | 434,706   |   |          | $ | 13.31 |              |  |  | 3.9            | 
|                                |  |        |           |   |          |   |       |              |  |  |                | 
|Six Months Ended June 30, 2011: |  |        |           |   |          |   |       |              |  |  |                | 
|Outstanding at January 1, 2011  |  |        | 881,000   |   |          | $ | 15.65 |              |  |  | 6.9            | 
|Granted                         |  |        | 166,500   |   |          |   | 26.05 |              |  |  | 9.6            | 
|Exercised                       |  |        | (5,000    | ) |          |   | 10.50 |              |  |  | 4.4            | 
|Outstanding at June 30, 2011    |  |        | 1,042,500 |   |          |   | 17.34 |              |  |  | 6.2            | 
|                                |  |        |           |   |          |   |       |              |  |  |                | 
|Exercisable at June 30, 2011    |  |        | 332,459   |   |          | $ | 12.71 |              |  |  | 4.8            | 



As of June 30, 2012, there was $1,940,000
of total unrecognized compensation cost related to non-vested stock options. The cost is expected to be recognized on the straight-line
method over the next 5.8 years.



20







Restricted Stock



The Company has issued restricted stock
to a certain executive officer and five other employees, and currently has 26,000 non-vested shares issued. The value of restricted
stock awards is determined to be the current value of the Company’s stock, and this total value will be recognized as compensation
expense over the vesting period, which is five years from the date of grant. As of June 30, 2012, there was $362,000 of total unrecognized
compensation cost related to non-vested restricted stock. The cost is expected to be recognized evenly over the remaining 2.5 years
of the restricted stock’s vesting period.



Stock Warrants



In recognition of the efforts and financial
risks undertaken by the organizers of ServisFirst Bank (the “Bank”) in 2005, the Bank granted warrants to organizers
to purchase a total 60,000 shares of common stock at a price of $10, which was the fair market value of the Bank’s common
stock at the date of the grant. The warrants became warrants to purchase a like number of shares of the Company’s common
stock upon the formation of the Company as a holding company for the Bank. The warrants vest in equal annual increments over a
three-year period commencing on the first anniversary date of the Bank’s incorporation and will terminate on the tenth anniversary
of the incorporation date. The total number of these warrants outstanding at June 30, 2012 and June 30, 2011 was 20,000 and 60,000,
respectively.



The Company issued warrants for 75,000
shares of common stock at a price of $25 per share in the third quarter of 2008. These warrants were issued in connection with
the trust preferred securities that are discussed in detail in Note 10.



NOTE 7 - DERIVATIVES



During 2008, the Company entered into interest
rate swaps (“swaps”) to facilitate customer transactions and meet customer financing needs. Upon entering into these
swaps, the Company entered into offsetting positions with a regional correspondent bank in order to minimize the risk to the Company.
As of June 30, 2012, the Company was party to two swaps with notional amounts totaling approximately $11.3 million with customers
and two swaps with notional amounts totaling approximately $11.3 million with a regional correspondent bank. These swaps qualify
as derivatives, but are not designated as hedging instruments. The Company has recorded the value of these swaps at $563,000 in
offsetting entries in other assets and other liabilities.



During 2010, the Company entered into an
interest rate cap with a notional value of $100 million. The cap has a strike rate of 2.00% and is indexed to the three month London
Interbank Offered Rate (“LIBOR”). The cap does not qualify for hedge accounting treatment, and is marked to market,
with changes in market value reflected in interest expense.



The Company has entered into agreements
with secondary market investors to deliver loans on a “best efforts delivery” basis. When a rate is committed to a
borrower, it is based on the best price that day and locked with the investor for the customer for a 30-day period. In the event
the loan is not delivered to the investor, the Company has no risk or exposure with the investor. The interest rate lock commitments
related to loans that are originated for later sale are classified as derivatives. The fair values of the Company’s agreements
with investors and rate lock commitments to customers as of June 30, 2012 and December 31, 2011 were not material.



21







NOTE 8 - RECENT ACCOUNTING PRONOUNCEMENTS



In December 2011, the FASB issued ASU No.
2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities,which amends disclosures by requiring
improved information about financial instruments and derivative instruments that are either offset on the balance sheet or subject
to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset on the balance sheet.
Reporting entities are required to provide both net and gross information for these assets and liabilities in order to enhance
comparability between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that
prepare their financial statements on the basis of international financial reporting standards (“IFRS”). Companies
are required to apply the amendments for fiscal years beginning on or after January 1, 2013, and interim periods within those years.
Retrospective disclosures are required. The Company does not believe this update will have a material impact on its financial position
or results of operations.



In December 2011, the FASB issued ASU No.
2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications
of Items Out of Accumulated Other Comprehensive Income in ASU No. 2011-05, which defers the effective date pertaining to reclassification
adjustments out of other accumulated comprehensive income in ASU 2011-05, until the FASB is able to reconsider those requirements.
All other requirements of ASU 2011-05 are not affected by this update, including the requirement to report comprehensive income
either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should
apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011, which coincide
with the effective dates of the requirements in ASU 2011-05 amended by this update. Adoption of this update by the Company had
no impact on its financial statements.



NOTE 9 - FAIR VALUE MEASUREMENT



Measurement of fair value under U.S. GAAP
establishes a hierarchy that prioritizes observable and unobservable inputs used to measure fair value, as of the measurement date,
into three broad levels, which are described below:



Level 1:Quoted prices (unadjusted) in active
markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority
to Level 1 inputs.

Level 2:Observable prices that are based
on inputs not quoted on active markets, but corroborated by market data.

Level 3:Unobservable inputs are used when
little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.



In determining fair value, the Company
utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent
possible and also considers counterparty credit risk in its assessment of fair value.



Securities. Where quoted prices
are available in an active market, securities are classified within Level 1 of the hierarchy. Level 1 securities include highly
liquid government securities such as U.S. Treasuries and exchange-traded equity securities. For securities traded in secondary
markets for which quoted market prices are not available, the Company generally relies on prices obtained from independent vendors.
Securities measured with these techniques are classified within Level 2 of the hierarchy and often involve using quoted market
prices for similar securities, pricing models or discounted cash flow calculations using inputs observable in the market where
available. Examples include U.S. government agency securities, mortgage-backed securities, obligations of states and political
subdivisions, and certain corporate, asset-backed and other securities. In cases where Level 1 or Level 2 inputs are not available,
securities are classified in Level 3 of the hierarchy.



22







Interest Rate Swap Agreements. The
fair value is estimated by a third party using inputs that are observable or that can be corroborated by observable market data
and, therefore, are classified within Level 2 of the hierarchy. These fair value estimations include primarily market observable
inputs such as yield curves and option volatilities, and include the value associated with counterparty credit risk.



Impaired Loans. Impaired loans are
measured and reported at fair value when full payment under the loan terms is not probable. Impaired loans are carried at the present
value of expected future cash flows using the loan’s existing rate in a discounted cash flow calculation, or the fair value
of the collateral if the loan is collateral-dependent. Expected cash flows are based on internal inputs reflecting expected default
rates on contractual cash flows. This method of estimating fair value does not incorporate the exit-price concept of fair value
described in Accounting Standards Codification (“ASC”) 820-10 and would generally result in a higher value than the
exit-price approach. For loans measured using the estimated fair value of collateral less costs to sell, fair value is generally
determined based on appraisals performed by certified and licensed appraisers using inputs such as absorption rates, capitalization
rates, and market comparables, adjusted for estimated costs to sell. Management modifies the appraised values, if needed, to take
into account recent developments in the market or other factors, such as changes in absorption rates or market conditions from
the time of valuation, and anticipated sales values considering management’s plans for disposition. Such modifications to
the appraised values could result in lower valuations of such collateral. Estimated costs to sell are based on current amounts
of disposal costs for similar assets. These measurements are classified as level 3 within the valuation hierarchy. Impaired loans
are subject to nonrecurring fair value adjustment upon initial recognition or subsequent impairment. A portion of the allowance
for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance. Impaired
loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly based on the
same factors identified above. The amount recognized as an impairment charge related to impaired loans that are measured at fair
value on a nonrecurring basis was $809,000 and $3,700,000 during the three and six months ended June 30, 2012, respectively, and
$1,508,000 and $3,135,000 during the three and six months ended June 30, 2011, respectively.



Other Real Estate Owned. Other real
estate assets (“OREO”) acquired through, or in lieu of, foreclosure are held for sale and are initially recorded at
the lower of cost or fair value, less selling costs. Any write-downs to fair value at the time of transfer to OREO are charged
to the allowance for loan losses subsequent to foreclosure. Values are derived from appraisals of underlying collateral and discounted
cash flow analysis. A loss on the sale and write-downs of OREO of $366,000 and $483,000 was recognized for the three and six months
ended June 30, 2012, respectively, and $144,000 and $91,000 for the three and six months ended June 30, 2011, respectively. These
charges were for write-downs in the value of OREO subsequent to foreclosure and losses on the disposal of OREO. OREO is classified
within Level 3 of the hierarchy.



The following table presents the Company’s
financial assets and financial liabilities carried at fair value on a recurring basis as of June 30, 2012 and December 31, 2011:



23







|                                                |  | Fair Value Measurements at June 30, 2012 Using |   |  |                   |  
|----------------------------------------------- |  | ---------------------------------------------- | - |  | ----------------- | -
|                                                |  | Quoted Prices in                               |   |  |                   |  
|                                                |  | Active Markets                                 |   |  | Significant Other |  
|                                                |  | for Identical                                  |   |  | Observable Inputs |  
|                                                |  | Assets (Level 1)                               |   |  | (Level 2)         |  
|                                                |  | (In Thousands)                                 |  
|Assets Measured on a Recurring Basis:           |  |                                                |   |  |                   |  
|Available-for-sale securities:                  |  |                                                |   |  |                   |  
|U.S. Treasury and government sponsored agencies |  | $                                              | - |  |                   | $
|Mortgage-backed securities                      |  |                                                | - |  |                   |  
|State and municipal securities                  |  |                                                | - |  |                   |  
|Corporate debt                                  |  |                                                | - |  |                   |  
|Interest rate swap agreements                   |  |                                                | - |  |                   |  
|Total assets at fair value                      |  | $                                              | - |  |                   | $
|                                                |  |                                                |   |  |                   |  
|Liabilities Measured on a Recurring Basis:      |  |                                                |   |  |                   |  
|Interest rate swap agreements                   |  | $                                              | - |  |                   | $



|                                                |  | Fair Value Measurements at December 31, 2011 Using |   |  |                   |  
|----------------------------------------------- |  | -------------------------------------------------- | - |  | ----------------- | -
|                                                |  | Quoted Prices in                                   |   |  |                   |  
|                                                |  | Active Markets                                     |   |  | Significant Other |  
|                                                |  | for Identical                                      |   |  | Observable Inputs |  
|                                                |  | Assets (Level 1)                                   |   |  | (Level 2)         |  
|                                                |  | (In Thousands)                                     |  
|Assets Measured on a Recurring Basis:           |  |                                                    |   |  |                   |  
|Available-for-sale securities                   |  |                                                    |   |  |                   |  
|U.S. Treasury and government sponsored agencies |  | $                                                  | - |  |                   | $
|Mortgage-backed securities                      |  |                                                    | - |  |                   |  
|State and municipal securities                  |  |                                                    | - |  |                   |  
|Corporate debt                                  |  |                                                    | - |  |                   |  
|Interest rate swap agreements                   |  |                                                    | - |  |                   |  
|Interest rate cap                               |  |                                                    | - |  |                   |  
|Total assets at fair value                      |  | $                                                  | - |  |                   | $
|                                                |  |                                                    |   |  |                   |  
|Liabilities Measured on a Recurring Basis:      |  |                                                    |   |  |                   |  
|Interest rate swap agreements                   |  | $                                                  | - |  |                   | $



24







The following table presents the Company’s
financial assets and financial liabilities carried at fair value on a nonrecurring basis as of June 30, 2012 and December 31, 2011:





|                                               |  | Fair Value Measurements at June 30, 2012 Using |   |  |                   | 
|---------------------------------------------- |  | ---------------------------------------------- | - |  | ----------------- | 
|                                               |  | Quoted Prices in                               |   |  |                   | 
|                                               |  | Active Markets                                 |   |  | Significant Other | 
|                                               |  | for Identical                                  |   |  | Observable        | 
|                                               |  | Assets (Level 1)                               |   |  | Inputs (Level 2)  | 
|                                               |  | (In Thousands)                                 |  
|Assets Measured on a Nonrecurring Basis:       |  |                                                |   |  |                   | 
|Impaired loans                                 |  | $                                              | - |  |                   | 
|Other real estate owned and repossessed assets |  |                                                | - |  |                   | 
|Total assets at fair value                     |  |                                                | - |  |                   | 







|                                         |  | Fair Value Measurements at December 31, 2011 Using |   |  |                   |  
|---------------------------------------- |  | -------------------------------------------------- | - |  | ----------------- | -
|                                         |  | Quoted Prices in                                   |   |  |                   |  
|                                         |  | Active Markets                                     |   |  | Significant Other |  
|                                         |  | for Identical                                      |   |  | Observable        |  
|                                         |  | Assets (Level 1)                                   |   |  | Inputs (Level 2)  |  
|                                         |  | (In Thousands)                                     |  
|Assets Measured on a Nonrecurring Basis: |  |                                                    |   |  |                   |  
|Impaired loans                           |  | $                                                  | - |  |                   | $
|Other real estate owned                  |  |                                                    | - |  |                   |  
|Total assets at fair value               |  | $                                                  | - |  |                   | $



The fair value of a financial instrument
is the current amount that would be exchanged in a sale between willing parties, other than in a forced liquidation. Fair value
is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s
various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using
present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement
of the instrument. Current U.S. GAAP excludes certain financial instruments and all nonfinancial instruments from its fair value
disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair
value of the Company.



The carrying amount, estimated fair value,
and placement in the fair value hierarchy of the Company’s financial instruments as of June 30, 2012 and December 31, 2011
are presented in the following table. This table includes those financial assets and liabilities that are not measured and reported
at fair value on a recurring basis or nonrecurring basis.



25







|                                          |  | June 30, 2012  |           |  | December 31, 2011 |  
|----------------------------------------- |  | -------------- | --------- |  | ----------------- | -
|                                          |  | Carrying       |           |  |                   |  
|                                          |  | Amount         |           |  | Fair Value        |  
|                                          |  | (In Thousands) |          
|Financial Assets:                         |  |                |           |  |                   |  
|Level 2 inputs:                           |  |                |           |  |                   |  
|Cash and cash equivalents                 |  | $              | 155,802   |  |                   | $
|Investment securities available for sale  |  |                | 284,797   |  |                   |  
|Investment securities held to maturity    |  |                | 21,011    |  |                   |  
|Restricted equity securities              |  |                | 4,018     |  |                   |  
|Mortgage loans held for sale              |  |                | 15,000    |  |                   |  
|Accrued interest and dividends receivable |  |                | 8,057     |  |                   |  
|Bank owned life insurance contracts       |  |                | 41,165    |  |                   |  
|Derivatives                               |  |                | 563       |  |                   |  
|                                          |  |                |           |  |                   |  
|Level 3 inputs:                           |  |                |           |  |                   |  
|Loans, net                                |  |                | 1,999,350 |  |                   |  
|                                          |  |                |           |  |                   |  
|Financial Liabilities:                    |  |                |           |  |                   |  
|Level 2 inputs:                           |  |                |           |  |                   |  
|Deposits                                  |  |                | 2,240,902 |  |                   |  
|Federal funds purchased                   |  |                | 80,205    |  |                   |  
|Borrowings                                |  |                | -         |  |                   |  
|Trust preferred securities                |  |                | 30,514    |  |                   |  
|Accrued interest payable                  |  |                | 935       |  |                   |  
|Derivatives                               |  |                | 563       |  |                   |  



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



Cash and cash equivalents: The carrying
amounts reported in the statements of financial condition for cash and cash equivalents approximate those assets’ fair values.



Investment securities: Fair values
for investment securities held to maturity are generally based on prices provided by independent pricing services. Management evaluates
the reasonableness of prices provided by such services, as well as their underlying pricing methodologies. These measurements are
classified within level 2 of the fair value hierarchy and often involve using quoted market prices for similar securities, pricing
models or discounted cash flow calculations using inputs observable in the market where available.



Restricted equity securities: Fair
values for other investments are considered to be their cost.



Loans: For variable-rate loans that
re-price frequently and with no significant change in credit risk, fair value is based on carrying amounts. The fair value of other
loans (for example, fixed-rate commercial real estate loans, mortgage loans, and industrial loans) is estimated using discounted
cash flow analysis, based on interest rates currently being offered for loans with similar terms to borrowers of similar credit
quality. Loan fair value estimates include judgments regarding future expected loss experience and risk characteristics. The method
of estimating fair value does not incorporate the exit-price concept of fair value as prescribed by ASC 820 and generally produces
a higher value than an exit-price approach. The measurement of the fair value of loans is classified within Level 3 of the fair
value hierarchy.



26







Mortgage loans held for sale:Loans
are committed to be delivered to investors on a “best efforts delivery” basis within 30 days of origination. Due to
this short turn-around time, the carrying amounts of the Company’s agreements approximate their fair values.



Derivatives:The fair values of
the derivative agreements are estimated by a third party using inputs that are observable or can be corroborated by observable
market data, and are therefore classified within Level 2 of the fair value hierarchy.



Accrued interest and dividends receivable:
The carrying amount of accrued interest and dividends receivable approximates its fair value.



Deposits: The fair values disclosed
for demand deposits are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts).
The carrying amounts of variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values.
Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation using interest rates
currently offered for deposits with similar remaining maturities. The fair value of the Company’s time deposits do not take
into consideration the value of the Company’s long-term relationships with depositors, which may have significant value.
Measurements of the fair value of certificates of deposit are classified within Level 2 of the fair value hierarchy.



Federal funds purchased:The carrying
amounts of federal funds purchased approximate their market value.



Other borrowings:The fair values
of other borrowings are estimated using discounted cash flow analysis, based on interest rates currently being offered by the Federal
Home Loan Bank for borrowings of similar terms as those being valued. These measurements are classified as Level 2 in the fair
value hierarchy.



Trust preferred securities:The
fair values of trust preferred securities are estimated using a discounted cash flow analysis, based on interest rates currently
being offered on the best alternative debt available at the measurement date. These measurements are classified as Level 2 in the
fair value hierarchy.



Accrued interest payable: The carrying
amount of accrued interest payable approximates its fair value.



Loan commitments: The fair values
of the Company’s off-balance-sheet financial instruments are based on fees currently charged to enter into similar agreements.
Since the majority of the Company’s other off-balance-sheet financial instruments consist of non-fee-producing, variable-rate
commitments, the Company has determined they do not have a distinguishable fair value.



NOTE 10 – SF HOLDING 1, INC. AND
SF REATLY 1, INC.



In January 2012, the Company formed SF Holding 1, Inc., an Alabama
corporation, and its subsidiary, SF Realty 1, Inc., an Alabama corporation. SF Realty 1 elected to be treated as a real estate
investment trust (“REIT”) for U.S. income tax purposes. SF Realty 1 holds and manages participations in residential
mortgages and commercial real estate loans originated by ServisFirst Bank.



NOTE 11 – SUBSEQUENT EVENTS



The Company has evaluated all subsequent
events through the date of this filing to ensure that this Form 10-Q includes appropriate disclosure of events both recognized
in the financial statements as of June 30, 2012, and events which occurred subsequent to June 30, 2012 but were not recognized
in the financial statements. As of the date of this filing, there were no subsequent events that required recognition or disclosure.



27







ITEM 2. MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



The following discussion and analysis is
designed to provide a better understanding of various factors relating to the results of operations and financial condition of
ServisFirst Bancshares, Inc. (the “Company”) and its wholly-owned subsidiary, ServisFirst Bank (the “Bank”).
This discussion is intended to supplement and highlight information contained in the accompanying unaudited consolidated financial
statements as of June 30, 2012 and for the three and six months ended June 30, 2012 and June 30, 2011.



Forward-Looking Statements



Statements in this document that are not
historical facts, including, but not limited to, statements concerning future operations, results or performance, are hereby identified
as “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Securities Exchange
Act of 1934 and Section 27A of the Securities Act of 1933. The words “believe,” “expect,” “anticipate,”
“project,” “plan,” “intend,” “will,” “would,” “might” and
similar expressions often signify forward-looking statements. Such statements involve inherent risks and uncertainties. The Company
cautions that such forward-looking statements, wherever they occur in this quarterly report or in other statements attributable
to the Company, are necessarily estimates reflecting the judgment of the Company’s senior management and involve a number
of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements.
Such forward-looking statements should, therefore, be considered in light of various factors that could affect the accuracy of
such forward-looking statements, including: general economic conditions, especially in the credit markets and in the Southeast;
the performance of the capital markets; changes in interest rates, yield curves and interest rate spread relationships; changes
in accounting and tax principles, policies or guidelines; changes in legislation or regulatory requirements; changes in our loan
portfolio and the deposit base; possible changes in laws and regulations and governmental monetary and fiscal policies, including,
but not limited to, economic stimulus initiatives and so-called “bailout” initiatives; the cost and other effects of
legal and administrative cases and similar contingencies; possible changes in the creditworthiness of customers and the possible
impairment of the collectability of loans and the value of collateral; the effect of natural disasters, such as hurricanes and
tornados, in our geographic markets; and increased competition from both banks and non-banks. The foregoing list of factors is
not exhaustive. For discussion of these and other risks that may cause actual results to differ from expectations, please refer
to “Risk Factors” in our most recent Annual Report on Form 10-K and our other SEC filings. If one or more of the factors
affecting our forward-looking information and statements proves incorrect, then our actual results, performance or achievements
could differ materially from those expressed in, or implied by, forward-looking information and statements contained herein. Accordingly,
you should not place undue reliance on any forward-looking statements, which speak only as of the date made.



Business



We are a bank holding company under the
Bank Holding Company Act of 1956 incorporated in Delaware and headquartered at 850 Shades Creek Parkway, Birmingham, Alabama 35209
(Jefferson County). Through the Bank, we operate ten full-service banking offices, with nine offices located in Jefferson, Shelby,
Madison, Montgomery and Houston counties in the metropolitan statistical areas (“MSAs”) of Birmingham-Hoover, Huntsville,
Montgomery and Dothan, Alabama, and one office located in Escambia County in the Pensacola-Ferry Pass-Brent, Florida MSA, which
opened April 1, 2011. These MSAs constitute our primary service areas.



28







Our principal business is to accept deposits
from the public and to make loans and other investments. Our principal sources of funds for loans and investments are demand, time,
savings, and other deposits (including negotiable orders of withdrawal, or NOW accounts). Our principal sources of income are interest
and fees collected on loans, interest and dividends collected on other investments and service charges. Our principal expenses
are interest paid on savings and other deposits (including NOW accounts), interest paid on our other borrowings, employee compensation,
office expenses and other overhead expenses.



Overview



As of June 30, 2012, we had consolidated
total assets of $2,570,243,000, an increase of $109,458,000, or 4.4%, from $2,460,785,000 at December 31, 2011. Total loans were
$2,022,589,000 at June 30, 2012, up $191,847,000, or 10.5%, from $1,830,742,000 at December 31, 2011. Total deposits were $2,240,902,000
at June 30, 2012, an increase of $97,015,000, or 4.5%, from $2,143,887,000 at December 31, 2011.



Net income available to common stockholders
for the quarter ended June 30, 2012 was $8,231,000, an increase of $2,386,000, or 40.8%, from $5,845,000 for the quarter ended
June 30, 2011. Basic and diluted earnings per common share were $1.38 and $1.21, respectively, for the three months ended June
30, 2012, compared to $1.02 and $0.89, respectively, for the corresponding period in 2011.



Net income available to common stockholders
for the six months ended June 30, 2012 was $16,387,000, an increase of $5,671,000, or 52.9%, from $10,716,000 for the six months
ended June 30, 2011. Basic and diluted earnings per common share were $2.74 and $2.41, respectively, for the six months ended June
30, 2012, compared to $1.88 and $1.65, respectively, for the corresponding period in 2011.



Critical Accounting Policies



The accounting and financial policies of
the Company conform to U.S. generally accepted accounting principles (“U.S. GAAP”) and to general practices within
the banking industry. To prepare consolidated financial statements in conformity with U.S. GAAP, management makes estimates and
assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements
and the disclosures provided, and future results could differ. The allowance for loan losses, valuation of foreclosed real estate,
deferred taxes, and fair value of financial instruments are particularly subject to change. Information concerning our accounting
policies with respect to these items is available in Item 7, “Management’s Discussion and Analysis of Financial Condition
and Results of Operations,” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011.



Financial Condition



Cash and Cash Equivalents



At June 30, 2012,
we had $84,468,000 in federal funds sold and other investments, compared to $100,565,000 at December 31, 2011.



Investment Securities



Investment securities available for sale
totaled $296,508,000 at June 30, 2012 and $293,809,000 at December 31, 2011. Investment securities held to maturity totaled $21,011,000
at June 30, 2012 and $15,209,000 at December 31, 2011. Purchases of $17,931,000 in mortgage-backed securities, $1,500,000 in government-sponsored
agencies, $13,097,000 in municipal bonds and $4,700,000 in corporate bonds replaced $28,620,000 in total security redemptions during
the first six months of 2012.



29











Each quarter, management assesses whether
there have been events or economic circumstances indicating that a security on which there is an unrealized loss is other-than-temporarily
impaired. Management considers several factors, including the amount and duration of the impairment; the intent and ability of
the Company to hold the security for a period sufficient for a recovery in value; and known recent events specific to the issuer
or its industry. In analyzing an issuer’s financial condition, management considers whether the securities are issued by
agencies of the federal government, whether downgrades by bond rating agencies have occurred, and industry analysts’ reports,
among other things. As we currently do not have the intent to sell these securities and it is not more likely than not that we
will be required to sell these securities before recovery of their amortized cost basis, which may be maturity, no declines are
deemed to be other than temporary. We will continue to evaluate our investment securities for possible other-than-temporary impairment,
which could result in non-cash charges to earnings in one or more future periods.



The following table shows the amortized
cost of our investment securities by their stated maturity at June 30, 2012:



|                                                    |  | Less Than      |        |   | One Year to |   |         | Five Years to |  |   | More Than |   |  |       |       
|--------------------------------------------------- |  | -------------- | ------ | - | ----------- | - | ------- | ------------- |  | - | --------- | - |  | ----- | ------
|                                                    |  | One Year       |        |   | Five Years  |   |         | Ten Years     |  |   | Ten Years |   |  | Total |       
|                                                    |  | (In Thousands) |       
|U.S. Treasury and government sponsored
    Agencies |  | $              | 20,011 |   |             | $ | 64,186  |               |  | $ | 1,853     |   |  | $     | 593   
|Mortgage-backed securities                          |  |                | 287    |   |             |   | 1,032   |               |  |   | 36,958    |   |  |       | 61,864
|State and municipal securities                      |  |                | 905    |   |             |   | 39,363  |               |  |   | 63,476    |   |  |       | 9,524 
|Corporate debt                                      |  |                | -      |   |             |   | 4,721   |               |  |   | 1,035     |   |  |       | -     
|Total                                               |  | $              | 21,203 |   |             | $ | 109,302 |               |  | $ | 103,322   |   |  | $     | 71,981
|                                                    |  |                |        |   |             |   |         |               |  |   |           |   |  |       |       
|Taxable-equivalent Yield                            |  |                | 1.90   | % |             |   | 2.40    | %             |  |   | 4.40      | % |  |       | 4.20  



All securities held are traded in liquid
markets. As of June 30, 2012, we owned certain restricted securities of the Federal Home Loan Bank with an aggregate book value
and market value of $3,767,000 and certain securities of First National Bankers Bank in which we invested $250,000. We had no
investments in any one security, restricted or liquid, in excess of 10% of our stockholders’ equity.



The Bank does not invest in collateralized
debt obligations (“CDOs”). All tax-exempt securities currently held are issued by government issuers within the State
of Alabama. All corporate bonds had a Standard and Poor’s or Moody’s rating of A-1 or better when purchased. The total
investment portfolio at June 30, 2012 has a combined average credit rating of AA.



The carrying value of investment securities
pledged to secure public funds on deposit and for other purposes as required by law was $200,660,000 and $111,347,000 as of June
30, 2012 and December 31, 2011, respectively.



Loans



We had total loans of $2,022,589,000 at
June 30, 2012, an increase of $191,847,000, or 10.5% year to date, compared to $1,830,742,000 at December 31, 2011. At June 30,
2012, 51% of our loans were in our Birmingham offices, 19% of our loans were in our Huntsville offices, 13% of our loans were
in our Dothan offices, 11% of our loans were in our Montgomery offices, and 6% of our loans were in our Pensacola, Florida office.



30







Asset Quality



The allowance for loan losses is established
and maintained at levels management deems adequate to absorb anticipated credit losses from identified and otherwise inherent
risks in the loan portfolio as of the balance sheet date. In assessing the adequacy of the allowance for loan losses management
considers its evaluation of the loan portfolio, past due loan experience, collateral values, current economic conditions and other
factors considered necessary to maintain the allowance at an adequate level. Our management believes that the allowance was adequate
at June 30, 2012.



31







The following table presents the allocation
of the allowance for loan losses for each respective loan category with the corresponding percentage of loans in each category
to total loans. Management believes that the comprehensive allowance analysis developed by our credit administration group is
in compliance with all current regulatory guidelines.



|                                       |  |                |        |  | Percentage of loans | 
|-------------------------------------- |  | -------------- | ------ |  | ------------------- | 
|                                       |  |                |        |  | in each category    | 
|June 30, 2012                          |  | Amount         |        |  | to total loans      | 
|                                       |  | (In Thousands) |        |  |                     | 
|Commercial, financial and agricultural |  | $              | 6,511  |  |                     | 
|Real estate - construction             |  |                | 7,582  |  |                     | 
|Real estate - mortgage                 |  |                | 3,640  |  |                     | 
|Consumer                               |  |                | 285    |  |                     | 
|Other                                  |  |                | 5,221  |  |                     | 
|Total                                  |  | $              | 23,239 |  |                     | 



|                                       |  |                |        |  | Percentage of loans | 
|-------------------------------------- |  | -------------- | ------ |  | ------------------- | 
|                                       |  |                |        |  | in each category    | 
|December 31, 2011                      |  | Amount         |        |  | to total loans      | 
|                                       |  | (In Thousands) |        |  |                     | 
|Commercial, financial and agricultural |  | $              | 6,627  |  |                     | 
|Real estate - construction             |  |                | 6,542  |  |                     | 
|Real estate - mortgage                 |  |                | 3,295  |  |                     | 
|Consumer                               |  |                | 531    |  |                     | 
|Other                                  |  |                | 5,035  |  |                     | 
|Total                                  |  | $              | 22,030 |  |                     | 



Nonperforming Assets



Total nonperforming loans, which include
nonaccrual loans and loans 90 or more days past due and still accruing, decreased to $12.1 million at June 30, 2012, compared
to $13.8 million at December 31, 2011. The nonperforming loan totals consist entirely of nonaccrual loans as there were no loans
90 or more days past due and still accruing for either period. Troubled Debt Restructurings (“TDR”) at June 30, 2012
were $8.4 million compared to $4.5 million at December 31, 2011 with the majority of this increase attributable to a single residential
builder relationship in the aggregate amount of $4.1 million. The Company had three TDR loans to one borrower in the amount of
$2.8 million enter into payment default status during the first quarter of 2012. All TDR loans at December 31, 2011 were performing
as agreed under the terms of their restructuring plans.



Other real estate owned (OREO) decreased
to $9.8 million at June 30, 2012, from $12.3 million at December 31, 2011. The total number of OREO accounts decreased from 39
to 30.



32







The following table summarizes our nonperforming
assets and TDRs at June 30, 2012 and December 31, 2011:



|                                                                                                 |  | June 30, 2012                 |        |   | December 31, 2011 | 
|------------------------------------------------------------------------------------------------ |  | ----------------------------- | ------ | - | ----------------- | 
|                                                                                                 |  |                               |        |   | Number of         | 
|                                                                                                 |  | Balance                       |        |   | Loans             | 
|                                                                                                 |  | (Dollar Amounts In Thousands) |       
|Nonaccrual loans:                                                                                |  |                               |        |   |                   | 
|Commercial, financial and agricultural                                                           |  | $                             | 456    |   |                   | 
|Real estate - construction                                                                       |  |                               | 7,515  |   |                   | 
|Real estate - mortgage:                                                                          |  |                               |        |   |                   | 
|Owner-occupied commercial                                                                        |  |                               | 2,957  |   |                   | 
|1-4 family mortgage                                                                              |  |                               | 468    |   |                   | 
|Other mortgage                                                                                   |  |                               | 693    |   |                   | 
|Total real estate - mortgage                                                                     |  |                               | 4,118  |   |                   | 
|Consumer                                                                                         |  |                               | 36     |   |                   | 
|Total Nonaccrual loans:                                                                          |  | $                             | 12,125 |   |                   | 
|                                                                                                 |  |                               |        |   |                   | 
|90+ days past due and accruing:                                                                  |  |                               |        |   |                   | 
|Commercial, financial and agricultural                                                           |  | $                             | -      |   |                   | 
|Real estate - construction                                                                       |  |                               | -      |   |                   | 
|Real estate - mortgage:                                                                          |  |                               |        |   |                   | 
|Owner-occupied commercial                                                                        |  |                               | -      |   |                   | 
|1-4 family mortgage                                                                              |  |                               | -      |   |                   | 
|Other mortgage                                                                                   |  |                               | -      |   |                   | 
|Total real estate - mortgage                                                                     |  |                               | -      |   |                   | 
|Consumer                                                                                         |  |                               | -      |   |                   | 
|Total 90+ days past due and accruing:                                                            |  | $                             | -      |   |                   | 
|                                                                                                 |  |                               |        |   |                   | 
|Total Nonperforming Loans:                                                                       |  | $                             | 12,125 |   |                   | 
|                                                                                                 |  |                               |        |   |                   | 
|Plus: Other real estate owned                                                                    |  |                               | 9,839  |   |                   | 
|Total Nonperforming Assets                                                                       |  | $                             | 21,964 |   |                   | 
|                                                                                                 |  |                               |        |   |                   | 
|Restructured accruing loans:                                                                     |  |                               |        |   |                   | 
|Commercial, financial and agricultural                                                           |  | $                             | 1,263  |   |                   | 
|Real estate - construction                                                                       |  |                               | 2,377  |   |                   | 
|Real estate - mortgage:                                                                          |  |                               |        |   |                   | 
|Owner-occupied commercial                                                                        |  |                               | -      |   |                   | 
|1-4 family mortgage                                                                              |  |                               | 1,709  |   |                   | 
|Other mortgage                                                                                   |  |                               | 304    |   |                   | 
|Total real estate - mortgage                                                                     |  |                               | 2,013  |   |                   | 
|Consumer                                                                                         |  |                               | -      |   |                   | 
|Total restructured accruing loans:                                                               |  | $                             | 5,653  |   |                   | 
|                                                                                                 |  |                               |        |   |                   | 
|Total Nonperforming assets and restructured accruing loans                                       |  | $                             | 27,617 |   |                   | 
|                                                                                                 |  |                               |        |   |                   | 
|Ratios:                                                                                          |  |                               |        |   |                   | 
|Nonperforming loans to total loans                                                               |  |                               | 0.60   | % |                   | 
|Nonperforming assets to total loans plus other real estate owned                                 |  |                               | 1.08   | % |                   | 
|Nonperforming loans plus restructured accruing loans to total loans plus other real estate owned |  |                               | 0.87   | % |                   | 



33







The balance of nonperforming assets can
fluctuate due to changes in economic conditions. We have established a policy to discontinue accruing
interest on a loan (i.e., place the loan on nonaccrual status) after it has become 90 days delinquent as to payment of principal
or interest, unless the loan is considered to be well-collateralized and is actively in the process of collection. In addition,
a loan will be placed on nonaccrual status before it becomes 90 days delinquent unless management believes that the collection
of interest is expected. Interest previously accrued but uncollected on such loans is reversed and charged against current income
when the receivable is determined to be uncollectible. Interest income on nonaccrual loans is recognized only as received. If
we believe that a loan will not be collected in full, we will increase the allowance for loan losses to reflect management’s
estimate of any potential exposure or loss. Generally, payments received on nonaccrual loans are applied directly to principal.



Impaired Loans and Allowance
for Loan Losses



We have allocated approximately $7.6 million
of our allowance for loan losses to real estate construction, including acquisition and development and lot loans, $6.5 million
to commercial, financial and agricultural loans, and $3.9 million to other loan types. We have a total loan loss reserve as of
June 30, 2012 allocable to specific loan types of $18.0 million. Another $5.2 million of our allowance for loan losses is based
on our judgments regarding various external and internal factors, including macroeconomic trends, our assessment of the Bank’s
loan growth prospects, and evaluations of internal risk controls. The total resulting loan loss reserve is $23.2 million. Based
upon historical performance, known factors, overall judgment, and regulatory methodologies, including consideration of the possible
effect of current residential housing market defaults and business failures plaguing financial institutions in general, management
believes that the current methodology used to determine the adequacy of the allowance for loan losses is reasonable.



As of June 30, 2012, we had impaired loans
of $38.6 million inclusive of nonaccrual loans, an increase of $1.3 million from $37.3 million as of December 31, 2011. We allocated
$3.1 million of our allowance for loan losses at June 30, 2012 to these impaired loans. A loan is considered impaired, based on
current information and events, if it is probable that we will be unable to collect the scheduled payments of principal or interest
when due according to the contractual terms of the original loan agreement. Impairment does not always indicate credit loss, but
provides an indication of collateral exposure based on prevailing market conditions and third-party valuations. Impaired loans
are measured by either the present value of expected future cash flows discounted at the loan’s effective interest rate,
the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral-dependent. The amount
of impairment, if any, and subsequent changes are included in the allowance for loan losses. Interest on accruing impaired loans
is recognized as long as such loans do not meet the criteria for nonaccrual status. Our credit risk management team performs verification
and testing to ensure appropriate identification of impaired loans and that proper reserves are held on these loans.



Of the $38.6 million of impaired loans
reported as of June 30, 2012, $19.5 million were real estate – construction loans, $4.0 million were commercial, financial,
and agricultural loans, $5.8 million were commercial real estate loans, and $5.9 million were residential real estate loans. The
remaining $3.4 million of impaired loans consisted of other mortgages and consumer loans. Of the $19.5 million of impaired real
estate – construction loans, $9.9 million (a total of 28 loans with 9 builders) were residential construction loans, and
$3.6 million consisted of various residential lot loans to 8 builders.



34







Deposits



Total deposits increased $97,015,000,
or 4.5%, to $2,240,902,000 at June 30, 2012 compared to $2,143,887,000 at December 31, 2011. We anticipate long-term sustainable
growth in deposits through continued development of market share in our markets.



For amounts and rates of our deposits
by category, see the table “Average Consolidated Balance Sheets and Net Interest Analysis on a Fully Taxable-equivalent
Basis” under the subheading “Net Interest Income”



Other Borrowings



We have paid off our two advances from
the Federal Home Loan Bank of Atlanta. The payoffs occurred in March and June 2011. As discussed more fully under “Noninterest
Expense” below, we incurred prepayment penalties totaling $738,000 by repaying these advances early. On June 1, 2012, we
paid off our subordinated note payable due June 1, 2016, including all related accrued interest payable. As discussed in Note
10 to the Consolidated Financial Statements, we borrowed $15.5 million through the issuance of trust preferred securities and
the related debenture on September 2, 2008. Both financial instruments bear an identical annual rate of interest of 8.50% and
pay interest on March 1, June 1, September 1 and December 1 of each year. The current book value of this borrowing is $15.4 million
as a result of amortization of the discount associated with 75,000 warrants issued to the holders of the trust preferred securities.
As discussed in Note 11 to the Consolidated Financial Statements, we borrowed $15.0 million through the issuance of trust preferred
securities and the related debenture on March 15, 2010. Both financial instruments bear an identical rate of interest of 6.00%
and pay interest on March 15, June 15, September 15 and December 15 of each year.



Liquidity



Liquidity is defined as our ability to
generate sufficient cash to fund current loan demand, deposit withdrawals, and other cash demands and disbursement needs, and
otherwise to operate on an ongoing basis.



The retention of existing deposits
and attraction of new deposit sources through new and existing customers is critical to our liquidity position. If our liquidity
were to decline due to a run-off in deposits, we have procedures that provide for certain actions under varying liquidity conditions.
These actions include borrowing from existing correspondent banks, selling or participating loans, and curtailing loan commitments
and funding. At June 30, 2012, liquid assets, which are represented by cash and due from banks, federal funds sold and unpledged
available-for-sale securities, totaled $296.3 million. Additionally, the Bank had additional borrowing availability of approximately
$125.0 million in unused federal funds lines of credit with regional banks, subject to certain restrictions and collateral requirements.
We believe these sources of funding are adequate to meet immediate anticipated funding needs, but we will need additional capital
to maintain our current growth. Our management meets on a quarterly basis to review sources and uses of funding to determine the
appropriate strategy to ensure an appropriate level of liquidity. At the current time, our long-term liquidity needs primarily
relate to funds required to support loan originations and commitments and deposit withdrawals. Our regular sources of funding
are from the growth of our deposit base, repayment of principal and interest on loans, the sale of loans and the renewal of time
deposits. In addition, we have issued debt as described above under “Other Borrowings”.



We are subject to general FDIC guidelines
that require a minimum level of liquidity. Management believes our liquidity ratios meet or exceed these guidelines. Our management
is not currently aware of any trends or demands that are reasonably likely to result in liquidity materially increasing or decreasing.



35









The following table reflects the contractual
maturities of our term liabilities as of June 30, 2012. The amounts shown do not reflect any early withdrawal or prepayment assumptions.



|                                   |  | Payments due by Period |          
|---------------------------------- |  | ---------------------- | ---------
|                                   |  |                        |          
|                                   |  | Total                  |          
|                                   |  | (In Thousands)         |          
|Contractual Obligations (1)        |  |                        |          
|                                   |  |                        |          
|Deposits without a stated maturity |  | $                      | 1,842,717
|Certificates of deposit (2)        |  |                        | 398,185  
|Federal funds purchased            |  |                        | 80,205   
|Subordinated debentures            |  |                        | 30,000   
|Operating lease commitments        |  |                        | 14,623   
|Total                              |  | $                      | 2,365,730



(1) Excludes interest

(2) Certificates of deposit give customers the right to early
withdrawal. Early withdrawals may be subject to penalties.

The penalty amount depends on the remaining time to maturity
at the time of early withdrawal.



Capital Adequacy



In the first quarter of 2010, we formed
ServisFirst Capital Trust II, which issued 15,000 shares of its 6.0% Mandatory Convertible Trust Preferred Securities (the “Preferred
Securities”) for $15,000,000 and 50,000 shares of its common securities for $50,000 (collectively the “Trust Securities”)
on March 15, 2010. The Trust invested all of the proceeds from the sale of the Trust Securities in the Company’s 6.0% Junior
Subordinated Mandatory Convertible Deferrable Interest Debentures due March 15, 2040 in the principal amount of $15,050,000 (the
“Subordinated Debentures”).  The Preferred Securities were offered and sold to accredited investors in a
private placement. The Federal Reserve Board has deemed these securities to qualify as Tier 1 capital of the Company up to 25%
of Tier 1 capital elements. See Note 11 to the consolidated financial statements for further discussion of the issuance and sale
of the Preferred Securities.



On June 21, 2011, we entered into a Securities
Purchase Agreement with the Secretary of the Treasury, pursuant to which we issued and sold to the Treasury 40,000 shares of our
Senior Non-Cumulative Perpetual Preferred Stock, Series A, having a liquidation preference of $1,000 per share (the “Series
A Preferred Stock”), for aggregate proceeds of $40,000,000. The issuance was pursuant to the Treasury’s Small Business
Lending Fund program, a $30 billion fund established under the Small Business Jobs Act of 2010, which encourages lending to small
businesses by providing capital to qualified community banks with assets of less than $10 billion. The Series A Preferred Stock
is entitled to receive non-cumulative dividends payable quarterly on each January 1, April 1, July 1 and October 1, commencing
October 1, 2011. The dividend rate, which is calculated on the aggregate Liquidation Amount, has been initially set at 1% per
annum based upon the current level of “Qualified Small Business Lending” (“QSBL”) by the Bank. The dividend
rate for future dividend periods will be set based upon the percentage change in qualified lending between each dividend period
and the baseline QSBL level established at the time the Agreement was entered into. Such dividend rate may vary from 1% per annum
to 5% per annum for the second through tenth dividend periods and from 1% per annum to 7% per annum for the eleventh through the
first half of the nineteenth dividend periods.  If the Series A Preferred Stock remains outstanding for more than four-and-one-half
years, the dividend rate will be fixed at 9%.  Prior to that time, in general, the dividend rate decreases as the level
of the Bank’s QSBL increases.  Such dividends are not cumulative, but the Company may only declare and pay dividends
on its common stock (or any other equity securities junior to the Series A Preferred Stock) if it has declared and paid dividends
for the current dividend period on the Series A Preferred Stock, and will be subject to other restrictions on its ability to repurchase
or redeem other securities.  In addition, if (i) we have not timely declared and paid dividends on the Series A Preferred
Stock for six dividend periods or more, whether or not consecutive, and (ii) shares of Series A Preferred Stock with an aggregate
liquidation preference of at least $25,000,000 are still outstanding, the Treasury (or any successor holder of Series A Preferred
Stock) may designate two additional directors to be elected to our Board of Directors.



36







As is more completely described in the
Certificate of Designation, holders of the Series A Preferred Stock have the right to vote as a separate class on certain matters
relating to the rights of holders of Series A Preferred Stock and on certain corporate transactions.  Except with respect
to such matters and, if applicable, the election of the additional directors described above, the Series A Preferred Stock does
not have voting rights.



We may redeem the shares of Series A Preferred
Stock, in whole or in part, at any time at a redemption price equal to the sum of the Liquidation Amount per share and the per-share
amount of any unpaid dividends for the then-current period, subject to any required prior approval by our primary federal banking
regulator.



As of June 30, 2012, our most recent notification
from the FDIC categorized us as well-capitalized under the regulatory framework for prompt corrective action. To remain categorized
as well-capitalized, we must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as disclosed in
the table below. Our management believes that we are well-capitalized under the prompt corrective action provisions as of June
30, 2012.



37







The following table sets forth (i) the
capital ratios required by the FDIC and the Alabama Banking Department’s leverage ratio requirement and (ii) our actual
ratios of capital to total regulatory or risk-weighted assets, as of June 30, 2012, December 31, 2011 and June 30, 2011:



|                                        |  |        |         |  |          |  |       |                      |  |   |                         |  |  | To Be Well Capitalized |     
|--------------------------------------- |  | ------ | ------- |  | -------- |  | ----- | -------------------- |  | - | ----------------------- |  |  | ---------------------- | ----
|                                        |  |        |         |  |          |  |       | For Capital Adequacy |  |   | Under Prompt Corrective | 
|                                        |  | Actual |         |  | Purposes |  |       | Action Provisions    | 
|                                        |  | Amount |         |  | Ratio    |  |       | Amount               |  |   | Ratio                   |  |  | Amount                 |     
|As of June 30, 2012:                    |  |        |         |  |          |  |       |                      |  |   |                         |  |  |                        |     
|Total Capital to Risk-Weighted Assets:  |  |        |         |  |          |  |       |                      |  |   |                         |  |  |                        |     
|Consolidated                            |  | $      | 260,495 |  |          |  | 12.37 | %                    |  | $ | 168,475                 |  |  |                        | 8.00
|ServisFirst Bank                        |  |        | 258,421 |  |          |  | 12.27 | %                    |  |   | 168,429                 |  |  |                        | 8.00
|Tier 1 Capital to Risk-Weighted Assets: |  |        |         |  |          |  |       |                      |  |   |                         |  |  |                        |     
|Consolidated                            |  |        | 237,256 |  |          |  | 11.27 | %                    |  |   | 84,238                  |  |  |                        | 4.00
|ServisFirst Bank                        |  |        | 235,182 |  |          |  | 11.17 | %                    |  |   | 84,214                  |  |  |                        | 4.00
|Tier 1 Capital to Average Assets:       |  |        |         |  |          |  |       |                      |  |   |                         |  |  |                        |     
|Consolidated                            |  |        | 237,256 |  |          |  | 9.36  | %                    |  |   | 101,393                 |  |  |                        | 4.00
|ServisFirst Bank                        |  |        | 235,182 |  |          |  | 9.29  | %                    |  |   | 101,293                 |  |  |                        | 4.00
|                                        |  |        |         |  |          |  |       |                      |  |   |                         |  |  |                        |     
|As of December 31, 2011:                |  |        |         |  |          |  |       |                      |  |   |                         |  |  |                        |     
|Total Capital to Risk-Weighted Assets:  |  |        |         |  |          |  |       |                      |  |   |                         |  |  |                        |     
|Consolidated                            |  | $      | 246,334 |  |          |  | 12.79 | %                    |  | $ | 154,094                 |  |  |                        | 8.00
|ServisFirst Bank                        |  |        | 243,279 |  |          |  | 12.63 | %                    |  |   | 154,070                 |  |  |                        | 8.00
|Tier 1 Capital to Risk-Weighted Assets: |  |        |         |  |          |  |       |                      |  |   |                         |  |  |                        |     
|Consolidated                            |  |        | 219,350 |  |          |  | 11.39 | %                    |  |   | 77,047                  |  |  |                        | 4.00
|ServisFirst Bank                        |  |        | 216,295 |  |          |  | 11.23 | %                    |  |   | 77,035                  |  |  |                        | 4.00
|Tier 1 Capital to Average Assets:       |  |        |         |  |          |  |       |                      |  |   |                         |  |  |                        |     
|Consolidated                            |  |        | 219,350 |  |          |  | 9.17  | %                    |  |   | 95,642                  |  |  |                        | 4.00
|ServisFirst Bank                        |  |        | 216,295 |  |          |  | 9.06  | %                    |  |   | 95,481                  |  |  |                        | 4.00
|                                        |  |        |         |  |          |  |       |                      |  |   |                         |  |  |                        |     
|As of June 30, 2011:                    |  |        |         |  |          |  |       |                      |  |   |                         |  |  |                        |     
|Total Capital to Risk-Weighted Assets:  |  |        |         |  |          |  |       |                      |  |   |                         |  |  |                        |     
|Consolidated                            |  | $      | 230,075 |  |          |  | 14.50 | %                    |  | $ | 126,967                 |  |  |                        | 8.00
|ServisFirst Bank                        |  |        | 226,026 |  |          |  | 14.24 | %                    |  |   | 126,956                 |  |  |                        | 8.00
|Tier 1 Capital to Risk-Weighted Assets: |  |        |         |  |          |  |       |                      |  |   |                         |  |  |                        |     
|Consolidated                            |  |        | 205,614 |  |          |  | 12.96 | %                    |  |   | 63,484                  |  |  |                        | 4.00
|ServisFirst Bank                        |  |        | 201,565 |  |          |  | 12.70 | %                    |  |   | 63,478                  |  |  |                        | 4.00
|Tier 1 Capital to Average Assets:       |  |        |         |  |          |  |       |                      |  |   |                         |  |  |                        |     
|Consolidated                            |  |        | 205,614 |  |          |  | 10.67 | %                    |  |   | 77,113                  |  |  |                        | 4.00
|ServisFirst Bank                        |  |        | 201,565 |  |          |  | 10.47 | %                    |  |   | 77,006                  |  |  |                        | 4.00



38







Off-Balance Sheet Arrangements



In the normal course of business, we are
a party to financial instruments with off-balance sheet risk to meet the financing needs of our customers. These financial instruments
include commitments to extend credit beyond current fundings, credit card arrangements, standby letters of credit, and financial
guarantees. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in
our balance sheet. The contract or notional amounts of those instruments reflect the extent of involvement we have in those particular
financial instruments.



Our exposure to credit loss in the event
of non-performance by the other party to such financial instruments is represented by the contractual or notional amount of those
instruments. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments.



As part of our mortgage operations, we
originate and sell certain loans to investors in the secondary market. We continue to experience a manageable level of investor
repurchase demands. For loans sold, we have an obligation to either repurchase the outstanding principal balance of a loan or
make the purchaser whole for the economic benefits of a loan if it is determined that the loans sold were in violation of representations
and warranties made by the Bank at the time of the sale. Representations and warranties typically include those made regarding
loans that had missing or insufficient file documentation or loans obtained through fraud by borrowers or other third parties
such as appraisers. We had a reserve of $179,000 as of June 30, 2012 for the settlement of any repurchase demands by investors.



Financial instruments whose contract amounts
represent credit risk at June 30, 2012 are as follows:



|                             |  | June 30, 2012  |        
|---------------------------- |  | -------------- | -------
|                             |  | (In Thousands) |        
|Commitments to extend credit |  | $              | 805,055
|Credit card arrangements     |  |                | 23,145 
|Standby letters of credit    |  |                | 34,702 
|                             |  | $              | 862,902



Commitments to extend credit beyond current
funded amounts are agreements to lend to a customer as long as there is no violation of any condition established in the applicable
loan agreement. Such commitments generally have fixed expiration dates or other termination clauses and may require payment of
a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of
collateral obtained if deemed necessary by us upon extension of credit is based on our management’s credit evaluation. Collateral
held varies but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.



Standby letters of credit are conditional
commitments issued by us to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to
support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. All letters
of credit are due within one year or less of the original commitment date. The credit risk involved in issuing letters of credit
is essentially the same as that involved in extending loan facilities to customers.



39







Federal funds lines of credit are uncommitted
lines issued to downstream correspondent banks for the purpose of providing liquidity to them. The lines are unsecured, and we
have no obligation to sell federal funds to the correspondent, nor does the correspondent have any obligation to request or accept
purchases of federal funds from us.



Results of Operations



Summary of Net Income



Net income for the three months ended
June 30, 2012 was $8,331,000 compared to net income of $5,845,000 for the three months ended June 30, 2011. Net income for the
six months ended June 30, 2012 was $16,587,000 compared to net income of $10,716,000 for the six months ended June 30, 2011. The
increase in net income was primarily attributable to increased net interest income as a result of growth in average earning assets.
Net interest income for the three months ended June 30, 2012 increased to $22,905,000, or $4,857,000, compared to $18,048,000
for the corresponding period in 2011. Net interest income for the six months ended June 30, 2012 increased to $44,643,000, or
27.5%, compared to $35,024,000 for the corresponding period in 2011. The provision for loan losses increased $1,589,000 to $3,083,000
for the three months ended June 30, 2012 compared to the corresponding period in 2011, and increased $1,741,000 to $5,466,000
for the six months ended June 30, 2012 compared to the corresponding period in 2011. The increase in provision for loan loss for
the three and six-month periods ended June 30, 2012 was primarily due to an increase in net charge-offs during the second quarter
compared to recent historical levels plus the year-to-date growth in the loan portfolio of 10.5% (21% annualized). This was partially
offset by a combination of pay-downs and additional collateral being pledged to secure loans that are specifically impaired. Noninterest
income increased $646,000 to $2,428,000 for the three months ended June 30, 2012 compared to the corresponding period in 2011,
and increased $1,644,000 to $4,697,000 for the six months ended June 30, 2012 compared to the corresponding period in 2011. This
increase in noninterest income was primarily attributable to increased mortgage banking income, as more fully explained in “Noninterest
Income” below. Operating expenses for the three months ended June 30, 2012 increased to $9,895,000, or 5.6%, compared to
$9,369,000 for the corresponding period in 2011, and for the six months ended June 30, 2012 increased to $18,926,000, or 5.3%,
compared to $17,966,000 for the corresponding period in 2011. The increase in operating expenses was primarily attributable to
an increase in OREO expense in 2012, as more fully explained in “Noninterest Expense” below.



Basic and diluted net income per common
share were $1.38 and $1.21, respectively, for the three months ended June 30, 2012, compared to $1.02 and $0.89, respectively,
for the corresponding period in 2011. Basic and diluted net income per common share were $2.74 and $2.41, respectively, for the
six months ended June 30, 2012, compared to $1.88 and $1.65, respectively, for the corresponding period in 2011. Return on average
assets for the three and six months ended June 30, 2012 was 1.31% and 1.32%, respectively, compared to 1.22% and 1.14% for the
corresponding period in 2011, and return on average common equity for the three and six months ended June 30, 2012 was 15.74%
and 16.02%, respectively, compared to 17.30% and 16.56% for the corresponding period in 2011.



Net Interest Income



Net interest income is the difference
between the income earned on interest-earning assets and interest paid on interest-bearing liabilities used to support such assets.
The major factors which affect net interest income are changes in volumes, the yield on interest-earning assets and the cost of
interest-bearing liabilities. Our management’s ability to respond to changes in interest rates by effective asset-liability
management techniques is critical to maintaining the stability of the net interest margin and the momentum of our primary source
of earnings.



40







Taxable-equivalent net interest income
increased $4,883,000, or 26.6%, to $23,274,000 for the three months ended June 30, 2012 compared to $18,391,000 for the corresponding
period in 2011, and increased $9,091,000, or 25.0%, to $45,384,000 for the six months ended June 30, 2012 compared to $36,293,000
for the corresponding period in 2011. This increase was primarily attributable to growth in average earning assets. The taxable-equivalent
yield on interest-earning assets decreased to 4.47% for the three months ended June 30, 2012 from 4.79% for the corresponding
period in 2011, and decreased to 4.45% for the six months ended June 30, 2012 from 4.77% for the corresponding period in 2011.
The yield on loans for the three months ended June 30, 2012 was 4.99% compared to 5.25% for the corresponding period in 2011,
and 5.01% compared to 5.27% for the six months ended June 30, 2012 and June 30, 2011, respectively. Loan fees included in the
yield calculation decreased to $74,000 for the three months ended June 30, 2012 from $153,000 for the corresponding period in
2011, and decreased to $184,000 for the six months ended June 30, 2012 from $304,000 for the corresponding period in 2011. Net
loan fees decreased due to the origination of fewer real estate construction loans. The cost of total interest-bearing liabilities
decreased to 0.80% for the three months ended June 30, 2012 from 1.07% for the corresponding period in 2011, and to 0.82% for
the six months ended June 30, 2012 from 1.00% for the corresponding period in 2011. Net interest margin for the three months ended
June 30, 2012 was 3.85% compared to 3.93% for the corresponding period in 2011, and 3.81% for the six months ended June 30, 2012
compared to 3.96% for the corresponding period in 2011.



The following tables show, for the three
and six months ended June 30, 2012 and June 30, 2011, the average balances of each principal category of our assets, liabilities
and stockholders’ equity, and an analysis of net interest revenue. The accompanying tables reflect changes in our net interest
margin as a result of changes in the volume and rate of our interest-earning assets and interest-bearing liabilities for the same
periods. Changes as a result of mix or the number of days in the periods have been allocated to the volume and rate changes in
proportion to the relationship of the absolute dollar amounts of the change in each. The tables are presented on a taxable-equivalent
basis where applicable:



41







Average Consolidated Balance Sheets
and Net Interest Analysis

On a Fully Taxable-Equivalent Basis

For the Three Months Ended June 30,
2012 and 2011

(Dollar Amounts In Thousands)



|                                               |  | 2012    |           |  | 2011     |  
|---------------------------------------------- |  | ------- | --------- |  | -------- | -
|                                               |  |         |           |  | Interest |  
|                                               |  | Average |           |  | Earned / |  
|                                               |  | Balance |           |  | Paid     |  
|Assets:                                        |  |         |           |  |          |  
|Interest-earning assets:                       |  |         |           |  |          |  
|Loans, net of unearned income (1)              |  |         |           |  |          |  
|Taxable                                        |  | $       | 1,962,367 |  |          | $
|Tax-exempt(2)                                  |  |         | 1,537     |  |          |  
|Mortgage loans held for sale                   |  |         | 11,390    |  |          |  
|Investment securities:                         |  |         |           |  |          |  
|Taxable                                        |  |         | 205,390   |  |          |  
|Tax-exempt(2)                                  |  |         | 99,705    |  |          |  
|Total investment securities (3)                |  |         | 305,095   |  |          |  
|Federal funds sold                             |  |         | 89,511    |  |          |  
|Restricted equity securities                   |  |         | 4,678     |  |          |  
|Interest-bearing balances with banks           |  |         | 55,208    |  |          |  
|Total interest-earning assets                  |  | $       | 2,429,786 |  |          | $
|Non-interest-earning assets:                   |  |         |           |  |          |  
|Cash and due from banks                        |  |         | 35,507    |  |          |  
|Net fixed assets and equipment                 |  |         | 5,863     |  |          |  
|interest and other assets                      |  |         | 63,675    |  |          |  
|Total assets                                   |  | $       | 2,534,831 |  |          |  
|                                               |  |         |           |  |          |  
|Liabilities and stockholders' equity:          |  |         |           |  |          |  
|Interest-bearing liabilities:                  |  |         |           |  |          |  
|Interest-bearing demand deposits               |  | $       | 342,814   |  |          | $
|Savings deposits                               |  |         | 16,182    |  |          |  
|Money market accounts                          |  |         | 994,751   |  |          |  
|Time deposits                                  |  |         | 400,100   |  |          |  
|Federal funds purchased                        |  |         | 86,690    |  |          |  
|Other borrowings                               |  |         | 33,838    |  |          |  
|Total interest-bearing liabilities             |  | $       | 1,874,375 |  |          | $
|Non-interest-bearing liabilities:              |  |         |           |  |          |  
|Non-interest-bearing demand deposits           |  |         | 442,590   |  |          |  
|Other liabilities                              |  |         | 7,529     |  |          |  
|Stockholders' equity                           |  |         | 202,741   |  |          |  
|Unrealized gains on securities and derivatives |  |         | 7,596     |  |          |  
|Total liabilities and stockholders' equity     |  | $       | 2,534,831 |  |          |  
|Net interest spread                            |  |         |           |  |          |  
|Net interest margin                            |  |         |           |  |          |  



(1)	 	Non-accrual loans
are included in average loan balances in all periods. Loan fees of $72,000 and $153,000 are included in interest income in 2012
and 2011, respectively.

(2)	 	Interest income
and yields are presented on a fully taxable equivalent basis using a tax rate of 35%.

(3)	 	Unrealized gains
of $11,687,000 and $6,295,000 are excluded from the yield calculation in 2012 and 2011, respectively.



42







|                                     |  | For the Three Months Ended June 30,                                   |      
|------------------------------------ |  | --------------------------------------------------------------------- | -----
|                                     |  | 2012 Compared to 2011                                                 |      
|                                     |  | Increase (Decrease) in Interest Income and Expense Due
to Changes in: |      
|                                     |  | Volume                                                                |      
|                                     |  | (In Thousands)                                                        |      
|Interest-earning assets:             |  |                                                                       |      
|Loans, net of unearned income        |  |                                                                       |      
|Taxable                              |  | $                                                                     | 5,771
|Tax-exempt                           |  |                                                                       | 22   
|Mortgages held for sale              |  |                                                                       | 63   
|Securities - taxable                 |  |                                                                       | 312  
|Securities - non taxable             |  |                                                                       | 267  
|Federal funds sold                   |  |                                                                       | 5    
|Restricted equity securities         |  |                                                                       | 1    
|Interest-bearing balances with banks |  |                                                                       | 15   
|Total interest-earning assets        |  |                                                                       | 6,456
|                                     |  |                                                                       |      
|Interest-bearing liabilities:        |  |                                                                       |      
|Interest-bearing demand deposits     |  |                                                                       | 50   
|Savings                              |  |                                                                       | 7    
|Money market accounts                |  |                                                                       | 247  
|Time deposits                        |  |                                                                       | 337  
|Federal funds purchased              |  |                                                                       | 54   
|Other borrowed funds                 |  |                                                                       | (156 
|Total interest-bearing liabilities   |  |                                                                       | 539  
|Increase in net interest income      |  | $                                                                     | 5,917



43







Average Consolidated Balance Sheets
and Net Interest Analysis

On a Fully Taxable-Equivalent Basis

For the Six Months Ended June 30, 2012
and 2011

(Dollar Amounts In Thousands)



|                                                             |  | 2012    |           |  | 2011     |  
|------------------------------------------------------------ |  | ------- | --------- |  | -------- | -
|                                                             |  |         |           |  | Interest |  
|                                                             |  | Average |           |  | Earned / |  
|                                                             |  | Balance |           |  | Paid     |  
|Assets:                                                      |  |         |           |  |          |  
|Interest-earning assets:                                     |  |         |           |  |          |  
|Loans, net of unearned income (1)                            |  |         |           |  |          |  
|Taxable                                                      |  | $       | 1,910,060 |  |          | $
|Tax-exempt(2)                                                |  |         | 769       |  |          |  
|Mortgage loans held for sale                                 |  |         | 11,622    |  |          |  
|Investment securities:                                       |  |         |           |  |          |  
|Taxable                                                      |  |         | 206,782   |  |          |  
|Tax-exempt(2)                                                |  |         | 96,538    |  |          |  
|Total investment securities (3)                              |  |         | 303,320   |  |          |  
|Federal funds sold                                           |  |         | 94,606    |  |          |  
|Restricted equity securities                                 |  |         | 4,384     |  |          |  
|Interest-bearing balances with banks                         |  |         | 70,328    |  |          |  
|Total interest-earning assets                                |  | $       | 2,395,089 |  |          | $
|Non-interest-earning assets:                                 |  |         |           |  |          |  
|Cash and due from banks                                      |  |         | 35,602    |  |          |  
|Net fixed assets and equipment                               |  |         | 5,331     |  |          |  
|Allowance for loan losses, accrued interest and other assets |  |         | 63,611    |  |          |  
|Total assets                                                 |  | $       | 2,499,633 |  |          |  
|                                                             |  |         |           |  |          |  
|Liabilities and stockholders' equity:                        |  |         |           |  |          |  
|Interest-bearing liabilities:                                |  |         |           |  |          |  
|Interest-bearing demand deposits                             |  | $       | 342,672   |  |          | $
|Savings deposits                                             |  |         | 15,974    |  |          |  
|Money market accounts                                        |  |         | 981,998   |  |          |  
|Time deposits                                                |  |         | 398,586   |  |          |  
|Federal funds purchased                                      |  |         | 79,636    |  |          |  
|Other borrowings                                             |  |         | 34,655    |  |          |  
|Total interest-bearing liabilities                           |  | $       | 1,853,521 |  |          | $
|Non-interest-bearing liabilities:                            |  |         |           |  |          |  
|Non-interest-bearing demand deposits                         |  |         | 433,769   |  |          |  
|Other liabilites                                             |  |         | 6,590     |  |          |  
|Stockholders' equity                                         |  |         | 198,303   |  |          |  
|Unrealized gains on securities and derivatives               |  |         | 7,450     |  |          |  
|Total liabilities and stockholders' equity                   |  | $       | 2,499,633 |  |          |  
|Net interest spread                                          |  |         |           |  |          |  
|Net interest margin                                          |  |         |           |  |          |  



(1)	 	Non-accrual loans
are included in average loan balances in all periods. Loan fees of $184,000 and $304,000 are included in interest income in 2012
and 2010, respectively.

(2)	 	Interest income
and yields are presented on a fully taxable equivalent basis using a tax rate of 35%.

(3)	 	Unrealized gains
of $11,710,000 and $5,396,000 are excluded from the yield calculation in 2012 and 2011, respectively.



44







|                                     |  | For the Six Months Ended June 30,                                     |       
|------------------------------------ |  | --------------------------------------------------------------------- | ------
|                                     |  | 2012 Compared to 2011                                                 |       
|                                     |  | Increase (Decrease) in Interest Income and Expense Due to Changes in: |       
|                                     |  | Volume                                                                |       
|                                     |  | (In Thousands)                                                        |       
|Interest-earning assets:             |  |                                                                       |       
|Loans, net of unearned income        |  |                                                                       |       
|Taxable                              |  | $                                                                     | 11,074
|Tax-exempt                           |  |                                                                       | 22    
|Mortgages held for sale              |  |                                                                       | 111   
|Taxable                              |  |                                                                       | 478   
|Tax-exempt                           |  |                                                                       | 466   
|Federal funds sold                   |  |                                                                       | 19    
|Restricted equity securities         |  |                                                                       | 1     
|Interest-bearing balances with banks |  |                                                                       | 36    
|Total interest-earning assets        |  |                                                                       | 12,207
|                                     |  |                                                                       |       
|Interest-bearing liabilities:        |  |                                                                       |       
|Interest-bearing demand deposits     |  |                                                                       | 79    
|Savings                              |  |                                                                       | 15    
|Money market accounts                |  |                                                                       | 479   
|Time deposits                        |  |                                                                       | 742   
|Federal funds purchased              |  |                                                                       | 99    
|Other borrowed funds                 |  |                                                                       | (348  
|Total interest-bearing liabilities   |  |                                                                       | 1,066 
|Increase in net interest income      |  | $                                                                     | 11,141



Provision for Loan Losses



The provision for loan losses represents
the amount determined by management to be necessary to maintain the allowance for loan losses at a level capable of absorbing
inherent losses in the loan portfolio. Our management reviews the adequacy of the allowance for loan losses on a quarterly basis.
The allowance for loan losses calculation is segregated into various segments that include classified loans, loans with specific
allocations and pass rated loans. A pass rated loan is generally characterized by a very low to average risk of default and in
which management perceives there is a minimal risk of loss. Loans are rated using a nine-point risk grade scale with loan officers
having the primary responsibility for assigning risk grades and for the timely reporting of changes in the risk grades. Based
on these processes, and the assigned risk grades, the criticized and classified loans in the portfolio are segregated into the
following regulatory classifications: Special Mention, Substandard, Doubtful or Loss, with some general allocation of reserve
based on these grades. At June 30, 2012, total loans rated Special Mention, Substandard, and Doubtful were $83.5 million, or 4.1%
of total loans, compared to $88.5 million, or 4.8% of total loans, at December 31, 2011. Impaired loans are reviewed specifically
and separately under FASB ASC 310-30-35, Subsequent Measurement of Impaired Loans, to determine the appropriate reserve allocation.
Our management compares the investment in an impaired loan with the present value of expected future cash flow discounted at the
loan’s effective interest rate, the loan’s observable market price or the fair value of the collateral, if the loan
is collateral-dependent, to determine the specific reserve allowance. Reserve percentages assigned to non-impaired loans are based
on historical charge-off experience adjusted for other risk factors. To evaluate the overall adequacy of the allowance to absorb
losses inherent in our loan portfolio, our management considers historical loss experience based on volume and types of loans,
trends in classifications, volume and trends in delinquencies and nonaccruals, economic conditions and other pertinent information.
Based on future evaluations, additional provisions for loan losses may be necessary to maintain the allowance for loan losses
at an appropriate level.



45







The provision for loan losses was $3,083,000
for the three months ended June 30, 2012, an increase of $1,589,000 from $1,494,000 for the three months ended June 30, 2011.
The provision for loan losses was $5,466,000 for thesixmonths endedJune 30, 2012, a $1,741,000 increase, compared to $3,725,000 for thesixmonths endedJune 30, 2011.The increase in provision for loan loss for the three and
six-month periods ended June 30, 2012 was primarily due to an increase in net charge-offs during the second quarter compared to
recent historical levels plus the year-to-date growth in the loan portfolio of 10.5% (21% annualized). This was partially offset
by a combination of pay-downs and additional collateral being pledged to secure loans that are specifically impaired. Our
management continues to maintain a proactive approach to credit risk management. Nonperforming loans decreased to $12.1
million, or 0.60% of total loans, at June 30, 2012 from $13.8 million, or 0.75% of total loans, at December 31, 2011, and were
also lower than $20.6 million, or 1.35% of total loans, at June 30, 2011. Impaired loans increased to $38.6 million, or 1.9% of
total loans, at June 30, 2012, compared to $37.3 million, or 2.0% of total loans, at December 31, 2011. The allowance for loan
losses totaled $23.2 million, or 1.15% of total loans, net of unearned income, at June 30, 2012, compared to $22.0 million, or
1.20% of loans, net of unearned income, at December 31, 2011 and $19.5 million,or 1.25%of loans, net of unearned income, at June 30, 2011.



Noninterest Income



Noninterest income totaled $2,428,000
for the three months ended June 30, 2012, an increase of $646,000, or 36.3%, compared to the corresponding period in 2011, and
totaled $4,697,000 for the six months ended June 30, 2012, an increase of $1,644,000, or 53.8%, compared to the corresponding
period in 2011. Income from mortgage banking operations for the three months ended June 30, 2012 was $879,000, up $403,000, or
84.7%, from $476,000 for the corresponding period in 2011, and for the six months ended June 30, 2012 was $1,836,000, up $1,009,000,
or 122.0%, from $827,000 for the corresponding period in 2011. The addition of new mortgage lenders and our continued expansion
in Pensacola, Florida, coupled with continued mortgage refinancings, lead to the increase in mortgage banking income. Service
charges on deposit accounts increased $172,000, or 31.4%, to $719,000 for the three months ended June 30, 2012, from $547,000
for the corresponding period in 2011, and increased $206,000, or 18.5%, to $1,320,000 for the six months ended June 30, 2012,
from $1,114,000 for the corresponding period in 2011. Much of this increase in deposit charges was attributable to overdraft charges,
net of waived charges, which increased 41.8% and 14.8% for the three and six month periods ended June 30, 2012 and 2011, respectively.
Interchange income on credit cards was $467,000 for the three months ended June 30, 2012 compared to only $59,000 for the corresponding
period in 2011, and was $250,000 for the six months ended June 30, 2012 compared to $59,000 for the corresponding period in 2011.
This large increase in credit card interchange income was the result of our change to a new credit card program provider during
the second quarter in 2011.



Noninterest Expense



Noninterest expense totaled $9,895,000
for the three months ended June 30, 2012, an increase of $526,000, or 5.6%, compared to $9,369,000 in 2011, and totaled $18,926,000
for the six months ended June 30, 2012, an increase of $960,000, or 5.3%, compared to $17,966,000 for the corresponding period
in 2011.



Details of expenses are as follows:



46







| | · | Salary
                                                                                                               and benefit expense
                                                                                                               increased $222,000,
                                                                                                               or 4.4%, to $5,248,000
                                                                                                               for the three months
                                                                                                               ended June 30,
                                                                                                               2012 from $5,026,000
                                                                                                               for the corresponding
                                                                                                               period in 2011,
                                                                                                               and increased $1,173,000,
                                                                                                               or 12.7%, to $10,413,000
                                                                                                               for the six months
                                                                                                               ended June 30,
                                                                                                               2012 from $9,240,000
                                                                                                               for the corresponding
                                                                                                               period in 2011.
                                                                                                               We had 220 full-time
                                                                                                               equivalent employees
                                                                                                               at June 30, 2012
                                                                                                               compared to 195
                                                                                                               at June 30, 2011,
                                                                                                               a 12.8% increase.
                                                                                                               Most of this increase
                                                                                                               in number of employees
                                                                                                               was due to our
                                                                                                               expansion into
                                                                                                               the Pensacola,
                                                                                                               Florida market
                                                                                                               and addition of
                                                                                                               new support staff
                                                                                                               necessitated by
                                                                                                               our continued growth.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Occupancy
                                                                                                               expense increased
                                                                                                               $27,000, or 2.9%,
                                                                                                               to $961,000 for
                                                                                                               the three months
                                                                                                               ended June 30,
                                                                                                               2012 from $934,000
                                                                                                               for the corresponding
                                                                                                               period in 2011
                                                                                                               and increased $76,000,
                                                                                                               or 4.2%, to $1,896,000
                                                                                                               for the six months
                                                                                                               ended June 30,
                                                                                                               2012 from $1,820,000
                                                                                                               for the corresponding
                                                                                                               period in 2011.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | FDIC
                                                                                                               and other regulatory
                                                                                                               assessments for
                                                                                                               the three months
                                                                                                               ended June 30,
                                                                                                               2012 were $356,000,
                                                                                                               an increase of
                                                                                                               $131,000, or 58.2%,
                                                                                                               from $225,000 during
                                                                                                               the corresponding
                                                                                                               period in 2011.
                                                                                                               Assessments for
                                                                                                               the six months
                                                                                                               ended June 30,
                                                                                                               2012 were $746,000,
                                                                                                               a decrease of $229,000,
                                                                                                               or 23.5%, from
                                                                                                               $975,000 during
                                                                                                               the corresponding
                                                                                                               period in 2011.
                                                                                                               Changes by the
                                                                                                               FDIC during the
                                                                                                               past year in the
                                                                                                               rates charged for
                                                                                                               deposit insurance
                                                                                                               and in the methodology
                                                                                                               used to calculate
                                                                                                               the assessment
                                                                                                               base have resulted
                                                                                                               in wide variances
                                                                                                               from period to
                                                                                                               period.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Expenses
                                                                                                               related to OREO
                                                                                                               increased $401,000
                                                                                                               to $536,000 for
                                                                                                               the three months
                                                                                                               ended June 30,
                                                                                                               2012, from $135,000
                                                                                                               for the corresponding
                                                                                                               period in 2011,
                                                                                                               and increased $284,000
                                                                                                               to $673,000 for
                                                                                                               the six months
                                                                                                               ended June 30,
                                                                                                               2012 from $389,000
                                                                                                               for the corresponding
                                                                                                               period in 2011.
                                                                                                               OREO expenses increased
                                                                                                               due to more write-downs
                                                                                                               in value, which
                                                                                                               increased to $370,000
                                                                                                               for the three months
                                                                                                               ended June 30,
                                                                                                               2012 from $71,000
                                                                                                               for the corresponding
                                                                                                               period in 2011,
                                                                                                               and increased to
                                                                                                               $420,000 for the
                                                                                                               six months ended
                                                                                                               June 30, 2012 from
                                                                                                               $156,000 for the
                                                                                                               corresponding period
                                                                                                               in 2011.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Decreases
                                                                                                               in other operating
                                                                                                               expenses for the
                                                                                                               three and six months
                                                                                                               ended June 30,
                                                                                                               2012 compared to
                                                                                                               the corresponding
                                                                                                               periods in 2011
                                                                                                               were the result
                                                                                                               of prepayment penalties
                                                                                                               in connection with
                                                                                                               the prepayment
                                                                                                               of our two fixed-rate
                                                                                                               advances from the
                                                                                                               Federal Home Loan
                                                                                                               Bank of Atlanta.
                                                                                                               The penalty for
                                                                                                               the first advance
                                                                                                               paid off during
                                                                                                               the first quarter
                                                                                                               of 2011 was $256,000,
                                                                                                               and the penalty
                                                                                                               for the second
                                                                                                               advance paid off
                                                                                                               in the second quarter
                                                                                                               of 2011 was $482,000,
                                                                                                               for a total cost
                                                                                                               of $738,000 for
                                                                                                               the six months
                                                                                                               ended June 30,
                                                                                                               2012.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Income Tax Expense



Income tax expense was $4,024,000 for
the three months ended June 30, 2012 versus $3,122,000 for the same period in 2011, and was $8,361,000 for the six months ended
June 30, 2012 versus $5,670,000 for the corresponding period in 2011. Our effective tax rate for the three and six months ended
June 30, 2012 was 32.57% and 33.51%, respectively, compared to 34.82% and 34.60%, respectively, for the corresponding periods
in 2011. Our primary permanent differences are related to tax exempt income on securities and incentive stock option expenses.



We invested in bank-owned life insurance
for certain named officers of the Bank on September 30, 2011. The periodic increase in cash surrender value of those policies
are tax exempt and therefore contribute to a larger permanent difference between book income and taxable income.



47







ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK



Like all financial institutions, we are
subject to market risk from changes in interest rates. Interest rate risk is inherent in the balance sheet due to the mismatch
between the maturities of rate-sensitive assets and rate-sensitive liabilities. If rates are rising, and the level of rate-sensitive
liabilities exceeds the level of rate-sensitive assets, the net interest margin will be negatively impacted. Conversely, if rates
are falling, and the level of rate-sensitive liabilities is greater than the level of rate-sensitive assets, the impact on the
net interest margin will be favorable. Managing interest rate risk is further complicated by the fact that all rates do not change
at the same pace; in other words, short-term rates may be rising while longer-term rates remain stable. In addition, different
types of rate-sensitive assets and rate-sensitive liabilities react differently to changes in rates.

To manage interest rate risk, we must
take a position on the expected future trend of interest rates. Rates may rise, fall or remain the same. Our asset-liability committee
develops its view of future rate trends and strives to manage rate risk within a targeted range by monitoring economic indicators,
examining the views of economists and other experts, and understanding the current status of our balance sheet. Our annual budget
reflects the anticipated rate environment for the next 12 months. The asset-liability committee conducts a quarterly analysis
of the rate sensitivity position and reports its results to our board of directors.



The asset-liability committee thoroughly
analyzes the maturities of rate-sensitive assets and liabilities. This analysis measures the “gap”, which is defined
as the difference between the dollar amount of rate-sensitive assets repricing during a period and the volume of rate-sensitive
liabilities repricing during the same period. The gap is also expressed as the ratio of rate-sensitive assets divided by rate-sensitive
liabilities. If the ratio is greater than one, the dollar value of assets exceeds the dollar value of liabilities; the balance
sheet is “asset-sensitive.” Conversely, if the value of liabilities exceeds the value of assets, the ratio is less
than one and the balance sheet is “liability-sensitive.” Our internal policy requires management to maintain the gap
such that net interest margins will not change more than 10% if interest rates change 100 basis points or more than 15% if interest
rates change 200 basis points. There have been no changes to our policies or procedures for analyzing our interest rate risk since
December 31, 2011, and there are no significant changes to our sensitivity to changes in interest rates since December 31, 2011
as disclosed in our Form 10-K.



ITEM 4. CONTROLS AND PROCEDURES



CEO and CFO Certification.



Appearing as exhibits to this report are
Certifications of our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”). The Certifications
are required to be made by Rule 13a-14 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
This item contains the information about the evaluation that is referred to in the Certifications, and the information set forth
below in this Item 4 should be read in conjunction with the Certifications for a more complete understanding of the Certifications.



Evaluation of Disclosure Controls and
Procedures.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange
Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and
that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely
decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized
that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving
the desired control objectives.



48







We conducted an evaluation (the "Evaluation")
of the effectiveness of the design and operation of our disclosure controls and procedures under the supervision and with the
participation of our management, including our CEO and CFO, as of June 30, 2012. Based upon the Evaluation, our CEO and CFO have
concluded that, as of June 30, 2012, our disclosure controls and procedures are effective to ensure that material information
relating to ServisFirst Bancshares, Inc. and its subsidiaries is made known to management, including the CEO and CFO, particularly
during the period when our periodic reports are being prepared.

There have not been any changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange
Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting, except as previously disclosed in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2011.



PART II. OTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS



From time to time we may be a party to
various legal proceedings arising in the ordinary course of business. We are not currently a party to any material legal proceedings
except as disclosed in Item 3, “Legal Proceedings”, in our Annual Report on Form 10-K for the fiscal year ended December
31, 2011, and there has been no material change in any matter described therein.



ITEM 1A. RISK FACTORS



Our business is influenced by many factors
that are difficult to predict, involve uncertainties that may materially affect actual results and are often beyond our control.
We have identified a number of these risk factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011,
which should be taken into consideration when reviewing the information contained in this report. There have been no material
changes with regard to the risk factors previously disclosed in the Form 10-K. For other factors that may cause actual results
to differ materially from those indicated in any forward-looking statement or projection contained in this report, see “Forward-Looking
Statements” under Part 1, Item 2 above.



ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS



None.



ITEM 3. DEFAULTS UPON SENIOR SECURITIES



None.



ITEM 4. MINE SAFETY DISCLOSURES



Not Applicable.



ITEM 5. OTHER INFORMATION



49







None.



ITEM 6. EXHIBITS



(a) Exhibit:

| | 31.01 Certification of principal executive officer pursuant to Rule 13a-14(a).        
| | --------------------------------------------------------------------------------------
| | 31.02 Certification of principal financial officer pursuant to Rule 13a-14(a).        
| | 32.01 Certification of principal executive officer pursuant to 18 U.S.C. Section 1350.
| | 32.02 Certification of principal financial officer pursuant to 18 U.S.C. Section 1350.



SIGNATURES



Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.



|                    | SERVISFIRST BANCSHARES, INC.
|------------------- | ----------------------------
|                    |                             
|Date: July 31, 2012 | By                          
|                    |                             
|                    |                             
|                    |                             
|                    |                             
|                    |                             
|Date: July 31, 2012 | By                          
|                    |                             
|                    |                             
|                    |                             
|                    |                             



50