SCBA Annual Convention Charleston Place June 7-9, 2015 Successful Acquirers, Sellers & Independents BeliefStrengthPurpose

2 Disclosure Statements This presentation was prepared exclusively for the South Carolina Bankers Association Annual Convention (“SCBA Annual Convention”) and for the benefit and internal use of the SCBA Annual Convention attendees to whom it is directly addressed and delivered (including such attendee’s subsidiaries and affiliates, the “Attendees”) as an informational presentation and does not carry any right of publication or disclosure, in whole or in part, to any other party. This presentation is for discussion purposes only and is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by Banks Street Partners, LLC (“BSP”). Neither this presentation nor any of its contents may be disclosed or used for any other purpose without the prior written consent of BSP. The information in this presentation is based upon public information and industry research and reflects prevailing conditions and our views as of this date, all of which are accordingly subject to change. BSP’s opinions and estimates constitute BSP’s judgment and should be regarded as indicative, preliminary and for illustrative purposes only. In preparing this presentation, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or industry research sources. Furthermore, BSP shall have no liability to any party for any errors or omissions that may be contained in this presentations. In addition, our analyses are not and do not purport to be appraisals of the assets, stock or business of any company, financial institution or any other entity. BSP makes no representations as to the actual value which may be paid or received in connection with any investment or other transaction nor the legal, tax or accounting effects of consummating any investment or other transaction. For any discussion or analysis contained in this presentation that pertains to public companies (including the Attendees, if they are public companies), please note that past performance of such companies and their securities is not necessarily a guide to future performance and no representation or warranty, express or implied, is made by BSP with respect to future performance. The price or value of the securities analyzed, either directly or indirectly, may fall or rise against the interest of investors. Any recommendation or opinion contained in this report may become outdated as a consequence of changes in the environment in which the issuer of the securities under analysis operates, in addition to changes in the estimates and forecasts, assumptions and valuation methodology used herein. IRS Circular 230 Disclosure: BSP and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters included herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone not affiliated with BSP of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties. This presentation is not to be considered a solicitation to buy or sell any securities and does not constitute a commitment by any BSP entity to underwrite, subscribe for or place any securities or to arrange credit or to provide any other services.

3 Banks Street Partners Professionals Seasoned professionals with more than 140 years of combined experience and more than 500 transactions in the financial services industry Lee Burrows Chief Executive Officer Mark Saunders Managing Director Jeff Adams Managing Director Will Brackett Senior Vice President Gary McNorrill COO & Managing Director Joe Maloney Senior Vice President/Analyst William Izlar Analyst Berkeley McKeown Analyst Nicole Mansfield Chief Marketing Officer ATLANTA CHARLOTTE Matt Kennedy Associate

4 Banks Street Partners Recent M&A Deals

5 Southeast M&A League Table Source: SNL Financial Whole Bank, Branch and FDIC-assisted transactions announced between Jan. 1, 2013 and June, with the target located in either AL, FL, GA, NC, SC or TN

6 Table of Contents TOPIC PAGE M&A Market Update 7 Successful Bank Acquirers 12 Successful Sellers 25 Remaining Independent 31

M&A Market Update

8 Southeast Bank M&A Multiple Trends P/E transaction multiples in Southeast M&A deals fluctuated greatly from 2006-YTD2015 driven by unstable earnings, elevated NPAs and an uncertain economic recovery P/TBV multiples are slowly trending upward but remain well below 2006 levels 66 # of M&A Deals Source: SNL Financial P/TBV (%) P/E (x)

9 M&A Activity by Region and State When compared to other regions, Southeast M&A deals completed in the last twelve months rank 4 th in P/TBV and 3 rd in P/E (of six) South Carolina’s median P/TBV multiple of 137% is in line with the Southeast (136%) and National (138%) medians South Carolina’s median P/E multiple of 24x is slightly above the Southeast (23x) and National (22x) medians NM Source: SNL Financial

10 M&A Pricing (Population & Asset Size) Urban designation assigned to selling banks headquartered in MSAs with a population of greater than 150,000 Figures represent medians for all publicly disclosed transactions announced since Jan. 1, 2013 with the target based in the Southeast Source: SNL Financial

11 Current Pricing Guidance Historically, over various economic cycles, banks have: Traded at 13x-15x P/E and sold in the 17x-20x P/E range Sold at a 25-35% premium to market price In 2014 and 2015 YTD: A typical, healthy, Southeast bank could attract a change in control premium in a range of 110%-135% of P/TBV and 16x-20x P/E Southeast Banks in urban markets are selling in a range of 130%-200% of P/TBV and 20x-30x P/E Southeast Banks in rural markets are selling in a range of 90%-120% of P/TBV and 14x-18x P/E Source: BSP

Successful Bank Acquirers

13 Is There a Difference? Source: The New Yorker

14 BNC Bancorp Overview & Acquisitions Acquisitions 11 acquisitions since 2010 Average size of acquired banks was $317mm and on average, represented 12% of BNCN’s total assets at the time of announcement Majority have been market expansions or only partially overlapped with existing branch network Average price change in BNCN stock from announcement to closing is 7.01% Overview Ticker: BNCN Headquarters: High Point, NC Bank Established: 1991 Total Assets: $5.0 bn (PF with most recent acquisition) Geography: 66 branches in North Carolina, South Carolina and Virginia Bank Brands: Bank of North Carolina and BNC Bank in South Carolina and Virginia Source: SNL Financial

15 BNC Bancorp Acquisition Map Legacy BNCN Beach First Regent Bank Blue Ridge Savings Bank KeySource First Trust Carolina Federal Randolph Bank & Trust South Street Community First Harbor Valley Financial Hampton Roads* Certus* *Branch Acquisition Sources: SNL Financial, ESRI

16 BNCN Stock Price Trend, Today Harbor National Bank Harrington Bank & Home Savings Bank Whole Bank AcquisitionsFDIC-Assisted Acquisitions Randolph Bank & Trust First Trust Bank KeySource Bank Regent Bank Carolina Federal Savings Bank Blue Ridge Savings Bank Beach First National Bank Source: SNL Financial Valley Bank

17 BNC Bancorp Key Strengths Took advantage of the financial upside associated with FDIC- assisted deals Able to acquire even when their stock was trading at a discount to book value All but 3 whole bank transactions were priced at or below book value at time of announcement Strong corporate culture Take care of management teams Currency caught up to culture and M&A expertise All but two transactions negotiated without auction process Source: BSP

18 South State Overview & Acquisitions Acquisitions 6 acquisitions since 2010 Average size of acquired banks was $1.1B and on average, represented 25% of SSB’s total assets at the time of announcement All acquisitions have been market expansions or only partially overlapped with existing branch network Average price change in SSB stock from announcement to closing is 8.83% Overview Ticker: SSB Headquarters: Columbia, SC Bank Established: 1934 Total Assets: $8.0 bn Geography: 134 branches in South Carolina, North Carolina and Georgia Bank Brand: South State Bank Source: SNL Financial

19 South State Acquisition Map Legacy SSB Community Bank & Trust Habersham BankMeridian Peoples Bancorp Savannah Bancorp First Financial Sources: SNL Financial, ESRI

20 SSB Stock Price Trend, Today Whole Bank AcquisitionsFDIC-Assisted Acquisitions First Financial Holdings Savannah Bancorp Peoples Bancorporation BankMeridian Habersham Bank Community Bank & Trust Sources: SNL Financial, BSP

21 South State Key Strengths Focused on distressed or underperforming banks Acquired larger targets ($1B average size) who had substantial or dominant market share All whole bank transactions but 1 were priced at a discount to book value Largest community bank in South Carolina and adjoining states Strong currency Source: BSP

22 Seven Cs of a Successful Acquirer Most, and sometimes all, of the Seven Cs below are key to successful transactions: Currency Culture and leadership Communication Creativity Command of the analytics Consistency with an established M&A policy Committee for M&A Source: BSP

23 Who Will be Successful in the New Cycle? Buying on the cheap or with FDIC assistance is less likely than at any time in the recent cycle FDIC-Assisted transactions have run their course Banks willing to sell at a discount to book will be rare in the future End of Trust Preferred Securities deferment periods may drive some distressed sales but likely very distressed and may involve a bankruptcy process Sources: SNL Financial, BSP

24 Who Will be Successful in the New Cycle? (cont.) Successful acquirers in the new cycle will: Have to pay attractive premiums for targets as multiples expand Need to maintain a strong stock valuation to compete against other acquirers Focus more on EPS accretion than TBV dilution Allow for more risk now that markets have stabilized and growth is improving Actively but appropriately pursue targets Sources: SNL Financial, BSP

Successful Sellers

26 Finding the Right Partner is Key Source: The New Yorker

27 Motivations for Selling Typically Point to Ideal Acquirers SHAREHOLDER LIQUIDITY DEMANDS – Cash Buyer or Larger Bank with liquid stock FINANCIAL – Larger Bank with strong earnings and ability to improve target earnings through cost saves or efficiencies and scale STRATEGIC – Merger of Equals or Larger Bank that offers more products and services and moves target up market SUCCESSION/MANAGEMENT CONCERNS – Merger of Equals or Larger, In-market Bank REGULATORY – Larger, In-market Bank but cast wide net for other Potential Buyers Source: BSP

28 Success After Announcement Peoples Bancorporation stockholders have seen a 164.2% return on SSB stock received as a result of their merger Likewise, KeySource Financial stockholders have seen a 177.8% return on BNCN stock received as a result of their merger Over the same time period, the SNL U.S. Bank Index rose 114% Market data as of 5/28/ % 177.8% The BNCN/KeySource & SSB/Peoples deals were both announced in December 2011 Source: SNL Financial

29 Tips for a Successful Sale Management and Board have clear objectives Implications of a change of control and social issues Acceptable pricing based in reality Ideal partners and nonstarters Executive Committee with authority to negotiate preliminary terms Third-party consultants – Investment Banker, Legal Counsel and Accountants Defined process – Negotiated or Auction Management and consultants are prepared for initial discussions and due diligence Financials Credit Executive Compensation Warrants and Options, Preferred Stock Potential Cost Saves 1x Transaction Costs Know the potential acquirers Currency – trading multiples, consensus analyst price targets, daily liquidity, dividend yield Management, Culture, Strategic Vision M&A Experience Pricing Today vs. Tomorrow Cash – all about pricing at announcement Stock – equal weight on today’s price and tomorrow’s potential Source: BSP

30 Stock for Stock Analysis Slide *Based on May 28 th closing price Sources: SNL Financial, BSP

Remaining Independent

32 Southeast Banks – Recent Performance ROAA and ROAE are S-Corp. adjusted. Pre-Tax, Pre-Prov ROAA = net income before taxes plus provision expense less securities gains plus any goodwill impairment, divided by average assets. Source: SNL Financial

33 Southeast Banks – Recent Performance Source: SNL Financial

34 The Status Quo Can Reduce Long-Term Value Staying independent can be risky to long-term shareholder value even at a 85 bps ROAA clip, assuming historical equity discount rates Source: BSP

35 Growth Alone Cannot Confirm Independence The same bank example but with 9.5% annual asset growth, if ROAA does not improve, barely breaks even for shareholders Source: BSP

36 Returns + Growth = Increased Shareholder Value Add higher ROAA growth to the higher asset growth trend and you start to see real value creation for shareholders in the independence case Source: BSP

37 Successful Independent Bank Profiles Date Established:4/17/1995 Total Assets:$377mm Mkts/Region:Charleston, SC Loans/Deposits:72.51% Cost of Funds: 0.12% Demand Deposits %:33.24% Average Loan Yield: 5.52% NIM: 4.15% Efficiency Ratio:57.02% ROA: 1.33% ROE:13.43% Non-II % of Revenue:11.06% Date Established:7/1/1939 Total Assets:$230mm Mkts/Region:Manning, SC Loans/Deposits:70.44% Cost of Funds: 0.21% Demand Deposits %:18.09% Average Loan Yield: 5.27% NIM: 3.98% Efficiency Ratio:61.06% ROA: 1.01% ROE: 7.14% Non-II % of Revenue:22.86% Source: SNL Financial

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