Bank OZK Annual Report 2011

FY2011 Annual Report · Bank OZK
Loading PDF…
Table of Contents

A Message to Our Shareholders 
A Long-Term Perspective 
Bank of the Ozarks’ Locations 
Our Senior Management Team 
Selected Consolidated Financial Data 
Management’s Discussion and Analysis 
Summary of Quarterly Results 
Company Performance 
Report of Management on the Company’s Internal Control 
   Over Financial Reporting 
Reports of Independent Registered Public Accounting Firm 
Consolidated Financial Statements 

1
2
5
6
9
10
53 
54

55
56
58

This report contains forward-looking statements and reﬂ ects man agement’s
current views of future economic circumstances, industry con ditions, Company 
performance and ﬁ nancial results. These forward-looking state ments are subject 
to a number of factors and uncertainties which could cause the Company’s 
actual results and experience to ma terially differ from anticipated results and 
expectations expressed in such for ward-looking statements. A de scription of 
certain factors which may affect operating results may be found in Man agement’s
Discussion and Analysis of Financial Con dition and Results of Operations under 
the caption “For ward-Looking In formation” contained elsewhere in this report.

All scenic photographs from Bank of the Ozarks’ trade area.

To Our Shareholders

We are very pleased to report our 
eleventh consecutive year of record 
net income. Our 2011 net income was 
a record $101.3 million, up 58.3% from 
2010 and our earnings per common 
share were also a record $2.94, up 56.4% 
from 2010. During 2011 we achieved 
record net interest income, our best net 
interest margin as a public company,
record service charge income and 
favorable results for asset quality. 
The strong earnings momentum we 
achieved in 2011 provides a solid 
foundation on which to build.

During 2011 we made three FDIC-
assisted acquisitions, each of which 
generated bargain purchase gains and 
operating net income following the 
acquisition. These acquisitions added 
new ofﬁ ces and customers to our 
existing franchise in Georgia and Florida.

With our excellent team of bankers, 
strong capital position, favorable deposit 
base, abundant sources of liquidity, 
solid credit culture, proven revenue 
generating capabilities and excellent 
franchise footprint, we feel we are in a 
great position to proﬁ t from opportunities 
in 2012.

As you read this annual report, we 

hope you will be pleased with our 
accomplishments in 2011 and share 
our enthusiasm for the future.

George Gleason
Chairman and Chief Executive Ofﬁ cer

1

A Long-Term Perspective

The record results we achieved in 2011 reﬂ ect our commitment to 
excellence and our focus on long-term goals. For many years, we have 
worked hard to build and improve our Company. Our constant pursuit of 
adding new customers, building relationships, improving performance and 
enhancing efﬁ ciency has produced great results. The following graphs provide 
a long-term perspective.

Our Company is focused on both growth and proﬁ t ability. We have 
achieved excellent long-term growth in loans, leases and deposits, while 
our net income and diluted earnings per common share have grown at 
similiar rates.

Net Income (Millions)
Earnings Per 
Common Share
(Diluted)

$101.3 

$64.0 

$2.94 

$31.5

$31.7

$31.7

$34.5 

$36.8 

$1.88 

$25.9

$20.2

$14.4

$9.0

$0.46
$0.29
2001 2002

$0.78

$0.62

$0.94 $0.94

$0.94

$1.02 

$1.09 

2003

2004

2005 2006

2007

2008

2009

2010

2011

Loans and Leases,
including Covered Loans
(Millions)

$2,021 

$1,904 

$1,871

$2,692 

$2,346 

$1,677

$1,371

$1,135

$909

$718

$616

2001 2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Over the past ten 
years, we have 
achieved com pounded
annual growth rates 
of 27.5% in net 
income and 26.1% 
in diluted earnings 
per common share. 

Over the past ten 
years, our loans and 
leases, including 
covered loans, have 
grown at a compounded 
annual rate of 15.9%. 

Deposits (Millions)

$2,944 

$2,541 

$2,341 

$2,045

$2,057

$2,029 

$1,592

$1,380

$1,062

$678

$790

Over the past ten 
years, our deposits 
have grown at a 
compounded annual 
rate of 15.8%. 

2001 2002

2003

2004

2005

2006

2007

2008

2009

2010

2011 

2

Net interest income is our largest revenue com ponent, and income 
from service charges, trust and mort gage lending have traditionally been 
our three principal sources of non-interest income.

Net Interest Income (Millions)

$168.7 

$118.3 

$123.6 

$98.7 

$77.6

Net interest income has 
grown over the last ten 
years at a compounded 
annual rate of 19.6%.

$68.6 

$70.7 

$60.6 

$48.8 

$39.8

$28.1

2001 2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Service Charge Income (Millions)

$18.1 

$15.2 

$12.2

$12.0 

$12.4 

$9.9 

$10.2 

$9.5 

$7.8 

$6.9

$3.8

2001 2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Income from service 
charges on deposit 
accounts has grown at 
a compounded annual 
rate of 17.0% over the 
past ten years.

Trust Income (Millions)

$3.4 

$3.2 

$3.1 

$2.6 

$2.2

$1.9 

$1.7 

$1.6 

$1.5 

$0.7

$0.6

2001 2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Over the past ten 
years, trust income 
has grown at a 
compounded annual 
rate of 18.2%.

Mortgage Lending Income (Millions)

$5.5 

$2.9

$3.3 

$3.0 

$2.9 

$2.7

$2.2 

$1.9

$3.9 

$3.3 

$3.3 

2001 2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Mortgage lending is 
a valuable service to 
our customers and an 
important source of 
non-interest income, 
but it is cyclical in 
nature and varies with 
interest rate and housing 
market conditions.

3

Efficiency Ratios

52.5%

47.9%

47.5%

46.2%

47.1%

43.4%

46.3%

42.3%

37.8%

42.9%

41.6%

Over the past decade we have signiﬁ cantly 
improved our effﬁ ciency ratio and have 
become one of the na tion’s most efﬁ cient 
bank holding companies.

2001 2002 2003 2004 2005 2006 2007

2008

2009

2010

2011

Charge-Off Ratios

FDIC Insured Financial Institutions
Bank of the Ozarks, Inc.

2.52%

2.55%

1.75%

1.61%*

1.29%

0.97%

0.83%

0.78%

0.56%

0.49%

0.39%

0.59%

0.45%

0.81%

0.69%

We consider the net charge-off ratio as the 
ultimate measure of asset quality. Our net 
charge-off ratio has consistently compared 
favorably with the ratio for all FDIC insured 
institutions as a group.

0.12% 0.24%
0.24%
2001 2002 2003 2004 2005 2006 2007

0.10% 0.11%

0.20%

0.22%

2008

2009

2010

2011*

Source: Data from the FDIC Quarterly Banking Proﬁ le for 3Q11.
*FDIC data for 2011 is annualized September 30, 2011 data.

Maintaining good asset quality has been an important factor in our historically strong growth in net 
income, and this has never been more important than in the recent challenging economic conditions.

Nonperforming Loans
& Leases/Total Loans 
& Leases

1.24%

Nonperforming Assets/
Total Assets

3.06%

Loans & Leases Past Due
30 Days Or More/Total Loans
& Leases

2.68%

0.76%

0.75%†

0.72%†

0.57%

0.47%

0.31%

0.29%

0.34%

0.35%

0.25%

1.99%

2.02%†

1.56%†

1.14%

1.72%†

1.18%†

0.81%

0.75%

0.72%

0.77%

0.76%

0.36%

0.39%

0.36%

0.60%

0.39%

0.28%

0.24%

0.24%

0.18%

2001 2002 2003 2004 2005 2006 2007

2008

2009

2010

2011

2001 2002 2003 2004 2005 2006 2007

2008

2009

2010

2011

2001 2002 2003 2004 2005 2006 2007

2008

2009

2010

2011

† Excludes loans and/or foreclosed assets covered by FDIC loss share agreements, except for their inclusion in total assets.

4

Bank of the Ozarks’ Locations

At year-end 2011, our franchise included a total of 111 ofﬁ ces in seven states, providing us 

substantial capacity and opportunities for growth.

North Carolina

South Carolina

Arkansas

Alabama

Georgia

Texas

Florida

Ofﬁ ce Locations
Arkansas 
Georgia 
Texas 
Florida 
North Carolina 
Alabama 
South Carolina 

66
27
10
4
2
1
1

Total 

111

5

Our Senior Man agement Team

George Gleason Chairman of the Board and Chief Ex ecutive Ofﬁ cer
George Gleason has led the Company and its predecessors for 33 years. Mr. Gleason purchased 
Bank of Ozark, which then had ap proximately $28 million of total assets, in 1979. Since then, 
the Company has grown rough ly 140 times its 1979 size. 

Mark Ross Vice Chairman and Chief Op erating Ofﬁ cer
Mark Ross joined the Company in 1980. Mr. Ross is responsible for oversight of a number of 
operational and administrative functions of the Company including internal audit, compliance, 
loan review, fa cilities, tech nology, human resources, deposit operations, trust services and 
mortgage banking. 

Greg McKinney Chief Financial Ofﬁ cer and Chief Ac counting Ofﬁ cer
Greg McKinney oversees all accounting, tax, ﬁ nancial reporting, regulatory reporting and fund 
management func tions for the Company. Mr. McKinney has 20 years of accounting and ﬁ nancial 
reporting ex pe ri ence and joined the Company in 2003. Mr. McKinney is a Certiﬁ ed Public Accountant.

Tyler Vance Chief Banking Ofﬁ cer
Tyler Vance joined the Company in 2006. Mr. Vance was named Chief Banking Ofﬁ cer in 2011 and 
oversees a broad range of duties including retail banking, deposit pricing, treasury management, 
marketing and training. In addition, he is responsible for oversight of banking operations in Arkansas 
and North Texas. He has 15 years of banking experience and is a Certiﬁ ed Public Accountant.

Ron Kuykendall Chief Information Ofﬁ cer
Ron Kuykendall joined the Company in 1989 and is responsible for the oversight of information 
systems, deposit operations, e-banking and item pro cessing. Mr. Kuykendall has 28 years of 
experience in bank ing.

Darrel Russell Chief Credit Ofﬁ cer and Chairman of the Loan Committee
Darrel Russell has 31 years of banking ex perience and has been with the Com pany since 1983. 
Mr. Russell was named Chief Credit Ofﬁ cer in 2011 and is responsible for the Company’s overall 
loan production and credit quality. Mr. Russell is also responsible for oversight of the Company’s 
loan production ofﬁ ce in Charlotte, North Carolina.

Dan Thomas President, Real Estate Specialties Group
Dan Thomas has 27 years experience in structuring, ﬁ nancing and managing commercial real estate 
transactions. He joined Bank of the Ozarks in 2003 and established the Real Estate Specialties 
Group, which handles many of the Company’s larger and more complex real estate transactions. 

Note: George Gleason, Mark Ross, Greg McKinney, Tyler Vance and Ron Kuykendall serve in the same ofﬁ cer 
capacity for both the Com pany and its bank subsidiary. All other ofﬁ cers shown in this article serve as ofﬁ cers 
only of the bank sub sidiary in the capacities indicated. 

6

(cid:36)(cid:85)(cid:65)(cid:78)(cid:69) (cid:34)(cid:73)(cid:67)(cid:75)(cid:73)(cid:78)(cid:71)(cid:83) (cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:12) (cid:35)(cid:69)(cid:78)(cid:84)(cid:82)(cid:65)(cid:76) (cid:39)(cid:69)(cid:79)(cid:82)(cid:71)(cid:73)(cid:65) (cid:36)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)
(cid:36)(cid:85)(cid:65)(cid:78)(cid:69) (cid:34)(cid:73)(cid:67)(cid:75)(cid:73)(cid:78)(cid:71)(cid:83) (cid:72)(cid:65)(cid:83) (cid:19)(cid:18) (cid:89)(cid:69)(cid:65)(cid:82)(cid:83) (cid:79)(cid:70) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69) (cid:65)(cid:78)(cid:68) (cid:74)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68) (cid:84)(cid:72)(cid:69) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89) (cid:73)(cid:78) (cid:18)(cid:16)(cid:17)(cid:16)(cid:14)
(cid:33)(cid:83) (cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84) (cid:79)(cid:70) (cid:84)(cid:72)(cid:69) (cid:35)(cid:69)(cid:78)(cid:84)(cid:82)(cid:65)(cid:76) (cid:39)(cid:69)(cid:79)(cid:82)(cid:71)(cid:73)(cid:65) (cid:36)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:12) (cid:45)(cid:82)(cid:14) (cid:34)(cid:73)(cid:67)(cid:75)(cid:73)(cid:78)(cid:71)(cid:83) (cid:79)(cid:86)(cid:69)(cid:82)(cid:83)(cid:69)(cid:69)(cid:83) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83) (cid:73)(cid:78) (cid:84)(cid:72)(cid:69)
(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:7)(cid:83) (cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:83) (cid:73)(cid:78) (cid:54)(cid:65)(cid:76)(cid:68)(cid:79)(cid:83)(cid:84)(cid:65) (cid:8)(cid:19)(cid:9)(cid:12) (cid:34)(cid:65)(cid:73)(cid:78)(cid:66)(cid:82)(cid:73)(cid:68)(cid:71)(cid:69) (cid:8)(cid:18)(cid:9)(cid:12) (cid:36)(cid:65)(cid:87)(cid:83)(cid:79)(cid:78)(cid:86)(cid:73)(cid:76)(cid:76)(cid:69) (cid:8)(cid:18)(cid:9)(cid:12) (cid:33)(cid:84)(cid:72)(cid:69)(cid:78)(cid:83)(cid:12) (cid:35)(cid:65)(cid:73)(cid:82)(cid:79)(cid:12) (cid:35)(cid:85)(cid:77)(cid:77)(cid:73)(cid:78)(cid:71)(cid:12)
(cid:44)(cid:65)(cid:75)(cid:69) (cid:48)(cid:65)(cid:82)(cid:75)(cid:12) (cid:45)(cid:65)(cid:82)(cid:66)(cid:76)(cid:69) (cid:40)(cid:73)(cid:76)(cid:76)(cid:12) (cid:45)(cid:67)(cid:36)(cid:79)(cid:78)(cid:79)(cid:85)(cid:71)(cid:72)(cid:12) (cid:47)(cid:65)(cid:75)(cid:87)(cid:79)(cid:79)(cid:68) (cid:65)(cid:78)(cid:68) (cid:51)(cid:84)(cid:79)(cid:67)(cid:75)(cid:66)(cid:82)(cid:73)(cid:68)(cid:71)(cid:69)(cid:12) (cid:39)(cid:69)(cid:79)(cid:82)(cid:71)(cid:73)(cid:65) (cid:65)(cid:78)(cid:68) (cid:47)(cid:67)(cid:65)(cid:76)(cid:65)(cid:12) (cid:38)(cid:76)(cid:79)(cid:82)(cid:73)(cid:68)(cid:65)(cid:14)

(cid:34)(cid:65)(cid:82)(cid:82)(cid:89) (cid:34)(cid:82)(cid:79)(cid:87)(cid:78) (cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:12) (cid:45)(cid:65)(cid:78)(cid:65)(cid:84)(cid:69)(cid:69) (cid:35)(cid:79)(cid:85)(cid:78)(cid:84)(cid:89)(cid:12) (cid:38)(cid:76)(cid:79)(cid:82)(cid:73)(cid:68)(cid:65) (cid:45)(cid:65)(cid:82)(cid:75)(cid:69)(cid:84)
(cid:34)(cid:65)(cid:82)(cid:82)(cid:89) (cid:34)(cid:82)(cid:79)(cid:87)(cid:78) (cid:74)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68) (cid:34)(cid:65)(cid:78)(cid:75) (cid:79)(cid:70) (cid:84)(cid:72)(cid:69) (cid:47)(cid:90)(cid:65)(cid:82)(cid:75)(cid:83) (cid:73)(cid:78) (cid:18)(cid:16)(cid:17)(cid:16) (cid:65)(cid:78)(cid:68) (cid:72)(cid:65)(cid:83) (cid:18)(cid:25) (cid:89)(cid:69)(cid:65)(cid:82)(cid:83) (cid:79)(cid:70) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:14)
(cid:45)(cid:82)(cid:14) (cid:34)(cid:82)(cid:79)(cid:87)(cid:78) (cid:79)(cid:86)(cid:69)(cid:82)(cid:83)(cid:69)(cid:69)(cid:83) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83) (cid:73)(cid:78) (cid:45)(cid:65)(cid:78)(cid:65)(cid:84)(cid:69)(cid:69) (cid:35)(cid:79)(cid:85)(cid:78)(cid:84)(cid:89)(cid:12) (cid:87)(cid:72)(cid:73)(cid:67)(cid:72) (cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:83) (cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:83) (cid:73)(cid:78)
(cid:34)(cid:82)(cid:65)(cid:68)(cid:69)(cid:78)(cid:84)(cid:79)(cid:78) (cid:8)(cid:18)(cid:9) (cid:65)(cid:78)(cid:68) (cid:48)(cid:65)(cid:76)(cid:77)(cid:69)(cid:84)(cid:84)(cid:79)(cid:12) (cid:38)(cid:76)(cid:79)(cid:82)(cid:73)(cid:68)(cid:65)(cid:14)

(cid:42)(cid:79)(cid:72)(cid:78) (cid:35)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82) (cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:12) (cid:44)(cid:73)(cid:84)(cid:84)(cid:76)(cid:69) (cid:50)(cid:79)(cid:67)(cid:75)(cid:12) (cid:33)(cid:82)(cid:75)(cid:65)(cid:78)(cid:83)(cid:65)(cid:83) (cid:45)(cid:65)(cid:82)(cid:75)(cid:69)(cid:84)
(cid:42)(cid:79)(cid:72)(cid:78) (cid:35)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82) (cid:74)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68) (cid:34)(cid:65)(cid:78)(cid:75) (cid:79)(cid:70) (cid:84)(cid:72)(cid:69) (cid:47)(cid:90)(cid:65)(cid:82)(cid:75)(cid:83) (cid:73)(cid:78) (cid:18)(cid:16)(cid:16)(cid:25) (cid:65)(cid:78)(cid:68) (cid:72)(cid:65)(cid:83) (cid:17)(cid:16) (cid:89)(cid:69)(cid:65)(cid:82)(cid:83) (cid:79)(cid:70) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:14)
(cid:45)(cid:82)(cid:14) (cid:35)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82) (cid:79)(cid:86)(cid:69)(cid:82)(cid:83)(cid:69)(cid:69)(cid:83) (cid:66)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83) (cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83) (cid:73)(cid:78) (cid:84)(cid:72)(cid:69) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:7)(cid:83) (cid:78)(cid:73)(cid:78)(cid:69) (cid:44)(cid:73)(cid:84)(cid:84)(cid:76)(cid:69) (cid:50)(cid:79)(cid:67)(cid:75) (cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:83)(cid:14)

(cid:42)(cid:79)(cid:72)(cid:78) (cid:36)(cid:65)(cid:86)(cid:73)(cid:83) (cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:12) (cid:46)(cid:79)(cid:82)(cid:84)(cid:72)(cid:87)(cid:69)(cid:83)(cid:84) (cid:39)(cid:69)(cid:79)(cid:82)(cid:71)(cid:73)(cid:65) (cid:36)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)
(cid:42)(cid:79)(cid:72)(cid:78) (cid:36)(cid:65)(cid:86)(cid:73)(cid:83) (cid:72)(cid:65)(cid:83) (cid:19)(cid:16) (cid:89)(cid:69)(cid:65)(cid:82)(cid:83) (cid:79)(cid:70) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69) (cid:65)(cid:78)(cid:68) (cid:74)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68) (cid:84)(cid:72)(cid:69) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89) (cid:73)(cid:78) (cid:18)(cid:16)(cid:16)(cid:21)(cid:14) (cid:45)(cid:82)(cid:14) (cid:36)(cid:65)(cid:86)(cid:73)(cid:83)
(cid:79)(cid:86)(cid:69)(cid:82)(cid:83)(cid:69)(cid:69)(cid:83) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83) (cid:73)(cid:78) (cid:84)(cid:72)(cid:69) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:7)(cid:83) (cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:83) (cid:73)(cid:78) (cid:35)(cid:65)(cid:82)(cid:84)(cid:69)(cid:82)(cid:83)(cid:86)(cid:73)(cid:76)(cid:76)(cid:69) (cid:8)(cid:18)(cid:9)(cid:12) (cid:33)(cid:68)(cid:65)(cid:73)(cid:82)(cid:83)(cid:86)(cid:73)(cid:76)(cid:76)(cid:69)(cid:12) (cid:35)(cid:65)(cid:76)(cid:72)(cid:79)(cid:85)(cid:78)(cid:12)
(cid:36)(cid:65)(cid:76)(cid:76)(cid:65)(cid:83)(cid:12) (cid:36)(cid:79)(cid:85)(cid:71)(cid:76)(cid:65)(cid:83)(cid:86)(cid:73)(cid:76)(cid:76)(cid:69)(cid:12) (cid:46)(cid:69)(cid:87)(cid:78)(cid:65)(cid:78)(cid:12) (cid:50)(cid:79)(cid:77)(cid:69)(cid:12) (cid:51)(cid:69)(cid:78)(cid:79)(cid:73)(cid:65) (cid:65)(cid:78)(cid:68) (cid:51)(cid:72)(cid:65)(cid:82)(cid:80)(cid:83)(cid:66)(cid:85)(cid:82)(cid:71)(cid:12) (cid:39)(cid:69)(cid:79)(cid:82)(cid:71)(cid:73)(cid:65)(cid:14)

(cid:44)(cid:65)(cid:82)(cid:82)(cid:89) (cid:36)(cid:73)(cid:67)(cid:75)(cid:83) (cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:12) (cid:50)(cid:73)(cid:86)(cid:69)(cid:82) (cid:54)(cid:65)(cid:76)(cid:76)(cid:69)(cid:89) (cid:33)(cid:82)(cid:75)(cid:65)(cid:78)(cid:83)(cid:65)(cid:83) (cid:36)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)
(cid:45)(cid:82)(cid:14) (cid:36)(cid:73)(cid:67)(cid:75)(cid:83) (cid:72)(cid:65)(cid:83) (cid:19)(cid:20) (cid:89)(cid:69)(cid:65)(cid:82)(cid:83) (cid:79)(cid:70) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:12) (cid:18)(cid:22) (cid:79)(cid:70) (cid:84)(cid:72)(cid:79)(cid:83)(cid:69) (cid:87)(cid:73)(cid:84)(cid:72) (cid:34)(cid:65)(cid:78)(cid:75) (cid:79)(cid:70) (cid:84)(cid:72)(cid:69) (cid:47)(cid:90)(cid:65)(cid:82)(cid:75)(cid:83)(cid:14) (cid:33)(cid:83)
(cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84) (cid:79)(cid:70) (cid:84)(cid:72)(cid:69) (cid:50)(cid:73)(cid:86)(cid:69)(cid:82) (cid:54)(cid:65)(cid:76)(cid:76)(cid:69)(cid:89) (cid:33)(cid:82)(cid:75)(cid:65)(cid:78)(cid:83)(cid:65)(cid:83) (cid:36)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:12) (cid:45)(cid:82)(cid:14) (cid:36)(cid:73)(cid:67)(cid:75)(cid:83) (cid:76)(cid:69)(cid:65)(cid:68)(cid:83) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83) (cid:73)(cid:78) (cid:84)(cid:72)(cid:69)
(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:7)(cid:83) (cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:83) (cid:73)(cid:78) (cid:50)(cid:85)(cid:83)(cid:83)(cid:69)(cid:76)(cid:76)(cid:86)(cid:73)(cid:76)(cid:76)(cid:69) (cid:8)(cid:19)(cid:9)(cid:12) (cid:35)(cid:76)(cid:65)(cid:82)(cid:75)(cid:83)(cid:86)(cid:73)(cid:76)(cid:76)(cid:69) (cid:8)(cid:18)(cid:9)(cid:12) (cid:47)(cid:90)(cid:65)(cid:82)(cid:75) (cid:8)(cid:18)(cid:9)(cid:12) (cid:33)(cid:76)(cid:84)(cid:85)(cid:83) (cid:65)(cid:78)(cid:68) (cid:48)(cid:65)(cid:82)(cid:73)(cid:83)(cid:14)

(cid:51)(cid:85)(cid:83)(cid:65)(cid:78) (cid:39)(cid:82)(cid:79)(cid:66)(cid:77)(cid:89)(cid:69)(cid:82) (cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:12) (cid:55)(cid:69)(cid:83)(cid:84)(cid:69)(cid:82)(cid:78) (cid:33)(cid:82)(cid:75)(cid:65)(cid:78)(cid:83)(cid:65)(cid:83) (cid:36)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)
(cid:51)(cid:85)(cid:83)(cid:65)(cid:78) (cid:39)(cid:82)(cid:79)(cid:66)(cid:77)(cid:89)(cid:69)(cid:82) (cid:74)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68) (cid:34)(cid:65)(cid:78)(cid:75) (cid:79)(cid:70) (cid:84)(cid:72)(cid:69) (cid:47)(cid:90)(cid:65)(cid:82)(cid:75)(cid:83) (cid:73)(cid:78) (cid:17)(cid:25)(cid:25)(cid:23) (cid:65)(cid:78)(cid:68) (cid:72)(cid:65)(cid:83) (cid:19)(cid:21) (cid:89)(cid:69)(cid:65)(cid:82)(cid:83) (cid:79)(cid:70) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:14)
(cid:45)(cid:82)(cid:83)(cid:14) (cid:39)(cid:82)(cid:79)(cid:66)(cid:77)(cid:89)(cid:69)(cid:82) (cid:79)(cid:86)(cid:69)(cid:82)(cid:83)(cid:69)(cid:69)(cid:83) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83) (cid:73)(cid:78) (cid:84)(cid:72)(cid:69) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:7)(cid:83) (cid:55)(cid:69)(cid:83)(cid:84)(cid:69)(cid:82)(cid:78) (cid:33)(cid:82)(cid:75)(cid:65)(cid:78)(cid:83)(cid:65)(cid:83) (cid:36)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:12)
(cid:87)(cid:72)(cid:73)(cid:67)(cid:72) (cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:83) (cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:83) (cid:73)(cid:78) (cid:38)(cid:79)(cid:82)(cid:84) (cid:51)(cid:77)(cid:73)(cid:84)(cid:72) (cid:8)(cid:19)(cid:9)(cid:12) (cid:54)(cid:65)(cid:78) (cid:34)(cid:85)(cid:82)(cid:69)(cid:78) (cid:8)(cid:18)(cid:9)(cid:12) (cid:45)(cid:85)(cid:76)(cid:66)(cid:69)(cid:82)(cid:82)(cid:89) (cid:65)(cid:78)(cid:68) (cid:33)(cid:76)(cid:77)(cid:65)(cid:14)

(cid:51)(cid:67)(cid:79)(cid:84)(cid:84) (cid:40)(cid:65)(cid:83)(cid:84)(cid:73)(cid:78)(cid:71)(cid:83) (cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:12) (cid:44)(cid:69)(cid:65)(cid:83)(cid:73)(cid:78)(cid:71) (cid:36)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)
(cid:51)(cid:67)(cid:79)(cid:84)(cid:84) (cid:40)(cid:65)(cid:83)(cid:84)(cid:73)(cid:78)(cid:71)(cid:83) (cid:74)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68) (cid:84)(cid:72)(cid:69) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89) (cid:73)(cid:78) (cid:18)(cid:16)(cid:16)(cid:19) (cid:84)(cid:79) (cid:69)(cid:83)(cid:84)(cid:65)(cid:66)(cid:76)(cid:73)(cid:83)(cid:72) (cid:65) (cid:44)(cid:69)(cid:65)(cid:83)(cid:73)(cid:78)(cid:71) (cid:36)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:14) (cid:45)(cid:82)(cid:14) (cid:40)(cid:65)(cid:83)(cid:84)(cid:73)(cid:78)(cid:71)(cid:83) (cid:72)(cid:65)(cid:83)
(cid:18)(cid:25) (cid:89)(cid:69)(cid:65)(cid:82)(cid:83) (cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69) (cid:73)(cid:78) (cid:76)(cid:69)(cid:65)(cid:83)(cid:73)(cid:78)(cid:71)(cid:14)

(cid:39)(cid:69)(cid:78)(cid:69) (cid:40)(cid:79)(cid:76)(cid:77)(cid:65)(cid:78) (cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:12) (cid:45)(cid:79)(cid:82)(cid:84)(cid:71)(cid:65)(cid:71)(cid:69) (cid:36)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)
(cid:39)(cid:69)(cid:78)(cid:69) (cid:40)(cid:79)(cid:76)(cid:77)(cid:65)(cid:78) (cid:72)(cid:65)(cid:83) (cid:19)(cid:24) (cid:89)(cid:69)(cid:65)(cid:82)(cid:83) (cid:79)(cid:70) (cid:77)(cid:79)(cid:82)(cid:84)(cid:71)(cid:65)(cid:71)(cid:69) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:65)(cid:78)(cid:68) (cid:82)(cid:69)(cid:65)(cid:76) (cid:69)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69) (cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:14) (cid:40)(cid:69) (cid:74)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68) (cid:84)(cid:72)(cid:69)
(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89) (cid:73)(cid:78) (cid:18)(cid:16)(cid:16)(cid:20) (cid:65)(cid:83) (cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84) (cid:79)(cid:70) (cid:84)(cid:72)(cid:69) (cid:45)(cid:79)(cid:82)(cid:84)(cid:71)(cid:65)(cid:71)(cid:69) (cid:36)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:14)

(cid:36)(cid:69)(cid:78)(cid:78)(cid:73)(cid:83) (cid:42)(cid:65)(cid:77)(cid:69)(cid:83) (cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82) (cid:79)(cid:70) (cid:45)(cid:69)(cid:82)(cid:71)(cid:69)(cid:82)(cid:83) (cid:65)(cid:78)(cid:68) (cid:33)(cid:67)(cid:81)(cid:85)(cid:73)(cid:83)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)
(cid:36)(cid:69)(cid:78)(cid:78)(cid:73)(cid:83) (cid:42)(cid:65)(cid:77)(cid:69)(cid:83) (cid:74)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68) (cid:84)(cid:72)(cid:69) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89) (cid:73)(cid:78) (cid:17)(cid:25)(cid:25)(cid:21) (cid:65)(cid:78)(cid:68) (cid:72)(cid:65)(cid:83) (cid:19)(cid:25) (cid:89)(cid:69)(cid:65)(cid:82)(cid:83) (cid:79)(cid:70) (cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69) (cid:73)(cid:78) (cid:108)(cid:78)(cid:65)(cid:78)(cid:67)(cid:69) (cid:65)(cid:78)(cid:68)
(cid:77)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:14) (cid:45)(cid:82)(cid:14) (cid:42)(cid:65)(cid:77)(cid:69)(cid:83) (cid:73)(cid:83) (cid:82)(cid:69)(cid:83)(cid:80)(cid:79)(cid:78)(cid:83)(cid:73)(cid:66)(cid:76)(cid:69) (cid:70)(cid:79)(cid:82) (cid:76)(cid:69)(cid:65)(cid:68)(cid:73)(cid:78)(cid:71) (cid:84)(cid:72)(cid:69) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:7)(cid:83) (cid:77)(cid:69)(cid:82)(cid:71)(cid:69)(cid:82) (cid:65)(cid:78)(cid:68) (cid:65)(cid:67)(cid:81)(cid:85)(cid:73)(cid:83)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78) (cid:65)(cid:67)(cid:84)(cid:73)(cid:86)(cid:73)(cid:84)(cid:89)(cid:14)

(cid:42)(cid:79)(cid:72)(cid:78) (cid:42)(cid:69)(cid:78)(cid:75)(cid:73)(cid:78)(cid:83) (cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:12) (cid:46)(cid:79)(cid:82)(cid:84)(cid:72) (cid:44)(cid:73)(cid:84)(cid:84)(cid:76)(cid:69) (cid:50)(cid:79)(cid:67)(cid:75)(cid:12) (cid:33)(cid:82)(cid:75)(cid:65)(cid:78)(cid:83)(cid:65)(cid:83) (cid:45)(cid:65)(cid:82)(cid:75)(cid:69)(cid:84)
(cid:42)(cid:79)(cid:72)(cid:78) (cid:42)(cid:69)(cid:78)(cid:75)(cid:73)(cid:78)(cid:83) (cid:74)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68) (cid:34)(cid:65)(cid:78)(cid:75) (cid:79)(cid:70) (cid:84)(cid:72)(cid:69) (cid:47)(cid:90)(cid:65)(cid:82)(cid:75)(cid:83) (cid:73)(cid:78) (cid:18)(cid:16)(cid:16)(cid:25) (cid:65)(cid:78)(cid:68) (cid:72)(cid:65)(cid:83) (cid:17)(cid:17) (cid:89)(cid:69)(cid:65)(cid:82)(cid:83) (cid:79)(cid:70) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:14)
(cid:45)(cid:82)(cid:14) (cid:42)(cid:69)(cid:78)(cid:75)(cid:73)(cid:78)(cid:83) (cid:79)(cid:86)(cid:69)(cid:82)(cid:83)(cid:69)(cid:69)(cid:83) (cid:66)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83) (cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83) (cid:73)(cid:78) (cid:84)(cid:72)(cid:69) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:7)(cid:83) (cid:46)(cid:79)(cid:82)(cid:84)(cid:72) (cid:44)(cid:73)(cid:84)(cid:84)(cid:76)(cid:69) (cid:50)(cid:79)(cid:67)(cid:75) (cid:8)(cid:19)(cid:9)(cid:12) (cid:44)(cid:79)(cid:78)(cid:79)(cid:75)(cid:69)(cid:12)
(cid:45)(cid:65)(cid:85)(cid:77)(cid:69)(cid:76)(cid:76)(cid:69) (cid:65)(cid:78)(cid:68) (cid:51)(cid:72)(cid:69)(cid:82)(cid:87)(cid:79)(cid:79)(cid:68) (cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:83)(cid:14)

(cid:23)

(cid:33)(cid:76)(cid:65)(cid:78) (cid:42)(cid:69)(cid:83)(cid:83)(cid:85)(cid:80) (cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:12) (cid:51)(cid:79)(cid:85)(cid:84)(cid:72) (cid:35)(cid:69)(cid:78)(cid:84)(cid:82)(cid:65)(cid:76) (cid:33)(cid:82)(cid:75)(cid:65)(cid:78)(cid:83)(cid:65)(cid:83) (cid:39)(cid:82)(cid:79)(cid:85)(cid:80) (cid:45)(cid:65)(cid:82)(cid:75)(cid:69)(cid:84)
(cid:33)(cid:76)(cid:65)(cid:78) (cid:42)(cid:69)(cid:83)(cid:83)(cid:85)(cid:80) (cid:74)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68) (cid:34)(cid:65)(cid:78)(cid:75) (cid:79)(cid:70) (cid:84)(cid:72)(cid:69) (cid:47)(cid:90)(cid:65)(cid:82)(cid:75)(cid:83) (cid:73)(cid:78) (cid:18)(cid:16)(cid:16)(cid:24) (cid:65)(cid:78)(cid:68) (cid:72)(cid:65)(cid:83) (cid:79)(cid:86)(cid:69)(cid:82) (cid:17)(cid:25) (cid:89)(cid:69)(cid:65)(cid:82)(cid:83) (cid:79)(cid:70) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:14)
(cid:45)(cid:82)(cid:14) (cid:42)(cid:69)(cid:83)(cid:83)(cid:85)(cid:80) (cid:79)(cid:86)(cid:69)(cid:82)(cid:83)(cid:69)(cid:69)(cid:83) (cid:66)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83) (cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83) (cid:73)(cid:78) (cid:84)(cid:72)(cid:69) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:7)(cid:83) (cid:51)(cid:79)(cid:85)(cid:84)(cid:72) (cid:35)(cid:69)(cid:78)(cid:84)(cid:82)(cid:65)(cid:76) (cid:33)(cid:82)(cid:75)(cid:65)(cid:78)(cid:83)(cid:65)(cid:83) (cid:77)(cid:65)(cid:82)(cid:75)(cid:69)(cid:84)(cid:12)
(cid:87)(cid:72)(cid:73)(cid:67)(cid:72) (cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:83) (cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:83) (cid:73)(cid:78) (cid:34)(cid:69)(cid:78)(cid:84)(cid:79)(cid:78) (cid:8)(cid:19)(cid:9)(cid:12) (cid:40)(cid:79)(cid:84) (cid:51)(cid:80)(cid:82)(cid:73)(cid:78)(cid:71)(cid:83) (cid:8)(cid:19)(cid:9)(cid:12) (cid:34)(cid:82)(cid:89)(cid:65)(cid:78)(cid:84)(cid:12) (cid:40)(cid:79)(cid:84) (cid:51)(cid:80)(cid:82)(cid:73)(cid:78)(cid:71)(cid:83) (cid:54)(cid:73)(cid:76)(cid:76)(cid:65)(cid:71)(cid:69) (cid:65)(cid:78)(cid:68) (cid:84)(cid:72)(cid:69)
(cid:44)(cid:73)(cid:84)(cid:84)(cid:76)(cid:69) (cid:50)(cid:79)(cid:67)(cid:75) (cid:47)(cid:84)(cid:84)(cid:69)(cid:82) (cid:35)(cid:82)(cid:69)(cid:69)(cid:75) (cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:14)

(cid:50)(cid:69)(cid:88) (cid:43)(cid:89)(cid:76)(cid:69) (cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:12) (cid:52)(cid:82)(cid:85)(cid:83)(cid:84) (cid:65)(cid:78)(cid:68) (cid:55)(cid:69)(cid:65)(cid:76)(cid:84)(cid:72) (cid:45)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84) (cid:36)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)
(cid:50)(cid:69)(cid:88) (cid:43)(cid:89)(cid:76)(cid:69) (cid:72)(cid:65)(cid:83) (cid:19)(cid:19) (cid:89)(cid:69)(cid:65)(cid:82)(cid:83) (cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69) (cid:73)(cid:78) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:65)(cid:83) (cid:65) (cid:84)(cid:82)(cid:85)(cid:83)(cid:84) (cid:80)(cid:82)(cid:79)(cid:70)(cid:69)(cid:83)(cid:83)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76)(cid:14) (cid:45)(cid:82)(cid:14) (cid:43)(cid:89)(cid:76)(cid:69) (cid:74)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68) (cid:84)(cid:72)(cid:69) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)
(cid:73)(cid:78) (cid:18)(cid:16)(cid:16)(cid:20) (cid:65)(cid:83) (cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84) (cid:79)(cid:70) (cid:84)(cid:72)(cid:69) (cid:52)(cid:82)(cid:85)(cid:83)(cid:84) (cid:65)(cid:78)(cid:68) (cid:55)(cid:69)(cid:65)(cid:76)(cid:84)(cid:72) (cid:45)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84) (cid:36)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:12) (cid:87)(cid:72)(cid:73)(cid:67)(cid:72) (cid:79)(cid:70)(cid:70)(cid:69)(cid:82)(cid:83) (cid:65) (cid:87)(cid:73)(cid:68)(cid:69) (cid:65)(cid:82)(cid:82)(cid:65)(cid:89)
(cid:79)(cid:70) (cid:65)(cid:83)(cid:83)(cid:69)(cid:84) (cid:77)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84) (cid:65)(cid:78)(cid:68) (cid:84)(cid:82)(cid:85)(cid:83)(cid:84) (cid:83)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83) (cid:70)(cid:79)(cid:82) (cid:73)(cid:78)(cid:68)(cid:73)(cid:86)(cid:73)(cid:68)(cid:85)(cid:65)(cid:76)(cid:83)(cid:12) (cid:66)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:69)(cid:83) (cid:65)(cid:78)(cid:68) (cid:71)(cid:79)(cid:86)(cid:69)(cid:82)(cid:78)(cid:77)(cid:69)(cid:78)(cid:84) (cid:69)(cid:78)(cid:84)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:14)

(cid:50)(cid:79)(cid:83)(cid:83) (cid:45)(cid:65)(cid:76)(cid:76)(cid:73)(cid:79)(cid:85)(cid:88) (cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:12) (cid:34)(cid:69)(cid:78)(cid:84)(cid:79)(cid:78) (cid:35)(cid:79)(cid:85)(cid:78)(cid:84)(cid:89) (cid:65)(cid:78)(cid:68) (cid:55)(cid:65)(cid:83)(cid:72)(cid:73)(cid:78)(cid:71)(cid:84)(cid:79)(cid:78) (cid:35)(cid:79)(cid:85)(cid:78)(cid:84)(cid:89)(cid:12) (cid:33)(cid:82)(cid:75)(cid:65)(cid:78)(cid:83)(cid:65)(cid:83)
(cid:50)(cid:79)(cid:83)(cid:83) (cid:45)(cid:65)(cid:76)(cid:76)(cid:73)(cid:79)(cid:85)(cid:88) (cid:74)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68) (cid:34)(cid:65)(cid:78)(cid:75) (cid:79)(cid:70) (cid:84)(cid:72)(cid:69) (cid:47)(cid:90)(cid:65)(cid:82)(cid:75)(cid:83) (cid:73)(cid:78) (cid:18)(cid:16)(cid:17)(cid:17) (cid:65)(cid:78)(cid:68) (cid:72)(cid:65)(cid:83) (cid:18)(cid:23) (cid:89)(cid:69)(cid:65)(cid:82)(cid:83) (cid:79)(cid:70) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:14)
(cid:45)(cid:82)(cid:14) (cid:45)(cid:65)(cid:76)(cid:76)(cid:73)(cid:79)(cid:85)(cid:88) (cid:79)(cid:86)(cid:69)(cid:82)(cid:83)(cid:69)(cid:69)(cid:83) (cid:66)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83) (cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83) (cid:73)(cid:78) (cid:34)(cid:69)(cid:78)(cid:84)(cid:79)(cid:78) (cid:35)(cid:79)(cid:85)(cid:78)(cid:84)(cid:89)(cid:12) (cid:87)(cid:72)(cid:73)(cid:67)(cid:72) (cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:83) (cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:83) (cid:73)(cid:78) (cid:50)(cid:79)(cid:71)(cid:69)(cid:82)(cid:83) (cid:8)(cid:19)(cid:9)(cid:12)
(cid:34)(cid:69)(cid:76)(cid:76)(cid:65) (cid:54)(cid:73)(cid:83)(cid:84)(cid:65) (cid:8)(cid:18)(cid:9) (cid:65)(cid:78)(cid:68) (cid:34)(cid:69)(cid:78)(cid:84)(cid:79)(cid:78)(cid:86)(cid:73)(cid:76)(cid:76)(cid:69) (cid:8)(cid:18)(cid:9)(cid:27) (cid:65)(cid:78)(cid:68) (cid:55)(cid:65)(cid:83)(cid:72)(cid:73)(cid:78)(cid:71)(cid:84)(cid:79)(cid:78) (cid:35)(cid:79)(cid:85)(cid:78)(cid:84)(cid:89)(cid:12) (cid:87)(cid:72)(cid:73)(cid:67)(cid:72) (cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:83) (cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:83) (cid:73)(cid:78) (cid:38)(cid:65)(cid:89)(cid:69)(cid:84)(cid:84)(cid:69)(cid:86)(cid:73)(cid:76)(cid:76)(cid:69) (cid:8)(cid:18)(cid:9)
(cid:65)(cid:78)(cid:68) (cid:51)(cid:80)(cid:82)(cid:73)(cid:78)(cid:71)(cid:68)(cid:65)(cid:76)(cid:69)(cid:14)

(cid:37)(cid:68)(cid:68)(cid:73)(cid:69) (cid:45)(cid:69)(cid:76)(cid:84)(cid:79)(cid:78) (cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:12) (cid:38)(cid:82)(cid:65)(cid:78)(cid:75)(cid:76)(cid:73)(cid:78) (cid:35)(cid:79)(cid:85)(cid:78)(cid:84)(cid:89)(cid:12) (cid:33)(cid:82)(cid:75)(cid:65)(cid:78)(cid:83)(cid:65)(cid:83)
(cid:37)(cid:68)(cid:68)(cid:73)(cid:69) (cid:45)(cid:69)(cid:76)(cid:84)(cid:79)(cid:78) (cid:74)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68) (cid:34)(cid:65)(cid:78)(cid:75) (cid:79)(cid:70) (cid:84)(cid:72)(cid:69) (cid:47)(cid:90)(cid:65)(cid:82)(cid:75)(cid:83) (cid:73)(cid:78) (cid:17)(cid:25)(cid:24)(cid:25) (cid:65)(cid:78)(cid:68) (cid:72)(cid:65)(cid:83) (cid:18)(cid:18) (cid:89)(cid:69)(cid:65)(cid:82)(cid:83) (cid:79)(cid:70) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:14)
(cid:45)(cid:82)(cid:14) (cid:45)(cid:69)(cid:76)(cid:84)(cid:79)(cid:78) (cid:79)(cid:86)(cid:69)(cid:82)(cid:83)(cid:69)(cid:69)(cid:83) (cid:66)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83) (cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83) (cid:73)(cid:78) (cid:38)(cid:82)(cid:65)(cid:78)(cid:75)(cid:76)(cid:73)(cid:78) (cid:35)(cid:79)(cid:85)(cid:78)(cid:84)(cid:89)(cid:12) (cid:87)(cid:72)(cid:73)(cid:67)(cid:72) (cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:83) (cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:83) (cid:73)(cid:78)
(cid:47)(cid:90)(cid:65)(cid:82)(cid:75) (cid:8)(cid:18)(cid:9) (cid:65)(cid:78)(cid:68) (cid:33)(cid:76)(cid:84)(cid:85)(cid:83)(cid:14)

(cid:39)(cid:65)(cid:82)(cid:89) (cid:45)(cid:73)(cid:76)(cid:76)(cid:69)(cid:82) (cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:12) (cid:42)(cid:79)(cid:72)(cid:78)(cid:83)(cid:79)(cid:78) (cid:35)(cid:79)(cid:85)(cid:78)(cid:84)(cid:89)(cid:12) (cid:33)(cid:82)(cid:75)(cid:65)(cid:78)(cid:83)(cid:65)(cid:83)
(cid:39)(cid:65)(cid:82)(cid:89) (cid:45)(cid:73)(cid:76)(cid:76)(cid:69)(cid:82) (cid:74)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68) (cid:34)(cid:65)(cid:78)(cid:75) (cid:79)(cid:70) (cid:84)(cid:72)(cid:69) (cid:47)(cid:90)(cid:65)(cid:82)(cid:75)(cid:83) (cid:73)(cid:78) (cid:18)(cid:16)(cid:16)(cid:24) (cid:65)(cid:78)(cid:68) (cid:72)(cid:65)(cid:83) (cid:19)(cid:25) (cid:89)(cid:69)(cid:65)(cid:82)(cid:83) (cid:79)(cid:70) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:14)
(cid:45)(cid:82)(cid:14) (cid:45)(cid:73)(cid:76)(cid:76)(cid:69)(cid:82) (cid:79)(cid:86)(cid:69)(cid:82)(cid:83)(cid:69)(cid:69)(cid:83) (cid:66)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83) (cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83) (cid:73)(cid:78) (cid:42)(cid:79)(cid:72)(cid:78)(cid:83)(cid:79)(cid:78) (cid:35)(cid:79)(cid:85)(cid:78)(cid:84)(cid:89)(cid:12) (cid:87)(cid:72)(cid:73)(cid:67)(cid:72) (cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:83) (cid:84)(cid:87)(cid:79) (cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:83)
(cid:73)(cid:78) (cid:35)(cid:76)(cid:65)(cid:82)(cid:75)(cid:83)(cid:86)(cid:73)(cid:76)(cid:76)(cid:69)(cid:14)

(cid:45)(cid:65)(cid:84)(cid:84) (cid:50)(cid:69)(cid:68)(cid:68)(cid:73)(cid:78) (cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:12) (cid:35)(cid:69)(cid:78)(cid:84)(cid:82)(cid:65)(cid:76) (cid:33)(cid:82)(cid:75)(cid:65)(cid:78)(cid:83)(cid:65)(cid:83) (cid:36)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)
(cid:45)(cid:65)(cid:84)(cid:84) (cid:50)(cid:69)(cid:68)(cid:68)(cid:73)(cid:78) (cid:72)(cid:65)(cid:83) (cid:17)(cid:16) (cid:89)(cid:69)(cid:65)(cid:82)(cid:83) (cid:79)(cid:70) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69) (cid:65)(cid:78)(cid:68) (cid:72)(cid:65)(cid:83) (cid:66)(cid:69)(cid:69)(cid:78) (cid:87)(cid:73)(cid:84)(cid:72) (cid:84)(cid:72)(cid:69) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89) (cid:83)(cid:73)(cid:78)(cid:67)(cid:69) (cid:18)(cid:16)(cid:16)(cid:22)(cid:14)
(cid:33)(cid:83) (cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84) (cid:79)(cid:70) (cid:84)(cid:72)(cid:69) (cid:35)(cid:69)(cid:78)(cid:84)(cid:82)(cid:65)(cid:76) (cid:33)(cid:82)(cid:75)(cid:65)(cid:78)(cid:83)(cid:65)(cid:83) (cid:36)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:12) (cid:45)(cid:82)(cid:14) (cid:50)(cid:69)(cid:68)(cid:68)(cid:73)(cid:78) (cid:79)(cid:86)(cid:69)(cid:82)(cid:83)(cid:69)(cid:69)(cid:83) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83) (cid:73)(cid:78) (cid:84)(cid:72)(cid:69)
(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:7)(cid:83) (cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:83) (cid:73)(cid:78) (cid:44)(cid:73)(cid:84)(cid:84)(cid:76)(cid:69) (cid:50)(cid:79)(cid:67)(cid:75) (cid:8)(cid:25)(cid:9)(cid:12) (cid:35)(cid:79)(cid:78)(cid:87)(cid:65)(cid:89) (cid:8)(cid:20)(cid:9)(cid:12) (cid:34)(cid:69)(cid:78)(cid:84)(cid:79)(cid:78) (cid:8)(cid:19)(cid:9)(cid:12) (cid:40)(cid:79)(cid:84) (cid:51)(cid:80)(cid:82)(cid:73)(cid:78)(cid:71)(cid:83) (cid:8)(cid:19)(cid:9)(cid:12) (cid:46)(cid:79)(cid:82)(cid:84)(cid:72) (cid:44)(cid:73)(cid:84)(cid:84)(cid:76)(cid:69) (cid:50)(cid:79)(cid:67)(cid:75) (cid:8)(cid:19)(cid:9)(cid:12)
(cid:35)(cid:65)(cid:66)(cid:79)(cid:84) (cid:8)(cid:18)(cid:9)(cid:12) (cid:45)(cid:79)(cid:85)(cid:78)(cid:84)(cid:65)(cid:73)(cid:78) (cid:40)(cid:79)(cid:77)(cid:69) (cid:8)(cid:18)(cid:9)(cid:12) (cid:34)(cid:82)(cid:89)(cid:65)(cid:78)(cid:84)(cid:12) (cid:40)(cid:79)(cid:84) (cid:51)(cid:80)(cid:82)(cid:73)(cid:78)(cid:71)(cid:83) (cid:54)(cid:73)(cid:76)(cid:76)(cid:65)(cid:71)(cid:69)(cid:12) (cid:44)(cid:79)(cid:78)(cid:79)(cid:75)(cid:69)(cid:12) (cid:45)(cid:65)(cid:85)(cid:77)(cid:69)(cid:76)(cid:76)(cid:69) (cid:65)(cid:78)(cid:68) (cid:51)(cid:72)(cid:69)(cid:82)(cid:87)(cid:79)(cid:79)(cid:68)(cid:14)

(cid:51)(cid:65)(cid:82)(cid:65)(cid:72) (cid:51)(cid:72)(cid:65)(cid:87) (cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:12) (cid:35)(cid:79)(cid:78)(cid:87)(cid:65)(cid:89)(cid:12) (cid:33)(cid:82)(cid:75)(cid:65)(cid:78)(cid:83)(cid:65)(cid:83) (cid:45)(cid:65)(cid:82)(cid:75)(cid:69)(cid:84)
(cid:51)(cid:65)(cid:82)(cid:65)(cid:72) (cid:51)(cid:72)(cid:65)(cid:87) (cid:74)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68) (cid:84)(cid:72)(cid:69) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89) (cid:73)(cid:78) (cid:18)(cid:16)(cid:16)(cid:18) (cid:65)(cid:78)(cid:68) (cid:72)(cid:65)(cid:83) (cid:18)(cid:23) (cid:89)(cid:69)(cid:65)(cid:82)(cid:83) (cid:79)(cid:70) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:14) (cid:45)(cid:82)(cid:83)(cid:14) (cid:51)(cid:72)(cid:65)(cid:87)
(cid:79)(cid:86)(cid:69)(cid:82)(cid:83)(cid:69)(cid:69)(cid:83) (cid:66)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83) (cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83) (cid:73)(cid:78) (cid:84)(cid:72)(cid:69) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:7)(cid:83) (cid:70)(cid:79)(cid:85)(cid:82) (cid:35)(cid:79)(cid:78)(cid:87)(cid:65)(cid:89) (cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:83)(cid:14)

(cid:35)(cid:72)(cid:82)(cid:73)(cid:83) (cid:51)(cid:84)(cid:82)(cid:73)(cid:78)(cid:71)(cid:69)(cid:82) (cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:12) (cid:46)(cid:79)(cid:82)(cid:84)(cid:72) (cid:52)(cid:69)(cid:88)(cid:65)(cid:83) (cid:36)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)
(cid:35)(cid:72)(cid:82)(cid:73)(cid:83) (cid:51)(cid:84)(cid:82)(cid:73)(cid:78)(cid:71)(cid:69)(cid:82) (cid:72)(cid:65)(cid:83) (cid:17)(cid:21) (cid:89)(cid:69)(cid:65)(cid:82)(cid:83) (cid:79)(cid:70) (cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69) (cid:73)(cid:78) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:65)(cid:78)(cid:68) (cid:74)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68) (cid:84)(cid:72)(cid:69) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89) (cid:73)(cid:78) (cid:18)(cid:16)(cid:17)(cid:17)(cid:14) (cid:45)(cid:82)(cid:14)
(cid:51)(cid:84)(cid:82)(cid:73)(cid:78)(cid:71)(cid:69)(cid:82) (cid:79)(cid:86)(cid:69)(cid:82)(cid:83)(cid:69)(cid:69)(cid:83) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83) (cid:73)(cid:78) (cid:84)(cid:72)(cid:69) (cid:46)(cid:79)(cid:82)(cid:84)(cid:72) (cid:52)(cid:69)(cid:88)(cid:65)(cid:83) (cid:36)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:12) (cid:87)(cid:72)(cid:73)(cid:67)(cid:72) (cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:83) (cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:83) (cid:73)(cid:78)
(cid:38)(cid:82)(cid:73)(cid:83)(cid:67)(cid:79) (cid:8)(cid:18)(cid:9)(cid:12) (cid:33)(cid:76)(cid:76)(cid:69)(cid:78)(cid:12) (cid:35)(cid:65)(cid:82)(cid:82)(cid:79)(cid:76)(cid:76)(cid:84)(cid:79)(cid:78)(cid:12) (cid:43)(cid:69)(cid:76)(cid:76)(cid:69)(cid:82)(cid:12) (cid:44)(cid:69)(cid:87)(cid:73)(cid:83)(cid:86)(cid:73)(cid:76)(cid:76)(cid:69) (cid:65)(cid:78)(cid:68) (cid:48)(cid:76)(cid:65)(cid:78)(cid:79)(cid:14)

(cid:33)(cid:85)(cid:68)(cid:87)(cid:73)(cid:78) (cid:54)(cid:65)(cid:85)(cid:71)(cid:72)(cid:78) (cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:12) (cid:46)(cid:79)(cid:82)(cid:84)(cid:72) (cid:35)(cid:69)(cid:78)(cid:84)(cid:82)(cid:65)(cid:76) (cid:33)(cid:82)(cid:75)(cid:65)(cid:78)(cid:83)(cid:65)(cid:83) (cid:39)(cid:82)(cid:79)(cid:85)(cid:80) (cid:45)(cid:65)(cid:82)(cid:75)(cid:69)(cid:84)
(cid:33)(cid:85)(cid:68)(cid:87)(cid:73)(cid:78) (cid:54)(cid:65)(cid:85)(cid:71)(cid:72)(cid:78) (cid:74)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68) (cid:34)(cid:65)(cid:78)(cid:75) (cid:79)(cid:70) (cid:84)(cid:72)(cid:69) (cid:47)(cid:90)(cid:65)(cid:82)(cid:75)(cid:83) (cid:73)(cid:78) (cid:18)(cid:16)(cid:16)(cid:25) (cid:65)(cid:78)(cid:68) (cid:72)(cid:65)(cid:83) (cid:18)(cid:22) (cid:89)(cid:69)(cid:65)(cid:82)(cid:83) (cid:79)(cid:70) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69)(cid:14)
(cid:45)(cid:82)(cid:14) (cid:54)(cid:65)(cid:85)(cid:71)(cid:72)(cid:78) (cid:79)(cid:86)(cid:69)(cid:82)(cid:83)(cid:69)(cid:69)(cid:83) (cid:66)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83) (cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83) (cid:73)(cid:78) (cid:84)(cid:72)(cid:69) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:7)(cid:83) (cid:35)(cid:65)(cid:66)(cid:79)(cid:84) (cid:8)(cid:18)(cid:9) (cid:65)(cid:78)(cid:68) (cid:45)(cid:79)(cid:85)(cid:78)(cid:84)(cid:65)(cid:73)(cid:78) (cid:40)(cid:79)(cid:77)(cid:69) (cid:8)(cid:18)(cid:9)
(cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:83)(cid:14)

(cid:40)(cid:65)(cid:82)(cid:86)(cid:69)(cid:89) (cid:55)(cid:73)(cid:76)(cid:76)(cid:73)(cid:65)(cid:77)(cid:83) (cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:12) (cid:46)(cid:79)(cid:82)(cid:84)(cid:72)(cid:87)(cid:69)(cid:83)(cid:84) (cid:33)(cid:82)(cid:75)(cid:65)(cid:78)(cid:83)(cid:65)(cid:83) (cid:36)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)
(cid:40)(cid:65)(cid:82)(cid:86)(cid:69)(cid:89) (cid:55)(cid:73)(cid:76)(cid:76)(cid:73)(cid:65)(cid:77)(cid:83) (cid:72)(cid:65)(cid:83) (cid:19)(cid:18) (cid:89)(cid:69)(cid:65)(cid:82)(cid:83) (cid:79)(cid:70) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69) (cid:65)(cid:78)(cid:68) (cid:74)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68) (cid:84)(cid:72)(cid:69) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89) (cid:73)(cid:78) (cid:18)(cid:16)(cid:16)(cid:22)(cid:14) (cid:40)(cid:69)
(cid:76)(cid:69)(cid:65)(cid:68)(cid:83) (cid:79)(cid:85)(cid:82) (cid:46)(cid:79)(cid:82)(cid:84)(cid:72)(cid:87)(cid:69)(cid:83)(cid:84) (cid:33)(cid:82)(cid:75)(cid:65)(cid:78)(cid:83)(cid:65)(cid:83) (cid:36)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78) (cid:87)(cid:72)(cid:73)(cid:67)(cid:72) (cid:67)(cid:79)(cid:78)(cid:83)(cid:73)(cid:83)(cid:84)(cid:83) (cid:79)(cid:70) (cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:83) (cid:73)(cid:78) (cid:50)(cid:79)(cid:71)(cid:69)(cid:82)(cid:83) (cid:8)(cid:19)(cid:9)(cid:12) (cid:38)(cid:65)(cid:89)(cid:69)(cid:84)(cid:84)(cid:69)(cid:86)(cid:73)(cid:76)(cid:76)(cid:69) (cid:8)(cid:18)(cid:9)(cid:12)
(cid:34)(cid:69)(cid:78)(cid:84)(cid:79)(cid:78)(cid:86)(cid:73)(cid:76)(cid:76)(cid:69) (cid:8)(cid:18)(cid:9)(cid:12) (cid:34)(cid:69)(cid:76)(cid:76)(cid:65) (cid:54)(cid:73)(cid:83)(cid:84)(cid:65) (cid:8)(cid:18)(cid:9)(cid:12) (cid:40)(cid:65)(cid:82)(cid:82)(cid:73)(cid:83)(cid:79)(cid:78) (cid:8)(cid:18)(cid:9)(cid:12) (cid:34)(cid:69)(cid:76)(cid:76)(cid:69)(cid:70)(cid:79)(cid:78)(cid:84)(cid:69)(cid:12) (cid:35)(cid:76)(cid:73)(cid:78)(cid:84)(cid:79)(cid:78)(cid:12) (cid:42)(cid:65)(cid:83)(cid:80)(cid:69)(cid:82)(cid:12) (cid:45)(cid:65)(cid:82)(cid:83)(cid:72)(cid:65)(cid:76)(cid:76)(cid:12) (cid:51)(cid:80)(cid:82)(cid:73)(cid:78)(cid:71)(cid:68)(cid:65)(cid:76)(cid:69)(cid:12)
(cid:55)(cid:69)(cid:83)(cid:84)(cid:69)(cid:82)(cid:78) (cid:39)(cid:82)(cid:79)(cid:86)(cid:69) (cid:65)(cid:78)(cid:68) (cid:57)(cid:69)(cid:76)(cid:76)(cid:86)(cid:73)(cid:76)(cid:76)(cid:69)(cid:14)

(cid:50)(cid:73)(cid:67)(cid:75) (cid:55)(cid:73)(cid:83)(cid:68)(cid:79)(cid:77) (cid:48)(cid:82)(cid:69)(cid:83)(cid:73)(cid:68)(cid:69)(cid:78)(cid:84)(cid:12) (cid:51)(cid:79)(cid:85)(cid:84)(cid:72)(cid:87)(cid:69)(cid:83)(cid:84) (cid:65)(cid:78)(cid:68) (cid:35)(cid:79)(cid:65)(cid:83)(cid:84)(cid:65)(cid:76) (cid:36)(cid:73)(cid:86)(cid:73)(cid:83)(cid:73)(cid:79)(cid:78)(cid:83)
(cid:50)(cid:73)(cid:67)(cid:75) (cid:55)(cid:73)(cid:83)(cid:68)(cid:79)(cid:77) (cid:72)(cid:65)(cid:83) (cid:19)(cid:16) (cid:89)(cid:69)(cid:65)(cid:82)(cid:83) (cid:79)(cid:70) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:69)(cid:88)(cid:80)(cid:69)(cid:82)(cid:73)(cid:69)(cid:78)(cid:67)(cid:69) (cid:65)(cid:78)(cid:68) (cid:74)(cid:79)(cid:73)(cid:78)(cid:69)(cid:68) (cid:84)(cid:72)(cid:69) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89) (cid:73)(cid:78) (cid:18)(cid:16)(cid:16)(cid:20)(cid:14)
(cid:45)(cid:82)(cid:14) (cid:55)(cid:73)(cid:83)(cid:68)(cid:79)(cid:77) (cid:79)(cid:86)(cid:69)(cid:82)(cid:83)(cid:69)(cid:69)(cid:83) (cid:66)(cid:65)(cid:78)(cid:75)(cid:73)(cid:78)(cid:71) (cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83) (cid:73)(cid:78) (cid:84)(cid:72)(cid:69) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:7)(cid:83) (cid:79)(cid:70)(cid:108)(cid:67)(cid:69)(cid:83) (cid:73)(cid:78) (cid:52)(cid:69)(cid:88)(cid:65)(cid:82)(cid:75)(cid:65)(cid:78)(cid:65)(cid:12) (cid:52)(cid:69)(cid:88)(cid:65)(cid:83) (cid:8)(cid:18)(cid:9)(cid:27)
(cid:45)(cid:79)(cid:66)(cid:73)(cid:76)(cid:69)(cid:12) (cid:33)(cid:76)(cid:65)(cid:66)(cid:65)(cid:77)(cid:65)(cid:27) (cid:52)(cid:69)(cid:88)(cid:65)(cid:82)(cid:75)(cid:65)(cid:78)(cid:65)(cid:12) (cid:33)(cid:82)(cid:75)(cid:65)(cid:78)(cid:83)(cid:65)(cid:83)(cid:27) (cid:34)(cid:82)(cid:85)(cid:78)(cid:83)(cid:87)(cid:73)(cid:67)(cid:75)(cid:12) (cid:51)(cid:65)(cid:86)(cid:65)(cid:78)(cid:78)(cid:65)(cid:72) (cid:65)(cid:78)(cid:68) (cid:51)(cid:84)(cid:14) (cid:51)(cid:73)(cid:77)(cid:79)(cid:78)(cid:83) (cid:41)(cid:83)(cid:76)(cid:65)(cid:78)(cid:68)(cid:12) (cid:39)(cid:69)(cid:79)(cid:82)(cid:71)(cid:73)(cid:65)(cid:27)
(cid:55)(cid:73)(cid:76)(cid:77)(cid:73)(cid:78)(cid:71)(cid:84)(cid:79)(cid:78)(cid:12) (cid:46)(cid:79)(cid:82)(cid:84)(cid:72) (cid:35)(cid:65)(cid:82)(cid:79)(cid:76)(cid:73)(cid:78)(cid:65) (cid:65)(cid:78)(cid:68) (cid:34)(cid:76)(cid:85)(cid:70)(cid:70)(cid:84)(cid:79)(cid:78)(cid:12) (cid:51)(cid:79)(cid:85)(cid:84)(cid:72) (cid:35)(cid:65)(cid:82)(cid:79)(cid:76)(cid:73)(cid:78)(cid:65)(cid:14)

(cid:24)

Financial Information
Selected Consolidated Financial Data

2011

Year Ended December 31,
2009

2008

2010

2007

Income statement data:

        (Dollars in thousands, except per share amounts)

Interest income ...................................................... $   199,169 $   157,972 $   165,908 $   183,003 $   176,970
99,352
30,435
Interest expense .....................................................
77,618
168,734
Net interest income ................................................
6,150
11,775
Provision for loan and lease losses ........................
22,975
117,083
Non-interest income ...............................................
48,252
122,531
Non-interest expense .............................................
-
-
Preferred stock dividends .......................................
31,746
101,321
Net income available to common stockholders .......

34,337
123,635
16,000
70,322
87,419
-
64,001

47,585
118,323
44,800
51,051
68,632
6,276
36,826

84,302
98,701
19,025
19,349
54,398
227
34,474

Common share and per common share data:(1)

Earnings - diluted .................................................. $         2.94 $         1.88 $         1.09 $         1.02
7.48
Book value .............................................................
0.250
Dividends ...............................................................
Weighted-average diluted shares
   outstanding (thousands) ....................................
End of period shares outstanding (thousands) ......

34,090
34,107

34,482
34,464

33,800
33,810

33,748
33,728

7.96
0.260

9.39
0.300

0.370

12.32

$         0.94
5.67
0.215

33,668
33,636

Balance sheet data at period end:

1,885,282
806,924
39,169
278,263

Total assets ............................................................ $3,839,987 $3,273,271 $2,770,811 $3,233,303 $2,710,875
Loans and leases not covered by
   FDIC loss share agreements ................................
Loans covered by FDIC loss share agreements .......
Allowance for loan and lease losses .......................
FDIC loss share receivable ......................................
Foreclosed assets covered by
   FDIC loss share agreements ................................
Investment securities .............................................
Deposits .................................................................
Repurchase agreements with customers .................
Other borrowings ...................................................
Subordinated debentures .......................................
Preferred stock, net of unamortized discount .........
Total common stockholders’ equity ........................
Loan and lease including covered loans
   to deposit ratio ....................................................

72,907
438,910
2,943,919
32,810
301,847
64,950
-
424,551

31,145
398,698
2,540,753
43,324
282,139
64,950
-
320,355

-
506,678
2,028,994
44,269
342,553
64,950
-
269,028

-
944,783
2,341,414
46,864
424,947
64,950
71,880
252,302

-
578,348
2,057,061
46,086
336,533
64,950
-
190,829

1,856,429
489,468
40,230
158,137

1,904,104
-
39,619
-

2,021,199
-
29,512
-

1,871,135
-
19,557
-

86.32%

92.33%

91.45%

93.84%

90.96%

Average balance sheet data:

Total average assets ............................................... $3,755,291 $2,998,850 $3,002,121 $3,017,707 $2,601,299
Total average common stockholders’ equity ...........
184,819
374,664
Average common equity to average assets .............

213,271

296,035

267,768

9.87%

9.98%

7.07%

8.92%

7.10%

Performance ratios:

Return on average assets .......................................
Return on average common stockholders’ equity ....
Net interest margin - FTE .......................................
Efficiency ratio .......................................................
Common stock dividend payout ratio .....................

Asset quality ratios:

Net charge-offs to average loans and leases(2) ........
Nonperforming loans and leases to total
   loans and leases(2) ...............................................
Nonperforming assets to total assets(2) ...................
Allowance for loan and lease losses as a percentage of:
Total loans and leases(2) .........................................
Nonperforming loans and leases ............................

Capital ratios at period end:

2.70%

2.13%

1.23%

1.14%

1.22%

27.04
5.84
41.56
12.50

21.62
5.18
42.86
15.89

13.75
4.80
37.84
23.84

16.16
3.96
42.32
24.42

17.18
3.44
46.33
22.75

0.69%

0.81%

1.75%

0.45%

0.24%

0.72
1.18

2.08%
290%

0.75
1.72

2.17%
288 %

1.24
3.06

2.08%
168%

0.76
0.81

1.46%
192%

0.35
0.36

1.05%
295%

9.80%

11.79
12.67

Tier 1 leverage .......................................................
Tier 1 risk-based capital .........................................
Total risk-based capital ..........................................

12.06%
17.67
18.93
(1) Adjusted to give effect to 2-for-1 stock split effective August 16, 2011.
(2) Excludes loans and/or foreclosed assets covered by FDIC loss share agreements, except for their inclusion in total assets.

11.64%
14.21
15.36

11.88%
16.13
17.39

11.39%
13.78
15.03

9

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

General

Net income available to common stockholders of Bank of the Ozarks, Inc. (the “Company”) was $101.3
million for the year ended December 31, 2011, a 58.3% increase from $64.0 million in 2010. Net income
available to common stockholders in 2009 was $36.8 million. Diluted earnings per common share were $2.94
for 2011, a 56.4% increase from $1.88 in 2010. Diluted earnings per common share were $1.09 in 2009.

On August 16, 2011, the Company completed a 2-for-1 stock split in the form of a stock dividend, effected
by issuing one share of common stock for each share of such stock outstanding on August 5, 2011. All share
and per share information in this management’s discussion and analysis of financial condition and results of
operations has been adjusted to give effect to this stock split.

The table below shows total assets, investment securities, loans and leases not covered by Federal

Deposit Insurance Corporation (“FDIC”) loss share agreements, loans covered by FDIC loss share agreements
(“covered loans”), FDIC loss share receivable, deposits, common stockholders’ equity, net income available
to common stockholders, diluted earnings per common share and book value per common share as of and
for the years ended December 31, 2011, 2010 and 2009 and the percentage of change year over year.
% Change

December 31,
2010
(Dollars in thousands, except per share amounts)

2009

2011

398,698

438,910

1,885,282

Total assets .......................................... $3,839,987 $3,273,271 $2,770,811
Investment securities ...........................
506,678
Loans and leases not covered by
   FDIC loss share agreements ..............
Loans covered by
   FDIC loss share agreements ..............
FDIC loss share receivable ...................
Deposits ...............................................
Common stockholders’ equity ..............
Net income available to
   common stockholders .......................
Diluted earnings per common share ....
Book value per common share .............

-
-
2,028,994
269,028

489,468
158,137
2,540,753
320,355

806,924
278,263
2,943,919
424,551

101,321
2.94
12.32

36,826
1.09
7.96

64,001
1.88
9.39

1,904,104

1,856,429

  2011

2010

  from 2010 from 2009

17.3%
10.1

18.1%
(21.3)

1.6

64.9
76.0
15.9
32.5

58.3
56.4
31.2

(2.5)

-
-
25.2
19.1

73.8
72.5
18.0

Two measures used to assess performance by banking institutions are return on average assets (“ROA”)

and return on average common stockholders’ equity (“ROE”). ROA measures net income available to
common stockholders in relation to average total assets. It is calculated by dividing annual net income
available to common stockholders by average total assets and indicates a company’s ability to employ its
resources profitably. For the year ended December 31, 2011, the Company’s ROA was 2.70% compared with
2.13% in 2010 and 1.23% in 2009. ROE measures net income available to common stockholders in relation
to average common stockholders’ equity. It is calculated by dividing annual net income available to common
stockholders by average common stockholders’ equity and indicates how effectively a company can generate
net income on the capital invested by its common stockholders. For the year ended December 31, 2011, the
Company’s ROE was 27.04% compared with 21.62% in 2010 and 13.75% in 2009.

Analysis of Results of Operations

The Company is a bank holding company whose primary business is commercial banking conducted

through its wholly-owned state chartered bank subsidiary – Bank of the Ozarks (the “Bank”). The Company’s
results of operations depend primarily on net interest income, which is the difference between the interest
income from earning assets, such as loans, leases, covered loans and investments, and the interest expense
incurred on interest bearing liabilities, such as deposits, borrowings and subordinated debentures. The
Company also generates non-interest income, including service charges on deposit accounts, mortgage
lending income, trust income, bank owned life insurance (“BOLI”) income, accretion of FDIC loss share
receivable, net of amortization of FDIC clawback payable, other loss share income, gains and losses on
investment securities and from sales of other assets, and gains on FDIC-assisted acquisitions.

The Company’s non-interest expense consists primarily of employee compensation and benefits, net occupancy

and equipment expense and other operating expenses. The Company’s results of operations are significantly
affected by its provision for loan and lease losses and its provision for income taxes. The following discussion

10

provides a summary of the Company’s operations for the past three years and should be read in conjunction
with the consolidated financial statements and related notes presented elsewhere in this report.

Net Interest Income

Net interest income and net interest margin are analyzed in this discussion on a fully taxable equivalent
(“FTE”) basis. The adjustment to convert net interest income to a FTE basis consists of dividing tax-exempt
income by one minus the statutory federal income tax rate of 35%. The FTE adjustments to net interest income
were $9.0 million in 2011, $10.0 million in 2010 and $12.0 million in 2009. No adjustments have been made
in this analysis for income exempt from state income taxes or for interest expense deductions disallowed
under the provisions of the Internal Revenue Code as a result of investments in certain tax-exempt securities.

2011 compared to 2010

Net interest income for 2011 increased 33.0% to $177.8 million compared to $133.6 million for 2010.
Net interest margin was 5.84% for 2011 compared to 5.18% for 2010. The growth in net interest income
was a result of the improvement in net interest margin, which increased 66 basis points (“bps”) for 2011
compared to 2010, and growth in average earning assets which increased 18.0% for 2011 compared to 2010.

The Company’s improvement in net interest margin for 2011 compared to 2010 resulted from a combination

of factors including, among others, an increase in both the volume and yield of the Company’s covered loan
portfolio and reductions in rates paid on all categories of interest bearing liabilities, partially offset by
decreases in yield on the Company’s loan and lease portfolio not covered by FDIC loss share agreements and
the taxable portion of its investment securities portfolio. Even though the yield on the Company’s non-covered
loan and lease portfolio decreased for 2011 compared to 2010, the Company’s spread between yields on such
non-covered loans and leases and rates paid on deposits increased by 25 bps for 2011 compared to 2010.

Yields on earning assets increased 33 bps for 2011 compared to 2010. This increase was primarily the
result of an increase in the yield on covered loans of 77 bps for 2011 compared to 2010, partially offset by a
decrease in yields on non-covered loans and leases of six bps for 2011 compared to 2010 and a decrease in
the yield on the Company’s taxable investment securities portfolio of 176 bps for 2011 compared to 2010.

Rates on interest bearing liabilities decreased 38 bps for 2011 compared to 2010. This decrease was
primarily due to the declines in rates on interest bearing deposits, the largest component of the Company’s
interest bearing liabilities, which decreased 31 bps for 2011 compared to 2010. This decrease in the rate on
interest bearing deposits was principally due to (i) a change in mix of the Company’s interest bearing deposits
as a result of growth in the volume of savings and interest bearing transaction accounts resulting in an
increase in these deposits, which generally pay lower rates than time deposits, to 60.2% of total interest
bearing deposits for 2011 compared to 56.3% for 2010 and (ii) effectively managing the repricing of both
time deposits and savings and interest bearing transaction deposits which resulted in lower rates paid on
deposits as they were renewed or otherwise repriced.

The Company’s other borrowing sources include (i) repurchase agreements with customers (“repos”),

(ii) other borrowings comprised primarily of Federal Home Loan Bank of Dallas (“FHLB – Dallas”) advances,
and, to a lesser extent, Federal Reserve Bank (“FRB”) borrowings and federal funds purchased, and (iii)
subordinated debentures. The rates on repos decreased 32 bps for 2011 compared to 2010 primarily as a
result of the Company’s efforts to effectively manage the rates on its interest bearing liabilities, including
repos. The rates on the Company’s other borrowings, which consist primarily of fixed rate callable FHLB –
Dallas advances, decreased 16 bps for 2011 compared to 2010. This decrease in rates for other borrowings
was due primarily to the repayment of $60.0 million of fixed rate, callable FHLB – Dallas advances with a
weighted-average interest rate of 6.25% that were repaid on their maturity dates in May 2010. The rates
paid on the Company’s subordinated debentures, which are tied to a spread over the 90-day London
Interbank Offered Rate (“LIBOR”) and reset periodically, decreased four bps for 2011 compared to 2010.

The increase in average earning assets was due primarily to increases in the Company’s average balance

of covered loans from $218 million for 2010 to $767 million for 2011. The Company made seven FDIC-
assisted acquisitions during 2010 and 2011, resulting in significant increases in its covered loan portfolio.
This increase was partially offset by a decrease in the Company’s average balance of non-covered loans and
leases of $60 million for 2011 compared to 2010. This decrease was due primarily to paydowns and payoffs
of existing loans and leases exceeding originations of non-covered loans and leases in the first half of 2011,
although originations of non-covered loans and leases during the second half of 2011 exceeded paydowns
and payoffs of existing loans and leases. As a result, the Company’s non-covered loans and leases at
December 31, 2011 increased 1.6% compared to December 31, 2010. The Company’s average earning assets
were also affected by changes in its average investment securities portfolio, which decreased $25 million for
2011 compared to 2010 although the Company’s aggregate investment securities portfolio increased 10.1%

11

from December 31, 2010 to December 31, 2011. In recent years, the Company has generally been a net seller
of investment securities as a result of ongoing evaluations of interest rate risk and to free up capital for
FDIC-assisted acquisitions.
2010 compared to 2009

Net interest income for 2010 increased 2.5% to $133.6 million compared to $130.3 million for 2009. Net
interest margin was 5.18% in 2010 compared to 4.80% in 2009. The growth in net interest income was a result
of the improvement in the Company’s net interest margin, which increased 38 bps from 2009 to 2010, offset
in part by a reduction in the Company’s average earning assets, which decreased 5.0% from 2009 to 2010.

The Company’s improvement in its net interest margin in 2010 resulted from a combination of factors
including (i) improvement in the Company’s spread between yields on loans and leases not covered by FDIC
loss share agreements and rates paid on deposits and (ii) the addition of higher yielding covered loans that
were acquired as a result of the Company’s four FDIC-assisted acquisitions in 2010.

Yields on average earning assets decreased four bps in 2010 compared to 2009. This decrease was due primarily
to a seven bps decrease in loan and lease yields in 2010, and a 21 bps decrease in the average yield on the Company’s
investment securities portfolio, mostly offset by the addition of higher yielding covered loans in 2010.

The seven bps decrease in loan and lease yields was due primarily to the repricing of the Company’s loan
and lease portfolio at lower interest rates during 2010. The 21 bps decrease in the Company’s average yield
on its investment securities in 2010 was the result of an 85 bps decrease in yield on taxable investment
securities, an 89 bps decrease in yield on tax-exempt investment securities, and a shift in the composition
of the portfolio to include a higher proportion of tax-exempt investment securities with generally higher
FTE yields than the Company’s taxable investment securities. During 2010 tax-exempt investment securities
comprised 81.8% of the average balance of the Company’s investment securities portfolio compared to 56.1%
in 2009. In 2009 and 2010, the Company reduced its investment securities portfolio as a result of its ongoing
evaluations of interest rate risk and to free up capital for FDIC-assisted acquisitions.

During 2010 the Company, through the Bank, made four FDIC-assisted acquisitions. Most loans acquired
in these acquisitions are covered loans and are higher yielding than the Company’s non-covered loans and
leases. The yield on covered loans in 2010 was 7.85%, or 160 bps higher than the Company’s 2010 yield
of 6.25% on non-covered loans and leases.

The four bps decrease in average earning asset yields in 2010 was more than offset by a 53 bps decrease

in the average rate on interest bearing liabilities, resulting in the overall 38 bps increase in net interest
margin in 2010 compared to 2009. The decrease in the average rate on interest bearing liabilities was
primarily attributable to a 56 bps decrease in the average rate on interest bearing deposits, the largest
component of the Company’s interest bearing liabilities. This decrease in the average rate on interest bearing
deposits was principally due to (i) effectively managing the repricing of time deposits which resulted in lower
rates paid on these deposits as they were renewed or repriced and (ii) a favorable shift in the mix of the
Company’s deposits, resulting in the Company’s average balance of time deposits, which generally pay higher
rates than other interest bearing deposits, decreasing to 43.7% of average interest bearing deposits in 2010
from 57.1% of average interest bearing deposits in 2009.

The Company’s other borrowing sources include (i) repos, (ii) FHLB advances, and (iii) subordinated
debentures. The rates paid on repos decreased 37 bps for 2010 compared to 2009 primarily as a result of
the Company’s efforts to effectively manage the rates on its interest bearing liabilities, including repos.
The rates paid on the Company’s other borrowings increased eight bps in 2010 compared to 2009. Other
borrowings consist primarily of fixed rate, callable FHLB advances. The increase in rates for other borrowings
in 2010 compared to 2009 was due primarily to lower utilization of lower rate short-term federal funds
purchased and short-term FHLB borrowings, partially offset by the repayment of $60.0 million of fixed rate,
callable FHLB advances with a weighted-average interest rate of 6.25% that were repaid on their maturity
dates in May 2010. The rates paid on the Company’s subordinated debentures decreased 57 bps in 2010
compared to 2009 as a result of the decrease in 90-day LIBOR on the applicable reset dates during 2010.

The 5.0% reduction in average earning assets in 2010 was due primarily to a decrease of $265 million in
the Company’s average investment securities portfolio. During both 2009 and 2010 the Company was a net
seller of investment securities, reducing its year-end portfolio by $438 million from December 31, 2008 to
December 31, 2009, and by $108 million from December 31, 2009 to December 31, 2010. The average
balance of investment securities was $469 million for 2010 compared to $734 million for 2009. The addition
of covered loans during 2010 partially offset the decrease in average earnings assets caused by the reduction
of the investment securities portfolio. During 2010, the Company’s covered loan portfolio increased from
none at December 31, 2009 to $498 million at December 31, 2010, and the average balance of covered
loans was $218 million for 2010 compared to none for 2009.

12

The following table sets forth certain information relating to the Company’s net interest income for the years

ended December 31, 2011, 2010 and 2009. The yields and rates are derived by dividing interest income or
interest expense by the average balance of the related assets or liabilities, respectively, for the periods shown
except where otherwise noted. Average balances are derived from daily average balances for such assets and
liabilities. The average balance of loans and leases not covered by loss share includes loans and leases on
which the Company has discontinued accruing interest. The average balances of investment securities are
computed based on amortized cost adjusted for unrealized gains and losses on investment securities available
for sale (“AFS”) and other-than-temporary impairment writedowns. The yields on loans and leases not covered
by loss share include late fees and amortization of certain deferred fees and origination costs, which are
considered adjustments to yields. The yields on investment securities include amortization of premiums and
accretion of discounts. The yields on covered loans consist of accretion of the net present value of expected
future cash flows using the effective yield method over the term of the loans and include late fees. Interest
expense and rates on other borrowings are presented net of interest capitalized on construction projects.

Average Consolidated Balance Sheets and Net Interest Analysis

2011
Average Income/ Yield/
Balance Expense Rate

Year Ended December 31,
2010
Average Income/ Yield/
Balance Expense Rate
(Dollars in thousands)

2009

Average
Income/ Yield/
Balance Expense  Rate

ASSETS
Earning assets:
  Interest earning deposits
    and federal funds sold ............ $       1,609 $         36 2.24 % $       1,230 $         18 1.50 % $          552 $         10 1.88 %
  Investment securities:
98,270
      Taxable .................................
345,454
      Tax-exempt - FTE ..................
1,830,779
  Loans and leases - FTE .............
767,079
  Covered loans ...........................
3,043,191
        Total earning assets - FTE ....
712,100
Non-interest earning assets ........
            Total assets ..................... $3,755,291

85,554
383,433
1,890,357
218,274
2,578,848
420,002
$2,998,850

322,215
411,710
1,981,454
-
2,715,931
286,190
$3,002,121

4,130 4.83
28,512 7.44
118,162 6.25
17,141 7.85
167,963 6.51

3,013 3.07
25,695 7.44
113,308 6.19
66,135 8.62
208,187 6.84

18,314 5.68
34,282 8.33
125,317 6.32
-
-
177,923 6.55

1,990,947

2,531,540

17,686 0.70

438,030
569,428

476,748
392,671

699,281
409,969

4,032 0.92
5,357 0.94

5,829 1.22
5,483 1.40

13,504 1.93
9,848 2.40

LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest bearing liabilities:
  Deposits:
      Savings and interest
         bearing transaction ............ $1,524,082 $    8,297 0.54% $1,121,528 $    8,735 0.78% $   832,808 $    7,128 0.86%
      Time deposits of
         $100,000 or more ..............
      Other time deposits ...............
        Total interest
           bearing deposits ...............
  Repurchase agreements
    with customers .......................
  Other borrowings ......................
  Subordinated debentures ..........
        Total interest
           bearing liabilities..............
Non-interest bearing liabilities:
  Non-interest bearing deposits ...
  Other non-interest
    bearing liabilities ....................
          Total liabilities ...................
Preferred stock, net of
   unamortized discount ..............
Common stockholders’ equity .....
Noncontrolling interest ...............
            Total liabilities and
               stockholders’ equity ..... $3,755,291
Net interest income - FTE ............
Net interest margin - FTE ............

380 0.76
12,146 3.82(1)
1,764 2.72

174 0.44
10,835 3.66(1)
1,740 2.68

592 1.13
14,375 3.74(1)
2,138 3.29

-
296,035
3,437

39,638
296,195
64,950

52,549
384,854
64,950

49,835
317,796
64,950

-
374,664
3,422

60,708
267,768
3,442

52,102
3,377,205

18,940
2,699,378

18,010
2,670,203

30,435 1.04

34,337 1.42

20,047 1.01

30,480 1.57

47,585 1.95

$2,998,850

$3,002,121

2,444,411

1,942,058

2,423,528

2,932,323

$177,752

$133,626

$130,338

207,782

256,910

392,780

4.80%

5.18%

5.84%

(1) The interest expense and rates for other borrowings were impacted by interest capitalized on construction projects in the
amount of $0.1 million, $0.1 million and $0.4 million for 2011, 2010 and 2009, respectively. In the absence of this
capitalization, these rates would have been 3.68%, 3.87% and 3.84% for 2011, 2010 and 2009, respectively.

13

The following table reflects how changes in the volume of interest earning assets and interest bearing
liabilities and changes in interest rates have affected the Company’s interest income - FTE, interest expense
and net interest income - FTE for the periods indicated. Information is provided in each category with respect to
changes attributable to (1) changes in volume (changes in volume multiplied by prior yield/rate); (2) changes
in yield/rate (changes in yield/rate multiplied by prior volume); and (3) changes in both yield/rate and volume
(changes in yield/rate multiplied by changes in volume). The changes attributable to the combined impact of
volume and yield/rate have all been allocated to the changes due to volume.

Analysis of Changes in Net Interest Income - FTE

2011 over 2010
 Yield/
 Rate

Net
Change

Volume

2010 over 2009
Yield/
Rate

Net
Change

 Volume
           (Dollars in thousands)

Increase (decrease) in:
  Interest income - FTE:
      Interest earning deposits
         and federal funds sold ............................ $         9
      Investment securities:
        Taxable ...................................................
        Tax-exempt - FTE ....................................
      Loans and leases - FTE .............................
      Covered loans ...........................................
           Total interest income - FTE ...................
  Interest expense:
2,192
      Savings and interest bearing transaction ....
(356)
      Time deposits of $100,000 or more ............
1,663
      Other time deposits ...................................
(45)
      Repurchase agreements with customers .....
(790)
      Other borrowings ......................................
-
      Subordinated debentures ...........................
           Total interest expense ...........................
2,664
Increase in net interest income - FTE ............... $38,539

390
(2,825)
(3,687)
47,316
41,203

Non-Interest Income

$        9

$       18

$        10 $        (2) $         8

(1,507)
8
(1,167)
1,678
(979)

(1,117)
(2,817)
(4,854)
48,994
 40,224

(11,445)
(2,106)
 (5,768)
17,141
(2,168)

(2,739) (14,184)
(5,770)
(3,664)
(7,155)
(1,387)
17,141
-
(7,792)  (9,960)

(2,630)
(1,441)
(1,789)
(161)
(521)
(24)
(6,566)
$ 5,587

(438)
(1,797)
(126)
(206)
 (1,311)
(24)
(3,902)
$44,126

(666)
(4,965)
(4,100)
(194)
308
(374)

2,273
(2,710)
(265)
(18)
(2,537)
-
(3,257)

1,607
(7,675)
(4,365)
(212)
 (2,229)
(374)
(9,991) (13,248)
$  1,089 $  2,199 $  3,288

The Company’s non-interest income consists primarily of service charges on deposit accounts, mortgage
lending income, trust income, BOLI income, accretion of FDIC loss share receivable, net of amortization of
FDIC clawback payable, other loss share income, gains on investment securities, gains (losses) on sales of
other assets and gains on FDIC-assisted acquisitions.

2011 compared to 2010

Non-interest income for 2011 increased 66.5% to $117.1 million compared to $70.3 million in 2010.

The increase in non-interest income for 2011 compared to 2010 is due primarily to $65.7 million of bargain
purchase gains recorded on three FDIC-assisted acquisitions during 2011 compared to $35.0 million of
bargain purchase gains recorded on four FDIC-assisted acquisitions in 2010.

Service charges on deposit accounts increased 19.4% to $18.1 million in 2011 compared to $15.2 million

in 2010. This increase was due to a number of factors including growth in the number of transaction
accounts, including the addition of deposit customers from the Company’s seven FDIC-assisted acquisitions
during the last two years, increased customer utilization of fee-based services and increases in certain fees.
The Company’s non-CD account deposits increased from 62.9% of total deposits at December 31, 2010 to
68.8% of total deposits at December 31, 2011.

Mortgage lending income decreased 15.2% to $3.3 million in 2011 compared to $3.9 million in 2010.

This decrease was due primarily to decreased volume. Originations of mortgage loans for sale, including both
originations for home purchases and refinancings of existing mortgages, decreased 18.0% to $154.2 million
in 2011 compared to $188.1 million in 2010. Mortgage originations for home purchases were 44% of 2011
origination volume compared to 38% in 2010. Refinancing of existing mortgages accounted for 56% of the
Company’s 2011 origination volume compared to 62% in 2010.

14

Trust income decreased 5.9% to $3.2 million in 2011 compared to $3.4 million in 2010. This decrease
was primarily due to a decline in corporate trust income earned for services provided in connection with new
municipal bond issues, partially offset by increases in employee benefit and personal trust business.

BOLI income increased 7.3% to $2.3 million in 2011 compared to $2.2 million in 2010 primarily due to

$10.2 million of additional BOLI purchased during May 2010.

Net gains on investment securities were $0.9 million in 2011 compared to $4.5 million in 2010. The

Company sold approximately $94 million of its investment securities in 2011 and approximately $251 million
of its investment securities in 2010.

Net gains on sales of other assets were $3.7 million in 2011 compared to $0.8 million in 2010. The
increases in net gains on sales of other assets was primarily due to net gains on sales of foreclosed assets
covered by FDIC loss share agreements, or covered foreclosed assets. Because the estimated fair value of
acquired covered foreclosed assets includes a net present value component, which is not accreted into income
over the expected holding period of the covered foreclosed assets, the sale of covered foreclosed assets has
typically resulted in gains on such sales.

The Company recognized $10.1 million of income from the accretion of the FDIC loss share receivable,
net of amortization of the FDIC clawback payable, during 2011 compared to $2.4 million during 2010. The
FDIC loss share receivable reflects the indemnification provided by the FDIC in FDIC-assisted acquisitions.
The FDIC clawback payable represents the obligation of the Company to reimburse the FDIC should actual
losses be less than certain thresholds established in each loss share agreement. The FDIC loss share
receivable and the FDIC clawback payable are both carried at net present value. The accretion of the FDIC
loss share receivable, net of amortization of the FDIC clawback payable, increased in 2011 compared to 2010
primarily due to the Company having entered into seven FDIC-assisted acquisitions as of December 31, 2011
compared to four FDIC-assisted acquisitions as of December 31, 2010, resulting in the significant increase
in the FDIC loss share receivable.

As the Company collects payments in future periods from the FDIC under the loss share agreements, the

balance of the FDIC loss share receivable, absent any significant revisions of the amounts expected to be
collected under the loss share agreements, will decline, resulting in a corresponding decrease in the accretion
of the FDIC loss share receivable. Because any amounts due under the FDIC clawback payable are due at the
conclusion of the loss share agreements, absent any significant revision of the amounts expected to be paid
to the FDIC under the clawback provisions of the loss share agreements, the amortization of this liability is
not expected to change significantly over the next several years. Further analysis of the FDIC loss share
receivable and the FDIC clawback payable is presented on pages 27, 28 and 30 of this Management’s
Discussion and Analysis.

Other loss share income, net, was $6.4 million in 2011 compared to $0.6 million in 2010. Other loss share

income, net, consists primarily of (i) income recognized on covered loan prepayments and payoffs that are
not considered yield adjustments and (ii) the net effect of recast adjustments on assets acquired and
liabilities assumed prior to the one-year anniversary of each of the Company’s FDIC-assisted acquisitions.

During 2011, the Company made three FDIC-assisted acquisitions which resulted in bargain purchase
gains totaling $65.7 million. Specifically, on January 14, 2011 the Company, through the Bank, entered into a
purchase and assumption agreement with loss share agreements with the FDIC pursuant to which it acquired
substantially all of the assets and assumed substantially all of the deposits and certain other liabilities of the
former Oglethorpe Bank (“Oglethorpe”). This FDIC-assisted acquisition resulted in the Company recognizing
a pre-tax bargain purchase gain of $3.0 million in the first quarter of 2011. On April 29, 2011 the Company,
through the Bank, entered into a purchase and assumption agreement with loss share agreements with the
FDIC pursuant to which it acquired substantially all of the assets and assumed substantially all of the
deposits and certain other liabilities of the former First Choice Community Bank (“First Choice”). This FDIC-
assisted acquisition resulted in the Company recognizing a pre-tax bargain purchase gain of $2.9 million in
the second quarter of 2011. On April 29, 2011 the Company, through the Bank, entered into a purchase and
assumption agreement with loss share agreements with the FDIC pursuant to which it acquired substantially
all of the assets and assumed substantially all of the deposits and certain other liabilities of the former The
Park Avenue Bank (“Park Avenue”). This FDIC-assisted acquisition resulted in the Company recognizing a
pre-tax bargain purchase gain of $59.8 million in the second quarter of 2011.

Management has up to 12 months following the date of the acquisition to finalize the fair values of
acquired assets and assumed liabilities. Once management has finalized the fair values of acquired assets
and assumed liabilities within this 12-month period, management considers such values to be the day 1 fair
values (“Day 1 Fair Values”). An analysis of the assets acquired and liabilities assumed and a detailed

15

discussion of the Day 1 Fair Values adjustments, as well as the key factors and methodologies utilized to
determine the estimated Day 1 Fair Values of assets acquired and liabilities assumed and the resulting
bargain purchase gain for each of the Company’s FDIC–assisted acquisitions is included in footnotes 2 and
3 to the Notes to the Consolidated Financial Statements.

2010 compared to 2009

Non-interest income for 2010 increased 37.7% to $70.3 million compared to $51.1 million in 2009.

The increase in non-interest income for 2010 compared to 2009 is due primarily to $35.0 million of bargain
purchase gains recorded on four FDIC-assisted transactions during 2010, partially offset by a $22.4 million
reduction in gains on investments securities.

Service charges on deposit accounts increased 22.0% to $15.2 million in 2010 compared to $12.4 million

in 2009. This increase was due to a number of factors including growth in the number of transaction
accounts, including the addition of deposit customers from the Company’s four FDIC-assisted acquisitions
during 2010, and increased customer utilization of fee-based services. The Company’s non-CD account
deposits grew $446 million during 2010 and increased from 56.8% of total deposits at December 31, 2009
to 62.9% of total deposits at December 31, 2010.

Mortgage lending income increased 16.6% to $3.9 million in 2010 compared to $3.3 million in 2009.
This increase was due to improved profit margins and, to a lesser extent, increased volume. Originations
of mortgage loans for sale, including both originations for home purchases and refinancings of existing
mortgages, increased 2.4% to $188.1 million in 2010 compared to $185.1 million in 2009. Mortgage
originations for home purchases were 38% of 2010 origination volume compared to 39% in 2009.
Refinancing of existing mortgages accounted for 62% of the Company’s 2010 origination volume
compared to 61% in 2009.

Trust income increased 10.7% to $3.4 million in 2010 compared to $3.1 million in 2009. This increase

was primarily the result of continued growth in personal trust business during 2010.

BOLI income decreased 32.5% to $2.2 million in 2010 compared to $3.2 million in 2009. BOLI income
was comprised of (i) increases in cash surrender value of $2.2 million in 2010 compared to $1.9 million
in 2009 and (ii) no income from BOLI death benefits in 2010 compared to $1.3 million in 2009.

Net gains on investment securities were $4.5 million in 2010 compared to net gains of $27.0 million in
2009. The Company sold approximately $251 million of its investment securities in 2010 and approximately
$501 million of its investment securities in 2009.

Net gains on sales of other assets were $0.8 million in 2010 compared to net losses of $0.2 million in 2009.

During 2010, the Company made four FDIC-assisted acquisitions which resulted in bargain purchase
gains totaling $35.0 million. Specifically, on March 26, 2010 the Company, through the Bank, entered into
a purchase and assumption agreement with loss share agreements with the FDIC pursuant to which it
acquired substantially all of the assets and assumed substantially all of the deposits and certain other
liabilities of the former Unity National Bank (“Unity”). This FDIC-assisted acquisition resulted in the
Company recognizing a pre-tax bargain purchase gain of $10.0 million in the first quarter of 2010. On July
16, 2010 the Company, through the Bank, entered into a purchase and assumption agreement with loss
share agreements with the FDIC pursuant to which it acquired substantially all of the assets and assumed
substantially all of the deposits and certain other liabilities of the former Woodlands Bank (“Woodlands”).
This FDIC-assisted acquisition resulted in the Company recognizing a pre-tax bargain purchase gain of
$14.3 million in the third quarter of 2010. On September 10, 2010 the Company, through the Bank, entered
into a purchase and assumption agreement with loss share agreements with the FDIC pursuant to which it
acquired substantially all of the assets and assumed substantially all of the deposits and certain other
liabilities of the former Horizon Bank (“Horizon”). This FDIC-assisted acquisition resulted in the Company
recognizing a pre-tax bargain purchase gain of $1.8 million in the third quarter of 2010. On December 17,
2010 the Company, through the Bank, entered into a purchase and assumption agreement with loss share
agreements with the FDIC pursuant to which it acquired substantially all of the assets and assumed
substantially all of the deposits and certain other liabilities of the former Chestatee State Bank (“Chestatee”).
This FDIC-assisted acquisition resulted in the Company recognizing a pre-tax bargain purchase gain of $8.9
million in the fourth quarter of 2010.

Non-interest income from all other sources was $5.4 million in 2010 compared to $2.2 million in 2009.
The increase in non-interest income from other sources was due primarily to the accretion of the FDIC loss
share receivable, net of the amortization of the FDIC clawback payable, of $2.4 million during 2010.

16

The following table presents non-interest income for the years ended December 31, 2011, 2010 and 2009.

Non-Interest Income

      Year Ended December 31,

2011

2010
(Dollars in thousands)
$15,156
3,863
3,406
2,151

Service charges on deposit accounts ...................................................
Mortgage lending income ....................................................................
Trust income .......................................................................................
Bank owned life insurance income .....................................................
Accretion of FDIC loss share receivable,
10,141
   net of amortization of FDIC clawback payable .................................
6,432
Other loss share income, net ...............................................................
933
Gains on investment securities ...........................................................
3,738
Gains (losses) on sales of other assets ...............................................
65,708
Gains on FDIC-assisted acquisitions ...................................................
Other ...................................................................................................
3,247
      Total non-interest income ............................................................. $117,083

 $  18,094
3,277
   3,206
2,307

2,429
599
4,544
802
35,019
2,353
$70,322

2009

$12,421
3,312
3,078
3,186

-
-
26,982
(177)
-
2,249
$51,051

Non-Interest Expense

Non-interest expense consists of salaries and employee benefits, net occupancy and equipment expense

and other operating expenses.

2011 compared to 2010

Non-interest expense for 2011 increased 40.2% to $122.5 million compared to $87.4 million in 2010.
The Company’s efficiency ratio (non-interest expense divided by the sum of FTE net interest income and
non-interest income) for 2011 was 41.6% compared to 42.9% in 2010.

Salaries and employee benefits, the Company’s largest component of non-interest expense, increased
40.1% to $56.3 million in 2011 from $40.2 million in 2010. The Company had 1,084 full-time equivalent
employees at December 31, 2011, an increase of 23.0% from 881 full-time equivalent employees at
December 31, 2010. This increase in full-time equivalent employees was due primarily to the Company’s
three FDIC-assisted acquisitions during 2011.

Net occupancy and equipment expense for 2011 increased 38.5% to $14.7 million compared to $10.6
million in 2010. At December 31, 2011, the Company had 111 offices, including 66 in Arkansas, 27 in
Georgia, ten in Texas, four in Florida, two in North Carolina, and one each in South Carolina and Alabama.
At December 31, 2010, the Company had 90 offices, including 66 in Arkansas, ten in Georgia, seven in
Texas, three in Florida, two in North Carolina, and one each in South Carolina and Alabama.

Other operating expenses for 2011 increased 40.7% to $51.6 million compared to $36.6 million in 2010,

primarily as a result of the items described in the following paragraph.

The increase in non-interest operating expense in 2011 was primarily attributable to (i) $6.3 million of
expenses related to FDIC-assisted acquisitions and costs incurred for completing and preparing for various
systems conversions related to acquisitions compared to $3.8 million of such costs in 2010, (ii) $7.9 million
of loan collection and repossession expenses in 2011 compared to $4.0 million in 2010, (iii) $3.5 million of
expenses for travel and meals in 2011 compared to $1.7 million in 2010, (iv) increased operating expenses
associated with having more offices in 2011 compared to 2010 and (v) a $1.25 million impairment charge
on the Company’s only equity investment in a real estate development project during the second quarter of
2011. There was no impairment charge related to this investment in 2010.

2010 compared to 2009

Non-interest expense for 2010 increased 27.4% to $87.4 million compared to $68.6 million in 2009.

The Company’s efficiency ratio for 2010 was 42.9% compared to 37.8% in 2009. The increase in the
efficiency ratio in 2010 resulted from the Company’s total revenue (the sum of FTE net interest income
and non-interest income) increasing at a slower rate than its non-interest expense.

Salaries and employee benefits, the Company’s largest component of non-interest expense, increased
26.1% to $40.2 million in 2010 from $31.8 million in 2009. The Company had 881 full-time equivalent

17

employees at December 31, 2010, an increase of 22.0% from 722 full-time equivalent employees at
December 31, 2009. This increase in full-time equivalent employees was due primarily to the Company’s
four FDIC-assisted acquisitions during 2010.

Net occupancy and equipment expense for 2010 increased 9.0% to $10.6 million compared to $9.7
million in 2009. During 2010 the Company added five new northwest Georgia banking offices from its
Unity acquisition, four new banking offices (one office each in North Carolina, South Carolina, Georgia and
Alabama) from its Woodlands acquisition, three new banking offices in Florida from its Horizon acquisition,
and four new north central Georgia banking offices from its Chestatee acquisition. The Company also opened
a new de novo banking office in Benton, Arkansas during 2010. At December 31, 2010, the Company had 90
offices, including 66 in Arkansas, ten in Georgia, seven in Texas, three in Florida, two in North Carolina, and
one each in South Carolina and Alabama. At December 31, 2009, the Company had 73 offices, including 65
in Arkansas, seven in Texas and one in North Carolina.

Other operating expenses for 2010 increased 35.5% to $36.6 million compared to $27.0 million in 2009.

The increase in non-interest operating expense in 2010 was primarily attributable to (i) $9.0 million of
writedowns of foreclosed assets during 2010 compared to $4.0 million of such writedowns during 2009,
(ii) $3.8 million of expenses related to FDIC-assisted acquisitions in 2010 and costs incurred for completing
and preparing for various systems conversions related to those acquisitions, (iii) costs of ongoing due
diligence efforts and (iv) $1.0 million of general cash bonuses paid in 2010.

The following table presents non-interest expense for the years ended December 31, 2011, 2010 and 2009.

Non-Interest Expense

 2011

Year Ended December 31,
 2010
(Dollars in thousands)
$40,161
10,618

 2009

$31,847
9,740

Salaries and employee benefits ............................................... $  56,262
Net occupancy and equipment expense ...................................
14,705
Other operating expenses:
3,091
    Postage and supplies ..........................................................
3,049
    Telephone and data lines ....................................................
3,571
    Advertising and public relations .........................................
4,822
    Professional and outside services .......................................
3,082
    Software expense ................................................................
3,488
    Travel and meals .................................................................
719
    FDIC and state assessments ................................................
2,155
    FDIC insurance ...................................................................
1,022
    ATM expense ......................................................................
7,873
    Loan collection and repossession expense ..........................
9,525
    Writedowns of foreclosed assets .........................................
1,677
    Amortization of intangibles ................................................
    Other ..................................................................................
7,490
         Total non-interest expense ............................................ $122,531

1,981
2,110
2,076
3,024
2,657
1,726
678
3,238
881
4,001
8,960
431
4,877
$87,419

1,530
1,806
1,083
1,793
1,524
666
673
4,291
745
3,999
4,009
110
4,816
$68,632

Income Taxes

The Company’s provision for income taxes was $50.2 million in 2011 compared to $26.6 million in 2010

and $12.9 million in 2009. Its effective income tax rates were 33.14%, 29.40% and 22.99%, respectively,
for 2011, 2010 and 2009. The effective tax rate increased 374 bps in 2011 compared to 2010, and increased
641 bps in 2010 compared to 2009. The increase in the Company’s effective tax rate for 2011 and 2010
compared to the previous years was due primarily to the increase in taxable income and the decrease, both
in volume and as a percentage of total income, of income exempt from federal and/or state income taxes.
The effective tax rates for all periods were also affected by various other factors including other non-taxable
income and non-deductible expenses.

18

Analysis of Financial Condition

Loan and Lease Portfolio

At December 31, 2011, the Company’s loan and lease portfolio, excluding loans covered by FDIC loss

share agreements, was $1.89 billion, an increase of 1.6% from $1.86 billion at December 31, 2010.

As of December 31, 2011, the Company’s loan and lease portfolio, excluding loans covered by FDIC
loss share agreements, consisted of 88.1% real estate loans, 6.4% commercial and industrial loans, 2.1%
consumer loans, 2.9% direct financing leases and 0.3% agricultural loans (non-real estate). Real estate
loans, the Company’s largest category of loans, include all loans made to finance the development of real
property construction projects, provided such loans are secured by real estate, and all other loans secured
by real estate as evidenced by mortgages or other liens.

The amount and type of loans and leases outstanding, excluding loans covered by FDIC loss share

agreements, are reflected in the following table.

Loan and Lease Portfolio

2011

2010

December 31,
2009
(Dollars in thousands)

2008

2007

Real estate:

Residential 1-4 family ................... $   260,473
708,766
Non-farm/non-residential .............
478,106
Construction/land development .....
Agricultural ...................................
71,158
Multifamily residential ..................
142,131
   Total real estate .......................... 1,660,634
120,679
40,162
54,745
6,322
2,740
   Total loans and leases ................ $1,885,282

Commercial and industrial ................
Consumer ..........................................
Direct financing leases ......................
Agricultural (non-real estate) ...........
Other .................................................

$   266,014
678,465
496,737
81,736
103,875
1,626,827
120,038
54,401
42,754
9,962
2,447
$1,856,429

$   282,733
606,880
600,342
86,237
55,860
1,632,052
150,208
63,561
40,353
15,509
2,421
$1,904,104

$   275,281
551,821
694,527
84,432
61,668
1,667,729
206,058
75,015
50,250
19,460
2,687
$2,021,199

$   279,375
445,303
684,775
91,810
31,414
1,532,677
173,128
87,867
53,446
22,439
1,578
$1,871,135

Included in the Company’s loan and lease portfolio are certain loans acquired in FDIC-assisted acquisitions,

primarily consumer loans, that are not covered by loss share. The amount of unpaid principal balance, the
valuation discount and the carrying value of these non-covered acquired loans at December 31, 2011 and
2010 are reflected in the following table.

Non-Covered Loans Acquired in FDIC-Assisted Acquisitions
  December 31,

2011

   2010

(Dollars in thousands)

Unpaid principal balance ...................................
Valuation discount .............................................
Carrying value ...................................................

$9,515
(4,716)
$4,799

$7,689
(2,373)
$5,316

The amount and percentage of the Company’s loan and lease portfolio, excluding loans covered by FDIC

loss share agreements, by state of originating office are reflected in the following table.

Loan and Lease Portfolio by State of Originating Office

Loans and Leases
Attributable to Offices In

2011

Amount

%

Arkansas ....................................... $1,018,885
788,570
Texas .............................................
65,908
North Carolina ...............................
10,492
Georgia ..........................................
808
Florida ...........................................
590
Alabama ........................................
29
South Carolina ...............................
       Total ....................................... $1,885,282 100.0%

54.0%
41.8
3.5
0.6
0.1
-
-

December 31,
2010

Amount
(Dollars in thousands)

%

$1,064,558
685,317
101,165
3,944
890
513
42
$1,856,429 100.0%

57.3%
36.9
5.5
0.2
0.1
-
-

 2009

Amount

%

$1,148,053
643,575
112,476
-
-
-
-
$1,904,104 100.0%

60.3%
33.8
5.9
-
-
-
-

19

The amount and type of the Company’s real estate loans, excluding loans covered by FDIC loss share

agreements, at December 31, 2011 based on the metropolitan statistical area (“MSA”) and other geographic
areas in which the principal collateral is located are reflected in the following table. Data for individual states
or MSAs is separately presented when aggregate real estate loans in that state or MSA exceed $10 million.

Geographic Distribution of Real Estate Loans

Residential Non-Farm/ Construction/
Non-

Land

1-4
Family

Multifamily
Residential Development Agricultural Residential
(Dollars in thousands)

  Total

-

-

6,603

9,269
8,525
25,019
60,385
7,261
237,399

Arkansas:
   Little Rock - North Little Rock -
      Conway, AR MSA .......................... $  93,950
   Fort Smith, AR - OK MSA ................
32,990
   Fayetteville - Springdale -
      Rogers, AR - MO MSA ..................
   Hot Springs, AR MSA ......................
   Western Arkansas(1) ........................
   Northern Arkansas(2) .......................
   All other Arkansas(3) .......................
         Total Arkansas ..........................
Texas:
   Dallas - Fort Worth -
      Arlington, TX MSA .......................
   Houston - Sugar Land -
      Baytown, TX MSA ........................
   San Antonio - New Braunfels,
      TX MSA ........................................
   Austin - Round Rock -
      San Marcos, TX MSA ....................
   Texarkana, TX -
      Texarkana, AR MSA .....................
   Beaumont - Port Arthur, TX MSA ....
   All other Texas(3) .............................
         Total Texas ................................
North Carolina/South Carolina:
   Charlotte - Gastonia -
      Concord, NC - SC MSA ..................
   All other North Carolina(3) ...............
   All other South Carolina(3) ...............
         Total North Carolina/
            South Carolina ........................
California ............................................
Washington - Arlington -
   Alexandria, DC - VA - MD -
-
   WV MSA ..........................................
Oklahoma(4) ........................................
812
-
Mississippi ..........................................
-
Louisiana ............................................
All other states(3)(5) .............................
2,515
         Total real estate loans ................ $260,473

10,393
-
1,056
18,052

703
-
992

1,695
-

-

$213,259
36,545

$  79,366
6,297

$10,668
4,177

$    4,514
2,795

$   401,757
82,804

12,501
8,818
34,850
26,796
11,316
344,085

17,612
7,102
5,004
10,660
3,295
129,336

6,075
-
8,477
28,060
2,446
59,903

1,673
1,471
1,526
608
82
12,669

47,130
25,916
74,876
126,509
24,400
783,392

137,707

166,015

55

60,341

370,721

64,562

29,805

-

-

9,585
-
13,805
225,659

28,625
29,504
12,443

70,572
2,498

24,161

1,856

3,952
-
1,832
227,621

11,948
29,696
5,311

46,955
28,637

-

-

-

247
-
-
302

-
-
-

-
-

13,226

107,593

-

24,161

17,973

19,829

1,152
17,449
3,491
113,632

5,125
-
6,543

11,668
-

25,329
17,449
20,184
585,266

46,401
59,200
25,289

130,890
31,135

-
13,032
14,385
907
37,628
$708,766

19,240
1,781
-
422
24,114
$478,106

-
-
-
10,265
688
$71,158

-
-
-
-
4,162
$142,131

19,240
15,625
14,385
11,594
69,107
$1,660,634

(1) This geographic area includes the following counties in Western Arkansas: Johnson, Logan, Pope and Yell counties.
(2) This geographic area includes the following counties in Northern Arkansas: Baxter, Boone, Marion, Newton, Searcy

and Van Buren counties.

(3) These geographic areas include all MSA and non-MSA areas that are not separately reported.
(4) This geographic area includes all real estate loans in Oklahoma except loans in Le Flore and Sequoyah counties

which are included in the Fort Smith, AR - OK MSA above.

(5) Includes all states not separately presented above.

20

The amount and type of non-farm/non-residential loans, excluding loans covered by FDIC loss share
agreements, at December 31, 2011 and 2010, and their respective percentage of the total non-farm/non-
residential loan portfolio are reflected in the following table.

Non-Farm/Non-Residential Loans

2011

Amount

December 31,

2010

%

Amount

(Dollars in thousands)

Retail, including shopping centers
   and strip centers ................................................... $274,777
40,929
Churches and schools ..............................................
101,724
Office, including medical offices ..............................
60,173
Office warehouse, warehouse and mini-storage ......
9,627
Gasoline stations and convenience stores ................
67,598
Hotels and motels ....................................................
33,452
Restaurants and bars ...............................................
9,362
Manufacturing and industrial facilities ....................
28,733
Nursing homes and assisted living centers ..............
Hospitals, surgery centers and other medical ..........
48,129
Golf courses, entertainment and
   recreational facilities .............................................
12,542
21,720
Other non-farm/non-residential ..............................
            Total ............................................................ $708,766

38.8%
5.8
14.3
8.5
1.4
9.5
4.7
1.3
4.0
6.8

$225,701
56,670
90,924
64,137
14,452
45,078
39,069
10,215
29,711
63,157

%

33.3%
8.3
13.4
9.5
2.1
6.6
5.8
1.5
4.4
9.3

1.8
3.1
100.0%

13,457
25,894
$678,465

2.0
3.8
100.0%

The amount and type of construction/land development loans, excluding loans covered by FDIC loss share

agreements, at December 31, 2011 and 2010, and their respective percentage of the total construction/land
development loan portfolio are reflected in the following table.

Construction/Land Development Loans

2011

Amount

144,550
90,797

Unimproved land ..................................................... $  92,288
Land development and lots:
   1-4 family residential and multifamily .................
   Non-residential .....................................................
Construction:
   1-4 family residential:
      Owner occupied .................................................
      Non-owner occupied:
3,777
         Pre-sold ..........................................................
34,523
         Speculative .....................................................
15,605
   Multifamily ...........................................................
85,815
   Industrial, commercial and other ..........................
            Total ............................................................ $478,106

10,751

December 31,

2010

%

Amount

(Dollars in thousands)

%

19.3%

$  99,084

20.0%

30.2
19.0

168,080
74,745

33.8
15.1

2.2

13,505

2.7

0.8
7.2
3.3
18.0
100.0%

4,153
43,899
60,536
32,735
$496,737

0.8
8.8
12.2
6.6
100.0%

21

The establishment of interest reserves for construction and development loans is established banking
practice, and many of the Company’s construction and development loans provide for the use of interest
reserves. When the Company underwrites construction and development loans, it considers the expected
total project costs, including hard costs such as land, site work and construction costs and soft costs such
as architectural and engineering fees, closing costs, leasing commissions and construction period interest.
Based on the total project costs and other factors, the Company determines the required borrower cash equity
contribution and the maximum amount the Company is willing to loan. In the vast majority of cases, the
Company requires that all of the borrower’s cash equity contribution be contributed prior to any significant
loan advances. This ensures that the borrower’s cash equity required to complete the project will in fact be
available for such purposes. As a result of this practice, the borrower’s cash equity typically goes toward the
purchase of the land and early stage hard costs and soft costs. This results in the Company funding the loan
later as the project progresses, and accordingly, the Company typically funds the majority of the construction
period interest through loan advances. However, when the Company initially determines the borrower’s cash
equity requirement, the Company typically requires the borrower’s cash equity to cover a majority, or all, of
the soft costs, including an amount equal to construction period interest, and an appropriate portion of the
hard costs. During 2011, the Company advanced construction period interest totaling approximately $3.2
million on construction and development loans. While the Company advanced these sums as part of the
funding process, the Company believes that the borrowers in effect had in most cases already provided for
these sums as part of their initial equity contribution. Specifically, the maximum committed balance of all
construction and development loans which provide for the use of interest reserves at December 31, 2011
was $510 million, of which $325 million was outstanding at December 31, 2011 and $185 million remained
to be advanced. The weighted average loan to cost on such loans, assuming such loans are ultimately fully
advanced, will be approximately 59%, which means that the weighted average cash equity contributed on
such loans, assuming such loans are ultimately fully advanced, will be approximately 41%. The weighted
average final loan to value ratio on such loans, based on the most recent appraisals and assuming such
loans are ultimately fully advanced, is expected to be approximately 56%.

Loan and Lease Maturities

The following table reflects loans and leases, excluding loans covered by FDIC loss share agreements,
grouped by remaining maturities at December 31, 2011 by type and by fixed or floating interest rates. This
table is based on actual maturities and does not reflect amortizations, projected paydowns or the earliest
repricing for floating rate loans. Many loans have principal paydowns scheduled in periods prior to the
period in which they mature. In addition many variable rate loans are subject to repricing in periods prior
to the period in which they mature.

Loan and Lease Maturities

1 Year
or Less

Over 1
Through
5 Years

Over
5 Years
                     (Dollars in thousands)

Real estate ............................................................ $534,944
75,081
Commercial and industrial.....................................
11,607
Consumer ..............................................................
Direct financing leases ..........................................
2,940
4,915
Other .....................................................................
       Total ............................................................... $629,487

Fixed rate .............................................................. $224,745
6,673
Floating rate (not at a floor or ceiling rate) ............
398,069
Floating rate (at floor rate) ....................................
Floating rate (at ceiling rate) .................................
-
       Total ............................................................... $629,487

$1,003,291
44,154
27,276
51,805
4,118
$1,130,644

$   498,470
3,176
628,998
-
$1,130,644

$122,399
1,444
1,279
-
29
$125,151

$  90,328
4,924
29,899
-
$125,151

Total

$1,660,634
120,679
40,162
54,745
9,062
$1,885,282

$   813,543
14,773
1,056,966
-
$1,885,282

22

The following table reflects loans and leases, excluding loans covered by FDIC loss share agreements,
as of December 31, 2011 grouped by expected amortizations, expected paydowns or the earliest repricing
opportunity for floating rate loans. This cash flow or repricing schedule approximates the Company’s ability
to reprice the outstanding principal of loans and leases either by adjusting rates on existing loans and leases
or reinvesting principal cash flow in new loans and leases.

Loan and Lease Cash Flows or Repricing

1 Year
or Less

Over 1
Through
2 Years

Over 2
Through
3 Years

Over 3
Through
5 Years
(Dollars in thousands)

Over
5 Years

Total

Fixed rate ................................... $   283,162 $202,242
Floating rate (not at a floor
322
   or ceiling rate) .........................
Floating rate (at floor rate)(1) ......
555
-
Floating rate (at ceiling rate) ......
      Total ..................................... $1,351,863 $203,119
Percentage of total .....................
Cumulative percentage of total ...

13,178
1,055,523
-

71.7%
71.7

10.8%
82.5

$142,091 $119,778 $66,270

$   813,543

1,044
888
-

-
-
-
$144,023 $120,007 $66,270

229
-
-

7.6%

90.1

6.4%

96.5

3.5%

100.0

14,773
1,056,966
-
$1,885,282

100.0%

(1) The inclusion of a floor rate in many of the Company’s loans and leases has lessened the impact of falling interest

rates on the Company’s loan and lease yields. Conversely, many loans and leases with floor rates will not immediately
reprice in a rising rate environment if the interest rate index and margin on such loans and leases continue to result
in a computed interest rate less than the applicable floor rate. The earnings simulation model results included in the
interest rate risk section of this Management’s Discussion and Analysis include consideration of the impact of all
interest rate floors and ceilings in loans and leases.

Covered Assets, FDIC Loss Share Receivable and FDIC Clawback Payable

On March 26, 2010, the Company, through the Bank, acquired substantially all of the assets and assumed

substantially all of the deposits and certain other liabilities of Unity in a FDIC-assisted acquisition. Loans
comprise the majority of the assets acquired and are subject to loss share agreements with the FDIC whereby
the Bank is indemnified against a portion of the losses on covered loans and covered foreclosed assets.

On July 16, 2010, the Company, through the Bank, acquired substantially all of the assets and assumed

substantially all of the deposits and certain other liabilities of Woodlands in a FDIC-assisted acquisition.
Loans comprise the majority of the assets acquired and all but a small amount of consumer loans are subject
to loss share agreements with the FDIC whereby the Bank is indemnified against a portion of the losses on
covered loans and covered foreclosed assets

On September 10, 2010, the Company, through the Bank, acquired substantially all of the assets and

assumed substantially all of the deposits and certain other liabilities of Horizon in a FDIC-assisted acquisition.
Loans comprise the majority of the assets acquired and all but a small amount of consumer loans are subject
to loss share agreements with the FDIC whereby the Bank is indemnified against a portion of the losses on
covered loans and covered foreclosed assets.

On December 17, 2010, the Company, through the Bank, acquired substantially all of the assets and assumed
substantially all of the deposits and certain other liabilities of Chestatee in a FDIC-assisted acquisition. Loans
comprise the majority of the assets acquired and all but a small amount of consumer loans are subject to loss
share agreements with the FDIC whereby the Bank is indemnified against a portion of the losses on covered
loans and covered foreclosed assets.

On January 14, 2011, the Company, through the Bank, acquired substantially all of the assets and assumed
substantially all of the deposits and certain other liabilities of Oglethorpe in a FDIC-assisted acquisition. Loans
comprise the majority of the assets acquired and all but a small amount of consumer loans are subject to loss
share agreements with the FDIC whereby the Bank is indemnified against a portion of the losses on covered
loans and covered foreclosed assets.

On April 29, 2011, the Company, through the Bank, acquired substantially all of the assets and assumed

substantially all of the deposits and certain other liabilities of First Choice in a FDIC-assisted acquisition.
Loans comprise the majority of the assets acquired and all but a small amount of consumer loans are subject
to loss share agreements with the FDIC whereby the Bank is indemnified against a portion of the losses on
covered loans and covered foreclosed assets.

23

On April 29, 2011, the Company, through the Bank, acquired substantially all of the assets and assumed

substantially all of the deposits and certain other liabilities of Park Avenue in a FDIC-assisted acquisition.
Loans comprise the majority of the assets acquired and all but a small amount of consumer loans are subject
to loss share agreements with the FDIC whereby the Bank is indemnified against a portion of the losses on
covered loans and covered foreclosed assets.

In conjunction with each of these acquisitions, the Bank entered into loss share agreements with the FDIC
such that the Bank and the FDIC will share in the losses on assets covered under the loss share agreements.
Pursuant to the terms of the loss share agreements for the Unity acquisition, on losses up to $65 million,
the FDIC will reimburse the Bank for 80% of losses. On losses exceeding $65 million, the FDIC will reimburse
the Bank for 95% of losses. Pursuant to the terms of the loss share agreements for the Woodlands, Chestatee,
Oglethorpe and First Choice acquisitions, the FDIC will reimburse the Bank for 80% of losses. Pursuant to the
terms of the loss share agreements for the Horizon acquisition, the FDIC will reimburse the Bank on single
family residential loans and related foreclosed assets for (i) 80% of losses up to $11.8 million, (ii) 30%
of losses between $11.8 million and $17.9 million and (iii) 80% of losses in excess of $17.9 million. For
non-single family residential loans and related foreclosed assets, the FDIC will reimburse the Bank for (i)
80% of losses up to $32.3 million, (ii) 0% of losses between $32.3 million and $42.8 million and (iii) 80%
of losses in excess of $42.8 million. Pursuant to the terms of the loss share agreements for the Park Avenue
acquisition, the FDIC will reimburse the Bank for (i) 80% of losses up to $218.2 million, (ii) 0% of losses
between $218.2 million and $267.5 million and (iii) 80% of losses in excess of $267.5 million.

The loss share agreements applicable to single family residential mortgage loans and related foreclosed

assets provide for FDIC loss sharing and the Bank’s reimbursement to the FDIC for recoveries of covered
losses for ten years from the date on which each applicable loss share agreement was entered. The loss
share agreements applicable to commercial loans and related foreclosed assets provide for FDIC loss sharing
for five years from the date on which each applicable loss share agreement was entered and the Bank’s
reimbursement to the FDIC for recoveries of covered losses for an additional three years thereafter.

To the extent that actual losses incurred by the Bank are less than (i) $65 million on the Unity assets
covered under the loss share agreements, (ii) $107 million on the Woodlands assets covered under the loss
share agreements, (iii) $60 million on the Horizon assets covered under the loss share agreements, (iv) $66
million on the Chestatee assets covered under the loss share agreements, (v) $66 million on the Oglethorpe
assets covered under the loss share agreements, (vi) $87 million on the First Choice assets covered under the
loss share agreements and (vii) $269 million on the Park Avenue assets covered under loss share agreements,
the Bank may be required to reimburse the FDIC under the clawback provisions of the loss share agreements.

The covered loans and covered foreclosed assets and the related FDIC loss share receivable and the FDIC

clawback payable are reported at the net present value of expected future amounts to be paid or received.

A summary of the covered assets, the FDIC loss share receivable and the FDIC clawback payable is as follows:

Covered Assets, FDIC Loss Share Receivable and FDIC Clawback Payable

December 31,

2011

2010

(Dollars in thousands)

Covered loans .......................................... $   806,924
FDIC loss share receivable ........................
278,263
72,907
Covered foreclosed assets ........................
    Total .................................................... $1,158,094
FDIC clawback payable ............................ $     24,606

$489,468
158,137
31,145
$687,750
$    6,904

Covered Loans

Purchased loans acquired in a business combination, including loans covered by FDIC loss share

agreements, or covered loans, are accounted for in accordance with the provisions of generally accepted
accounting principles (“GAAP”) applicable to loans acquired with deteriorated credit quality and pursuant to
the American Institute of Certificated Public Accountants’ (“AICPA”) December 18, 2009 letter in which the
AICPA summarized the U.S. Securities and Exchange Commission’s (“SEC”) view regarding the accounting
in subsequent periods for discount accretion associated with non-credit impaired loans acquired in a business
combination or asset purchase. Considering, among other factors, the general lack of adequate underwriting,
proper documentation, appropriate loan structure and insufficient equity contributions for a large number of

24

these acquired loans, and the uncertainty of the borrowers’ and/or guarantors’ ability or willingness to
make contractually required (or any) principal and interest payments, management has determined that
a significant portion of the purchased loans acquired in FDIC-assisted acquisitions has evidence of credit
deterioration since origination. Accordingly, management has elected to apply the provisions of GAAP
applicable to loans acquired with deteriorated credit quality, as provided by the AICPA’s December 18, 2009
letter, to all purchased loans acquired in its FDIC-assisted acquisitions.

At the time such purchased loans are acquired, management individually evaluates substantially all

loans acquired in the transaction. This evaluation allows management to determine the estimated fair value
of the purchased loans (not considering any FDIC loss sharing agreements) and includes no carryover of
any previously recorded allowance for loan and lease losses. In determining the estimated fair value of
purchased loans, management considers a number of factors including, among other things, the remaining
life of the acquired loans, estimated prepayments, estimated loss ratios, estimated value of the underlying
collateral, estimated holding periods, and net present value of cash flows expected to be received. To the
extent that any purchased loan acquired in a FDIC-assisted acquisition is not specifically reviewed,
management applies a loss estimate to that loan based on the average expected loss rates for the purchased
loans that were individually reviewed in that purchased loan portfolio.

As provided for under GAAP, management has up to 12 months following the date of the acquisition to
finalize the fair values of acquired assets and assumed liabilities. Once management has finalized the fair
values of acquired assets and assumed liabilities within this 12-month period, management considers such
values to be the Day 1 Fair Values.

In determining the Day 1 Fair Values of purchased loans, management calculates a non-accretable

difference (the credit component of the purchased loans) and an accretable difference (the yield component
of the purchased loans). The non-accretable difference is the difference between the contractually required
payments and the cash flows expected to be collected in accordance with management’s determination of
the Day 1 Fair Values. Subsequent decreases to the expected cash flows will generally result in a provision
for loan and lease losses. Subsequent increases in cash flows will result in a reversal of the provision for
loan and lease losses to the extent of prior charges and then an adjustment to accretable yield, which would
have a positive impact on interest income. Any such increase or decrease in expected cash flows will result
in a corresponding decrease or increase, respectively, of the FDIC loss share receivable for the portion of
such reduced or additional loss expected to be collected from the FDIC.

The accretable difference on purchased loans is the difference between the expected cash flows and the
net present value of expected cash flows. Such difference is accreted into earnings using the effective yield
method over the term of the loans. In determining the net present value of the expected cash flows, the
Company used discount rates ranging from 6.0% to 9.5% per annum depending on the risk characteristics
of each individual loan. At December 31, 2011, the weighted average period during which management
expects to receive the estimated cash flows for its covered loan portfolio (not considering any payment
under the FDIC loss share agreements) is 2.4 years.

Management separately monitors the purchased loan portfolio and periodically reviews loans contained
within this portfolio against the factors and assumptions used in determining the Day 1 Fair Values. A loan
is typically reviewed (i) when it is modified or extended, (ii) when material information becomes available
to the Company that provides additional insight regarding the loan’s performance, the status of the
borrower, or the quality or value of the underlying collateral, or (iii) in conjunction with the annual review
of projected cash flows which include a substantial portion of each acquired loan portfolio. To the extent
that a loan is performing in accordance with management’s expectation established in conjunction with the
determination of the Day 1 Fair Values, such loan is not included in any of the Company’s credit quality
ratios, is not considered to be an impaired loan, is not risk rated in a similar manner as are the Company’s
non-purchased loans and is not considered in the determination of the required allowance for loan and
lease losses. To the extent that a loan’s performance has deteriorated from management’s expectation
established in conjunction with the determination of the Day 1 Fair Values, such loan is generally included
in certain of the Company’s credit quality metrics, may be considered an impaired loan, and is considered
in the determination of the required level of allowance for loan and lease losses.

25

The following table presents a summary, by acquisition, of covered loans acquired as of the dates of

acquisition and activity within covered loans during the periods indicated.

First
 Unity Woodlands Horizon  Chestatee Oglethorpe Choice

Covered Loans

Park
Avenue

Total

(236,843)

(516,216)

(52,526)

(83,933)

(47,538)

(67,300)

1,255,207

(Dollars in thousands)

(86,210) (126,321)

134,452
7,436

186,478
7,144

155,884
(21,432)

231,170
(44,692)

173,968
(24,074)

326,337
(63,420)

133,985
(22,604)

106,810
(25,376)

At acquistion date:
  Contractually required
     principal and interest ........... $208,410 $315,103 $179,441 $181,523 $174,110 $260,178 $452,658 $1,771,423
  Nonaccretable difference .........
(52,388)
  Cash flows expected
127,053
     to be collected ......................
  Accretable difference ...............
(35,245)
  Fair value at acquisition date .... $134,452 $186,478 $ 91,808 $111,381 $  81,434 $149,894 $262,917 $1,018,364
Carrying value at
  January 1, 2010 ....................... $           - $           - $           - $           - $           - $           - $           - $              -
524,119
91,808
Covered loans acquired .............
Accretion ..................................
17,141
2,222
Transfers to foreclosed assets
  covered by FDIC loss share
  agreements .............................
Payments received ....................
Other activity, net ......................
     Carrying value at
        December 31, 2010 ............
Covered loans acquired .............
Accretion ..................................
Transfers to foreclosed assets
   covered by FDIC loss share
   agreements ............................
Payments received ....................
Other activity, net ......................
     Carrying value at
        December 31, 2011 ........... $  96,360 $131,775 $  79,798 $  74,701 $  64,391 $133,305 $226,594 $   806,924

(1,990)
(11,598)
(1,044)

(2,381)
(40,814)
(1,348)

(1,218)
(22,061)
(225)

(2,432)
(48,249)
(1,231)

(858)
(22,514)
(1,015)

(14,938)
(40,256)
(2,467)

(5,197)
(20,296)
(792)

(2,755)
(23,786)
(364)

(2,599)
(15,356)
53

175,720
-
13,716

-
262,917
15,589

114,983
-
7,662

111,051
-
8,193

-
149,894
7,798

489,468
494,245
66,135

87,714
-
6,716

-
81,434
6,461

111,381
339

(6,339)

(669)

-
-
-

-
-
-

-
-
-

23

-
-

-
-

-
-

-

-

-

(29,014)
(205,788)
(8,122)

(5,354)
(46,150)
(288)

The following table presents a summary of the carrying value and type of covered loans at December 31,

2011 and 2010.

Covered Loan Portfolio

Real estate:
   Residential 1-4 family ......................................
   Non-farm/non-residential ...............................
   Construction/land development .......................
   Agricultural .....................................................
   Multifamily residential ....................................
       Total real estate ...........................................
Commercial and industrial..................................
Consumer ...........................................................
Agricultural (non-real estate) ............................
Other ..................................................................
       Total covered loans .....................................

December 31,

2010
2011
(Dollars in thousands)

$202,621
369,757
160,872
24,104
15,894
773,248
29,749
958
2,806
163
$806,924

$132,108
214,435
102,099
9,643
10,709
468,994
17,999
1,248
73
1,154
$489,468

26

The following table presents a summary, by acquisition, of changes in the accretable difference on covered

loans during the periods indicated.

Accretable Difference on Covered Loans

First
 Unity Woodlands Horizon Chestatee Oglethorpe Choice

Park
Avenue

Total

Accretable difference
  at January 1, 2010 ............. $          - $          - $          - $          - $          - $          - $          - $            -

(Dollars in thousands)

Accretable difference
  acquired ............................. 21,432

44,692

35,245

22,604

Accretion .............................

(7,436)

(7,144)

(2,222)

(339)

Adjustments to accretable
  difference due to:

  Covered loans transferred
    to foreclosed assets
    covered by FDIC loss
    share agreements ............

(299)

(109)

-

  Covered loans paid off .......

(871)

(1,010)

(1,075)

  Cash flow revisions as a
    result of renewals
    and/or modifications
    of covered loans ..............

  Other, net ...........................

2,453

-

647

106

4

213

-

-

-

-

      Accretable difference at
         December 31, 2010 ..... 15,279

37,182

32,165

22,265

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

123,973

(17,141)

(408)

(2,956)

3,104

319

106,891

Accretable difference
  acquired .............................

-

-

-

-

25,376

24,074

63,420

112,870

Accretion .............................

(7,662) (13,716)

(6,716)

(8,193)

(6,461)

(7,798) (15,589)

(66,135)

Adjustments to accretable
  difference due to:

  Covered loans transferred
    to foreclosed assets
    covered by FDIC loss
    share agreements ............

(384)

(1,611)

(191)

(503)

(315)

(91)

(327)

(3,422)

  Covered loans paid off .......

(273)

(2,146)

(934)

(4,564)

(2,811)

(1,435)

(3,167)

(15,330)

  Cash flow revisions as a
    result of renewals and/or
    modifications of
    covered loans ...................

3,514

4,691

  Other, net ...........................

140

155

10

98

1,481

1,446

1,269

2,097

14,508

177

103

165

671

1,509

      Accretable difference at
         December 31, 2011 ..... $10,614 $24,555 $24,432 $10,663 $17,338 $16,184 $47,105 $150,891

FDIC Loss Share Receivable

In connection with the Company’s FDIC-assisted acquisitions, the Company has recorded a FDIC loss share
receivable to reflect the indemnification provided by the FDIC. Currently, the expected losses on covered assets
for each of the Company’s loss share agreements would result in expected recovery of approximately 80% of
incurred losses. Since the indemnified items are covered loans and covered foreclosed assets, which are measured
at Day 1 Fair Values, the FDIC loss share receivable is also measured and recorded at Day 1 Fair Values, and
is calculated by discounting the cash flows expected to be received from the FDIC. A discount rate of 5.0%
per annum was used to determine the net present value of the FDIC loss share receivable. These cash flows are

27

estimated by multiplying estimated losses by the reimbursement rates as set forth in the loss share agreements.
The balance of the FDIC loss share receivable is adjusted periodically to reflect changes in expectations of
discounted cash flows, expense reimbursements under the loss share agreements and other factors.

The following table presents a summary, by acquisition, of the FDIC loss share receivable as of the dates

of acquisition and the activity within the FDIC loss share receivable during the periods indicated.

FDIC Loss Share Receivable

  First

Park

   Unity   Woodlands  Horizon  Chestatee  Oglethorpe  Choice Avenue

 Total

628

80%

80%

80%

80%

80%

80%

80%

 80%

7,907

9,979

5,897

82,211

48,266

60,333

65,769

50,263

35,372

70,797

79,117

44,215

63,294

56,638

62,829

49,850

15,960

(5,535)

(4,204)

(4,119)

(6,225)

(6,283)

(7,428)

(49,844)

564,479

451,584

131,982

164,977

(16,050)

(Dollars in thousands)

At acquisition date:
  Expected principal loss
     on covered assets:
     Covered loans ..................... $50,354 $73,220 $40,537 $46,869 $62,890 $81,583 $115,127 $470,580
     Covered foreclosed assets ....
93,899
3,678
  Total expected
     principal losses ..................
  Estimated loss sharing
     percentage(1) .......................
  Estimated recovery from FDIC
     loss share agreements ........
  Discount for net present
     value on FDIC loss share
     receivable ...........................
  Net present value of FDIC
     loss share receivable
     at acquisition date .............. $44,147 $55,866 $29,089 $46,059 $51,103 $59,544 $115,932 $401,740
Carrying value at
   January 1, 2010 ................... $          - $          - $          - $          - $          - $          - $            - $            -
FDIC loss share receivable
   recorded at acquisition .........
Accretion income ....................
Cash received from FDIC .........
Other activity, net ....................
       Carrying value at
          December 31, 2010 .......
FDIC loss share receivable
   recorded at acquisition .........
Accretion income ....................
Cash received from FDIC .........
Reductions of FDIC loss share
   receivable for payments on
   covered loans in excess of
   Day 1 Fair Values estimates ...
Expenses on covered assets
   reimbursable by FDIC ...........
Other activity, net ....................
       Carrying value at
          December 31, 2011 ....... $27,575 $29,177 $21,757 $29,382 $37,720 $47,982 $  84,670 $278,263

59,544
1,814
(9,505) (18,466) (11,942) (12,372)

-
1,807
(5,069) (23,001)

44,147
1,229
(15,308)
1,052

55,866
1,007
(4,802)
(295)

29,089
331
-
(238)

46,059
-
-
-

226,579
11,076
(28,646) (109,001)

175,161
2,567
(20,110)
519

115,932
2,427

51,103
1,997

-
1,363

1,183
918

1,606
579

1,376
282

8,647
4,511

1,330
1,988

1,943
218

-
927

-
741

472
136

737
390

158,137

(21,686)

(1,612)

(3,590)

(2,892)

(7,204)

(4,565)

29,182

51,776

31,120

46,059

(948)

(875)

-
-
-
-

-
-
-
-

-
-
-
-

-

-

-

(1) Certain of the Company’s loss share agreements contain tranches whereby the FDIC’s loss sharing percentage is

more than or less than 80%. However, management’s current expectation of most of the principal losses on covered
assets under each of the loss share agreements falls in the tranches whereby the FDIC would reimburse the
Company for approximately 80% of such losses.

28

Foreclosed Assets Covered by FDIC Loss Share Agreements

Foreclosed assets covered by FDIC loss share agreements, or covered foreclosed assets, are recorded
at Day 1 Fair Values. In estimating the fair value of covered foreclosed assets, management considers a
number of factors including, among others, appraised value, estimated selling prices, estimated selling costs,
estimated holding periods and net present value of cash flows expected to be received. Discount rates ranging
from 8.0% to 9.5% per annum were used to determine the net present value of covered foreclosed assets.

The following table presents a summary, by acquisition, of foreclosed assets covered by FDIC loss share
agreements, or covered foreclosed assets, as of the dates of acquisition and activity within covered foreclosed
assets during the periods indicated.

Foreclosed Assets Covered by FDIC Loss Share Agreements
First

Park

  Unity  Woodlands Horizon Chestatee Oglethorpe Choice Avenue

 Total

At acquisition date:
  Balance on acquired
     bank’s books ....................... $20,304 $12,258 $8,391 $31,647 $16,554 $2,773 $91,442 $183,369
  Total expected losses ..............
(93,899)
  Discount for net present value
(18,557)
     of expected cash flows .........
  Fair value at acquisition date .... $  8,859 $  5,029 $3,683 $13,406 $  7,085 $1,671 $31,180 $  70,913

(5,897) (3,678) (15,960)

(1,332) (1,030)

(474) (10,412)

(628) (49,850)

(Dollars in thousands)

(9,979)

(7,907)

(2,281)

(1,562)

(1,466)

-

-

-

8,859

5,029

3,683

2,755

2,599

13,406

Carrying value at
  January 1, 2010 ...................... $          - $          - $        - $          - $          - $        - $          - $            -
Covered foreclosed
  assets acquired .......................
Covered loans transferred to
  covered foreclosed assets ........
Sales of covered
  foreclosed assets .....................
       Carrying value at
          December 31, 2010 ........
Covered foreclosed
  assets acquired .......................
Covered loans transferred to
  covered foreclosed assets ........
Sales of covered
  foreclosed assets .....................
       Carrying value at
          December 31, 2011 ......... $10,272 $14,435 $3,677 $  9,677 $  7,132 $2,224 $25,490 $  72,907

(6,499) (1,996)

(1,171)

(6,110)

(2,985)

(3,554)

(8,122)

(1,632)

31,145

13,406

29,014

14,938

39,936

31,180

30,977

(305)

3,683

5,996

8,060

1,990

5,197

2,432

2,381

1,218

5,354

1,671

7,085

858

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

(27,188)

(5,186)

The following table presents a summary of the carrying value and type of foreclosed assets covered by

FDIC loss share agreements, or covered foreclosed assets, at December 31, 2011 and 2010.

Foreclosed Assets Covered by FDIC Loss Share Agreements

Real estate:
   Residential 1-4 family .....................................................................
   Non-farm/non-residential ..............................................................
   Construction/land development ......................................................
   Multifamily residential ...................................................................
         Total real estate ........................................................................
Repossessions ...................................................................................
         Total covered foreclosed assets .................................................

December 31,

2010
2011
(Dollars in thousands)

$15,945
11,624
43,323
2,014
72,906
1
$72,907

$10,624
3,755
16,366
-
30,745
400
$31,145

29

FDIC Clawback Payable

Pursuant to the clawback provisions of the loss share agreements for the Company’s FDIC-assisted

acquisitions, the Company may be required to reimburse the FDIC should actual losses be less than certain
thresholds established in each loss share agreement. The amount of the clawback provision for each
acquisition is measured and recorded at Day 1 Fair Values. It is calculated as the difference between
management’s estimated losses on covered loans and covered foreclosed assets and the loss threshold
contained in each loss share agreement, multiplied by the applicable clawback provisions contained in each
loss share agreement. This clawback amount, which is payable to the FDIC upon termination of the applicable
loss share agreement, is then discounted back to net present value using a discount rate of 5.0% per annum.
To the extent that actual losses on covered loans and covered foreclosed assets are less than estimated
losses, the applicable clawback payable to the FDIC upon termination of the loss share agreements will
increase. To the extent that actual losses on covered loans and covered foreclosed assets are more than
estimated losses, the applicable clawback payable to the FDIC upon termination of the loss share agreements
will decrease.

The following table presents a summary, by acquisition, of the FDIC clawback payable as of the dates of

acquisition and activity within the FDIC clawback payable during the periods indicated.

FDIC Clawback Payable

First
 Unity Woodlands  Horizon  Chestatee Oglethorpe Choice

Park
Avenue

Total

At acquisition date:

  Estimated FDIC
    clawback payable ................ $2,612

  Discount for net present
    value on FDIC
    clawback payable ................ (1,046)

(Dollars in thousands)

$4,846

$2,380 $1,291

$1,721 $1,515

$24,219

$38,584

(1,905)

(919)

(499)

(664)

(585)

(9,351)

(14,969)

  Net present value of FDIC
    clawback payable at
    acquisition date .................. $ 1,566 $ 2,941 $ 1,461 $   792

$1,057 $   930 $ 14,868

$ 23,615

Carrying value
  at January 1, 2010 ................ $        -

FDIC clawback payable
  recorded at acquisition .......... 1,566

$        -

$        - $        -

$        - $        -

$          -

$          -

2,941

1,461

792

Amortization expense .............

Other activity, net ...................

63

-

63

-

12

6

-

-

      Carrying value at
         December 31, 2010 ........ 1,629

3,004

1,479

792

-

-

-

-

-

-

-

-

-

-

-

-

6,760

138

6

6,904

FDIC clawback payable
  recorded at acquisition ..........

Amortization expense .............

Other activity, net ...................

-

80

-

-

149

-

-

73

-

-

55

(88)

1,057

930

14,868

16,855

42

-

31

-

505

-

935

(88)

      Carrying value at
         December 31, 2011 ........ $1,709

Nonperforming Assets

$3,153

$1,552

$  759

$1,099 $   961

$15,373

$24,606

Nonperforming assets, excluding assets covered by FDIC loss share agreements, consist of (1) nonaccrual
loans and leases, (2) accruing loans and leases 90 days or more past due, (3) certain troubled and restructured
loans for which a concession has been granted by the Company to the borrower because of a deterioration in
the financial position of the borrower (“TDRs”) and (4) real estate or other assets that have been acquired in
partial or full satisfaction of loan or lease obligations or upon foreclosure.

30

The Company generally places a loan or lease on nonaccrual status when such loan or lease is (i) deemed
impaired or (ii) 90 days or more past due, or earlier when doubt exists as to the ultimate collection of payments.
The Company may continue to accrue interest on certain loans or leases contractually past due 90 days or
more if such loans or leases are both well secured and in the process of collection. At the time a loan or lease
is placed on nonaccrual status, interest previously accrued but uncollected is generally reversed and charged
against interest income. Nonaccrual loans and leases are generally returned to accrual status when payments
are less than 90 days past due and the Company reasonably expects to collect all payments. If a loan or lease
is determined to be uncollectible, the portion of the principal determined to be uncollectible will be charged
against the allowance for loan and lease losses. Income on nonaccrual loans or leases, including impaired
loans and leases but excluding certain TDRs which continue to accrue interest, is recognized on a cash basis
when and if actually collected.

The following table presents information, excluding loans and foreclosed assets covered by FDIC loss share

agreements, concerning nonperforming assets, including nonaccrual loans and leases, TDRs, and foreclosed
assets as of the date indicated.

Nonperforming Assets

           2011

  2010

December 31,
 2009
(Dollars in thousands)

2008

 2007

Nonaccrual loans and leases ........................................ $12,494
Accruing loans and leases 90 days or more past due ...
-
1,000
TDRs ............................................................................
13,494
Total nonperforming loans and leases ..................

$13,944
-
-
13,944

$23,604
-
-
23,604

$15,382
-
-
15,382

$6,610
26
-
6,636

Foreclosed assets not covered by
   FDIC loss share agreements(1) ......................................

31,762
Total nonperforming assets(2) ............................... $45,256

42,216
$56,160

61,148
$84,752

10,758
$26,140

3,112
$9,748

Nonperforming loans and leases
   to total loans and leases(2) .........................................
Nonperforming assets to total assets(2) ........................

0.72%
1.18

0.75%
1.72

1.24%
3.06

0.76% 0.35%
0.81

0.36

(1) Repossessed personal properties and real estate acquired through or in lieu of foreclosure are initially recorded at the
lesser of current principal investment or estimated market value less estimated cost to sell at the date of repossession
or foreclosure. Valuations of these assets are periodically reviewed by management with the carrying value of such
assets adjusted through non-interest expense to the then estimated market value net of estimated selling costs, if
lower, until disposition.

(2) Excludes assets covered by FDIC loss share agreements, except for their inclusion in total assets.

Because covered loans and covered foreclosed assets are not included in the above calculations of the
Company’s nonperforming loans and leases ratio and nonperforming assets ratio, the Company’s nonperforming
loans and leases ratio and nonperforming assets ratio may not be comparable from period to period or with
such ratios of other financial institutions, including institutions that have made FDIC-assisted acquisitions.

As of December 31, 2011, the Company had identified purchased loans covered by FDIC loss share

agreements acquired in its FDIC-assisted acquisitions totaling $3.2 million where the expected performance
of such loans had deteriorated from management’s performance expectations established in conjunction with
the determination of the Day 1 Fair Values. As a result the Company recorded partial charge-offs, net of
adjustments to the FDIC loss share receivable and the FDIC clawback payable, totaling $0.3 million for such
loans during the fourth quarter of 2011. The Company also recorded $0.3 million of provision for loan and
lease losses during the fourth quarter of 2011 to cover such charge-offs. In addition to such net charge-offs,
the Company also transferred certain of these covered loans to covered foreclosed assets during the fourth
quarter of 2011. As a result of these actions, the Company had $1.9 million of impaired covered loans at
December 31, 2011 (none at December 31, 2010).

If an adequate current determination of collateral value has not been performed, once a loan or lease is
considered impaired, management seeks to establish an appropriate value for the collateral. This assessment
may include (i) obtaining an updated appraisal, (ii) obtaining one or more broker price opinions or
comprehensive market analyses, (iii) internal evaluations or (iv) other methods deemed appropriate
considering the size and complexity of the loan and the underlying collateral. On an ongoing basis, typically
at least quarterly, the Company evaluates the underlying collateral on all impaired loans and leases and, if

31

needed, due to changes in market or property conditions, the underlying collateral is reassessed and the
estimated fair value is revised. The determination of collateral value includes any adjustments considered
necessary related to estimated holding period and estimated selling costs.

At December 31, 2011, the Company has reduced the carrying value of its non-covered loans and leases
deemed impaired (all of which were included in nonaccrual loans and leases) by $9.9 million to the estimated
fair value of such loans and leases of $10.5 million. The adjustment to reduce the carrying value of impaired
loans and leases to estimated fair value consisted of $8.1 million of partial charge-offs and $1.8 million of
specific loan and lease loss allocations. These amounts do not include the Company’s $1.9 million of impaired
covered loans at December 31, 2011.

The following table presents information concerning the geographic location of nonperforming assets,

excluding assets covered by FDIC loss share agreements, at December 31, 2011. Nonaccrual loans and leases
are reported in the physical location of the principal collateral. Foreclosed assets are reported in the physical
location of the asset. Repossessions are reported at the physical location where the borrower resided or had
its principal place of business at the time of repossession.

Geographic Distribution of Nonperforming Assets

 Nonperforming
 Loans and
 Leases

Arkansas .......................................................................
Texas .............................................................................
North Carolina ...............................................................
South Carolina ...............................................................
Georgia ..........................................................................
Florida ...........................................................................
Alabama ........................................................................
All other.........................................................................
      Total ........................................................................

$  9,578
313
2,876
393
270
63
-
1
$13,494

Allowance and Provision for Loan and Lease Losses

Foreclosed
Assets
(Dollars in thousands)
$12,955
16,030
975
1,155
5
-
-
642
$31,762

Total
Nonperforming
Assets

$22,533
16,343
3,851
1,548
275
63
-
643
$45,256

Excluding covered loans, the Company’s allowance for loan and lease losses was $39.2 million, or 2.08%

of total loans and leases at December 31, 2011, compared with $40.2 million, or 2.17% of total loans and
leases, at December 31, 2010, and $39.6 million, or 2.08% of loans and leases, at December 31, 2009. The
Company had no allowance for covered loans at December 31, 2011, 2010 or 2009. Excluding covered loans,
the Company’s allowance for loan and lease losses was equal to 290% of its total nonperforming loans and
leases at December 31, 2011 compared to 288% at December 31, 2010 and 168% at December 31, 2009.
While the Company believes the current allowance is appropriate, changing economic and other conditions
may require future adjustments to the allowance for loan and lease losses.

The amount of provision to the allowance for loan and lease losses is based on the Company’s analysis of
the adequacy of the allowance for loan and lease losses utilizing the criteria discussed below. The provision
for loan and lease losses for 2011 was $11.8 million, including $11.5 million for non-covered loans and
leases and $0.3 million for covered loans, compared to $16.0 million for non-covered loans and leases and
no provision for covered loans in 2010. The Company’s provision for loan and lease losses in 2009, all of
which was for non-covered loans and leases, was $44.8 million. The Company’s decrease in its provision
for loan and lease losses for 2011 compared to 2010 and for 2010 compared to 2009 was primarily due to
the reduction of net charge-offs in 2011 compared to 2010 and in 2010 compared to 2009. Additionally,
the Company’s provision for loan and lease losses and its net charge-offs for 2009 were significantly
impacted by the weak economic conditions that existed during 2009.

32

An analysis of the allowance for loan and lease losses for the periods indicated is shown in the

following table.

Analysis of the Allowance for Loan and Lease Losses

 2011

Year Ended December 31,
 2009
 2010
(Dollars in thousands)

2008

2007

9,631

4,644

35,885

12,988

16,764

1,079
552
3,059
645
250
5,585
1,259
1,783
734
270

872
1,702
4,037
301
133
7,045
6,937
1,196
478
1,108

215
182
796
37
-
1,230
1,798
1,046
367
203

2,743
1,033
5,651
771
-
10,198
1,465
825
413
87

1,619
3,182
20,188
844
4,355
30,188
3,347
1,303
648
399

Balance, beginning of period ....................................... $40,230 $39,619 $29,512 $19,557 $17,699
Non-covered loans and leases charged off:
     Real estate:
          Residential 1-4 family .......................................
          Non-farm/non-residential ..................................
          Construction/land development .........................
          Agricultural .......................................................
          Multifamily/residential ......................................
               Total real estate ............................................
     Commercial and industrial ......................................
     Consumer ...............................................................
     Direct financing leases ............................................
     Other ......................................................................
               Total non-covered loans and leases
                  charged off ................................................
Recoveries of non-covered loans and leases
   previously charged off:
     Real estate:
25
          Residential 1-4 family .......................................
3
          Non-farm/non-residential ..................................
-
          Construction/land development .........................
19
          Agricultural .......................................................
-
          Multifamily residential.......................................
47
               Total real estate ............................................
62
     Commercial and industrial ......................................
209
     Consumer ...............................................................
27
     Direct financing leases ............................................
7
     Other ......................................................................
352
               Total recoveries .............................................
4,292
Net non-covered loans and leases charged off .............
-
Covered loans charged off ............................................
4,292
Net charge-offs - total loans and leases .......................
6,150
Provision for loan and lease losses ..............................
Balance, end of period ................................................. $39,169 $40,230 $39,619 $29,512 $19,557
Net charge-offs of non-covered loans and leases
   to average non-covered loans and leases(1) ...............
Net charge-offs of total loans and leases, including
   covered and non-covered loans and leases, to
   total loans and leases ...............................................
Allowance for loan and lease losses to total
   non-covered loans and leases(1) ................................
Allowance for loan and lease losses to
   nonperforming loans and leases(1) ............................

64
16
30
-
-
110
142
166
5
4
427
12,561
275
12,836
11,775

99
87
253
45
1
485
656
212
20
2
1,375
15,389
-
15,389
16,000

99
147
82
-
1
329
566
183
67
47
1,192
34,693
-
34,693
44,800

55
76
29
-
-
160
51
317
21
12
561
9,070
-
9,070
19,025

1.75% 0.45%

1.75% 0.45%

2.08% 1.46%

0.81%

0.69%

0.73%

0.49%

2.08%

2.17%

290%

192%

288%

168%

0.22%

0.22%

1.05%

295%

(1) Excludes assets covered by FDIC loss share agreements.

Provisions to and the adequacy of the allowance for loan and lease losses are based on evaluations of
the loan and lease portfolio utilizing objective and subjective criteria. The objective criteria primarily include
an internal grading system and specific allowances. In addition to these objective criteria, the Company
subjectively assesses the adequacy of the allowance for loan and lease losses and the need for additions
thereto, with consideration given to the nature and mix of the portfolio, including concentrations of credit;

33

general economic and business conditions, including national, regional and local business and economic
conditions that may affect borrowers’ or lessees’ ability to pay; expectations regarding the current business
cycle; trends that could affect collateral values and other relevant factors. The Company also utilizes a peer
group analysis and a historical analysis to validate the overall adequacy of its allowance for loan and lease
losses. Changes in any of these criteria or the availability of new information could require adjustment of the
ALLL in future periods. While a specific allowance has been calculated for impaired loans and leases and for
loans and leases where the Company has otherwise determined a specific reserve is appropriate, no portion
of the Company’s ALLL is restricted to any individual loan or lease or group of loans or leases, and the entire
ALLL is available to absorb losses from any and all loans and leases.

The Company’s internal grading system assigns one of nine grades to all loans and leases, with each grade
being assigned a specific allowance allocation percentage, except residential 1-4 family loans, consumer loans
and purchased loans, including covered loans.

The grade for each graded individual loan or lease is determined by the account officer and other approving
officers at the time the loan or lease is made and changed from time to time to reflect an ongoing assessment
of loan or lease risk. Grades are reviewed on specific loans and leases from time to time by senior management
and as part of the Company’s internal loan review process. These risk elements include, among others, the
following: (1) for non-farm/non-residential, multifamily residential, and agricultural real estate loans, the
debt service coverage ratio (income from the property in excess of operating expenses compared to loan
repayment requirements), operating results of the owner in the case of owner-occupied properties, the loan-
to-value ratio, the age, condition, value, nature and marketability of the collateral and the specific risks and
volatility of income, property value and operating results typical of properties of that type; (2) for construction
and land development loans, the perceived feasibility of the project including the ability to sell developed lots
or improvements constructed for resale or ability to lease property constructed for lease, the quality and nature
of contracts for presale or preleasing, if any, experience and ability of the developer and loan-to-value ratios;
(3) for commercial and industrial loans and leases, the operating results of the commercial, industrial or
professional enterprise, the borrower’s or lessee’s business, professional and financial ability and expertise,
the specific risks and volatility of income and operating results typical for businesses in the applicable
industry and the age, condition, value, nature and marketability of collateral; and (4) for non-real estate
agricultural loans and leases, the operating results, experience and ability of the borrower or lessee,
historical and expected market conditions and the age, condition, value, nature and marketability of
collateral. In addition, for each category the Company considers secondary sources of income and the
financial strength of the borrower or lessee and any guarantors.

Residential 1-4 family and consumer loans are assigned an allowance allocation percentage based on

past due status.

Allowance allocation percentages for the various risk grades and past due categories for residential 1-4
family and consumer loans are determined by management and are adjusted periodically. In determining
these allowance allocation percentages, management considers, among other factors, historical loss
percentages and a variety of subjective criteria in determining the allowance allocation percentages.

For purchased loans, including covered loans, management separately monitors this portfolio and
periodically reviews loans contained within this portfolio against the factors and assumptions used in
determining the Day 1 Fair Values. To the extent that a loan’s performance has deteriorated from
management’s expectation established in conjunction with the determination of the Day 1 Fair Values,
such loan is considered in the determination of the required level of allowance for loan and lease losses.
To the extent that a revised loss estimate exceeds the loss estimate established in the determination of the
Day 1 Fair Values, such deterioration will result in an allowance allocation or a charge-off. At December 31,
2011 and 2010, the Company had no allowance for its covered loans because all losses had been charged
off on covered loans whose performance had deteriorated from management’s expectations established in
conjunction with the determination of the Day 1 Fair Values.

All loans and leases deemed to be impaired are evaluated individually. The Company considers a loan
or lease, excluding purchased loans and loans covered by FDIC loss share agreements, to be impaired when
based on current information and events, it is probable that the Company will be unable to collect all amounts
due according to the contractual terms thereof. The Company considers a purchased loan, including a covered
loan, to be impaired once a decrease in expected cash flows, subsequent to the determination of the Day 1
Fair Values, results in an allowance allocation, a partial or full charge-off or in a provision for loan and lease
losses. Most of the Company’s nonaccrual loans and leases, excluding loans covered by FDIC loss share

34

agreements, and all TDRs are considered impaired. The majority of the Company’s impaired loans and leases
are dependent upon collateral for repayment. For such loans and leases, impairment is measured by
comparing collateral value, net of holding and selling costs, to the current investment in the loan or lease.
For all other impaired loans and leases, the Company compares estimated discounted cash flows to the
current investment in the loan or lease. To the extent that the Company’s current investment in a particular
loan or lease exceeds its estimated net collateral value or its estimated discounted cash flows, the impaired
amount is specifically considered in the determination of the allowance for loan and lease losses or is
charged off as a reduction of the allowance for loan and lease losses.

The Company also maintains an allowance for certain loans and leases, excluding purchased loans and
loans covered by FDIC loss share agreements, not considered impaired where (i) the customer is continuing
to make regular payments, although payments may be past due, (ii) there is a reasonable basis to believe the
customer may continue to make regular payments, although there is also an elevated risk that the customer
may default, and (iii) the collateral or other repayment sources are likely to be insufficient to recover the
current investment in the loan or lease if a default occurs. The Company evaluates such loans and leases to
determine if an allowance is needed for these loans and leases. For the purpose of calculating the amount of
such allowance, management assumes that (i) no further regular payments occur and (ii) all sums recovered
will come from liquidation of collateral and collection efforts from other payment sources. To the extent that
the Company’s current investment in a particular loan or lease evaluated for the need for such an allowance
exceeds its net collateral value or its estimated discounted cash flows, such excess is considered allocated
allowance for purposes of the determination of the allowance for loan and lease losses.

The Company also includes further allowance allocation for risk-rated loans, including commercial real
estate loans and excluding purchased loans and loans covered by FDIC loss share agreements, that are in
markets determined by management to be “stressed”. Stressed markets may include any specific geography
experiencing (i) high unemployment substantially above the U.S. average, (ii) significant over-development
in one or more commercial real estate categories, (iii) recent or announced loss of a major employer or
significant workforce reductions, (iv) significant declines in real estate values and (v) various other factors.
The additional allowance for such stressed markets compensates for the expectation that a higher risk of loss
is anticipated for the “work-out” or liquidation of a real estate loan in a stressed market versus a market that
is not experiencing any significant levels of stress. The required allocation percentage applicable to real
estate loans in stressed markets may be applied to the total market or it may be determined at the individual
loan level based on collateral value, loan-to-value ratios, strength of the borrower and/or guarantor, viability
of the underlying project and other factors.

Prior to December 31, 2011, the Company utilized the sum of all allowance amounts derived as described
above, combined with a reasonable unallocated allowance, as the primary indicator of the appropriate level
of allowance for loan and lease losses. During the fourth quarter of 2011, the Company refined its allowance
calculation whereby it “allocated” the portion of the allowance that was previously deemed to be unallocated
allowance. This refined allowance calculation includes specific allowance allocations at December 31, 2011
for qualitative factors including, among other factors, (i) concentrations of credit, (ii) general economic
and business conditions, (iii) trends that could effect collateral values and (iv) expectations regarding the
current business cycle. The Company may also consider other qualitative factors in future periods for
additional allowance allocations, including, among other factors, (1) credit quality trends (including trends
in nonperforming loans and leases expected to result from existing conditions), (2) seasoning of the loan
and lease portfolio, (3) specific industry conditions affecting portfolio segments, (4) the Company’s expansion
into new markets and (5) the offering of new loan and lease products. Because the Company has refined its
allowance calculation during 2011 such that it no longer maintains unallocated allowance at December 31, 2011,
the Company’s allocation of its allowance at December 31, 2011 may not be comparable with prior periods.

In addition to the allowance for loan and lease losses methodology described above, the Company

compares the allowance for loan and lease losses (as a percentage of total loans and leases) maintained by
the Bank to the peer group average percentages as shown on the most recently available FDIC’s Uniform
Bank Performance Report and FRB’s Uniform Bank Holding Company Performance Report. This comparison
is used to validate the overall adequacy of the allowance for loan and lease losses.

The board of directors reviews the analysis of the adequacy of the allowance for loan and lease losses

on a quarterly basis, or more frequently as needed, to determine whether the amount of provisions are
adequate or whether additional provisions should be made to the allowance. While the allowance is
determined by (i) management’s assessment and grading of individual loans and leases in the case of

35

loans and leases other than residential 1-4 family loans, consumer loans and covered loans, (ii) the past
due status of residential 1-4 family loans and consumer loans, (iii) allowances made for specific loans and
leases, (iv) “stressed” market allocations, (v) allowance allocations for covered loans and (vi) qualitative
factor allocations, the total allowance amount is available to absorb losses across the Company’s entire
loan and lease portfolio.

The following table sets forth the sum of the amounts of the allowance for loan and lease losses

attributable to individual loans and leases within each category, or loan and lease categories in general
and, prior to December 31, 2011, the unallocated allowance. As previously discussed, the Company refined
its allowance calculation during 2011 such that it no longer maintains unallocated allowance. The table also
reflects the percentage of loans and leases, excluding loans covered by FDIC loss share agreements, in each
category to the total portfolio of non-covered loans and leases for each of the periods indicated. These
allowance amounts have been computed using the Company’s internal grading system, specific impairment
analyses, specific special reserve analyses, “stressed” markets allocations and qualitative factor allocations.
The amounts shown are not necessarily indicative of the actual future losses that may occur within particular
categories. The Company had no allocation of its allowance to covered loans for any of the periods presented.

Allocation of the Allowance for Loan and Lease Losses

2011

2010

% of
Loans
and

% of
Loans
and

December 31,

2009

% of
Loans
and

2008

2007

% of
Loans
and

% of
Loans
and

Allowance Leases Allowance Leases

Allowance Leases Allowance Leases Allowance Leases

Real estate:
  Residential 1-4 family ................. $  3,848
  Non-farm/non-residential ........... 12,203
9,478
  Construction/land development ...
3,383
  Agricultural ................................
2,564
  Multifamily residential ................
4,591
Commercial and industrial ............
1,209
Consumer .....................................
1,632
Direct financing leases ..................
261
Other ............................................
Unallocated allowance ..................
-
       Total ...................................... $39,169

(Dollars in thousands)

13.8 % $  2,999
8,313
37.6
10,565
25.4
2,569
3.8
1,320
7.5
4,142
6.4
2,051
2.1
1,726
2.9
201
0.5
6,344
$40,230

14.3 % $  3,600
36.5
6,574
11,585
26.8
750
4.4
710
5.6
3,587
6.5
2,599
2.9
1,560
2.3
289
0.7
8,365
$39,619

14.9% $  2,170
4,396
31.9
8,560
31.5
745
4.5
1,658
2.9
2,421
7.9
1,894
3.4
808
2.1
209
0.9
6,651
$29,512

13.6% $  2,217
3,470
27.3
5,192
34.4
791
4.2
198
3.0
1,439
10.2
2,280
3.7
335
2.5
207
1.1
3,428
$19,557

14.9%
23.8
36.6
4.9
1.7
9.3
4.7
2.8
1.3

The Company maintains an internally classified loan and lease list that, along with the list of nonaccrual
loans and leases, the list of impaired loans and leases, the list of loans and leases with specific reserves, the
“stressed” market allocations and the qualitative factor allocations, helps management assess the overall
quality of the loan and lease portfolio and the adequacy of the allowance. Loans and leases classified as
“substandard” have clear and defined weaknesses such as highly leveraged positions, unfavorable financial
ratios, uncertain repayment sources or poor financial condition which may jeopardize collectability of the
loan or lease. Loans and leases classified as “doubtful” have characteristics similar to substandard loans and
leases, but also have an increased risk that a loss may occur or at least a portion of the loan or lease may
require a charge-off if liquidated. Although loans and leases classified as substandard do not duplicate loans
and leases classified as doubtful, both substandard and doubtful loans and leases may include some that are
past due at least 90 days, are on nonaccrual status or have been restructured. Loans and leases classified
as “loss” are charged off. At December 31, 2011 substandard loans and leases, excluding loans covered
by FDIC loss share agreements, not designated as impaired, nonaccrual or 90 days past due, totaled $28.1
million, compared to $35.8 million at December 31, 2010 and $26.1 million at December 31, 2009. No loans
or leases were designated as doubtful or loss at December 31, 2011, 2010 or 2009.

Administration of the Bank’s lending function is the responsibility of the Chief Executive Officer, Chief
Credit Officer and certain senior lenders. Such officers perform their lending duties subject to the oversight
and policy direction of the board of directors and the loan committee. Loan or lease authority is granted to
the Chief Executive Officer and certain other senior officers as determined by the board of directors. Loan
or lease authorities of other lending officers are granted by the loan committee on the recommendation of
appropriate senior officers.

36

Loans or leases and aggregate loan and lease relationships exceeding $3.0 million up to the lending

limits established by the Company’s board of directors may be approved by the loan committee. At
December 31, 2011 the loan committee consisted of five or more directors and four of the Bank’s senior
officers. The Company’s loan committee reviews various reports of loan and lease concentrations, loan and
lease originations and commitments over $100,000, internally classified and watch list loans and leases and
various other loan and lease reports. At least quarterly the board of directors reviews summary reports of
past due loans and leases and activity in the Company’s allowance for loan and lease losses and various
other loan and lease reports.

The Company’s compliance and loan review officers are responsible for the Bank’s compliance and loan
review functions. Periodic reviews are scheduled for the purpose of evaluating asset quality and effectiveness
of loan and lease administration. The compliance and loan review officers prepare reports which identify
deficiencies, establish recommendations for improvement and outline management’s proposed action plan
for curing the identified deficiencies. These reports are provided to and reviewed by the Company’s audit
committee. Additionally, the reports issued by the Company’s loan review function are provided to and
reviewed by the Company’s loan committee.

Investment Securities

At December 31, 2011, 2010 and 2009, the Company classified all of its investment securities portfolio as
available for sale. Accordingly, its investment securities are stated at estimated fair value in the consolidated
financial statements with the unrealized gains and losses, net of tax, reported as a separate component of
stockholders’ equity and included in other comprehensive income (loss).

The Company’s holdings of “other equity securities” include Federal Home Bank of Dallas (“FHLB-
Dallas”), Federal Home Loan Bank of Atlanta (“FHLB-Atlanta”) and First National Banker’s Bankshares,
Inc. (“FNBB”) shares which do not have readily determinable fair values and are carried at cost.

The following table presents the amortized cost and the fair value of investment securities as of the

dates indicated.

Investment Securities

2011

December 31,
2010

2009

Amortized
Cost

Fair
Value(1)

Amortized
Cost

Fair
Value(1)

Amortized
Cost

 Fair
Value(1)

           (Dollars in thousands)

Obligations of states and political

       subdivisions ........................................ $359,667 $373,047

$378,822 $378,547

$385,581 $393,887

U.S. Government agency residential
   mortgage-backed securities .................
Corporate obligations ..............................
Collateralized debt obligation ..................
Other equity securities ..............................

46,068
-
-
17,828

48,035
-
-
17,828

1,269
-
-
18,882

1,269
-
-
18,882

93,159
1,596
100
16,316

94,510
1,865
100
16,316

           Total ............................................ $423,563 $438,910

$398,973 $398,698

$496,752 $506,678

(1) The Company utilizes independent third parties as its principal sources for determining fair value of investment

securities which are measured on a recurring basis. For investment securities traded in an active market, the fair
values are obtained from independent pricing services and are based on quoted market prices if available. If quoted
market prices are not available, fair values are based on market prices for comparable securities, broker quotes or
comprehensive interest rate tables, pricing matrices or a combination thereof. For investment securities traded in a
market that is not active, fair value is determined using unobservable inputs.

37

The Company’s investment securities portfolio is reported at estimated fair value, which included gross
unrealized gains of $16.3 million and gross unrealized losses of $1.0 million at December 31, 2011; gross
unrealized gains of $6.4 million and gross unrealized losses of $6.7 million at December 31, 2010; and
gross unrealized gains of $12.1 million and gross unrealized losses of $2.2 million at December 31, 2009.
Management believes that all of its unrealized losses on individual investment securities at December 31,
2011 are the result of fluctuations in interest rates and do not reflect deterioration in the credit quality of
its investments. Accordingly management considers these unrealized losses to be temporary in nature.
The Company does not have the intent to sell these investment securities and more likely than not would
not be required to sell these investment securities before fair value recovers to amortized cost.

At December 31, 2009, the Company’s investment securities portfolio included one security categorized

as a CDO. During 2009, the Company determined that it no longer expected to hold this security until
maturity or until such time as fair value recovered to or above cost. Accordingly, the Company recorded a
$0.9 million charge during 2009 to reduce the carrying value of this security to $0.1 million. This CDO was
sold during 2010.

The following table presents the unaccreted discount and unamortized premium of the Company’s

investment securities for the dates indicated.

Unaccreted Discount and Unamortized Premium

Amortized  Unaccreted Unamortized

Cost

 Discount

Premium

Par
Value

(Dollars in thousands)

December 31, 2011:
  Obligations of states and political subdivisions .......... $359,667
  U.S. Government agency residential
46,068
     mortgage-backed securities .....................................
  Other equity securities ..................................................
17,828
         Total .................................................................... $423,563
December 31, 2010:
  Obligations of states and political subdivisions .......... $378,822
  U.S. Government agency residential
1,269
     mortgage-backed securities .....................................
18,882
  Other equity securities ..................................................
         Total .................................................................... $398,973

$4,969

$   (134)

$364,502

-
-
$4,969

(1,556)
-
$(1,690)

44,512
17,828
$426,842

$5,307

$   (193)

$383,936

-
-
$5,307

(22)
-
$   (215)

1,247
18,882
$404,065

During 2011, the Company recognized premium amortization, net of discount accretion, of $0.4 million,

which is considered an adjustment to the yield of its investment securities. During 2010 and 2009,
respectively, the Company recognized discount accretion, net of premium amortization, of $0.6 million and
$4.5 million.

The Company had net gains of $0.9 million from the sale of $94 million of investment securities in 2011
compared to net gains of $4.5 million from the sale of $251 million of investment securities in 2010 and net
gains of $27.9 million from the sale of $501 million of investment securities in 2009. The Company also
recorded other-than-temporary impairment charges of $0.9 million in 2009. During 2011, 2010 and 2009,
respectively, investment securities totaling $31 million, $60 million and $247 million matured or were called
by the issuer. The Company purchased $13 million, $121 million and $322 million of investment securities
during 2011, 2010 and 2009, respectively.

During the fourth quarter of 2008 and the first quarter of 2009, the Company purchased investment

securities which offered relatively good value at the time of purchase and consisted of tax-exempt mortgage-
backed securities issued by housing authorities of states and political subdivisions (“Municipal Housing
Authority Bonds”). These Municipal Housing Authority Bonds are primarily backed by single family or
multi-family residential mortgages, the repayment of which is guaranteed by the Government National
Mortgage Association, Federal National Mortgage Association, Federal Home Loan Mortgage Corporation,
U.S. Department of Veterans’ Affairs, Federal Housing Agency or U.S. Department of Agriculture Rural
Development.

During 2009, the Company sold most of the Municipal Housing Authority Bonds and, during 2009
and 2010, the Company sold most of its U.S. Government agency residential mortgage-backed securities.
This reduction of the Company’s investment securities portfolio was a result of management’s ongoing
evaluations of interest rate risk and to free up capital for FDIC-assisted acquisitions.

38

The Company invests in securities it believes offer good relative value at the time of purchase, and it will,

from time to time reposition its investment securities portfolio. In making its decisions to sell or purchase
securities, the Company considers credit ratings, call features, maturity dates, relative yields, current market
factors, interest rate risk and other relevant factors.

The following table presents the types and estimated fair values of the Company’s investment securities at

December 31, 2011 based on credit ratings by one or more nationally-recognized credit rating agencies.

Credit Ratings of Investment Securities
  AAA(1)

  AA(2)

 A(3)

BBB(4)
(Dollars in thousands)

 BB(5) Non-Rated(6) Total

Obligations of states and
       political subdivisions:

     Arkansas ................................ $        - $125,785 $  6,528 $  3,349 $2,098(7) $139,259 $277,019
72,007
     Texas ...................................... 1,322
5,819
-
     Pennsylvania ..........................
4,285
-
     Louisiana ................................
3,479
-
     South Carolina ........................
2,843
-
     Georgia ...................................
2,735
-
     Connecticut .............................
2,595
-
     Iowa ........................................
2,003
-
     Massachusetts ........................
     Alabama .................................
262
-
U.S. Government agency

29,983   13,416
  -
  -
  -
 185
  2,735
  2,595
  -
  -

15,136
-
-
-
611
-
-
-
262

12,150
5,819
-
3,479
596
-
-
2,003
-

-
4,285
-
1,451
-
-
-
-

-
-
-
-
-
-
-
-
-

       residential mortgage-backed
-
       securities ..................................
Other equity securities .................
-
        Total ..................................... $1,322 $209,539 $25,459 $19,358 $2,098

48,035
-

-
     -

-
-

-
-

Percentage of total .......................
Cumulative percentage of total .....

0.3%
0.3%

47.7%
0.5%
48.0% 53.8% 58.2% 58.7%

4.4%

5.8%

-
17,828

48,035
17,828
$181,134 $438,910

41.3%
100.0%

100.0%

(1) Includes securities rated Aaa by Moody’s, AAA by Standard & Poor’s (“S&P”) or a comparable rating by other

nationally-recognized credit rating agencies.

(2) Includes securities rated Aa1 to Aa3 by Moody’s, AA+ to AA- by S&P or a comparable rating by other nationally-

recognized credit rating agencies.

(3) Includes securities rated A1 to A3 by Moody’s, A+ to A- by S&P or a comparable rating by other nationally-

recognized credit rating agencies.

(4) Includes securities rated Baa1 to Baa3 by Moody’s, BBB+ to BBB- by S&P or a comparable rating by other

nationally-recognized credit rating agencies.

(5) Includes securities rated Ba1 to Ba3 by Moody’s, BB+ to BB- by S&P or a comparable rating by other nationally-

recognized credit rating agencies.

(6) Includes all securities that are not rated or securities that are not rated but that have a rated credit enhancement

where the Company has ignored such credit enhancement. For these securities, the Company has performed its own
evaluation of the security and/or the underlying issuer and believes that such security or its issuer would warrant a
credit rating of investment grade (i.e., Baa3 or better by Moody’s or BBB- or better by S&P or a comparable rating
by another nationally-recognized credit rating agency).

(7) These securities were sold in January 2012 with net proceeds equal to fair value at December 31, 2011, resulting in

no gain or loss on sale.

39

The following table reflects the expected maturity distribution of the Company’s investment securities,
at fair value, as of December 31, 2011 and weighted-average yields (for tax-exempt obligations on a FTE
basis) of such securities. The maturity for all investment securities is shown based on each security’s
contractual maturity date, except (1) equity securities with no contractual maturity date which are shown
in the longest maturity category, (2) U.S. Government agency residential mortgage-backed securities are
allocated among various maturities based on an estimated repayment schedule utilizing Bloomberg median
prepayment speeds based on interest rate levels at December 31, 2011, and (3) callable investment securities
when the Company has received notification of call are included in the maturity category in which the call
occurs or is expected to occur. Actual maturities will differ from contractual maturities because issuers may
have the right to call or prepay obligations with or without call or prepayment penalties. The weighted-
average yields - FTE are calculated based on the coupon rate and amortized cost for such securities and
do not include any projected discount accretion or premium amortization.

Expected Maturity Distribution of Investment Securities

Obligations of states and political subdivisions ...
U.S. Government agency
   residential mortgage-backed securities ............
Other equity securities(1) .....................................
       Total ...........................................................

1 Year
or
Less

$   2,971

9,653
-
$12,624

Over 1
Through
5 Years

$12,732

Over 5
Through
10 Years
(Dollars in thousands)
$24,666

Over
10
Years

$332,678

Total

$373,047

25,807
-
$38,539

12,575
-
$37,241

-
17,828
$350,506

48,035
17,828
$438,910

Percentage of total .............................................
Cumulative percentage of total ...........................

Weighted-average yield - FTE(2) ..........................

2.9%
2.9%

4.53%

8.8%
11.7%

4.98%

8.4%
20.1%

5.89%

79.9%
100.0%

7.25%

100.0%

6.85%

(1) Includes approximately $17.4 million of FHLB-Dallas and FHLB-Atlanta stock which has historically paid quarterly

dividends at a variable rate approximating the federal funds rate.

(2) The weighted-average yields - FTE are calculated based on the coupon rate and amortized cost for such securities

and do not include any projected discount accretion or premium amortization.

Deposits

The Company’s lending and investing activities are funded primarily by deposits. The amount and type
of deposits outstanding at December 31, 2011, 2010 and 2009 and their respective percentage of the total
deposits are reflected in the following table.

Non-interest bearing ...............................
Interest bearing: ......................................
   Transaction (NOW) ..............................
   Savings and money market ..................
   Time deposits less than $100,000 ........
   Time deposis of $100,000 or more .......
       Total deposits ...................................

Deposits

2011

 December 31,
2010
(Dollars in thousands)

2009

$   447,214

15.2% $   298,585

11.8% $   223,741

11.0%

738,926
839,523
508,675
409,581

25.1
28.5
17.3
13.9

625,524
673,534
459,027
484,083

24.6
26.5
18.1
19.0

521,057
406,920
337,042
540,234

25.7
20.1
16.6
26.6

$2,943,919 100.0% $2,540,753 100.0% $2,028,994 100.0%

The Company’s total deposits increased to $2.94 billion at December 31, 2011, compared to $2.54 billion

at December 31, 2010 and $2.03 billion at December 31, 2009. These increases were primarily due to the
Company’s three FDIC-assisted acquisitions during 2011 and its four FDIC-assisted acquisitions during 2010.

In recent years, the Company has benefited from favorable change in its deposit mix. The Company’s non-
CD deposits have grown and comprised 68.8% of total deposits at December 31, 2011, compared to 62.9% at
December 31, 2010 and 56.8% at December 31, 2009. Non-CD deposits totaled $2.03 billion at December 31,
2011, compared to $1.60 billion at December 31, 2010 and $1.15 billion at December 31, 2009.

At December 31, 2011, the Company had outstanding brokered deposits of $41 million compared to $58

million at December 31, 2010 and $57 million at December 31, 2009.

40

The following table reflects the average balance and average rate paid for each deposit category shown for

the years ended December 31, 2011, 2010 and 2009.

Average Deposit Balances and Rates

2011
Average Average
Balance Rate Paid

Year Ended December 31,
2010
Average Average
Balance Rate Paid
(Dollars in thousands)

2009
Average Average
Balance Rate Paid

Non-interest bearing accounts .......... $   392,780
Interest bearing accounts:
698,808
   Transaction (NOW) ........................
825,274
   Savings and money market ...........
569,428
   Time deposits less than $100,000 ....
438,030
   Time deposits $100,000 or more ....
       Total deposits ............................. $2,924,320

-

$   256,910

-

$   207,782

-

0.39%
0.67
0.94
0.92

574,432
547,096
392,671
476,748
$2,247,857

0.49%
1.09
1.40
1.22

431,587
401,221
409,969
699,281
$2,149,840

0.58%
1.15
2.40
1.93

The following table sets forth, by time remaining to maturity, time deposits in amounts of $100,000 and

over at December 31, 2011.

Maturity Distribution of Time Deposits of $100,000 and Over

December 31, 2011
(Dollars in thousands)

3 months or less ................................................... $121,362
129,637
Over 3 to 6 months ...............................................
118,298
Over 6 to 12 months .............................................
Over 12 months ....................................................
40,284
     Total ................................................................ $409,581

The amount and percentage of the Company’s deposits by state of originating office are reflected in the

following table.

Deposits by State of Originating Office

Deposits Attributable
to Offices In

2011

Amount

%

Arkansas ......................................... $1,582,294
419,422
Texas ...............................................
751,087
Georgia ............................................
157,230
Florida .............................................
8,968
South Carolina .................................
12,952
North Carolina .................................
Alabama ..........................................
11,966
      Total .......................................... $2,943,919 100.0%

53.6%
14.3
25.5
5.4
0.3
0.5
0.4

Other Interest Bearing Liabilities

December 31,
2010

Amount
(Dollars in thousands)

%

$1,752,977
455,089
152,333
110,556
32,861
19,615
17,322

69.0%
17.9
6.0
4.3
1.3
0.8
0.7

$2,540,753 100.0%

2009

Amount

%

$1,734,870
294,124
-
-
-
-
-
$2,028,994 100.0%

85.5%
14.5
-
-
-
-
-

The Company also relies on other interest bearing liabilities to fund its lending and investing activities.
Such liabilities consist of repurchase agreements with customers, other borrowings (primarily FHLB advances
and, to a lesser extent, FRB borrowings and federal funds purchased) and subordinated debentures.

Total other interest bearing liabilities were $400 million at December 31, 2011, an increase of $10 million
from $390 million at December 31, 2010. Repurchase agreements with customers decreased from $43 million
at December 31, 2010 to $33 million at December 31, 2011. Other borrowings, including FHLB advances, FRB
borrowings and federal funds purchased, increased from $282 million at December 31, 2010 to $302 million
at December 31, 2011.

41

The following table reflects the average balance and average rate paid for each category of other interest

bearing liabilities for the years ended December 31, 2011, 2010 and 2009.

Average Balances and Rates of Other Interest Bearing Liabilities

2011
Average Average
Balance Rate Paid

Year Ended December 31,
2010
Average Average
Balance Rate Paid
(Dollars in thousands)

2009
Average Average
Balance Rate Paid

Repurchase agreements
   with customers .............................. $  39,638
Other borrowings(1) ...........................
296,195
Subordinated debentures ..................
64,950
   Total other interest
       bearing liabilities ....................... $400,783

0.44%
3.66
2.68

$  49,835
317,796
64,950

0.76%
3.82
2.72

$  52,549
384,854
64,950

1.13%
3.74
3.29

3.18%

$432,581

3.30%

$502,353

3.40%

(1) Included in other borrowings at December 31, 2011 are FHLB advances that contain quarterly call features and
mature as follows: 2017, $260.0 million at 3.90% weighted-average rate; and 2018, $20.0 million at 2.53%
weighted-average rate.

Capital Resources

Capital Resources and Liquidity

Subordinated Debentures. At December 31, 2011, the Company had an aggregate of $64.9 million of
subordinated debentures and related trust preferred securities outstanding consisting of $20.6 million of
subordinated debentures and securities issued in 2006 that bear interest, adjustable quarterly, at LIBOR plus
1.60%; $15.4 million of subordinated debentures and securities issued in 2004 that bear interest, adjustable
quarterly, at LIBOR plus 2.22%; and $28.9 million of subordinated debentures and securities issued in 2003
that bear interest, adjustable quarterly, at a weighted-average rate of LIBOR plus 2.925%. These subordinated
debentures and securities generally mature 30 years after issuance and may be prepaid at par, subject to
regulatory approval, on or after approximately five years from the date of issuance, or at an earlier date upon
certain changes in tax laws, investment company laws or regulatory capital requirements. These subordinated
debentures and the related trust preferred securities provide the Company additional regulatory capital to
support its expected future growth and expansion.

Preferred Stock and Common Stock Warrant. On December 12, 2008, as part of the United States Department

of the Treasury’s (the “Treasury”) Capital Purchase Program made available to certain financial institutions
in the U.S. pursuant to the Emergency Economic Stabilization Act of 2008 (“EESA”), the Company and the
Treasury entered into a Letter Agreement including the Securities Purchase Agreement – Standard Terms
incorporated therein pursuant to which the Company issued to the Treasury, in exchange for aggregate
consideration of $75.0 million, (i) 75,000 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred
Stock, Series A, par value $0.01 and liquidation preference $1,000 per share (the “Series A Preferred Stock”),
and (ii) a warrant (the “Warrant”) to purchase up to 759,622 split-adjusted shares of the Company’s common
stock, par value $0.01 per share, at a split-adjusted exercise price of $14.81 per share. On November 4, 2009,
the Company redeemed all of the Series A Preferred Stock for $75.0 million plus accrued and unpaid
dividends, with the approval of the Company’s primary regulator in consultation with the Treasury. On
November 24, 2009, the Company repurchased the Warrant from the Treasury for $2.65 million, which was
charged against the Company’s additional paid-in capital.

Tangible Common Equity. The Company uses its tangible common equity ratio as the principal measure
of the strength of its capital. The tangible common equity ratio is calculated by dividing total common equity
less intangible assets by total assets less intangible assets. The Company’s tangible common equity ratio was
10.77% at December 31, 2011 compared to 9.57% at December 31, 2010 and 9.53% at December 31, 2009.

Common Stock Dividend Policy. In 2011 the Company paid dividends of $0.37 per share. In 2010 and 2009

the Company paid dividends of $0.30 per share and $0.26 per share, respectively. In 2011, the per share
dividend was $0.085 in the first quarter, $0.09 in the second quarter, $0.095 in the third quarter and $0.10
in the fourth quarter. In 2010, the per share dividend was $0.07 in the first quarter, $0.075 per quarter in
the second and third quarters, and $0.08 in the fourth quarter. In 2009 the per share dividend was $0.065
in each quarter. On January 3, 2012, the Company’s board of directors approved a dividend of $0.1 1 per
common share that was paid on January 20, 2012. The determination of future dividends on the Company’s
common stock will depend on conditions existing at that time.

42

Capital Compliance

Bank regulatory authorities in the United States impose certain capital standards on all bank holding

companies and banks. These capital standards require compliance with certain minimum “risk-based capital
ratios” and a minimum “leverage ratio.” The risk-based capital ratios consist of (1) Tier 1 capital (common
stockholders’ equity excluding goodwill, certain intangibles and net unrealized gains and losses on available-
for-sale investment securities, but including, subject to limitations, trust preferred securities, certain types of
preferred stock and other qualifying items) to risk-weighted assets and (2) total capital (Tier 1 capital plus
Tier 2 capital which includes the qualifying portion of the allowance for loan and lease losses and the portion
of trust preferred securities not counted as Tier 1 capital) to risk-weighted assets. The Tier 1 leverage ratio is
measured as Tier 1 capital to adjusted quarterly average assets.

The Company’s consolidated risk-based capital and leverage ratios exceeded these minimum requirements
at December 31, 2011 and 2010 and are presented in the following table, followed by the capital ratios of the
Bank at December 31, 2011 and 2010.

Tier 1 capital:

Consolidated Capital Ratios

                  December 31,

2011
2010
(Dollars in thousands)

Common stockholders’ equity ..................................................................... $   424,551
63,000
Allowed amount of trust preferred securities ..............................................
(9,327)
Net unrealized losses (gains) on investment securities AFS .......................
  (12,207)
Less goodwill and certain intangible assets ................................................
  466,017
    Total Tier 1 capital ...................................................................................

$   320,355
63,000
167
(7,925)
  375,597

Tier 2 capital:

Qualifying allowance for loan and lease losses ...........................................
29,241
    Total risk-based capital ........................................................................... $   499,055  $   404,838

     33,038

Risk-weighted assets ....................................................................................... $2,636,875  $2,328,251

Adjusted quarterly average assets - fourth quarter .......................................... $3,864,468  $3,160,452
Ratios at end of period:

Tier 1 leverage ............................................................................................
Tier 1 risk-based capital ..............................................................................
Total risk-based capital ...............................................................................

Minimum ratio guidelines:

Tier 1 leverage(1) ..........................................................................................
Tier 1 risk-based capital ..............................................................................
Total risk-based capital ...............................................................................

Minimum ratio guidelines to be “well capitalized”:

Tier 1 leverage ............................................................................................
Tier 1 risk-based capital ..............................................................................
Total risk-based capital ...............................................................................

 12.06%
17.67
18.93

3.00%
4.00
8.00

5.00%
6.00
10.00

11.88%
16.13
17.39

3.00%
4.00
8.00

5.00%
6.00
10.00

(1) Regulatory authorities require institutions to operate at varying levels (ranging from 100-200 bps) above a

minimum Tier 1 leverage ratio of 3% depending upon capitalization classification.

Bank Capital Ratios

Stockholders’ equity - Tier 1 capital .................................................................
Tier 1 leverage ratio .........................................................................................
Tier 1 risk-based capital ratio ..........................................................................
Total risk-based capital ratio ............................................................................

 December 31,

 2010
 2011
(Dollars in thousands)

$445,789

$358,852

11.58%
16.98
18.23

11.40%
15.49
16.75

43

Liquidity

Liquidity represents an institution’s ability to provide funds to satisfy demands from depositors, borrowers
and other creditors by either converting assets into cash or accessing new or existing sources of incremental
funds. Liquidity risk arises from the possibility the Company may be unable to satisfy current or future
funding requirements and needs. The ALCO and Investments Committee (“ALCO”), which reports to the
board of directors, has primary responsibility for oversight of the Company’s liquidity, funds management,
asset/liability (interest rate risk) position and investment portfolio functions.

The objective of managing liquidity risk is to ensure the cash flow requirements resulting from depositor,
borrower and other creditor demands are met, as well as operating cash needs of the Company, and the cost
of funding such requirements and needs is reasonable. The Company maintains a liquidity risk management
policy and a contingency funding plan that include policies and procedures for managing liquidity risk.
Generally the Company relies on deposits, loan and lease and covered loan repayments, and repayments
of its investment securities as its primary sources of funds. The principal deposit sources utilized by the
Company include consumer, commercial and public funds customers in the Company’s markets. The
Company has used these funds, together with wholesale deposit sources such as brokered deposits, along
with FHLB advances, FRB borrowings, federal funds purchased and other sources of short-term borrowings,
to make loans and leases, acquire investment securities and other assets and to fund continuing operations.

Deposit levels may be affected by a number of factors, including rates paid by competitors, general

interest rate levels, returns available to customers on alternative investments, general economic and market
conditions and other factors. Loan and lease repayments are a relatively stable source of funds but are
subject to the borrowers’ and lessees’ ability to repay the loans and leases, which can be adversely affected
by a number of factors including changes in general economic conditions, adverse trends or events affecting
business industry groups or specific businesses, declines in real estate values or markets, business closings
or lay-offs, inclement weather, natural disasters and other factors. Furthermore, loans and leases generally
are not readily convertible to cash. Accordingly, the Company may be required from time to time to rely
on secondary sources of liquidity to meet loan, lease and deposit withdrawal demands or otherwise fund
operations. Such secondary sources include FHLB advances, secured and unsecured federal funds lines of
credit from correspondent banks and FRB borrowings.

At December 31, 2011 the Company had substantial unused borrowing availability. This availability was
primarily comprised of the following four options: (1) $647 million of available blanket borrowing capacity
with the FHLB, (2) $93 million of investment securities available to pledge for federal funds or other
borrowings, (3) $123 million of available unsecured federal funds borrowing lines and (4) up to $77 million
of available borrowing capacity from borrowing programs of the FRB.

The Company anticipates it will continue to rely primarily on deposits, loan and lease and covered loan
repayments, and repayments of its investment securities to provide liquidity. Additionally, where necessary,
the sources of borrowed funds described above will be used to augment the Company’s primary funding
sources.

Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”). On July 21,

2010, the Dodd-Frank Act was signed into law. Among other things, the Dodd-Frank Act provides full
deposit insurance with no maximum coverage amount for non-interest bearing transaction accounts for two
years beginning December 31, 2010. Participation in this deposit insurance coverage of the Dodd-Frank Act
is mandatory for all financial institutions and requires no separate fee assessment to the Bank. Additionally,
the Dodd-Frank Act permanently increases the maximum deposit insurance coverage for all other deposit
categories to $250,000 retroactive to January 1, 2008.

Sources and Uses of Funds. Net cash provided by operating activities totaled $21 million, $41 million and

$48 million, respectively, for 2011, 2010 and 2009. Net cash provided by operating activities is comprised
primarily of net income, adjusted for certain non-cash items and for changes in various operating assets
and liabilities.

Investing activities provided $792 million in 2011, $492 million in 2010 and $476 million in 2009. The

Company’s investing activities include net loan and lease fundings, which used $27 million in 2011 and
provided $38 million in 2010 and $12 million in 2009, purchases of premises and equipment which used $21
million, $17 million, and $9 million, respectively, in 2011, 2010 and 2009, and net activity in its investment
securities portfolio, which provided $112 million in 2011, $194 million in 2010, and $454 million in 2009.
The Company received $365 million of cash in connection with its three FDIC-assisted acquisitions in 2011
and $201 million of cash in connection with its four FDIC-assisted acquisitions in 2010 (none in 2009).

44

Net decreases in covered loans provided $214 million in 2011 and $46 million in 2010 (none in 2009), and
payments received from the FDIC under loss share agreements totaled $109 million in 2011 and $20 million
in 2010 (none in 2009). The Company purchased $10 million of BOLI in 2010. The Company invested $2
million in 2011 and $5 million in 2010 in unconsolidated investments and noncontrolling interest. Proceeds
from sales of other assets provided $42 million in 2011, $24 million in 2010 and $17 million in 2009, and
proceeds from BOLI death benefits provided $2 million in 2009 (none in 2011 or 2010).

Financing activities used $804 million in 2011, $562 million in 2010 and $487 million in 2009. The
Company’s net changes in deposit accounts used $712 million in 2011, $441 million in 2010 and $312
million in 2009, and its net repayments of other borrowings and repurchase agreements with customers
used $84 million in 2011, $115 million in 2010 and $85 million in 2009. In addition the Company paid
common stock cash dividends of $13 million, $10 million and $9 million, respectively, in 2011, 2010 and
2009, and the Company paid preferred stock cash dividends of $3.4 million in 2009 (none in 2011 or 2010).
Proceeds and current tax benefits from exercise of stock options provided $4.9 million in 2011, $3.4 million
in 2010 and $0.4 million in 2009. The Company’s financing activities were also impacted by the redemption
of the Series A Preferred Stock for $75 million in 2009, as well as the repurchase of the Warrant for $2.65
million in 2009.

Contractual Obligations. The following table presents, as of December 31, 2011, significant fixed and
determinable contractual obligations to third parties by contractual date with no consideration given to
earlier call or prepayment features. Other obligations consist primarily of contractual obligations for capital
expenditures, software contracts and various other contractual obligations.

Contractual Obligations
1 Year
or
Less

Over 3
Over 1
Through Through
5 Years
3 Years

Over
5
Years

                                (Dollars in thousands)

Total

Time deposits(1) ................................................. $   823,752   $  87,212 $11,930 $            - $   922,894
Deposits without a stated maturity(2) ................    2,025,825
           -    2,025,825
Repurchase agreements with customers(1) ........
32,810
32,810
Other borrowings(1) ...........................................
375,316
32,844
Subordinated debentures(1) ...............................
109,088
 2,141
5,858
1,152
Lease obligations ..............................................
Other obligations ..............................................
53,037
16,496
     Total contractual obligations ........................ $2,935,020 $117,136 $39,350 $433,322 $3,524,828

           -
-
 21,686
3,691
1,726
2,821

         -
-
21,673
3,686
1,137
924

-
299,113
99,570
1,843
32,796

(1) Includes unpaid interest through the contractual maturity on both fixed and variable rate obligations. The interest
included on variable rate obligations is based upon interest rates in effect at December 31, 2011. The contractual
amounts to be paid on variable rate obligations are affected by changes in interest rates. Future changes in interest
rates could materially affect the contractual amounts to be paid.

(2) Includes interest accrued and unpaid through December 31, 2011.

Off-Balance Sheet Commitments. The following table details the amounts and expected maturities of
significant off-balance sheet commitments as of December 31, 2011. Commitments to extend credit do not
necessarily represent future cash requirements as these commitments may expire without being drawn.

Off-Balance Sheet Commitments

1 Year
or
Less

Commitments to extend credit(1) ..... $116,639
7,621
Standby letters of credit .................
Total commitments ................. $124,260

Over 1
Through
3 Years

 Over 3
 Through
 5 Years
(Dollars in thousands)

$154,729
5,800
$160,529

$48,264
124
$48,388

 Over
 5
 Years

$6,359
-
$6,359

Total

$325,991
13,545
$339,536

(1) Includes commitments to extend credit under mortgage interest rate locks of $13.3 million that expire in one year

or less.

45

Interest Rate Risk

Interest rate risk results from timing differences in the repricing of assets and liabilities or from changes in
relationships between interest rate indexes. The Company’s interest rate risk management is the responsibility
of the ALCO.

The Company regularly reviews its exposure to changes in interest rates. Among the factors considered
are changes in the mix of interest earning assets and interest bearing liabilities, interest rate spreads and
repricing periods. Typically, the ALCO reviews on at least a quarterly basis the Company’s relative ratio of rate
sensitive assets (“RSA”) to rate sensitive liabilities (“RSL”) and the related cumulative gap for different time
periods. However, the primary tool used by the ALCO to analyze the Company’s interest rate risk and interest
rate sensitivity is an earnings simulation model.

This earnings simulation modeling process projects a baseline net interest income (assuming no changes
in interest rate levels) and estimates changes to that baseline net interest income resulting from changes in
interest rate levels. The Company relies primarily on the results of this model in evaluating its interest rate
risk. This model incorporates a number of factors including: (1) the expected exercise of call features on
various assets and liabilities, (2) the expected rates at which various RSA and RSL will reprice, (3) the
expected growth in various interest earning assets and interest bearing liabilities and the expected interest
rates on such new assets and liabilities, (4) the expected relative movements in different interest rate indexes
which are used as the basis for pricing or repricing various assets and liabilities, (5) existing and expected
contractual cap and floor rates on various assets and liabilities, (6) expected changes in administered rates
on interest bearing transaction, savings, money market and time deposit accounts and the expected impact
of competition on the pricing or repricing of such accounts and (7) other relevant factors. Inclusion of these
factors in the model is intended to more accurately project the Company’s expected changes in net interest
income resulting from interest rate changes. The Company models its change in net interest income assuming
interest rates go up 100 bps, up 200 bps, up 300 bps, up 400 bps, down 100 bps and down 200 bps. Based
on current conditions, the Company believes that modeling its change in net interest income assuming rates
go down 100 bps and down 200 bps is not meaningful. For purposes of this model, the Company has assumed
that the change in interest rates phases in over a 12-month period. While the Company believes this model
provides a reasonably accurate projection of its interest rate risk, the model includes a number of assumptions
and predictions which may or may not be correct and may impact the model results. These assumptions and
predictions include inputs to compute baseline net interest income, growth rates, expected changes in
administered rates on interest bearing deposit accounts, competition and a variety of other factors that are
difficult to accurately predict. Accordingly, there can be no assurance the earnings simulation model will
accurately reflect future results.

The following table presents the earnings simulation model’s projected impact of a change in interest rates

on the projected baseline net interest income for the 12-month period commencing January 1, 2012. This
change in interest rates assumes parallel shifts in the yield curve and does not take into account changes in
the slope of the yield curve.

Earnings Simulation Model Results

Change in
Interest Rates
(in bps)
+400
+300
+200
+100
-100
-200

% Change in
Projected Baseline
Net Interest Income
(1.6)%
(1.8)
(1.5)
(0.8)
Not meaningful
Not meaningful

In the event of a shift in interest rates, the Company may take certain actions intended to mitigate the

negative impact to net interest income or to maximize the positive impact to net interest income. These
actions may include, but are not limited to, restructuring of interest earning assets and interest bearing
liabilities, seeking alternative funding sources or investment opportunities and modifying the pricing or
terms of loans and leases and deposits.
Impact of Inflation and Changing Prices

The consolidated financial statements and related notes presented elsewhere in this report have been
prepared in accordance with accounting principles generally accepted in the United States. This requires the
measurement of financial position and operating results in terms of historical dollars without considering
the changes in the relative purchasing power of money over time due to inflation. Unlike most industrial

46

companies, the vast majority of the assets and liabilities of the Company are monetary in nature. As a
result, interest rates have a greater impact on the Company’s performance than do the effects of general
levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the
prices of goods and services.

Growth and Expansion
On March 26, 2010 the Company, through the Bank, entered into a purchase and assumption agreement
with loss share agreements with the FDIC pursuant to which it acquired substantially all of the assets and
assumed substantially all of the deposits and certain other liabilities of Unity with five offices in Georgia,
including Cartersville (2), Rome, Adairsville and Calhoun.

On July 16, 2010 the Company, through the Bank, entered into a purchase and assumption agreement
with loss share agreements with the FDIC pursuant to which it acquired substantially all of the assets and
assumed substantially all of the deposits and other liabilities of Woodlands, with offices in South Carolina
(2), North Carolina (2), Georgia (1) and Alabama (3). On October 26, 2010 the Company closed four
Woodlands offices including one each in South Carolina and North Carolina and two in Alabama, and in
December 2010 the Company relocated two offices. The Company also renegotiated the leases on the two
remaining offices. As a result the Company now operates one office each in Bluffton, South Carolina;
Wilmington, North Carolina; Savannah, Georgia; and Mobile, Alabama.

On September 10, 2010 the Company, through the Bank, entered into a purchase and assumption

agreement with loss share agreements with the FDIC pursuant to which it acquired substantially all of the
assets and assumed substantially all of the deposits and other liabilities of Horizon, with four offices in
Florida, including Bradenton (2), Palmetto and Brandon. The Company closed the Brandon office on
December 23, 2010.

On December 17, 2010 the Company, through the Bank, entered into a purchase and assumption

agreement with loss share agreements with the FDIC pursuant to which it acquired substantially all of the
assets and assumed substantially all of the deposits and certain other liabilities of Chestatee with four
offices in Georgia, including Dawsonville (2), Cumming and Marble Hill.

On January 14, 2011 the Company, through the Bank, entered into a purchase and assumption agreement

with loss share agreements with the FDIC pursuant to which it acquired substantially all of the assets and
assumed substantially all of the deposits and certain other liabilities of Oglethorpe with two offices in
Georgia, including Brunswick and St. Simons Island.

On April 29, 2011 the Company, through the Bank, entered into a purchase and assumption agreement
with loss share agreements with the FDIC pursuant to which it acquired substantially all of the assets and
assumed substantially all of the deposits and certain other liabilities of First Choice with seven offices in
Georgia, including Dallas, Newnan (2), Senoia, Sharpsburg, Douglasville and Carrollton. On July 1, 2011,
the Company closed one of the offices in Newnan, Georgia, and on October 26, 2011, the Company closed
the office in Carrollton, Georgia.

On April 29, 2011 the Company, through the Bank, entered into a purchase and assumption agreement
with loss share agreements with the FDIC pursuant to which it acquired substantially all of the assets and
assumed substantially all of the deposits and certain other liabilities of Park Avenue with eleven offices
in Georgia, including Valdosta (3), Bainbridge (2), Cairo, Lake Park, Stockbridge, McDonough, Oakwood,
and Athens and one office in Ocala, Florida. On October 21, 2011, the Company closed the office in
Stockbridge, Georgia.

The Company plans to continue evaluating and bidding on failed bank opportunities and hopes to make

additional FDIC-assisted acquisitions.

In addition, the Company expects to continue its growth and de novo branching strategy, although it has
slowed the pace of new office openings in recent years and currently has a focus on additional FDIC-assisted
acquisitions. In the first and second quarters of 2011, the Company opened three offices in the metro-Dallas
area in Carrollton, Texas; Plano, Texas; and Keller, Texas. In January 2012, the Company opened a loan
production office in Austin, Texas. Additionally, the Company expects to open its ninth metro-Dallas office
in The Colony, Texas in the first quarter of 2012, open its second Mobile, Alabama office in the third quarter
of 2012, and relocate its existing Charlotte, North Carolina loan production office to a new full-service office
in the fourth quarter of 2012. The Company is also working on a potential relocation of its leased office in
Bluffton, South Carolina to a new facility it hopes to acquire.

Opening new offices is subject to availability of qualified personnel and suitable sites, designing,

constructing, equipping and staffing such offices, obtaining regulatory and other approvals and many other
conditions and contingencies that the Company cannot predict with certainty. The Company may increase or

47

decrease its expected number of new offices as a result of a variety of factors including the Company’s
financial results, changes in economic or competitive conditions, strategic opportunities or other factors.

During 2011 the Company spent $21 million on capital expenditures for premises and equipment, including
premises and equipment acquired in FDIC-assisted acquisitions. The Company’s capital expenditures for 2012
are expected to be in the range of $29 million to $45 million, including progress payments on construction
projects expected to be completed in 2012 or 2013, furniture and equipment costs, acquisition of sites for future
development and premises and equipment acquired in FDIC-assisted acquisitions. Actual expenditures may
vary significantly from those expected, depending on the number and cost of additional branch offices
acquired or constructed and sites acquired for future development, progress or delays encountered on ongoing
and new construction projects, delays in or inability to obtain required approvals, potential premises and
equipment expenditures associated with FDIC-assisted acquisitions, if any, and other factors.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in

the United States requires management to make estimates, assumptions and judgments that affect the
amounts reported in the consolidated financial statements. The Company’s determination of (i) the provisions
to and the adequacy of the allowance for loan and lease losses, (ii) the fair value of its investment securities
portfolio, (iii) the fair value of foreclosed assets not covered by FDIC loss share agreements and (iv) the fair
value of the assets acquired and liabilities assumed pursuant to business combination transactions, including
the Company’s FDIC-assisted acquisitions, all involve a higher degree of judgment and complexity than its
other significant accounting policies. Accordingly, the Company considers the determination of (i) provisions
to and the adequacy of the allowance for loan and lease losses, (ii) the fair value of its investment securities
portfolio, (iii) the fair value of foreclosed assets not covered by FDIC loss share agreements and (iv) the fair
value of the assets acquired and liabilities assumed pursuant to business combination transactions to be
critical accounting policies.

Provisions to and adequacy of the allowance for loan and lease losses. The ALLL is established through
a provision for such losses charged against income. All or portions of loans or leases, excluding purchased
loans and loans covered by FDIC loss share agreements, deemed to be uncollectible are charged against the
ALLL when management believes that collectibility of all or some portion of outstanding principal is unlikely.
Subsequent recoveries, if any, of loans or leases previously charged off are credited to the ALLL.

For purchased loans, including covered loans, management separately monitors this portfolio and
periodically reviews loans contained within this portfolio against the factors and assumptions used in
determining the Day 1 Fair Values. To the extent that a loan’s performance has deteriorated from
management’s expectation established in conjunction with the determination of the Day 1 Fair Values,
such loan is considered in the determination of the required level of allowance for loan and lease losses.
To the extent that a revised loss estimate exceeds the loss estimate established in the determination of the
Day 1 Fair Values, such deterioration will result in an allowance allocation or a charge-off.

The ALLL is maintained at a level management believes will be adequate to absorb probable incurred
losses in the loan and lease portfolio. Provision to and the adequacy of the ALLL are based on evaluations
of the loan and lease portfolio utilizing objective and subjective criteria. The objective criteria primarily
include an internal grading system and specific allowances. In addition to the objective criteria, the Company
subjectively assesses the adequacy of the allowance for loan and lease losses and the need for additions
thereto, with consideration given to the nature and mix of the portfolio, including concentrations of credit;
general economic and business conditions, including national, regional and local business and economic
conditions that may affect the borrowers’ or lessees’ ability to pay; expectations regarding the current
business cycle; trends that could affect collateral values and other relevant factors. Changes in any of these
criteria or the availability of new information could require adjustment of the ALLL in future periods. While
a specific allowance has been calculated for impaired loans and leases and for loans and leases where the
Company has otherwise determined a specific reserve is appropriate, no portion of the Company’s ALLL is
restricted to any individual loan or lease or group of loans or leases, and the entire ALLL is available to
absorb losses from any and all loans and leases. The Company also utilizes a peer group analysis and a
historical analysis to validate the overall adequacy of its ALLL.

The Company generally places a loan or lease on nonaccrual status when such loan or lease is (i) deemed

impaired or (ii) 90 days or more past due, or earlier when doubt exists as to the ultimate collection of
payments. The Company may continue to accrue interest on certain loans or leases contractually past due 90
days or more if such loans or leases are both well secured and in the process of collection. At the time a loan
or lease is placed on nonaccrual status, interest previously accrued but uncollected is generally reversed and
charged against interest income. Nonaccrual loans and leases are generally returned to accrual status when

48

payments are less than 90 days past due and the Company reasonably expects to collect all payments. If a
loan or lease is determined to be uncollectible, the portion of the principal determined to be uncollectible will
be charged against the allowance for loan and lease losses. Loans and leases for which the terms have been
modified and for which (i) the borrower or lessee is experiencing financial difficulties and (ii) a concession
has been granted to the borrower by the Company are considered TDRs and are included in impaired loans
and leases. Income on nonaccrual loans or leases, including impaired loans and leases but excluding certain
TDRs which continue to accrue interest, is recognized on a cash basis when and if actually collected.

All loans and leases deemed to be impaired are evaluated individually. The Company considers a loan or

lease, excluding purchased loans and loans covered by FDIC loss share agreements, to be impaired when,
based on current information and events, it is probable that the Company will be unable to collect all amounts
due according to the contractual terms thereof. The Company considers a purchased loan, including a covered
loan, to be impaired once a decrease in expected cash flows, subsequent to the determination of the Day 1
Fair Values, results in an allowance allocation, a partial or full charge-off or in a provision for loan and lease
losses. Most of the Company’s nonaccrual loans or leases, excluding purchased loans and loans covered by
FDIC loss share agreements, and all TDRs are considered impaired. The majority of the Company’s impaired
loans and leases are dependent upon collateral for repayment. For such loans and leases, impairment is
measured by comparing collateral value, net of holding and selling costs, to the current investment in the
loan or lease. For all other impaired loans and leases, the Company compares estimated discounted cash
flows to the current investment in the loan or lease. To the extent that the Company’s current investment in
a particular loan or lease exceeds its estimated net collateral value or its estimated discounted cash flows,
the impaired amount is specifically considered in the determination of the allowance for loan and lease
losses, or is charged off as a reduction of the allowance for loan and lease losses.

The Company also maintains an allowance for certain loans and leases, excluding purchased loans and
loans covered by FDIC loss share agreements, not considered impaired where (i) the customer is continuing
to make regular payments, although payments may be past due, (ii) there is a reasonable basis to believe the
customer may continue to make regular payments, although there is also an elevated risk that the customer
may default, and (iii) the collateral or other repayment sources are likely to be insufficient to recover the
current investment in the loan or lease if a default occurs. The Company evaluates such loans and leases to
determine if an allowance is needed for these loans and leases. For the purpose of calculating the amount of
such allowance, management assumes that (i) no further regular payments occur and (ii) all sums recovered
will come from liquidation of collateral and collection efforts from other payment sources. To the extent that
the Company’s current investment in a particular loan or lease evaluated for the need for such allowance
exceeds its net collateral value or its estimated discounted cash flows, such excess is considered allocated
allowance for purposes of the determination of the allowance for loan and lease losses.

The Company also includes further allowance allocation for risk-rated loans, including commercial real
estate loans, but excluding purchased loans and loans covered by FDIC loss share agreements, that are in
markets determined by management to be “stressed”. Stressed markets may include any specific geography
experiencing (i) high unemployment substantially above the U.S. average, (ii) significant over-development
in one or more commercial real estate categories, (iii) recent or announced loss of a major employer or
significant workforce reductions, (iv) significant declines in real estate values and (v) various other factors.
The additional allowance for such stressed markets compensates for the expectation that a higher risk of
loss is anticipated for the “work-out” or liquidation of a real estate loan in a stressed market versus a market
that is not experiencing any significant levels of stress. The required allocation percentage applicable to real
estate loans in stressed markets may be applied to the total market or it may be determined at the individual
loan level based on collateral value, loan-to-value ratios, strength of the borrower and/or guarantor, viability
of the underlying project and other factors.

Prior to December 31, 2011, the Company utilized the sum of all allowance amounts derived as described
above, combined with a reasonable unallocated allowance, as the primary indicator of the appropriate level
of allowance for loan and lease losses. During the fourth quarter of 2011, the Company refined its allowance
calculation whereby it “allocated” the portion of the allowance that was previously deemed to be unallocated
allowance. This refined allowance calculation includes specific allowance allocations at December 31, 2011
for qualitative factors including (i) concentrations of credit, (ii) general economic and business conditions,
(iii) trends that could affect collateral values and (iv) expectations regarding the current business cycle.
The Company may also consider other qualitative factors in future periods for additional allowance
allocations, including, among other factors, (1) credit quality trends (including trends in nonperforming
loans and leases expected to result from existing conditions), (2) seasoning of the loan and lease portfolio,
(3) specific industry conditions affecting portfolio segments, (4) the Company’s expansion into new markets
and (5) the offering of new loan and lease products.

49

Changes in the criteria used in this evaluation or the availability of new information could cause the
allowance to be increased or decreased in future periods. In addition bank regulatory agencies, as part of
their examination process, may require adjustments to the allowance for loan and lease losses based on
their judgments and estimates.

Fair value of the investment securities portfolio.The Company has classified all of its investment securities
as AFS. Accordingly, its investment securities are stated at estimated fair value in the consolidated financial
statements with unrealized gains and losses, net of related income taxes, reported as a separate component of
stockholders’ equity and any related changes are included in accumulated other comprehensive income (loss).
The Company utilizes independent third parties as its principal sources for determining fair value of its
investment securities that are measured on a recurring basis. For investment securities traded in an active
market, the fair values are based on quoted market prices if available. If quoted market prices are not
available, fair values are based on market prices for comparable securities, broker quotes or comprehensive
interest rate tables, pricing matrices or a combination thereof. For investment securities traded in a market
that is not active, fair value is determined using unobservable inputs.

The fair values of the Company’s investment securities traded in both active and inactive markets can be
volatile and may be influenced by a number of factors including market interest rates, prepayment speeds,
discount rates, credit quality of the issuer, general market conditions including market liquidity conditions
and other factors. Factors and conditions are constantly changing and fair values could be subject to material
variations that may significantly impact the Company’s financial condition, results of operations and liquidity.
Fair value of foreclosed assets not covered by FDIC loss share agreements. Repossessed personal properties

and real estate acquired through or in lieu of foreclosure are initially recorded at the lesser of current
principal investment or fair value less estimated cost to sell at the date of repossession or foreclosure.
Valuations of these assets are periodically reviewed by management with the carrying value of such assets
adjusted through non-interest expense to the then estimated fair value net of estimated selling costs, if lower,
until disposition. Fair values of these assets are generally based on third party appraisals, broker price
opinions or other valuations of the property.

Fair value of assets acquired and liabilities assumed pursuant to business combination transactions.
Assets acquired and liabilities assumed in business combinations are recorded at estimated fair value on
their purchase date. Purchased loans acquired in a business combination, including loans covered by FDIC
loss share agreements, are accounted for in accordance with the provisions of GAAP applicable to loans
acquired with deteriorated credit quality and pursuant to the AICPA’s December 18, 2009 letter in which the
AICPA summarized the SEC’s view regarding the accounting in subsequent periods for discount accretion
associated with non-credit impaired loans acquired in a business combination or asset purchase. Considering,
among other factors, the general lack of adequate underwriting, proper documentation, appropriate loan
structure and insufficient equity contributions for a large number of these acquired loans, and the uncertainty
of the borrowers’ and/or guarantors’ ability or willingness to make contractually required (or any) principal
and interest payments, management has determined that a significant portion of the purchased loans
acquired in FDIC-assisted acquisitions had evidence of credit deterioration since origination. Accordingly,
management has elected to apply the provisions of GAAP applicable to loans acquired with deteriorated
credit quality as provided by the AICPA’s December 18, 2009 letter, to all purchased loans acquired in its
FDIC-assisted acquisitions.

At the time such purchased loans are acquired, management individually evaluates substantially all

loans acquired in the transaction. This evaluation allows management to determine the estimated fair value
of the purchased loans (not considering any FDIC loss sharing agreements) and includes no carryover of any
previously recorded allowance for loan and lease losses. In determining the estimated fair value of purchased
loans, management considers a number of factors including, among other things, the remaining life of the
acquired loans, estimated prepayments, estimated loss ratios, estimated value of the underlying collateral,
estimated holding periods, and net present value of cash flows expected to be received. To the extent that any
purchased loan acquired in a FDIC-assisted acquisition is not specifically reviewed, management applies a
loss estimate to that loan based on the average expected loss rates for the purchased loans that were
individually reviewed in that purchased loan portfolio.

As provided for under GAAP, management has up to 12 months following the date of the acquisition to
finalize the fair values of acquired assets and assumed liabilities. Once management has finalized the fair
values of acquired assets and assumed liabilities within this 12-month period, management considers such
values to be the Day 1 Fair Values.

In determining the Day 1 Fair Values of purchased loans, including covered loans, management calculates

a non-accretable difference (the credit component of the purchased loans) and an accretable difference

50

(the yield component of the purchased loans). The non-accretable difference is the difference between the
contractually required payments and the cash flows expected to be collected in accordance with management’s
determination of the Day 1 Fair Values. Subsequent decreases to the expected cash flows will generally
result in a provision for loan and lease losses. Subsequent increases in cash flows will result in a reversal
of the provision for loan and lease losses to the extent of prior charges and then an adjustment to accretable
yield, which would have a positive impact on interest income. Any such increase or decrease in expected
cash flows will result in a corresponding decrease or increase, respectively, of the FDIC loss share receivable
for the portion of such reduced or additional loss expected to be collected from the FDIC.

The accretable difference on purchased loans, including covered loans, is the difference between the
expected cash flows and the net present value of expected cash flows. Such difference is accreted into
earnings using the effective yield method over the term of the loans. In determining the net present value
of the expected cash flows, the Company used discount rates ranging from 6.0% to 9.5% per annum
depending on the risk characteristics of each individual loan. At December 31, 2011 the weighted average
period during which management expects to receive the estimated cash flows for its covered loan portfolio
(not considering any payment under the FDIC loss share agreements) is 2.4 years.

Management separately monitors the purchased loan portfolio and periodically reviews loans contained
within this portfolio against the factors and assumptions used in determining the Day 1 Fair Values. A loan
is typically reviewed (i) when it is modified or extended, (ii) when material information becomes available
to the Company that provides additional insight regarding the loan’s performance, the status of the
borrower, or the quality or value of the underlying collateral, or (iii) in conjunction with the annual review
of projected cash flows which include a substantial portion of each acquired loan portfolio. To the extent
that a loan is performing in accordance with management’s expectation established in conjunction with the
determination of the Day 1 Fair Values, such loan is not included in any of the Company’s credit quality
ratios, is not considered to be an impaired loan, is not risk rated in a similar manner as are the Company’s
non-purchased loans and is not considered in the determination of the required allowance for loan and lease
losses. To the extent that a loan’s performance has deteriorated from management’s expectation established
in conjunction with the determination of the Day 1 Fair Values, such loan is generally included in certain
of the Company’s credit quality metrics, may be considered an impaired loan, and is considered in the
determination of the required level of allowance for loan and lease losses.

Foreclosed assets covered by FDIC loss share agreements, or covered foreclosed assets, are recorded at
Day 1 Fair Values. In estimating the fair value of covered foreclosed assets, management considers a number
of factors including, among others, appraised value, estimated selling prices, estimated selling costs,
estimated holding periods and net present value of cash flows expected to be received. Discount rates ranging
from 8.0% to 9.5% per annum were used to determine the net present value of covered foreclosed assets.
In connection with the Company’s FDIC-assisted acquisitions, the Company has recorded an FDIC loss

share receivable to reflect the indemnification provided by the FDIC. Currently, the expected losses on
covered assets for each of the Company’s loss share agreements would result in expected recovery of
approximately 80% of incurred losses. Since the indemnified items are covered loans and covered foreclosed
assets, which are measured at Day 1 Fair Values, the FDIC loss share receivable is also measured and
recorded at Day 1 Fair Values, and is calculated by discounting the cash flows expected to be received from
the FDIC. A discount rate of 5.0% per annum was used to determine the net present value of the FDIC loss
share receivable. These cash flows are estimated by multiplying estimated losses by the reimbursement
rates as set forth in the loss share agreements. The balance of the FDIC loss share receivable is adjusted
periodically to reflect changes in expectations of discounted cash flows, expense reimbursements under
the loss share agreements and other factors.

Pursuant to the clawback provisions of the loss share agreements for the Company’s FDIC-assisted

acquisitions, the Company may be required to reimburse the FDIC should actual losses be less than certain
thresholds established in each loss share agreement. The amount of the clawback provision for each
acquisition is measured and recorded at Day 1 Fair Values. It is calculated as the difference between
management’s estimated losses on covered loans and covered foreclosed assets and the loss threshold
contained in each loss share agreement, multiplied by the applicable clawback provisions contained in each
loss share agreement. This clawback amount, which is payable to the FDIC upon termination of the applicable
loss share agreement, is then discounted back to net present value using a discount rate of 5.0% per annum.
To the extent that actual losses on covered loans and covered foreclosed assets are less than estimated losses,
the applicable clawback payable to the FDIC upon termination of the loss share agreements will increase. To
the extent that actual losses on covered loans and covered foreclosed assets are more than estimated losses,
the applicable clawback payable to the FDIC upon termination of the loss share agreements will decrease.

51

The Day 1 Fair Values of investment securities acquired in business combinations are generally based

on quoted market prices, broker quotes, comprehensive interest rate tables or pricing matrices, or a
combination thereof. The Day 1 Fair Values of assumed liabilities in business combinations is generally
the amount payable by the Company necessary to completely satisfy the assumed obligations.

Recently Issued Accounting Standards
See Note 1 to the Consolidated Financial Statements for a discussion of certain recently issued accounting

pronouncements.

Forward-Looking Information

This Management’s Discussion and Analysis of Financial Condition and Results of Operations, other
filings made by the Company with the Securities and Exchange Commission and other oral and written
statements or reports by the Company and its management include certain forward-looking statements
including, without limitation, statements about economic, real estate market, competitive, employment,
credit market and interest rate conditions; plans, goals, beliefs, expectations, thoughts, estimates and
outlook for the future; revenue growth; net income and earnings per common share; net interest margin;
net interest income; non-interest income, including service charges on deposit accounts, mortgage lending
and trust income, gains (losses) on investment securities and sales of other assets; gains on FDIC-assisted
acquisitions; income from accretion of the FDIC loss share receivable, net of amortization of the FDIC
clawback payable; other loss share income; non-interest expense; efficiency ratio; anticipated future
operating results and financial performance; asset quality and asset quality ratios, including the effects of
current economic and real estate market conditions; nonperforming loans and leases; nonperforming assets;
net charge-offs; net charge-off ratio; provision and allowance for loan and lease losses; past due loans and
leases; current or future litigation; interest rate sensitivity, including the effects of possible interest rate
changes; future growth and expansion opportunities including plans for making additional FDIC-assisted
acquisitions and plans for opening new offices or closing offices; opportunities and goals for future market
share growth; expected capital expenditures; loan, lease and deposit growth; changes in covered assets;
changes in the volume, yield and value of the Company’s investment securities portfolio; availability of
unused borrowings and other similar forecasts and statements of expectation. Words such as “anticipate,”
“believe,” “estimate,” “expect,” “intend,” “plan,” “look,” “seek,” “may,” “will,” “could,” “trend,” “target,”
“goal,” “hope,” and similar expressions, as they relate to the Company or its management, identify forward-
looking statements. Forward-looking statements made by the Company and its management are based on
estimates, projections, beliefs, plans and assumptions of management at the time of such statements and
are not guarantees of future performance. The Company disclaims any obligation to update or revise any
forward-looking statement based on the occurrence of future events, the receipt of new information
or otherwise.

Actual future performance, outcomes and results may differ materially from those expressed in forward-

looking statements made by the Company and its management due to certain risks, uncertainties and
assumptions. Certain factors that may affect operating results of the Company include, but are not limited
to, potential delays or other problems in implementing the Company’s growth and expansion strategy
including delays in identifying satisfactory sites, hiring or retaining qualified personnel, obtaining
regulatory or other approvals, obtaining permits and designing, constructing and opening new offices; the
ability to enter into additional FDIC-assisted acquisitions or problems with integrating or managing such
acquisitions; opportunities to profitably deploy capital; the ability to attract new or retain existing deposits,
loans and leases; the ability to generate future revenue growth or to control future growth in non-interest
expense; interest rate fluctuations, including changes in the yield curve between short-term and long-term
interest rates; competitive factors and pricing pressures, including their effect on the Company’s net interest
margin; general economic, unemployment, credit market and real estate market conditions, including their
effect on the creditworthiness of borrowers and lessees, collateral values, the value of investment securities
and asset recovery values, including the value of the FDIC loss share receivable and related assets covered
by FDIC loss share agreements; changes in legal and regulatory requirements; recently enacted and
potential legislation and regulatory actions, including legislation and regulatory actions intended to
stabilize economic conditions and credit markets, increase regulation of the financial services industry and
protect homeowners or consumers; changes in U.S. government monetary and fiscal policy; possible further
downgrade of U.S. Treasury securities; adoption of new accounting standards or changes in existing
standards; and adverse results in current or future litigation as well as other factors described in this and
other Company reports and statements. Should one or more of the foregoing risks materialize, or should
underlying assumptions prove incorrect, actual results or outcomes may vary materially from those
described in the forward-looking statements.

52

Summary of Quarterly Results of
Operations, Market Prices of Common Stock and Dividends
Unaudited

        2011 - Three Months Ended

Mar. 31

June 30

Sept. 30

Dec. 31

(Dollars in thousands, except per share amounts)

Interest income .................................................... $44,023
(7,940)
Interest expense ..................................................
36,083
Net interest income ......................................
(2,250)
Provision for loan and lease losses .....................
12,990
Non-interest income ............................................
(26,192)
Non-interest expense ..........................................
(6,004)
Income taxes .......................................................
3
Noncontrolling interest ........................................
       Net income available to
          common stockholders ............................... $14,630

$50,874
(8,398)
42,476
(3,750)
75,058
(35,200)
(28,380)
13

$51,902
(7,566)
44,336
(1,500)
16,071
(31,800)
(8,220)
17

$52,370
(6,531)
45,839
(4,275)
12,964
(29,339)
(7,604)
(15)

$50,217

$18,904

$17,570

Per common share:

Earnings - diluted ........................................ $    0.43
Cash dividends .............................................

0.085

$    1.46

$    0.55

$    0.51

0.090

0.095

0.100

Bid price per common share:

Low .............................................................. $  20.96
22.23
High .............................................................

$  22.04
26.03

$  19.89
26.88

$  20.64
30.80

         2010 - Three Months Ended

Mar. 31

June 30

Sept. 30

Dec. 31

(Dollars in thousands, except per share amounts)

Interest income .................................................... $36,213
(9,020)
Interest expense ..................................................
27,193
Net interest income ......................................
(4,200)
Provision for loan and lease losses .....................
17,365
Non-interest income ............................................
(17,471)
Non-interest expense ..........................................
(6,944)
Income taxes .......................................................
Noncontrolling interest ........................................
11
       Net income available to
          common stockholders ............................... $15,954

$38,580
(8,851)
29,729
(3,400)
9,127
(21,110)
(3,488)
32

$41,092
(8,324)
32,768
(4,300)
25,183
(23,565)
(9,878)
17

$42,087
(8,142)
33,945
(4,100)
18,646
(25,274)
(6,303)
17

$10,890

$20,225

$16,931

Per common share:

Earnings - diluted ........................................ $    0.47
Cash dividends .............................................

0.070

$    0.32

$    0.59

$    0.49

0.075

0.075

0.080

Bid price per common share:

Low .............................................................. $  14.33
17.77
High .............................................................

$  16.82
19.73

$  17.20
19.64

$  18.51
22.25

See Note 18 to Consolidated Financial Statements for discussion of dividend restrictions.

53

Company Performance
The graph below shows a comparison for the period commencing December 31, 2006 through December
31, 2011 of the cumulative total stockholder returns (assuming reinvestment of dividends) for the common
stock of the Company, the S&P Smallcap Index and the NASDAQ Financial Index, assuming a $100
investment on December 31, 2006.

Cumulative Return Comparison

$200

$175

$150

$125

$100

$  75

$  50

12/31/2006

12/31/2007

12/31/2008

12/31/2009

12/31/2010

12/31/2011

OZRK (Bank of the Ozarks, Inc.)

SML (S&P Smallcap Index)

NDF (NASDAQ Financial Index)

12/31/2006 12/31/2007 12/31/2008 12/31/2009 12/31/2010 12/31/2011

OZRK (Bank of the Ozarks, Inc.)

SML (S&P Smallcap Index)

NDF (NASDAQ Financial Index)

$100

$100

$100

$  81

$100

$  93

$  93

$  69

$  66

$  93

$  86

$  68

$140

$109

$  78

$194

$110

$  70

54

Report of Management on the Company’s
Internal Control Over Financial Reporting

February 29, 2012

Management of Bank of the Ozarks, Inc. is responsible for establishing and maintaining
adequate internal control over financial reporting. Internal control over financial reporting
is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance
with accounting principles generally accepted in the United States. Internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of assets; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with accounting
principles generally accepted in the United States, and that receipts and expenditures are
made only in accordance with authorizations of management and directors; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the objectives of
the control system are met. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues and instances
of fraud, if any, have been detected. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies and procedures
may deteriorate.

Management of Bank of the Ozarks, Inc., including the Chief Executive Officer and the
Chief Financial Officer and Chief Accounting Officer, has assessed the Company’s internal
control over financial reporting as of December 31, 2011, based on criteria for effective
internal control over financial reporting described in “Internal Control – Integrated Framework”
issued by the Committee of Sponsoring Organizations of the Treadway Commission. As
permitted by SEC guidance, management excluded from its assessment the operations of the
three FDIC-assisted acquisitions made during 2011, which are described in Note 2 to the
Consolidated Financial Statements. The assets acquired in these acquisitions consist primarily
of “covered assets” which comprised approximately 17% of total consolidated assets at
December 31, 2011. Based on this assessment, management has concluded that the
Company’s internal control over financial reporting was effective as of December 31, 2011,
based on the specified criteria.

The effectiveness of Bank of the Ozarks, Inc.’s internal control over financial reporting
has been audited by Crowe Horwath LLP, an independent registered public accounting firm,
as stated in their report which is included herein.

George Gleason
Chairman and Chief Executive Officer

Greg McKinney
Chief Financial Officer and Chief Accounting Officer

55

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Bank of the Ozarks, Inc.

We have audited Bank of the Ozarks, Inc.’s internal control over financial reporting as of

December 31, 2011, based on criteria established in Internal Control-Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria).
Bank of the Ozarks, Inc.’s management is responsible for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Report of Management on the Company’s Internal Control
Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles. A company’s
internal control over financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or

detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.

As permitted, the Company excluded the operations of the three financial institutions acquired
during 2011, which are described in Note 2 of the consolidated financial statements, from the scope
of management’s report on internal control over financial reporting. As such they have also been
excluded from the scope of our audit of internal control over financial reporting.

In our opinion, Bank of the Ozarks, Inc. maintained, in all material respects, effective internal

control over financial reporting as of December 31, 2011, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheet of Bank of the Ozarks, Inc. as of
December 31, 2011 and 2010 and the related consolidated statements of income, stockholders’ equity
and cash flows for each of the three years in the period ended December 31, 2011, and our report
dated February 29, 2012, expressed an unqualified opinion thereon.

Atlanta, Georgia
February 29, 2012

56

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Bank of the Ozarks, Inc.

We have audited the accompanying consolidated balance sheets of Bank
of the Ozarks, Inc. (the “Company”) as of December 31, 2011 and 2010 and
the related consolidated statements of income, stockholders’ equity, and cash
flows for each of the three years in the period ended December 31, 2011. These
financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with the standards of the Public

Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Bank of the
Ozarks, Inc. at December 31, 2011 and 2010 and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
2011, in conformity with accounting principles generally accepted in the
United States.

We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), Bank of the Ozarks,
Inc.’s internal control over financial reporting as of December 31, 2011, based
on criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our
report dated February 29, 2012, expressed an unqualified opinion thereon.

Atlanta, Georgia
February 29, 2012

57

Bank of the Ozarks, Inc.
CONSOLIDATED BALANCE SHEETS

ASSETS

Cash and due from banks
Interest earning deposits
   Cash and cash equivalents
Investment securities - available for sale (“AFS”)
Loans and leases not covered by Federal Deposit Insurance Corporation
    (“FDIC”) loss share agreements
Loans covered by FDIC loss share agreements
Allowance for loan and lease losses
   Net loans and leases
FDIC loss share receivable
Premises and equipment, net
Foreclosed assets not covered by FDIC loss share agreements
Foreclosed assets covered by FDIC loss share agreements
Accrued interest receivable
Bank owned life insurance (“BOLI”)
Intangible assets, net
Other, net
      Total assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

Deposits:
   Demand non-interest bearing
   Savings and interest bearing transaction
   Time
      Total deposits
Repurchase agreements with customers
Other borrowings
Subordinated debentures
FDIC clawback payable
Accrued interest payable and other liabilities
      Total liabilities

Commitments and contingencies

Stockholders’ equity:
   Preferred stock; $0.01 par value; 1,000,000 shares authorized:
     no shares outstanding at December 31, 2011 and 2010
   Common stock; $0.01 par value; 50,000,000 shares authorized;
     34,463,880 and 34,107,280 shares issued and outstanding at
     December 31, 2011 and 2010, respectively
   Additional paid-in capital
   Retained earnings
   Accumulated other comprehensive income (loss)
      Total stockholders’ equity before noncontrolling interest
   Noncontrolling interest
      Total stockholders’ equity
          Total liabilities and stockholders’ equity

See accompanying notes to the consolidated financial statements.

58

 December 31,

2011

 2010

(Dollars in thousands, except per share amounts)

$     58,247
 680
58,927
438,910

1,885,282
806,924
(39,169)
2,653,037
278,263
186,533
31,762
72,907
12,868
62,078
   12,207
32,495
$3,839,987

$   447,214
1,578,449
 918,256
2,943,919
32,810
301,847
64,950
24,606
43,882
 3,412,014

$     48,024
1,005
49,029
398,698

1,856,429
489,468
(40,230)
2,305,667
158,137
170,497
42,216
31,145
13,899
59,771
7,925
36,287
$3,273,271

$   298,585
1,299,058
943,110
2,540,753
43,324
282,139
64,950
6,904
11,431
2,949,501

-

-

345
51,145
363,734
    9,327
 424,551
3,422
 427,973
$3,839,987

341
45,107
275,074
(167)
320,355
3,415
323,770
$3,273,271

Bank of the Ozarks, Inc.
CONSOLIDATED STATEMENTS OF INCOME

Interest income:
   Loans and leases
   Covered loans
   Investment securities:
     Taxable
     Tax-exempt
   Deposits with banks and federal funds sold
        Total interest income

Interest expense:
   Deposits
   Repurchase agreements with customers
   Other borrowings
   Subordinated debentures
        Total interest expense

Net interest income
Provision for loan and lease losses
Net interest income after provision
    for loan and lease losses

Non-interest income:
   Service charges on deposit accounts
   Mortgage lending income
   Trust income
   BOLI income
   Accretion of FDIC loss share receivable, net of
      amortization of FDIC clawback payable
   Other loss share income, net
   Gains on investment securities
   Gains (losses) on sales of other assets
   Gains on FDIC-assisted acquisitions
   Other
        Total non-interest income

Non-interest expense:
   Salaries and employee benefits
   Net occupancy and equipment
   Other operating expenses
        Total non-interest expense

Income before taxes
Provision for income taxes
Net income
Net loss attributable to noncontrolling interest
Preferred stock dividends and amortization of
   preferred stock discount
Net income available to common stockholders

 2011

 Year Ended December 31,
2010
(Dollars in thousands, except per share amounts)

2009

$113,283
66,135

3,013
16,702
36
199,169

17,686
174
     10,835
1,740
 30,435

168,734
11,775

$118,150
17,141

$125,301
-

4,130
18,533
18
157,972

20,047
380
12,146
1,764
34,337

123,635
 16,000

18,314
22,283
10
165,908

30,480
592
14,375
2,138
47,585

118,323
 44,800

 156,959

107,635

73,523

18,094
3,277
3,206
2,307

10,141
6,432
933
3,738
65,708
  3,247
  117,083

56,262
14,705
 51,564
  122,531

151,511
50,208
  101,303
  18

-
$101,321

15,156
3,863
3,406
2,151

2,429
599
4,544
802
35,019
2,353
70,322

40,161
10,618
36,640
87,419

90,538
26,614
    63,924
    77

  -
  $  64,001

$      1.89

$      1.88

12,421
3,312
3,078
3,186

-
-
26,982
(177)
-
2,249
51,051

31,847
9,740
27,045
68,632

55,942
12,859
    43,083
    19

  (6,276)
  $  36,826

$      1.09

$      1.09

Basic earnings per common share

Diluted earnings per common share

       $      2.96

       $      2.94

See accompanying notes to the consolidated financial statements.

59

Bank of the Ozarks, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

 Preferred

 Additional

  Stock- Common   Paid-In
  Capital
 Series A Stock

Accumulated
Other
Retained Comprehensive Controlling
Earnings Income (Loss)

Interest

Non-

 Total

(Dollars in thousands, except per share amounts)

$71,880

$338

$43,145 $193,195

$15,624

$ 3,421 $327,603

      preferred stock

(72,343)

Balances - January 1, 2009
Comprehensive income:

    Net income
    Net loss attributable to
      noncontrolling interest
    Other comprehensive income (loss):
      Unrealized gains/losses on
         investment securities AFS,
         net of $4,393 tax effect
      Reclassification of gains/losses
         included in net income,
         net of $10,584 tax effect
Total comprehensive income
Common stock dividends paid

      $0.26 per share

Preferred stock dividends
Amortization of preferred stock discount
Redemption of 75,000 shares of

Repurchase of a warrant for 759,622

      shares of common stock

Issuance of 43,600 shares of common

      stock for exercise of stock options

Tax (expense) benefit on exercise and

      forfeiture of stock options

Stock-based compensation expense
Investment in noncontrolling interest
Issuance of 37,200 shares of unvested

      common stock under restricted
      stock plan
Balances - December 31, 2009

Comprehensive income:

    Net income
    Net loss attributable to
      noncontrolling interest
    Other comprehensive income (loss):
      Unrealized gains/losses on
         investment securities AFS,
         net of $2,218 tax effect
      Reclassification of gains/losses
         included in net income,
          net of $1,782 tax effect

Total comprehensive income
Common stock dividends paid,

      $0.30 per share

Issuance of 227,600 shares of common

      stock for exercise of stock options
Tax (expense) benefit on exercise
      and forfeiture of stock options

Stock-based compensation expense
Investment in noncontrolling interest
Issuance of 74,600 shares of

      unvested common stock under
      restricted stock plan

Forfeiture of 4,000 shares of

      unvested common stock under
      restricted stock plan
Balances - December 31, 2010

-

-

-

-

-
-
463

-

-

-
-
-

-

-

-

-

-
-
-

-

-

-

-
-
-

-

-

-

-

-
-
-

-

(2,650)

258

(50)
712
-

43,083

19

-

-

-

43,083

(19)

-

-

-

6,806

(16,398)

(8,778)
(3,156)
(463)

(2,657)

-

-

-
-
-

-
-
-

-

-

-

-
-
-

-

-

-
-
-

-

-

-

-
-
40

6,806

(16,398)
33,491

(8,778)
(3,156)

-

(75,000)

(2,650)

258

(50)
712
40

-
         -

-
338

-
41,415

-
221,243

-
  6,032

-
 3,442

-
272,470

-

-

-

-

-

-

-
-
-

-

-

-

-

-

-

2

-
-
-

1

-

-

-

-

-

2,823

37
833
-

(1)

63,924

77

-

-

-

63,924

(77)

-

-

-

(3,437)

(2,762)

(10,170)

-

-
-
-

-

-

-

-
-
-

-

-

-

-

-

-
-
50

-

(3,437)

(2,762)
57,725

(10,170)

2,825

37
833
50

-

-
          -

-
 341

-
 45,107

-
 275,074

-
     (167)

-

-
  3,415  323,770

60

Bank of the Ozarks, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)

 Preferred

 Additional

  Stock- Common   Paid-In
  Capital
 Series A Stock

Accumulated
Other
Retained Comprehensive Controlling
Earnings Income (Loss)

Interest

Non-

Total

Balances - December 31, 2010

$         -

$341

$45,107 $275,074

$    (167)

$3,415 $323,770

(Dollars in thousands, except per share amounts)

Comprehensive income:

     Net income
     Net loss attributable to
       noncontrolling interest
     Other comprehensive income (loss):
       Unrealized gains/losses on
          investment securities AFS,
          net of $6,494 tax effect
       Reclassification of gains/losses
          included in net income,
           net of $366 tax effect

Total comprehensive income
Common stock dividends paid,

     $0.37 per share

Issuance of 262,500 shares of common

     stock for exercise of stock options
Tax (expense) benefit on exercise

     and forfeiture of stock options

Stock-based compensation expense
Investment in noncontrolling interest
Issuance of 95,700 shares of
     unvested common stock under
     restricted stock plan

Forfeiture of 1,600 shares of
     unvested common stock under
     restricted stock plan
Balances - December 31, 2011

-

-

-

-

-

-

-
-
-

-

-

-

-

-

-

3

-
-
-

1

-

-

-

-

-

101,303

18

-

-

(12,661)

4,029

482
1,528
-

(1)

-

-
-
-

-

-

-

-

101,303

(18)

-

10,061

(567)

-

-

-
-
-

-

-

-

-

-

-
-
25

-

10,061

(567)
110,797

(12,661)

4,032

482
1,528
25

-

-
$         -

-
$345

-

-
$51,145 $363,734

-
$  9,327

-

-
$3,422 $427,973

See accompanying notes to the consolidated financial statements.

61

Bank of the Ozarks, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS

Cash flows from operating activities:

Net income
Adjustments to reconcile net income to net cash

     provided by operating activities:

Depreciation
Amortization
Net loss attributable to noncontrolling interest
Provision for loan and lease losses
Provision for losses on foreclosed assets
Writedown of other assets
Net amortization (accretion) of investment securities AFS
Net gains on investment securities AFS
Originations and purchases of mortgage loans held for sale
Proceeds from sales of mortgage loans held for sale
Accretion of covered loans
Accretion of FDIC loss share receivable, net of amortization of

          FDIC clawback payable

(Gains) losses on sales of other assets
Gains on FDIC-assisted transactions
Deferred income tax expense (benefit)
Increase in cash surrender value of BOLI
Current tax benefit on exercise of stock options
Stock-based compensation expense
BOLI death benefits in excess of cash surrender value
Changes in assets and liabilities:
 Accrued interest receivable
 Other assets, net
 Accrued interest payable and other liabilities

Net cash provided by operating activities

Cash flows from investing activities:

Proceeds from sales of investment securities AFS
Proceeds from maturities/calls/paydowns of investment securities AFS
Purchases of investment securities AFS
Net (fundings) paydowns of non-covered loans and leases
Net decrease in covered loans
Payments received from FDIC under loss share agreements
Net cash proceeds received in FDIC-assisted acquisitions
Purchases of premises and equipment
Proceeds from sales of other assets
Proceeds from BOLI death benefits
Purchase of BOLI
Net investment in unconsolidated investments

     and noncontrolling interest
Net cash provided by investing activities

Cash flows from financing activities:

Net decrease in deposits
Net repayments of other borrowings
Net decrease in repurchase agreements with customers
Proceeds from exercise of stock options
Redemption of preferred stock
Repurchase of common stock warrant
Current tax benefit on exercise of stock options
Cash dividends paid on common stock
Cash dividends paid on preferred stock

Net cash used by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents - beginning of year
Cash and cash equivalents - end of year

See accompanying notes to the consolidated financial statements.

62

 2011

Year Ended December 31,
 2010
(Dollars in thousands)

  2009

$ 101,303

$   63,924

$   43,083

5,358
1,677
18
11,775
9,525
1,250
426
(933)
(154,168)
150,562
(66,135)

(10,141)
(3,738)
(65,708)
11,866
(2,307)
(870)

1,528
-

1,551
13,637
14,844
  21,320

94,676
31,052
(13,453)
(27,216)
213,910
109,001
365,394
(21,138)
41,847
-
-

4,471
431
77
16,000
8,960
-

(585)
(4,544)
(188,120)
180,371
(17,141)

(2,429)
(802)
(35,019)
8,195
(2,151)
(535)
833
-

1,430
6,519
1,015
40,900

255,232
59,887
(121,086)
38,195
46,438
20,110
201,473
(16,881)
23,507
-

(10,200)

(1,795)

 792,278

(4,575)

492,100

(711,568)
 (73,111)
(11,262)
4,032
 -
-
870
(12,661)

-
(803,700)
9,898
49,029
$   58,927

(440,624)
(113,948)
(883)
2,825
-
-
535
(10,170)

-
(562,265)
(29,265)
78,294
$   49,029

4,172
110
19
44,800
4,009
1,639
(4,466)
(26,982)
(185,075)
184,195
-

-
177
-
(1,706)
(1,932)
(111)
712
(1,254)

4,117
(12,598)
(4,946)
47,963

528,542
246,888
(321,925)
12,293
-
-
-
(9,199)
17,438
2,149
-

(15)
476,171

(312,420)
(82,394)
(2,595)
258
(75,000)
(2,650)
111
(8,778)
(3,354)
(486,822)
37,312
40,982
$   78,294

Bank of the Ozarks, Inc.
Notes to Consolidated Financial Statements
December 31, 2011, 2010 and 2009

1. Summary of Significant Accounting Policies

Organization - Bank of the Ozarks, Inc. (the “Company”) is a bank holding company headquartered in

Little Rock, Arkansas, which operates under the rules and regulations of the Board of Governors of the
Federal Reserve System. The Company owns a wholly-owned state chartered bank subsidiary - Bank of the
Ozarks (the “Bank”), four 100%-owned finance subsidiary business trusts - Ozark Capital Statutory Trust II
(“Ozark II”), Ozark Capital Statutory Trust III (“Ozark III”), Ozark Capital Statutory Trust IV (“Ozark IV”) and
Ozark Capital Statutory Trust V (“Ozark V”) (collectively, the “Trusts”) and, indirectly through the Bank, a
subsidiary engaged in the development of real estate, a subsidiary that owns a private aircraft and various
other entities that hold foreclosed assets or tax credits or engage in other activities. The Bank is subject to
the regulation of certain federal and state agencies and undergoes periodic examinations by those regulatory
authorities. At December 31, 2011, the Company had 111 offices, including 66 in Arkansas, 27 in Georgia,
ten in Texas, four in Florida, two in North Carolina and one each in South Carolina and Alabama.

Basis of presentation, use of estimates and principles of consolidation - The preparation of financial

statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires
management to make estimates, assumptions and judgments that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

The consolidated financial statements include the accounts of the Company, the Bank, the real estate
subsidiary and the aircraft subsidiary. In addition, subsidiaries in which the Company has majority voting
interest (principally defined as owning a voting or economic interest greater than 50%) or where the Company
exercises control over the operating and financial policies of the subsidiary through an operating agreement
or other means are consolidated. Investments in companies in which the Company has significant influence
over voting and financing decisions (principally defined as owning a voting or economic interest of 20% to
50%) and investments in limited partnerships and limited liability companies where the Company does not
exercise control over the operating and financial policies are generally accounted for by the equity method of
accounting. Investments in limited partnerships and limited liability companies in which the Company’s
interest is so minor such that it has virtually no influence over operating and financial policies (typically less
than 20%) are generally accounted for by the cost method of accounting. Significant intercompany
transactions and amounts have been eliminated in consolidation.

The voting interest approach is not applicable for entities that are not controlled through voting interests
or in which the equity investors do not bear the residual economic risk. In such instances, management makes
a determination, based on its review of applicable GAAP, on when the assets, liabilities and activities of a
variable interest entity (“VIE”) should be included in the Company’s consolidated financial statements. GAAP
requires a VIE to be consolidated by a company if that company is considered the primary beneficiary of the
VIE’s activities. The Company has determined that the 100%-owned finance subsidiary Trusts are VIEs, but
that the Company is not the primary beneficiary of the Trusts. Accordingly, the Company does not consolidate
the activities of the Trusts into its financial statements, but instead reports its ownership interests in the Trusts
as other assets and reports the subordinated debentures issued to the Trusts as a liability in the consolidated
balance sheets. The distributions on the subordinated debentures are reported as interest expense in the
accompanying consolidated statements of income.

Stock Split - On August 16, 2011, the Company completed a 2-for-1 stock split in the form of a stock

dividend, effected by issuing one share of common stock for each share of such stock outstanding on August
5, 2011. All share and per share information in the consolidated financial statements and the notes to the
consolidated financial statements has been adjusted to give effect to this stock split.

Cash and cash equivalents - For cash flow purposes, cash and cash equivalents include cash on hand,

amounts due from banks and interest bearing deposits with banks.

Investment securities - Management determines the appropriate classification of investment securities at the

time of purchase and reevaluates such designation as of each balance sheet date. At December 31, 2011 and
2010, the Company has classified all of its investment securities as available for sale (“AFS”).

AFS investment securities are stated at estimated fair value, with the unrealized gains and losses

determined on a specific identification basis. Such unrealized gains and losses, net of tax, are reported as a

63

separate component of stockholders’ equity and included in other comprehensive income (loss). The
Company utilizes independent third parties as its principal pricing sources for determining fair value of
investment securities which are measured on a recurring basis. For investment securities traded in an
active market, fair values are obtained from an independent pricing service and based on quoted market
prices if available. If quoted market prices are not available, fair values are based on quoted market prices
of comparable securities, broker quotes or comprehensive interest rate tables, pricing matrices or a
combination thereof. For investment securities traded in a market that is not active, fair value is determined
using unobservable inputs.

At December 31, 2011 and 2010, the Company owned stock in the Federal Home Loan Bank of Dallas

(“FHLB-Dallas”), Federal Home Loan Bank of Atlanta (“FHLB-Atlanta”) and First National Banker’s
Bankshares, Inc. (“FNBB”). The FHLB-Dallas, FHLB-Atlanta and FNBB shares do not have readily
determinable fair values and are carried at cost.

Declines in the fair value of investment securities below their amortized cost are reviewed at least
quarterly by the Company for other-than-temporary impairment. Factors considered during such review
include, among other things, the length of time and extent that fair value has been less than cost and the
financial condition and near term prospects of the issuer. The Company also assesses whether it has the
intent to sell the investment security or more likely than not would be required to sell the investment
security before any anticipated recovery in fair value. If either of the criteria regarding intent or requirement
to sell is met, the entire difference between amortized cost and fair value is recognized as impairment
through the income statement. For securities that do not meet the aforementioned criteria, the amount of
impairment is split into (i) other-than-temporary impairment related to credit loss, which must be recognized
in the income statement, and (ii) other-than-temporary impairment related to other factors, which is
recognized in other comprehensive income. The credit loss is defined as the difference between the present
value of the cash flows expected to be collected and the amortized cost basis.

Interest and dividends on investment securities, including the amortization of premiums and accretion
of discounts through maturity, or in the case of mortgage-backed securities, over the estimated life of the
security, are included in interest income. Realized gains or losses on the sale of investment securities are
recognized on the specific identification method at the time of sale and are included in non-interest income.
Purchases and sales of investment securities are recognized on a trade-date basis.

Loans and leases - Loans, excluding loans covered by Federal Deposit Insurance Corporation (“FDIC”) loss

share agreements, that management has the intent and ability to hold for the foreseeable future or until
maturity or payoff are reported at their outstanding principal balance adjusted for any charge-offs, deferred
fees or costs on originated loans, and unamortized premiums or discounts on purchased loans. Interest on
loans is recognized on an accrual basis and is calculated using the simple interest method on daily balances
of the principal amount outstanding. Loan origination fees and costs are generally deferred and recognized
over the life of the loan as an adjustment to yield on the related loan.

Leases are classified as either direct financing leases or operating leases, based on the terms of the

agreement. Direct financing leases are reported as the sum of (i) total future lease payments to be received,
net of unearned income, and (ii) estimated residual value of the leased property. Operating leases are
recorded at the cost of the leased property, net of accumulated depreciation. Income on direct financing
leases is included in interest income and is recognized on a basis that achieves a constant periodic rate of
return on the outstanding investment. Income on operating leases is recognized as non-interest income on
a straight-line basis over the lease term.

In the ordinary course of business, the Company has entered into off-balance sheet financial instruments
consisting of commitments to extend credit and letters of credit. Such financial instruments are recorded in
the financial statements when they are funded. Related fees are generally recognized when collected.

Mortgage loans held for sale are included in the Company’s loans and leases and totaled $17.9 million
and $14.3 million, respectively, at December 31, 2011 and 2010. Mortgage loans held for sale are carried at
the lower of cost or fair value. Gains and losses from the sales of mortgage loans are the difference between
the selling price of the loan and its carrying value, net of discounts and points, and are recognized as
mortgage lending income when the loan is sold to investors and servicing rights are released.

As part of its standard mortgage lending practice, the Company issues a written put option, in the form
of an interest rate lock commitment (“IRLC”), such that the interest rate on the mortgage loan is established
prior to funding. In addition to the IRLC, the Company enters into a forward sale commitment (“FSC”) for the

64

sale of its mortgage loan originations to reduce its market risk on such originations in process. The IRLC
on mortgage loans held for sale and the FSC have been determined to be derivatives as defined by GAAP.
Accordingly, the fair values of derivative assets and liabilities for the Company’s IRLC and FSC are based
primarily on the fluctuation of interest rates between the date on which the particular IRLC and FSC were
entered into and year-end. At December 31, 2011 and 2010, respectively, the Company’s IRLC and FSC
derivative assets and corresponding derivative liabilities were not material. The notional amounts of loan
commitments under both the IRLC and FSC were $13.3 million and $6.4 million at December 31, 2011 and
2010, respectively.

Covered loans - Purchased loans acquired in a business combination, including loans covered by FDIC loss
share agreements (“covered loans”), are accounted for in accordance with the provisions of GAAP applicable
to loans acquired with deteriorated credit quality and pursuant to the American Institute of Certified Public
Accountants’ (“AICPA”) December 18, 2009 letter in which the AICPA summarized the SEC’s view regarding
the accounting in subsequent periods for discount accretion associated with non-credit impaired loans
acquired in a business combination or asset purchase. Considering, among other factors, the general
lack of adequate underwriting, proper documentation, appropriate loan structure and insufficient equity
contributions for a large number of these acquired loans, and the uncertainty of the borrowers’ and/or
guarantors’ ability or willingness to make contractually required (or any) principal and interest payments,
management has determined that a significant portion of the purchased loans acquired in FDIC-assisted
acquisitions had evidence of credit deterioration since origination. Accordingly, management has elected to
apply the provisions of GAAP applicable to loans acquired with deteriorated credit quality, as provided by
the AICPA’s December 18, 2009 letter, to all purchased loans acquired in its FDIC-assisted acquisitions.

At the time such purchased loans are acquired, management individually evaluates substantially all loans
acquired in the transaction. This evaluation allows management to determine the estimated fair value of the
purchased loans (not considering any FDIC loss sharing agreements) and includes no carryover of any
previously recorded allowance for loan and lease losses. In determining the estimated fair value of purchased
loans, management considers a number of factors including, among other things, the remaining life of the
acquired loans, estimated prepayments, estimated loss ratios, estimated value of the underlying collateral,
estimated holding periods, and net present value of cash flows expected to be received. To the extent that any
purchased loan acquired in a FDIC-assisted acquisition is not specifically reviewed, management applies a
loss estimate to that loan based on the average expected loss rates for the purchased loans that were
individually reviewed in that purchased loan portfolio.

As provided for under GAAP, management has up to 12 months following the date of the acquisition to
finalize the fair values of acquired assets and assumed liabilities. Once management has finalized the fair
values of acquired assets and assumed liabilities within this 12-month period, management considers such
values to be the day 1 fair values (“Day 1 Fair Values”).

In determining the Day 1 Fair Values of purchased loans, management calculates a non-accretable

difference (the credit component of the purchased loans) and an accretable difference (the yield component
of the purchased loans). The non-accretable difference is the difference between the contractually required
payments and the cash flows expected to be collected in accordance with management’s determination of the
Day 1 Fair Values. Subsequent decreases to the expected cash flows will generally result in a provision for
loan and lease losses. Subsequent increases in cash flows will result in a reversal of the provision for loan
and lease losses to the extent of prior charges and then an adjustment to accretable yield, which would have
a positive impact on interest income. Any such increase or decrease in expected cash flows will result in a
corresponding decrease or increase, respectively, of the FDIC loss share receivable for the portion of such
reduced or additional loss expected to be collected from the FDIC.

The accretable difference on purchased loans, including covered loans, is the difference between the
expected cash flows and the net present value of expected cash flows. Such difference is accreted into
earnings using the effective yield method over the term of the loans. In determining the net present value of
the expected cash flows, the Company used discount rates ranging from 6.0% to 9.5% per annum depending
on the risk characteristics of each individual loan. At December 31, 2011, the weighted average period during
which management expects to receive the estimated cash flows for its covered loan portfolio (not considering
any payment under the FDIC loss share agreements) is 2.4 years.

Management separately monitors the purchased loan portfolio and periodically reviews loans contained
within this portfolio against the factors and assumptions used in determining the Day 1 Fair Values. A loan
is typically reviewed (i) when it is modified or extended, (ii) when material information becomes available

65

to the Company that provides additional insight regarding the loan’s performance, the status of the borrower,
or the quality or value of the underlying collateral, or (iii) in conjunction with the annual review of projected
cash flows which include a substantial portion of each acquired loan portfolio. To the extent that a loan is
performing in accordance with management’s expectation established in conjunction with the determination
of the Day 1 Fair Values, such loan is not included in any of the Company’s credit quality ratios, is not
considered to be an impaired loan, is not risk rated in a similar manner as are the Company’s non-purchased
loans and is not considered in the determination of the required allowance for loan and lease losses. To the
extent that a loan’s performance has deteriorated from management’s expectation established in conjunction
with the determination of the Day 1 Fair Values, such loan is generally included in certain of the Company’s
credit quality metrics, may be considered an impaired loan, and is considered in the determination of the
required level of allowance for loan and lease losses.

FDIC loss share receivable – In connection with the Company’s FDIC-assisted acquisitions, the Company
has recorded a FDIC loss share receivable to reflect the indemnification provided by the FDIC. Currently, the
expected losses on covered assets for each of the Company’s loss share agreements would result in expected
recovery of approximately 80% of incurred losses. Since the indemnified items are covered loans and covered
foreclosed assets, which are measured at Day 1 Fair Values, the FDIC loss share receivable is also measured
and recorded at Day 1 Fair Values, and is calculated by discounting the cash flows expected to be received
from the FDIC. A discount rate of 5.0% per annum was used to determine the net present value of the FDIC
loss share receivable. These cash flows are estimated by multiplying estimated losses by the reimbursement
rates as set forth in the loss share agreements. The balance of the FDIC loss share receivable is adjusted
periodically to reflect changes in expectations of discounted cash flows, expense reimbursements under the
loss share agreements and other factors.

FDIC clawback payable – Pursuant to the clawback provisions of the loss share agreements for the

Company’s FDIC-assisted acquisitions, the Company may be required to reimburse the FDIC should actual
losses be less than certain thresholds established in each loss share agreement. The amount of the clawback
provision for each acquisition is measured and recorded at Day 1 Fair Values. It is calculated as the difference
between management’s estimated losses on covered loans and covered foreclosed assets and the loss threshold
contained in each loss share agreement, multiplied by the applicable clawback provisions contained in each
loss share agreement. This clawback amount, which is payable to the FDIC upon termination of the applicable
loss share agreement, is then discounted back to net present value using a discount rate of 5.0% per annum.
To the extent that actual losses on covered loans and covered foreclosed assets are less than estimated losses,
the applicable clawback payable to the FDIC upon termination of the loss share agreements will increase. To
the extent that actual losses on covered loans and covered foreclosed assets are more than estimated losses,
the applicable clawback payable to the FDIC upon termination of the loss share agreements will decrease.

Allowance for loan and lease losses (“ALLL”) – The ALLL is established through a provision for such

losses charged against income. All or portions of loans or leases, excluding purchased loans and loans
covered by FDIC loss share agreements, deemed to be uncollectible are charged against the ALLL when
management believes that collectibility of all or some portion of outstanding principal is unlikely. Subsequent
recoveries, if any, of loans or leases previously charged off are credited to the ALLL.

For purchased loans, including covered loans, management separately monitors this portfolio and
periodically reviews loans contained within this portfolio against the factors and assumptions used in
determining the Day 1 Fair Values. To the extent that a loan’s performance has deteriorated from management’s
expectation established in conjunction with the determination of the Day 1 Fair Values, such loan is considered
in the determination of the required level of allowance for loan and lease losses. To the extent that the revised
loss estimate exceeds the loss estimate established in the determination of the Day 1 Fair Values, such
deterioration will result in an allowance allocation or a charge-off.

The ALLL is maintained at a level management believes will be adequate to absorb probable incurred losses

in the loan and lease portfolio. Provision to and the adequacy of the ALLL are based on evaluations of the
loan and lease portfolio utilizing objective and subjective criteria. The objective criteria primarily include an
internal grading system and specific allowances. In addition to the objective criteria, the Company subjectively
assesses the adequacy of the allowance for loan and lease losses and the need for additions thereto, with
consideration given to the nature and mix of the portfolio, including concentrations of credit; general economic
and business conditions, including national, regional and local business and economic conditions that may
affect the borrowers’ or lessees’ ability to pay; expectations regarding the current business cycle; trends that
could affect collateral values and other relevant factors. Changes in any of these criteria or the availability

66

of new information could require adjustment of the ALLL in future periods. While a specific allowance has
been calculated for impaired loans and leases and for loans and leases where the Company has otherwise
determined a specific reserve is appropriate, no portion of the Company’s ALLL is restricted to any individual
loan or lease or group of loans or leases, and the entire ALLL is available to absorb losses from any and all
loans and leases. The Company also utilizes a peer group analysis and a historical analysis to validate the
overall adequacy of its ALLL.

The Company generally places a loan or lease on nonaccrual status when such loan or lease is (i) deemed

impaired or (ii) 90 days or more past due, or earlier when doubt exists as to the ultimate collection of
payments. The Company may continue to accrue interest on certain loans or leases contractually past due 90
days or more if such loans or leases are both well secured and in the process of collection. At the time a loan
or lease is placed on nonaccrual status, interest previously accrued but uncollected is generally reversed and
charged against interest income. Nonaccrual loans and leases are generally returned to accrual status when
payments are less than 90 days past due and the Company reasonably expects to collect all payments. If a
loan or lease is determined to be uncollectible, the portion of the principal determined to be uncollectible will
be charged against the allowance for loan and lease losses. Loans for which the terms have been modified
and for which (i) the borrower is experiencing financial difficulties and (ii) a concession has been granted
to the borrower by the Company are considered troubled debt restructurings (“TDRs”) and are included
in impaired loans and leases. Income on nonaccrual loans or leases, including impaired loans and leases
but excluding certain TDRs which continue to accrue interest, is recognized on a cash basis when and if
actually collected.

All loans and leases deemed to be impaired are evaluated individually. The Company considers a loan or

lease, excluding purchased loans and loans covered by FDIC loss share agreements, to be impaired when,
based on current information and events, it is probable that the Company will be unable to collect all amounts
due according to the contractual terms thereof. The Company considers a purchased loan, including a covered
loan, to be impaired once a decrease in expected cash flows, subsequent to the determination of the Day 1
Fair Values, results in an allowance allocation, a partial or full charge-off or in a provision for loan and lease
losses. Most of the Company’s nonaccrual loans or leases, excluding purchased loans and loans covered by
FDIC loss share agreements, and all TDRs are considered impaired. The majority of the Company’s impaired
loans and leases are dependent upon collateral for repayment. For such loans and leases, impairment is
measured by comparing collateral value, net of holding and selling costs, to the current investment in the
loan or lease. For all other impaired loans and leases, the Company compares estimated discounted cash
flows to the current investment in the loan or lease. To the extent that the Company’s current investment in
a particular loan or lease exceeds its estimated net collateral value or its estimated discounted cash flows,
the impaired amount is specifically considered in the determination of the allowance for loan and lease
losses, or is charged off as a reduction of the allowance for loan and lease losses.

The Company also maintains an allowance for certain loans and leases, excluding purchased loans and
loans covered by FDIC loss share agreements, not considered impaired where (i) the customer is continuing
to make regular payments, although payments may be past due, (ii) there is a reasonable basis to believe
the customer may continue to make regular payments, although there is also an elevated risk that the
customer may default, and (iii) the collateral or other repayment sources are likely to be insufficient to
recover the current investment in the loan or lease if a default occurs. The Company evaluates such loans
and leases to determine if an allowance is needed for these loans and leases. For the purpose of calculating
the amount of such allowance, management assumes that (i) no further regular payments occur and (ii) all
sums recovered will come from liquidation of collateral and collection efforts from other payment sources. To
the extent that the Company’s current investment in a particular loan or lease evaluated for the need for such
allowance exceeds its net collateral value or its estimated discounted cash flows, such excess is considered
allocated allowance for purposes of the determination of the allowance for loan and lease losses.

The Company also includes further allowance allocation for risk-rated loans, including commercial real
estate loans, but excluding purchased loans and loans covered by FDIC loss share agreements, that are in
markets determined by management to be “stressed”. Stressed markets may include any specific geography
experiencing (i) high unemployment substantially above the U.S. average, (ii) significant over-development
in one or more commercial real estate categories, (iii) recent or announced loss of a major employer or
significant workforce reductions, (iv) significant declines in real estate values and (v) various other factors.
The additional allowance for such stressed markets compensates for the expectation that a higher risk of loss
is anticipated for the “work-out” or liquidation of a real estate loan in a stressed market versus a market

67

that is not experiencing any significant levels of stress. The required allocation percentage applicable to real
estate loans in stressed markets may be applied to the total market or it may be determined at the individual
loan level based on collateral value, loan-to-value ratios, strength of the borrower and/or guarantor, viability
of the underlying project and other factors.

Prior to December 31, 2011, the Company utilized the sum of all allowance amounts derived as described
above, combined with a reasonable unallocated allowance, as the primary indicator of the appropriate level
of allowance for loan and lease losses. During the fourth quarter of 2011, the Company refined its allowance
calculation whereby it “allocated” the portion of the allowance that was previously deemed to be unallocated
allowance. This refined allowance calculation includes specific allowance allocations at December 31, 2011
for qualitative factors including (i) concentrations of credit, (ii) general economic and business conditions,
(iii) trends that could affect collateral values and (iv) expectations regarding the current business cycle. The
Company may also consider other qualitative factors in future periods for additional allowance allocations,
including, among other factors, (1) credit quality trends (including trends in nonperforming loans and leases
expected to result from existing conditions), (2) seasoning of the loan and lease portfolio, (3) specific industry
conditions affecting portfolio segments, (4) the Company’s expansion into new markets and (5) the offering of
new loan and lease products. This refined allowance calculation had no impact on the Company’s provision for
loan and lease losses for 2011.

The accrual of interest on loans and leases, excluding purchased loans and loans covered by FDIC loss share

agreements, is discontinued when, in management’s opinion, the borrower or lessee may be unable to meet
payments as they become due. When interest accrual is discontinued, all unpaid accrued interest is reversed.
Interest income is subsequently recognized only to the extent interest payments are received.

Premises and equipment – Premises and equipment are reported at cost less accumulated depreciation and
amortization. Depreciation and amortization are computed on a straight-line basis over the estimated useful
lives of the related assets. Depreciable lives for the major classes of assets are generally 45 years for buildings
and 3 to 25 years for furniture, fixtures, equipment and certain building improvements. Leasehold
improvements are amortized over the shorter of the asset’s estimated useful life or the term of the lease.
Accelerated depreciation methods are used for income tax purposes. Maintenance and repair charges are
expensed as incurred.

Foreclosed assets covered by FDIC loss share agreements – Foreclosed assets covered by FDIC loss share

agreements, or covered foreclosed assets, are recorded at Day 1 Fair Values. In estimating the fair value of
covered foreclosed assets, management considers a number of factors including, among others, appraised
value, estimated selling prices, estimated selling costs, estimated holding periods and net present value
of cash flows expected to be received. Discount rates ranging from 8.0% to 9.5% per annum were used to
determine the net present value of covered foreclosed assets. Gains and losses from the sale of covered
foreclosed assets are recorded in non-interest income. Expenses to maintain the properties, net of amounts
reimbursable by the FDIC, are included in non-interest expense.

Foreclosed assets not covered by FDIC loss share agreements – Repossessed personal properties and
real estate acquired through or in lieu of foreclosure are initially recorded at the lesser of current principal
investment or fair value less estimated cost to sell at the date of repossession or foreclosure. Valuations of
these assets are periodically reviewed by management with the carrying value of such assets adjusted through
non-interest expense to the then estimated fair value net of estimated selling costs, if lower, until disposition.
Fair values of these assets are generally based on third party appraisals, broker price opinions or other
valuations of the property. Gains and losses from the sale of such repossessions and real estate acquired
through or in lieu of foreclosure are recorded in non-interest income, and expenses to maintain the properties
are included in non-interest expense.

Income taxes – The Company utilizes the asset and liability method in accounting for income taxes. Under
this method, deferred tax assets and liabilities are determined based upon the difference between the values
of the assets and liabilities as reflected in the financial statements and their related tax basis using enacted
tax rates in effect for the year or years in which the differences are expected to be recovered or settled.
As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes.

The Company recognizes a tax position as a benefit only if it is “more likely than not” that the tax position

would be sustained in a tax examination, with a tax examination being presumed to occur. The amount

68

recognized is the largest amount of tax benefit that has a greater than 50% likelihood of being realized on
examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

The Company files consolidated tax returns. The Bank and the other consolidated entities provide for
income taxes on a separate return basis and remit to the Company amounts determined to be currently
payable. The Company recognizes interest related to income tax matters as interest income or expense, and
penalties related to income tax matters are recognized as non-interest expense. The Company is no longer
subject to income tax examinations by U.S. federal tax authorities for years prior to 2008.

Bank owned life insurance (“BOLI”) – BOLI consists of life insurance purchased by the Company on

(i) a qualifying group of officers with the Company designated as owner and beneficiary of the policies and
(ii) one of the Company’s executive officers with the Company designated as owner and both the Company
and the executive officer designated as beneficiaries of the policies. The earnings on BOLI policies are used
to offset a portion of employee benefit costs. BOLI is carried at the policies’ realizable cash surrender values
with changes in cash surrender values and death benefits received in excess of cash surrender values
reported in non-interest income.

Intangible assets – Intangible assets consist of goodwill, bank charter costs and core deposit intangibles.

Goodwill represents the excess purchase price over the fair value of net assets acquired in business
acquisitions. The Company had goodwill of $5.2 million at both December 31, 2011 and 2010. The Company
performed its annual impairment test of goodwill as of September 30, 2011. This test indicated no
impairment of the Company’s goodwill.

Bank charter costs represent costs paid to acquire a Texas bank charter and are being amortized over 20

years. Bank charter costs totaled $239,000 at both December 31, 2011 and 2010, less accumulated
amortization of $95,000 and $82,000 at December 31, 2011 and 2010, respectively.

Core deposit intangibles represent premiums paid for deposits acquired via acquisition and are being
amortized over 3 to 5 years. Core deposit intangibles totaled $9.5 million and $3.6 million at December 31,
2011 and 2010, respectively, less accumulated amortization of $2.7 million and $1.1 million at December 31,
2011 and 2010, respectively.

The aggregate amount of amortization expense for the Company’s core deposit and bank charter

intangibles is expected to be $2.0 million per year in 2012 and 2013; $1.4 million in 2014; $1.1 million in
2015 and $0.3 million in 2016.

Earnings per common share – Earnings per common share are computed using the two-class method. Basic

earnings per share are computed by dividing net earnings allocated to common stock by the weighted-
average number of common shares outstanding during the applicable period. Diluted earnings per common
share are computed by dividing reported earnings allocated to common stockholders by the weighted-average
number of common shares outstanding after consideration of the dilutive effect, if any, of the Company’s
common stock options using the treasury stock method. The Company has determined that its outstanding
non-vested stock awards granted under its restricted stock plan are participating securities.

Stock-based compensation – The Company has an employee stock option plan, a non-employee director

stock option plan and an employee restricted stock plan, which are described more fully in Note 15. The
Company measures the cost of employee services received in exchange for an award of equity instruments
based on the grant-date fair value of the award. Such cost is to be recognized over the vesting period of the
award. For the years ended December 31, 2011, 2010 and 2009, the Company recognized $1.5 million, $0.8
million and $0.7 million, respectively, of non-interest expense for its stock-based compensation plans.

Segment disclosures – The Company operates in only one segment – community banking. Accordingly,
there is no requirement to report segment information in the Company’s consolidated financial statements.
No revenues are derived from foreign countries and no single external customer comprises more than 10%
of the Company’s revenues.

Recent accounting pronouncements – In April 2011, the Financial Accounting Standards Board (“FASB”)

issued Accounting Standards Update (“ASU”) No. 2011-02, “A Creditor’s Determination of Whether a
Restructuring is a Troubled Debt Restructuring.” The provisions of ASU No. 2011-02 amend and clarify
GAAP related to the accounting for debt restructurings. Specifically, ASU No. 2011-02 requires that, when
evaluating whether a restructuring constitutes a troubled debt restructuring, a creditor must separately
conclude that both (i) the restructuring constitutes a concession and (ii) the debtor is experiencing financial
difficulties. In evaluating whether a concession has been granted, a creditor must evaluate whether (i) a

69

debtor has access to funds at a market rate for debt with similar risk characteristics as the restructured debt
in order to determine if the restructuring would be considered to be at a below-market rate, indicating that
the creditor has granted a concession, (ii) a temporary or permanent increase in the contractual interest rate
as a result of a restructuring may be considered a concession because the new contractual interest rate on the
restructured debt is still below the market interest rate for new debt with similar risk characteristics, and (iii)
a restructuring that results in a delay in payment is either significant and is a concession or is insignificant
and is not a concession. In evaluating whether a debtor is experiencing financial difficulties, a creditor may
conclude that a debtor is experiencing financial difficulties, even though the debtor is not currently in
payment default. A creditor should evaluate whether it is probable that the debtor would be in payment
default on any of its debt in the foreseeable future without a modification of the debt. The provisions of
ASU No. 2011-02 were effective July 1, 2011 and were applied retroactively to modifications occurring on or
after January 1, 2011. The Company reassessed significant modifications and loan restructurings occurring
between January 1, 2011 and June 30, 2011 noting no such modifications and loan restructurings that were
considered troubled debt restructurings under the provisions of ASU No. 2011-02. For the year ended
December 31, 2011, there were no defaults during the preceding 12 months on any loans that were
considered troubled debt restructurings.

In May 2011, the FASB issued ASU 2011-04 “Fair Value Measurement: Amendments to Achieve Common

Fair Value Measurement and Disclosure Requirements in US GAAP and IFRS.” ASU 2011-04 expands the
disclosure requirements for fair value measurements categorized within Level 3 of the fair value hierarchy
to include (1) a quantitative disclosure of the unobservable inputs and assumptions used within the
measurement, (2) a description of the valuation processes in place and (3) a narrative description of the
sensitivity of the fair value to changes in unobservable inputs and interrelationships between those inputs.
In addition, ASU 2011-04 requires that companies disclose the level within the fair value hierarchy for items
not measured at fair value in the statement of financial position but whose fair value must be disclosed.
ASU 2011-04 is effective for reporting periods beginning after December 15, 2011 and should be applied
prospectively. The Company does not expect the adoption of the provisions of ASU 2011-04 will have a
material impact on the Company’s financial position, results of operations or liquidity, but will increase its
disclosures requirements related to its fair value measurements.

In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income,” which revises
the manner in which entities present comprehensive income in their financial statements. The provisions
of ASU 2011-05 require reporting the components of comprehensive income in either (i) a continuous
statement of comprehensive income or (ii) two separate but consecutive statements. ASU 2011-05 does not
change the items that must be reported in other comprehensive income but rather removes the presentation
option of including other comprehensive income in the statement of stockholders’ equity. The new presentation
disclosures required by ASU 2011-05 are effective for interim and annual periods beginning after December
15, 2011. As this ASU amends only the presentation of comprehensive income, the adoption will have no
impact on the Company’s financial position, results of operations or liquidity. In December 2011, the FASB
indefinitely deferred certain provisions of ASU 2011-05 that require companies to present reclassification
adjustments out of accumulated other comprehensive income by component in both the statement of income
and statement of other comprehensive income.

In September 2011, the FASB issued ASU 2011-08, “Testing Goodwill for Impairment.” The provisions
of ASU 2011-08 provide the option of performing a qualitative assessment before calculating the fair value
of a reporting unit in step 1 of the goodwill impairment test. If based on qualitative factors, the fair value of
the reporting unit is more likely than not less than the carrying amount, the two step impairment test would
be required. This ASU is effective beginning January 1, 2012; however, early adoption is permitted. The
Company does not expect the provisions of ASU 2011-08 will have a material impact on its financial position,
results of operations or liquidity.

Reclassifications and recasts – Certain reclassifications of 2010 and 2009 amounts have been made to
conform with the 2011 financial statements presentation. These reclassifications had no impact on prior
years’ net income, as previously reported. Additionally, as discussed in Note 2, the Company has made
adjustments to the acquired assets and assumed liabilities for certain of its FDIC-assisted acquisitions in
the determination of Day 1 Fair Values. As a result, certain amounts previously reported in the Company’s
December 31, 2010 consolidated balance sheet have been recast.

70

2. Acquisitions

2011 Acquisitions

On January 14, 2011, the Company, through the Bank, entered into a purchase and assumption agreement

with loss share agreements with the FDIC pursuant to which it acquired substantially all of the assets and
assumed substantially all of the deposits and certain other liabilities of the former Oglethorpe Bank
(“Oglethorpe”) with two offices in Georgia, including Brunswick and St. Simons Island.

On April 29, 2011, the Company, through the Bank, entered into a purchase and assumption agreement
with loss share agreements with the FDIC pursuant to which it acquired substantially all of the assets and
assumed substantially all of the deposits and certain other liabilities of the former First Choice Community
Bank (“First Choice”) with seven offices in Georgia, including Dallas, Newnan (2), Senoia, Sharpsburg,
Douglasville and Carrollton. On July 1, 2011, the Company closed one of the offices in Newnan, Georgia,
and on October 26, 2011, the Company closed the office in Carrollton, Georgia.

On April 29, 2011, the Company, through the Bank, entered into a purchase and assumption agreement
with loss share agreements with the FDIC pursuant to which it acquired substantially all of the assets and
assumed substantially all of the deposits and certain other liabilities of the former The Park Avenue Bank
(“Park Avenue”) with 11 offices in Georgia, including Valdosta (3), Bainbridge (2), Cairo, Lake Park,
Stockbridge, McDonough, Oakwood and Athens, and one office in Ocala, Florida. On October 21, 2011,
the Company closed the office in Stockbridge, Georgia.

Subsequent to the reporting of the assets acquired and the liabilities assumed in the Oglethorpe and Park

Avenue acquisitions, the Company made certain adjustments to these values in order to finalize the Day 1
Fair Values on Oglethorpe and adjust the Day 1 Fair Values on Park Avenue. As a result of those adjustments,
the Company has “recast” the assets acquired and liabilities assumed in the Oglethorpe and Park Avenue
acquisitions to reflect the Day 1 Fair Values. The following tables provide a summary of the Day 1 Fair
Values of assets acquired and liabilities assumed, including any such recast adjustments, for the Company’s
2011 FDIC-assisted acquisitions.

A summary of the assets acquired and liabilities assumed in the Oglethorpe acquisition, including recast

adjustments, is as follows:

Assets acquired:

As Recorded
by
Oglethorpe

January 14, 2011

Fair Value

Recast

Adjustments Adjustments
(Dollars in thousands)

As Recorded
by the
Company

(1)

Cash and cash equivalents ................................. $  14,710
Loans not covered by FDIC
   loss share agreements .....................................
Loans covered by FDIC loss share agreements ....
FDIC loss share receivable ..................................
Foreclosed assets covered by
   FDIC loss share agreements .............................
Core deposit intangible .......................................
Other assets ........................................................
     Total assets acquired .....................................

16,554
-
1,054
192,868

6,532
154,018
-

Liabilities assumed:

195,067
Deposits ..............................................................
-
FDIC clawback payable .......................................
333
Other liabilities ...................................................
195,400
Total liabilities assumed ................................
(2,532)
Net assets acquired ..................................................
Asset discount bid ...................................................
(38,000)
Cash received from FDIC .......................................... $  40,532
Pre-tax gain .............................................................

$           -

$         -

$  14,710

(3,447) b
(73,342) b
52,395 c

-
758
(1,292)

(9,410) d
401 e
(621) f

(34,024)

(59)
-
726
133

- i
924 h
100 f

1,024
$(35,048)

-
133
-
133
$         -

3,085
81,434
51,103

7,085
401
1,159
158,977

195,067
1,057
433
196,557
(37,580)

40,532
$    2,952

(1) Represents the Day 1 Fair Values of assets acquired and liabilities assumed in the Oglethorpe acquisition.

71

A summary of the assets acquired and liabilities assumed in the First Choice acquisition is as follows:

As Recorded
by
First Choice

April 29, 2011

Fair Value
Adjustments
(Dollars in thousands)

As Recorded
by the
Company

(1)

Assets acquired:

Cash and cash equivalents ..........................................
Investment securities AFS ...........................................
Loans not covered by FDIC loss share agreements ......
Loans covered by FDIC loss share agreements ............
FDIC loss share receivable ...........................................
Foreclosed assets covered by
   FDIC loss share agreements ......................................
Core deposit intangible ................................................
Other assets .................................................................
     Total assets acquired ..............................................

Liabilities assumed:

Deposits .......................................................................
FHLB-Atlanta advances ...............................................
FDIC clawback payable ................................................
Other liabilities ............................................................
     Total liabilities assumed .........................................
Net assets acquired ...........................................................
Asset discount bid ............................................................
Cash received from FDIC ...................................................
Pre-tax gain ......................................................................

$  38,018
4,588
1,973
246,451
-

2,773
-
931
294,734

293,344
4,000
-
478
297,822
(3,088)
(42,900)
$  45,988

$           -

(20) a
(419) b
(96,557) b
c
59,544

(1,102) d
e
495
(861)
f
(38,920)

i
g
h
f

-
-
930
100
1,030
$(39,950)

$  38,018
 4,568
 1,554
 149,894
 59,544

 1,671
 495
 70
 255,814

 293,344
 4,000
 930
 578
 298,852
 (43,038)

 45,988
$    2,950

(1) The Day 1 Fair Values of assets acquired and liabilities assumed in the First Choice acquisition were not yet

finalized as of December 31, 2011.

72

A summary of the assets acquired and liabilities assumed in the Park Avenue acquisition, including recast

adjustments, is as follows:

April 29, 2011

As Recorded
by

Fair Value

Park Avenue Adjustments

Recast
Adjustments

As Recorded
by the
Company

(1)

(Dollars in thousands)

Assets acquired:

Cash and cash equivalents ................................. $  66,825
Investment securities AFS ..................................
132,737
Loans not covered by FDIC
   loss share agreements .....................................
Loans covered by FDIC loss share agreements ...
FDIC loss share receivable ..................................
Foreclosed assets covered by

23,664
408,069
-

$             -

(947) a

$         -
-

$  66,825
131,790

(5,968) b
(145,152) b
113,683 c

-
-
2,249

        FDIC loss share agreements .............................
Core deposit intangible .......................................
Other assets ........................................................
     Total assets acquired .....................................

91,442
-
5,012
727,749

(59,812) d
5,063 e
(2,035) f

(95,168)

(450)
-
(1,799)
-

Liabilities assumed:

626,321
Deposits ..............................................................
84,260
FHLB-Atlanta advances ......................................
-
FDIC clawback payable .......................................
1,588
Other liabilities ...................................................
712,169
Total liabilities assumed ................................
15,580
Net assets acquired ..................................................
Asset discount bid ...................................................
(174,900)
Cash received from FDIC .......................................... $159,320
Pre-tax gain .............................................................

i
-
4,559 g
14,868 h
500 f

19,927
$(115,095)

-
-
-
-
-
$         -

17,696
262,917
115,932

31,180
5,063
1,178
632,581

626,321
88,819
14,868
2,088
732,096
(99,515)

159,320
$  59,805

(1) Represents the Day 1 Fair Values, as determined at December 31, 2011, of the assets acquired and liabilities

assumed in the Park Avenue acquisition, which Day 1 Fair Values were not yet finalized at December 31, 2011.

  Explanation of fair value adjustments

a- Adjustment reflects the fair value adjustment based on the Company’s pricing of investment securities AFS.
b- Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired loan portfolio.
c - Adjustment reflects the estimated fair value of payments the Company expects to receive from the FDIC under the

loss share agreements.

d- Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired foreclosed

assets covered by FDIC loss share agreements.

e- Adjustment reflects the estimated fair value of the core deposit intangible.
f - Adjustment reflects the amount needed to adjust the carrying value of other assets and other liabilities

to estimated fair value.

g- Adjustment reflects the amount of the prepayment penalty, if any, assessed on early payoff of FHLB-

Atlanta advances.

h- Adjustment reflects the estimated fair value of payments the Company expects to make to the FDIC under the
clawback provisions of the loss share agreements at the conclusion of the term of the loss share agreements.
i - Because the Company reset deposit rates for these assumed deposits, as provided for under the purchase and

assumption agreements, to reflect an appropriate market rate of interest, there was no fair value adjustment for
such assumed deposits.

The Company’s results of operations include the operating results of the acquired assets and assumed

liabilities from the respective dates of acquisition through the end of the reporting period. Due to the
significant fair value adjustments and the nature of the loss sharing agreements with the FDIC, the
Company believes pro forma information that would include pre-acquisition historical results of the
acquired assets and assumed liabilities is not relevant. Accordingly, no pro forma information is included
in these consolidated financial statements.

73

2010 Acquisitions

On March 26, 2010, the Company, through the Bank, entered into a purchase and assumption agreement

with loss share agreements with the FDIC pursuant to which it acquired substantially all of the assets and
assumed substantially all of the deposits and certain other liabilities of the former Unity National Bank
(“Unity”) with five offices in Georgia, including Cartersville (2), Rome, Adairsville and Calhoun.

On July 16, 2010, the Company, through the Bank, entered into a purchase and assumption agreement
with loss share agreements with the FDIC pursuant to which it acquired substantially all of the assets and
assumed substantially all of the deposits and certain other liabilities of the former Woodlands Bank
(“Woodlands”) with eight offices, including two in South Carolina; two in North Carolina; one in Georgia
and three in Alabama. On October 26, 2010, the Company closed four of the Woodlands offices, and in
December 2010 the Company relocated two offices. The Company also renegotiated the leases on the
remaining two offices. As a result, the Company now operates one office each in Bluffton, South Carolina;
Wilmington, North Carolina; Savannah, Georgia; and Mobile, Alabama.

On September 10, 2010, the Company, through the Bank, entered into a purchase and assumption

agreement with loss share agreements with the FDIC pursuant to which it acquired substantially all of the
assets and assumed substantially all of the deposits and certain other liabilities of the former Horizon Bank
(“Horizon”) with four offices in Florida, including Bradenton (2), Palmetto and Brandon. On December 23,
2010, the Company closed the office in Brandon, Florida.

On December 17, 2010, the Company, through the Bank, entered into a purchase and assumption

agreement with loss share agreements with the FDIC pursuant to which it acquired substantially all of the
assets and assumed substantially all of the deposits and certain other liabilities of the former Chestatee State
Bank (“Chestatee”) with four offices in Georgia, including Dawsonville (2), Cumming and Marble Hill.

Subsequent to the reporting of the assets acquired and the liabilities assumed in the Unity, Woodlands,

Horizon and Chestatee acquisitions, the Company made certain adjustments to these values in order to
finalize the Day 1 Fair Values. As a result of those adjustments, the Company has “recast” the assets
acquired and liabilities assumed in the Unity, Woodlands, Horizon and Chestatee acquisitions to reflect the
Day 1 Fair Values. The following tables provide a summary of the Day 1 Fair Values of assets acquired and
liabilities assumed, including any such recast adjustments, for the Company’s 2010 FDIC-assisted acquisitions.

A summary of the assets acquired and liabilities assumed in the Unity acquisition, including recast

adjustments, is as follows:

As Recorded
by
Unity

March 26, 2010

Fair Value

Recast

Adjustments Adjustments
(Dollars in thousands)

As Recorded
by the
Company

(1)

Assets acquired:

Cash and cash equivalents ................................. $  45,401
5,580
Investment securities AFS ..................................
185,213
Loans covered by FDIC loss share agreements ...
FDIC loss share receivable ..................................
-
Foreclosed assets covered by
   FDIC loss share agreements .............................
Core deposit intangible .......................................
Other assets ........................................................
     Total assets acquired .....................................

20,304
-
1,137
257,635

Liabilities assumed:

220,806
Deposits ..............................................................
23,000
FHLB-Atlanta advances ......................................
-
FDIC clawback payable .......................................
629
Other liabilities ...................................................
244,435
Total liabilities assumed ................................
13,200
Net assets acquired ..................................................
Asset discount bid ...................................................
(29,900)
Cash received from FDIC .......................................... $  16,700
Pre-tax gain .............................................................

$           -

- a
(42,038) b
35,683 c

$         -
-
(8,723)
8,464

$  45,401
5,580
134,452
44,147

(10,890) d
1,657 e
(954) f

(16,542)

(555)
-
-
(814)

- i
1,078 g
2,265 h
(22) f

3,321
$(19,863)

-
-
(699)
(115)
(814)
$         -

8,859
1,657
183
240,279

220,806
24,078
1,566
492
246,942
(6,663)

16,700
$  10,037

(1) Represents the Day 1 Fair Values of assets acquired and liabilities assumed in the Unity acquisition.

74

A summary of the assets acquired and liabilities assumed in the Woodlands acquisition, including recast

adjustments, is as follows:

Assets acquired:

As Recorded
by
Woodlands

July 16, 2010

Fair Value

Recast

Adjustments Adjustments
(Dollars in thousands)

As Recorded
by the
Company

(1)

Cash and cash equivalents ................................. $  13,447
Investment securities AFS ..................................
85,017
Loans not covered by FDIC
   loss share agreements .....................................
Loans covered by FDIC loss share agreements ...
FDIC loss share receivable ..................................
Foreclosed assets covered by
   FDIC loss share agreements .............................
Core deposit intangible .......................................
Other assets ........................................................
     Total assets acquired .....................................

12,258
-
2,556
385,113

1,500
270,335
-

Liabilities assumed:

344,723
Deposits ..............................................................
10,000
FHLB-Atlanta advances ......................................
-
FDIC clawback payable .......................................
258
Other liabilities ...................................................
354,981
Total liabilities assumed ................................
30,132
Net assets acquired ..................................................
Asset discount bid ...................................................
(54,392)
Cash received from FDIC .......................................... $  24,260
Pre-tax gain .............................................................

$           -

(525) a

$        -
-

$  13,447
84,492

(387) b
(82,337) b
54,827 c

-
(1,520)
1,039

(7,229) d
200 e
(1,411) f

(36,862)

- i
142 g
3,030 h
- f

3,172
$(40,034)

-
-
327
(154)

-
-
(89)
(65)
(154)
$        -

1,113
186,478
55,866

5,029
200
1,472
348,097

344,723
10,142
2,941
193
357,999
(9,902)

24,260
$  14,358

(1) Represents the Day 1 Fair Values of assets acquired and liabilities assumed in the Woodlands acquisition.

A summary of the assets acquired and liabilities assumed in the Horizon acquisition, including recast

adjustments, is as follows:

As Recorded
by
Horizon

September 10, 2010

Fair Value

Recast

Adjustments Adjustments
(Dollars in thousands)

As Recorded
by the
Company

(1)

Assets acquired:

Cash and cash equivalents ................................. $  11,775
Investment securities AFS ..................................
5,312
Loans not covered by FDIC
   loss share agreements .....................................
Loans covered by FDIC loss share agreements ...
FDIC loss share receivable ..................................
Foreclosed assets covered by

1,323
138,778
-

$           -

(207) a

$         -
-

$  11,775
5,105

(431) b
(45,775) b
29,089 c

-
(1,195)
-

        FDIC loss share agreements .............................
Core deposit intangible .......................................
Other assets ........................................................
     Total assets acquired .....................................

8,391
-
2,868
168,447

(4,708) d
396 e
(887) f

(22,523)

-
-
1,195
-

Liabilities assumed:

Deposits ..............................................................
FHLB-Atlanta advances ......................................
FDIC clawback payable .......................................
Other liabilities ...................................................
Total liabilities assumed ................................
(2,502)
Net assets acquired ..................................................
Asset discount bid ...................................................
(27,000)
Cash received from FDIC .......................................... $  29,502
Pre-tax gain .............................................................
(1) Represents the Day 1 Fair Values of assets acquired and liabilities assumed in the Horizon acquisition.

-
-
-
-
-
$         -

i
-
1,251 g
1,461 h
f
-
2,712

152,387
18,000
-
562
170,949

$(25,235)

75

892
91,808
29,089

3,683
396
3,176
145,924

152,387
19,251
1,461
562
173,661
(27,737)

29,502
$    1,765

A summary of the assets acquired and liabilities assumed in the Chestatee acquisition, including recast

adjustments, is as follows:

Assets acquired:

As Recorded
by
Chestatee

December 17, 2010

Fair Value

Recast

Adjustments Adjustments
(Dollars in thousands)

As Recorded
by the
Company

(1)

Cash and cash equivalents ................................. $  21,964
Investment securities AFS ..................................
7,204
Loans not covered by FDIC
   loss share agreements .....................................
Loans covered by FDIC loss share agreements ...
FDIC loss share receivable ..................................
Foreclosed assets covered by
   FDIC loss share agreements .............................
Core deposit intangible .......................................
Other assets ........................................................
     Total assets acquired .....................................

31,647
-
1,722
231,234

5,269
163,428
-

Liabilities assumed:

Deposits ..............................................................
FDIC clawback payable .......................................
Other liabilities ...................................................
Total liabilities assumed ................................
(3,674)
Net assets acquired ..................................................
Asset discount bid ...................................................
(34,750)
Cash received from FDIC .......................................... $  38,424
Pre-tax gain .............................................................

234,468
-
440
234,908

$           -

(47) a

$         -
-

$  21,964
7,157

(1,693) b
(46,620) b
42,072 c

-
(5,427)
3,987

(18,241) d
550 e
(621) f

(24,600)

-
-
1,141
(299)

i
-
1,091 h
200 f

1,291
$(25,891)

-
(299)
-
(299)
$         -

3,576
111,381
46,059

13,406
550
2,242
206,335

234,468
792
640
235,900
(29,565)

38,424
$    8,859

(1) Represents the Day 1 Fair Values of assets acquired and liabilities assumed in the Chestatee acquisition.

Explanation of fair value adjustments

a- Adjustment reflects the fair value adjustment based on the Company’s pricing of investment securities AFS.
b- Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired loan portfolio.
c- Adjustment reflects the estimated fair value of payments the Company expects to receive from the FDIC under the

loss share agreements.

d- Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired foreclosed assets

covered by FDIC loss share agreements.

e- Adjustment reflects the estimated fair value of the core deposit intangible.
f- Adjustment reflects the amount needed to adjust the carrying value of other assets and other liabilities to estimated

fair value.

g- Adjustment reflects the amount of the prepayment penalty, if any, assessed on early payoff of FHLB-Atlanta

advances.

h- Adjustment reflects the estimated fair value of payments the Company expects to make to the FDIC under the
clawback provisions of the loss share agreements at the conclusion of the term of the loss share agreements.
i - Because the Company reset deposit rates for these assumed deposits, as provided for under the purchase and
assumption agreements, to reflect an appropriate market rate of interest, there was no fair value adjustment
for such assumed deposits.

The Company’s results of operations include the operating results of the acquired assets and assumed

liabilities from the respective dates of acquisition through the end of the reporting period. Due to the
significant fair value adjustments and the nature of the loss sharing agreements with the FDIC, the Company
believes pro forma information that would include pre-acquisition historical results of the acquired assets
and assumed liabilities is not relevant. Accordingly, no pro forma information is included in these consolidated
financial statements.

76

Purchase Accounting Adjustments

The recast adjustments to the acquired assets and assumed liabilities for Unity, Woodlands, Horizon,

Chestatee, Oglethorpe and Park Avenue were made subsequent to the acquisition, but prior to their one year
anniversaries and, as provided for under GAAP, were considered to be purchase accounting adjustments in
deriving the Day 1 Fair Values for the acquired assets and assumed liabilities. These adjustments impacted
the net assets acquired and the resulting pre-tax gains on these acquisitions. However, because the net
effect on net assets acquired and resulting pre-tax gains was not material, management recorded the impact
of such adjustments as an increase or decrease to non-interest income during the quarter in which the
adjustments were determined. The net decrease to non-interest income is included as an adjustment to
“other assets” and “other liabilities” in the previous tables.

As a result of the recast adjustments recorded on the Unity, Woodlands, Horizon and Chestatee acquisitions

and used by management in its determination of Day 1 Fair Values, certain amounts previously reported in
the Company’s December 31, 2010 consolidated financial statements have been recast. The following is a
summary of those financial statement captions that have been impacted by these recast adjustments.

As Previously
Reported

Recast
Adjustments
(Dollars in thousands)

As
Recast

December 31, 2010:

Loans covered by FDIC loss share agreements ............
FDIC loss share receivable ...........................................
Other assets .................................................................
FDIC clawback payable ................................................
Accrued interest payable and other liabilities ..............

$497,545
153,111
33,624
7,286
11,437

$(8,077)
5,026
2,663
(382)
(6)

$489,468
158,137
36,287
6,904
11,431

Loss Share Agreements and Other Acquisition Matters

In conjunction with these FDIC-assisted acquisitions, the Bank entered into loss share agreements with
the FDIC such that the Bank and the FDIC will share in the losses on assets covered under the loss share
agreements. Pursuant to the terms of the loss share agreements for the Unity acquisition, on losses up to
$65.0 million, the FDIC will reimburse the Bank for 80% of losses. On losses exceeding $65.0 million, the
FDIC will reimburse the Bank for 95% of losses. Pursuant to the terms of the loss share agreements for the
Woodlands acquisition, the Chestatee acquisition, the Oglethorpe acquisition and the First Choice acquisition,
the FDIC will reimburse the Bank for 80% of losses. Pursuant to the terms of the loss share agreements for
the Horizon acquisition, the FDIC will reimburse the Bank on single family residential loans and related
foreclosed assets for (i) 80% of losses up to $11.8 million, (ii) 30% of losses between $11.8 million and
$17.9 million and (iii) 80% of losses in excess of $17.9 million. For non-single family residential loans and
related foreclosed assets, the FDIC will reimburse the Bank for (i) 80% of losses up to $32.3 million, (ii) 0%
of losses between $32.3 million and $42.8 million and (iii) 80% of losses in excess of $42.8 million. Pursuant
to the terms of the loss share agreements for the Park Avenue acquisition, the FDIC will reimburse the Bank
for (i) 80% of losses up to $218.2 million, (ii) 0% of losses between $218.2 million and $267.5 million and
(iii) 80% of losses in excess of $267.5 million.

The loss share agreements applicable to single family residential mortgage loans and related foreclosed

assets provide for FDIC loss sharing and the Bank’s reimbursement to the FDIC for recoveries of covered
losses for ten years from the date on which each applicable loss share agreement was entered. The loss share
agreements applicable to commercial loans and related foreclosed assets provide for FDIC loss sharing
for five years from the date on which each applicable loss share agreement was entered and the Bank’s
reimbursement to the FDIC for recoveries of covered losses for an additional three years thereafter.

To the extent that actual losses incurred by the Bank are less than (i) $65 million on the Unity assets
covered under the loss share agreements, (ii) $107 million on the Woodlands assets covered under the loss
share agreements, (iii) $60 million on the Horizon assets covered under the loss share agreements, (iv) $66
million on the Chestatee assets covered under the loss share agreements, (v) $66 million on the Oglethorpe
assets covered under the loss share agreements, (vi) $87 million on the First Choice assets covered under
the loss share agreements and (vii) $269 million on the Park Avenue assets covered under the loss share
agreements, the Bank may be required to reimburse the FDIC under the clawback provisions of the loss
share agreements.

77

The terms of the purchase and assumption agreements for the Unity, Woodlands, Horizon, Chestatee,
Oglethorpe, First Choice and Park Avenue acquisitions provide for the FDIC to indemnify the Bank against
certain claims, including claims with respect to assets, liabilities or any affiliate not acquired or otherwise
assumed by the Bank and with respect to claims based on any action by Unity’s, Woodlands’, Horizon’s,
Chestatee’s, Oglethorpe’s, First Choice’s or Park Avenue’s directors, officers or employees.

3. Covered Assets, FDIC Loss Share Receivable and FDIC Clawback Payable

A summary of the covered assets, the FDIC loss share receivable and the FDIC clawback payable is

as follows:

December 31,

2011

2010

(Dollars in thousands)

Covered loans ....................................................... $   806,924
FDIC loss share receivable ....................................
278,263
72,907
Covered foreclosed assets .....................................
    Total ................................................................. $1,158,094

$489,468
158,137
31,145
$678,750

FDIC clawback payable ......................................... $     24,606

$    6,904

Covered Loans

The following table presents a summary, by acquisition, of covered loans acquired as of the dates of

acquisition and activity within covered loans during the periods indicated.

 Unity  Woodlands  Horizon  Chestatee Oglethorpe Choice Avenue

Total

First

Park

At acquistion date:

(Dollars in thousands)

  Contractually required
     principal and interest ........ $208,410 $315,103 $179,441 $181,523 $174,110 $260,178 $452,658 $1,771,423

  Nonaccretable difference .....

(52,526)

(83,933) (52,388)

(47,538) (67,300)

(86,210) (126,321)

(516,216)

  Cash flows expected
     to be collected ...................

155,884

231,170 127,053

133,985 106,810

173,968 326,337

1,255,207

  Accretable difference ...........

(21,432)

(44,692) (35,245)

(22,604) (25,376)

(24,074) (63,420)

(236,843)

  Fair value at acquisition date

$134,452 $186,478 $ 91,808 $111,381 $  81,434 $149,894 $262,917 $1,018,364

Carrying value at
  January 1, 2010 .................... $           - $           - $           - $           - $           - $           - $           - $              -

Covered loans acquired ..........

134,452

186,478

91,808

111,381

Accretion ...............................

7,436

7,144

2,222

339

Transfers to foreclosed assets
  covered by FDIC loss share
  agreements ..........................

(2,755)

(2,599)

-

-

Payments received .................

(23,786)

(15,356)

(6,339)

(669)

Other activity, net ..................

(364)

53

23

-

     Carrying value at
        December 31, 2010 ........

114,983

175,720

87,714

111,051

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

524,119

17,141

(5,354)

(46,150)

(288)

489,468

Covered loans acquired ..........

-

-

-

-

81,434

149,894 262,917

494,245

Accretion ...............................

7,662

13,716

6,716

8,193

6,461

7,798

15,589

66,135

Transfers to foreclosed assets
   covered by FDIC loss share
   agreements .........................

(5,197)

(14,938)

(1,990)

(2,381)

(1,218)

(858)

(2,432)

(29,014)

Payments received .................

(20,296)

(40,256) (11,598)

(40,814) (22,061)

(22,514) (48,249)

(205,788)

Other activity, net ..................

(792)

(2,467)

(1,044)

(1,348)

(225)

(1,015)

(1,231)

(8,122)

     Carrying value at
        December 31, 2011 ....... $  96,360 $131,775 $  79,798 $  74,701 $  64,391 $133,305 $226,594 $   806,924

78

The following table presents a summary of the carrying value and type of covered loans at December 31,

2011 and 2010.

Real estate:
   Residential 1-4 family ........................................
   Non-farm/non-residential ..................................
   Construction/land development .........................
   Agricultural .......................................................
   Multifamily residential .......................................
       Total real estate .............................................
Commercial and industrial ....................................
Consumer ..............................................................
Agricultural (non-real estate) ...............................
Other .....................................................................
       Total covered loans ........................................

December 31,

2010
2011
(Dollars in thousands)

$202,621
369,757
160,872
24,104
15,894
773,248
29,749
958
2,806
163
$806,924

$132,108
214,435
102,099
9,643
10,709
468,994
17,999
1,248
73
1,154
$489,468

The following table presents a summary, by acquisition, of changes in the accretable difference on covered

loans during the periods indicated.

First
 Unity Woodlands Horizon Chestatee Oglethorpe Choice

Park
Avenue

 Total

(408)
(2,956)

123,973
(17,141)

-
-

-
-

-
-

-
-

-
-

-
-

-
-

(Dollars in thousands)

(299)
(871)

2,453
-

(109)
(1,010)

-
(1,075)

35,245
(2,222)

44,692
(7,144)

22,604
(339)

Accretable difference
  at January 1, 2010 ............. $          - $          - $          - $          - $          - $          - $          - $            -
Accretable difference
  acquired ............................. 21,432
Accretion .............................
(7,436)
Adjustments to accretable
  difference due to:
  Covered loans
   transferred to covered
   foreclosed assets ...............
  Covered loans paid off .......
  Cash flow revisions as a
    result of renewals
    and/or modifications
    of covered loans ..............
  Other, net ...........................
      Accretable difference at
         December 31, 2010 .... 15,279
Accretable difference
  acquired .............................
Accretion .............................
Adjustments to accretable
  difference due to:
  Covered loans
   transferred to covered
   foreclosed assets ...............
  Covered loans paid off .......
  Cash flow revisions as a
    result of renewals and/or
    modifications of
    covered loans ...................
  Other, net ...........................
      Accretable difference at
         December 31, 2011 .... $10,614 $24,555 $24,432 $10,663 $17,338 $16,184 $47,105 $150,891

63,420
24,074
(7,798) (15,589)

-
(7,662) (13,716)

25,376
(6,461)

(503)
(4,564)

(315)
(2,811)

(1,611)
(2,146)

(91)
(1,435)

(327)
(3,167)

-
(8,193)

-
(6,716)

14,508
1,509

2,097
671

1,269
165

1,446
103

4,691
155

1,481
177

3,514
140

3,104
319

(191)
(934)

(384)
(273)

647
106

4
213

106,891

32,165

22,265

37,182

10
98

-
-

-
-

-
-

-
-

-

-

-

-

112,870
(66,135)

(3,422)
(15,330)

79

FDIC Loss Share Receivable

The following table presents a summary, by acquisition, of the FDIC loss share receivable as of the dates

of acquisition and the activity within the FDIC loss share receivable during the periods indicated.

First
   Unity    Woodlands  Horizon Chestatee Oglethorpe Choice

Park
Avenue

 Total

9,979

5,897

3,678

(Dollars in thousands)

At acquisition date:
  Expected principal loss
     on covered assets:
     Covered loans .................... $50,354 $73,220 $40,537 $ 46,869 $62,890 $81,583 $115,127 $470,580
     Covered foreclosed
       assets ..............................
     Total expected
       principal losses ................
  Estimated loss sharing
     percentage(1) ......................
  Estimated recovery
     from FDIC ...........................
  Discount for net present
     value on FDIC loss share
     receivable ..........................
  Net present value of FDIC
     loss share receivable
     at acquisition date ............. $44,147 $55,866 $29,089 $46,059 $51,103 $59,544 $115,932 $401,740

(16,050)

564,479

164,977

131,982

451,584

(7,428)

(6,283)

(6,225)

(4,119)

(5,535)

(4,204)

70,797

62,829

44,215

60,333

79,117

82,211

35,372

63,294

65,769

48,266

56,638

50,263

49,850

15,960

93,899

7,907

 80%

80%

80%

80%

80%

80%

80%

80%

628

(49,844)

-
-
-
-

-
-
-
-

-
-
-
-

31,120

46,059
-
-
-

29,089
331
-
(238)

55,866
1,007
(4,802)
(295)

44,147
1,229
(15,308)
1,052

Carrying value at
   January 1, 2010 ................... $          - $          - $          - $          - $          - $          - $            - $            -
FDIC loss share receivable
   recorded at acquisition ........
Accretion income ....................
Cash received from FDIC .........
Other activity, net ...................
       Carrying value at
          December 31, 2010 ......
FDIC loss share receivable
   recorded at acquisition ........
Accretion income ....................
Cash received from FDIC .........
Reductions of FDIC loss share
   receivable for payments on
   covered loans in excess of
   Day 1 Fair Values estimates ...
Expenses on covered assets
   reimbursable by FDIC ..........
Other activity, net ...................
       Carrying value at
          December 31, 2011 ....... $27,575 $29,177 $21,757 $29,382 $37,720 $47,982 $  84,670 $278,263

59,544
1,814
(9,505) (18,466) (11,942) (12,372)

-
1,807
(5,069) (23,001)

226,579
11,076
(28,646) (109,001)

175,161
2,567
(20,110)
519

115,932
2,427

51,103
1,997

1,376
282

1,606
579

1,183
918

1,330
1,988

8,647
4,511

1,943
218

-
1,363

737
390

472
136

-
927

-
741

(21,686)

158,137

(1,612)

(3,590)

(7,204)

(4,565)

(2,892)

51,776

46,059

29,182

(948)

(875)

-

-

-

(1) Certain of the Company’s loss share agreements contain tranches whereby the FDIC’s loss sharing percentage is

more than or less than 80%. However, management’s current expectation of most of the principal losses on covered
assets under each of the loss share agreements falls in the tranches whereby the FDIC would reimburse the
Company for approximately 80% of such losses.

80

Foreclosed Assets Covered by FDIC Loss Share Agreements

The following table presents a summary, by acquisition, of foreclosed assets covered by FDIC loss share

agreements, or covered foreclosed assets, as of the dates of acquisition and the activity within covered
foreclosed assets during the periods indicated.

First

Park

  Unity  Woodlands Horizon Chestatee Oglethorpe Choice Avenue

 Total

At acquisition date:
  Balance on acquired
     bank’s books ....................... $20,304 $12,258 $8,391 $ 31,647 $16,554 $2,773 $91,442 $183,369
  Total expected losses ..............
(93,899)
  Discount for net present value
     of expected cash flows .........
(18,557)
  Fair value at acquisition date ... $  8,859 $  5,029 $3,683 $13,406 $  7,085 $1,671 $31,180 $  70,913

(5,897) (3,678) (15,960)

(1,332) (1,030)

(474) (10,412)

(628) (49,850)

(Dollars in thousands)

(2,281)

(1,562)

(1,466)

(9,979)

(7,907)

-

-

-

8,859

5,029

3,683

2,755

2,599

13,406

Carrying value at
  January 1, 2010 ...................... $          - $          - $        - $          - $          - $        - $          - $            -
Covered foreclosed
  assets acquired .......................
Covered loans transferred to
  covered foreclosed assets ........
Sales of covered
  foreclosed assets .....................
       Carrying value at
          December 31, 2010 ........
Covered foreclosed
  assets acquired .......................
Covered loans transferred to
  covered foreclosed assets ........
Sales of covered
  foreclosed assets .....................
       Carrying value at
          December 31, 2011 ......... $10,272 $14,435 $3,677 $  9,677 $  7,132 $2,224 $25,490 $  72,907

(6,499) (1,996)

(1,632)

(6,110)

(8,122)

(1,171)

(2,985)

(3,554)

13,406

31,145

29,014

14,938

39,936

31,180

30,977

8,060

3,683

5,996

1,990

1,218

5,197

2,432

2,381

5,354

1,671

7,085

(305)

858

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

(27,188)

(5,186)

The following table presents a summary of the carrying value and type of foreclosed assets covered by

FDIC loss share agreements, or covered foreclosed assets, at December 31, 2011 and 2010.

December 31,

Real estate:
   Residential 1-4 family .................................................................... $15,945
11,624
   Non-farm/non-residential ..............................................................
43,323
   Construction/land development .....................................................
2,014
   Multifamily residential ...................................................................
72,906
         Total real estate .......................................................................
Commercial and industrial ................................................................
1
$72,907
         Total covered foreclosed assets ................................................

$10,624
3,755
16,366
-
30,745
400
$31,145

2011
2010
(Dollars in thousands)

81

FDIC Clawback Payable

The following table presents a summary, by acquisition, of the FDIC clawback payable as of the dates of

acquisition and activity within the FDIC clawback payable during the periods indicated.
 First
 Unity Woodlands  Horizon  Chestatee Oglethorpe  Choice

Park
Avenue

Total

At acquisition date:
  Estimated FDIC
    clawback payable ........... $2,612
  Discount for net present
    value on FDIC
    clawback payable ...........
  Net present value of FDIC
    clawback payable at
    acquisition date ............. $1,566

(1,046)

(Dollars in thousands)

$4,846

$2,380

$1,291

$1,721

$1,515 $24,219 $38,584

(1,905)

(919 )

(499)

(664)

(585)

(9,351) (14,969)

$2,941

$1,461

$   792

$ 1,057

$   930 $14,868 $23,615

1,566
63
-

2,941
63
-

Carrying value
  at January 1, 2010 ........... $        - $        -
FDIC clawback payable
  recorded at acquisition .....
Amortization expense ........
Other activity, net ..............
      Carrying value at
         December 31, 2010 ...
FDIC clawback payable
  recorded at acquisition .....
Amortization expense ........
Other activity, net ..............
      Carrying value at
         December 31, 2011 .... $1,709

-
149
-

-
80
-

$3,153

1,629

3,004

$        -

$        -

$        -

$        - $          - $          -

1,461
12
6

1,479

-
73
-

792
-
-

792

-
55
(88)

-
-
-

-

-
-
-

-

-
-
-

-

6,760
138
6

6,904

1,057
42
-

930
31
-

14,868
505
-

16,855
935
(88)

$1,552

$   759

$1,099

$   961 $15,373 $24,606

4. Investment Securities

The following table is a summary of the amortized cost and estimated fair values of investment securities,
all of which are classified as AFS. The Company’s holdings of “other equity securities” include FHLB-Dallas,
FHLB-Atlanta and FNBB shares which do not have readily available fair values and are carried at cost.

Gross
Amortized Unrealized Unrealized
Gains

 Losses

 Gross

Cost

Estimated
Fair
  Value(1)

December 31, 2011:
Obligations of states and political subdivisions ....... $359,667
U.S. Government agency residential
46,068
   mortgage-backed securities ..................................
Other equity securities .............................................
17,828
      Total investment securities AFS ......................... $423,563

December 31, 2010:
Obligations of states and political subdivisions ....... $378,822
U.S. Government agency residential
1,269
   mortgage-backed securities ..................................
Other equity securities .............................................
18,882
      Total investment securities AFS ......................... $398,973

(Dollars in thousands)

$14,359

$   (979)

$373,047

1,967
-
$16,326

-
-
$   (979)

48,035
17,828
$438,910

$  6,431

$(6,706)

$378,547

-
-
$  6,431

-
-
$(6,706)

1,269
18,882
$398,698

(1) The Company utilizes independent third parties as its principal pricing sources for determining fair value of
investment securities which are measured on a recurring basis. For investment securities traded in an active
market, the fair values are obtained from independent pricing services and based on quoted market prices if
available. If quoted market prices are not available, fair values are based on market prices for comparable securities,
broker quotes or comprehensive interest rate tables and pricing matrices or a combination thereof. For investment
securities traded in a market that is not active, fair value is determined using unobservable inputs.

82

The following table shows gross unrealized losses and estimated fair value of investment securities AFS,
aggregated by investment category and length of time that individual investment securities have been in a
continuous unrealized loss position.

 Less than 12 Months
Estimated Unrealized
Fair Value

Losses

   12 Months or More
Estimated Unrealized
Fair Value

Losses
(Dollars in thousands)

Total
Estimated Unrealized
Fair Value

Losses

December 31, 2011:
Obligations of states and
  political subdivisions .......... $    6,035
    Total temporarily impaired
      investment securities ........ $    6,035

December 31, 2010:
Obligations of states and
  political subdivisions .......... $174,356
    Total temporarily impaired
      investment securities ........ $174,356

$   248

$16,582

$731

$  22,617

$   979

$   248

$16,582

$731

$  22,617

$   979

$6,153

$  5,387

$553

$179,743

$6,706

$6,153

$  5,387

$553

$179,743

$6,706

In evaluating the Company’s unrealized loss positions for other-than-temporary impairment for the

investment securities portfolio, management considers the credit quality of the issuer, the nature and cause
of the unrealized loss, the severity and duration of the impairments and other factors. At December 31, 2011
and 2010, management determined the unrealized losses were the result of fluctuations in interest rates and
did not reflect deteriorations of the credit quality of the investments. Accordingly, management believes that
all of its unrealized losses on investment securities are temporary in nature. The Company does not have the
intent to sell these investment securities and more likely than not would not be required to sell these
investment securities before fair value recovers to amortized cost.

A maturity distribution of investment securities AFS reported at amortized cost and estimated fair value

as of December 31, 2011 is as follows:

Amortized
Cost
(Dollars in thousands)

Estimated
Fair Value

Due in one year or less .........................................
Due after one year to five years ...........................
Due after five years to ten years ..........................
Due after ten years ..............................................
    Total .................................................................

$  12,216
37,392
35,935
338,020
$423,563

$  12,624
38,539
37,241
350,506
$438,910

For purposes of this maturity distribution, all investment securities are shown based on their contractual
maturity date, except (i) FHLB-Dallas, FHLB-Atlanta and FNBB stock with no contractual maturity date are
shown in the longest maturity category and (ii) U.S. Government agency residential mortgage-backed
securities are allocated among various maturities based on an estimated repayment schedule utilizing
Bloomberg median prepayment speeds and interest rate levels at December 31, 2011. Expected maturities
will differ from contractual maturities because issuers may have the right to call or prepay obligations with
or without call or prepayment penalties.

Sales activities and other-than-temporary impairment charges of the Company’s investment securities AFS

are summarized as follows:

2011

Year Ended December 31,
2010
(Dollars in thousands)
$255,232

2009

$528,542

Sales proceeds ......................................................... $94,676

Gross realized gains ................................................. $  1,044
(111)
Gross realized losses ................................................
-
Other-than-temporary impairment charges ..............

$    5,030
(486)
-

$  30,802
(2,920)
(900)

   Net gains (losses) on investment securities ......... $     933

$    4,544

$  26,982

83

Investment securities with carrying values of $316.8 million and $345.3 million at December 31, 2011 and
2010, respectively, were pledged to secure public funds and trust deposits and for other purposes required or
permitted by law.

At December 31, 2011, the Company’s holdings of investment securities issued by the Government National

Mortgage Association, which carry the full faith and credit guaranty of the U.S. Government, totaled $45.6
million, or 10.7% of total common stockholder’s equity. At December 31, 2010, the Company had no holdings of
investment securities of any one issuer in an amount greater than 10% of total common stockholders’ equity.

5. Loans and Leases

The following table is a summary of the loan and lease portfolio, excluding loans covered by FDIC loss

share agreements, by principal category.

December 31,

2011

2010

Real estate:
   Residential 1-4 family .............................. $   260,473
708,766
   Non-farm/non-residential ........................
478,106
   Construction/land development ...............
71,158
   Agricultural .............................................
142,131
   Multifamily residential .............................
1,660,634
       Total real estate ...................................
120,679
Commercial and industrial ..........................
40,162
Consumer ....................................................
54,745
Direct financing leases ................................
6,322
Agricultural (non-real estate) .....................
Other ...........................................................
2,740
       Total loans and leases .......................... $1,885,282

(Dollars in thousands)

13.8% $   266,014
678,465
37.6
496,737
25.4
81,736
3.8
103,875
7.5
1,626,827
88.1
120,038
6.4
54,401
2.1
42,754
2.9
9,962
0.3
2,447
0.2
100.0% $1,856,429

14.3%
36.5
26.8
4.4
5.6
87.6
6.5
2.9
2.3
0.5
0.2
100.0%

The above table includes deferred costs, net of deferred fees, that totaled $0.6 million and $1.6 million at

December 31, 2011 and 2010, respectively.

Loans and leases on which the accrual of interest has been discontinued aggregated $12.5 million and

$13.9 million at December 31, 2011 and 2010, respectively. Interest income recorded during 2011, 2010
and 2009 for nonaccrual loans and leases at December 31, 2011, 2010 and 2009 was $0.4 million, $0.1
million and $1.3 million, respectively. Under the original terms, these loans and leases would have reported
$1.2 million, $1.1 million and $2.5 million of interest income during 2011, 2010 and 2009, respectively.

The Company’s direct financing leases include estimated residual values of $0.1 million at December 31,
2011 and $0.5 million at December 31, 2010. Direct financing leases are presented net of unearned income
totaling $7.4 million and $5.9 million at December 31, 2011 and 2010, respectively.

6. Allowance for Loan and Lease Losses (“ALLL”)
The following table is a summary of activity within the ALLL.

 2011

Year Ended December 31,
 2010
(Dollars in thousands)

 2009

Balance - beginning of year ....................................................................
Non-covered loans and leases charged off ..............................................
Recoveries of non-covered loans and leases previously charged off .......
Net charge-offs - non-covered loans and leases .....................................
Covered loans charged off .......................................................................
      Net charge-offs - total loans and leases ............................................
Provision for loan and lease losses .........................................................
Balance - end of year ..............................................................................

$40,230
(12,988)
427
(12,561)
(275)
(12,836)
11,775
$39,169

$39,619
(16,764)
1,375
(15,389)
-
(15,389)
16,000
$40,230

$29,512
(35,885)
1,192
(34,693)
-
(34,693)
44,800
$39,619

84

As of December 31, 2011, the Company identified purchased loans covered by FDIC loss share agreements

acquired in its FDIC-assisted acquisitions totaling $3.2 million where the expected performance of such
loans had deteriorated from management’s performance expectations established in conjunction with the
determination of the Day 1 Fair Values. As a result the Company recorded partial charge-offs, net of
adjustments to the FDIC loss share receivable and the FDIC clawback payable, totaling $0.3 million for such
loans during the fourth quarter of 2011. The Company also recorded $0.3 million of provision for loan and
lease losses during the fourth quarter of 2011 to cover such charge-offs. In addition to those net charge-offs,
the Company also transferred certain of these covered loans to covered foreclosed assets during the fourth
quarter of 2011. As a result of these actions, the Company had $1.9 million of impaired covered loans at
December 31, 2011 (none at December 31, 2010).

The following table is a summary of the Company’s ALLL as of and for the years ended December 31,

2011 and 2010.

Beginning
Balance

Charge-offs Recoveries Provision

(Dollars in thousands)

December 31, 2011:

Real estate:
   Residential 1-4 family ................................. $  2,999
8,313
   Non-farm/non-residential ............................
10,565
   Construction/land development ...................
2,569
   Agricultural .................................................
1,320
   Multifamily residential .................................
4,142
Commercial and industrial ..............................
2,051
Consumer ........................................................
1,726
Direct financing leases ....................................
 201
Other ...............................................................
 -
Covered loans .................................................
6,344
Unallocated .....................................................
Total ........................................................ $40,230

December 31, 2010:

Real estate:
   Residential 1-4 family ................................. $  3,600
6,574
   Non-farm/non-residential ............................
11,585
   Construction/land development ...................
750
   Agricultural .................................................
710
   Multifamily residential .................................
3,587
Commercial and industrial ..............................
2,599
Consumer ........................................................
1,560
Direct financing leases ....................................
 289
Other ...............................................................
8,365
Unallocated .....................................................
Total ........................................................ $39,619

$  (2,743)
(1,033)
(5,651)
(771)
-
(1,465)
(825)
(413)
(87)
(275)
-
$(13,263)

$     (872)
(1,702)
(4,037)
(301)
(133)
(6,937)
(1,196)
(478)
(1,108)
-
$(16,764)

$     64
16
30
-
-
142
166
5
4
-
-
$   427

$     99
87
253
45
1
656
212
20
2
-
$1,375

$  3,528
4,907
4,534
1,585
1,244
1,772
(183)
314
143
275
(6,344)
$11,775

$     172
3,354
2,764
2,075
742
6,836
436
624
1,018
(2,021)
$16,000

Ending
Balance

$  3,848
12,203
9,478
3,383
2,564
4,591
1,209
1,632
261
-
-
$39,169

$  2,999
8,313
10,565
2,569
1,320
4,142
2,051
1,726
201
6,344
$40,230

Because the Company has refined its allowance calculation during 2011 such that it no longer maintains
unallocated allowance at December 31, 2011, the Company’s allocation of its allowance at December 31, 2011
may not be comparable with prior periods.

85

The following table is a summary of the Company’s ALLL and recorded investment in loans and leases,

excluding loans covered by FDIC loss share agreements, as of December 31, 2011 and 2010.

Allowance for
Loan and Leases Losses

Loans and Leases not Covered
by FDIC Loss Share Agreements

ALLL for
Individually
Evaluated
Impaired
Loans and
Leases

ALLL
for All
Other
 Loans
and
Leases

Individually
Evaluated
Impaired All Other

Loans
and
Leases

Loans
and
Leases

Total
ALLL

Total
Loans
and
Leases

(Dollars in thousands)

December 31, 2011:

Real estate:
   Residential 1-4 family(1) ..............
   Non-farm/non-residential ............
   Construction/land development ...
   Agricultural .................................
   Multifamily residential .................
Commercial and industrial ..............
Consumer ........................................
Direct financing leases ....................
Other ...............................................
Total ........................................

$   415
410
31
-
-
868
57
-
 2
$1,783

$  3,433 $  3,848
12,203
9,478
3,383
2,564
4,591
1,209
1,632
261
$37,386 $39,169

11,793
9,447
3,383
2,564
3,723
1,152
1,632
259

$  3,239
3,837
3,001
737
-
1,390
87
-
11
$12,302

$   257,234 $   260,473
708,766
478,106
71,158
142,131
120,679
40,162
54,745
9,062
$1,872,980 $1,885,282

704,929
475,105
70,421
142,131
119,289
40,075
54,745
9,051

December 31, 2010:

Real estate:
   Residential 1-4 family .................
   Non-farm/non-residential ............
   Construction/land development ...
   Agricultural .................................
   Multifamily residential .................
Commercial and industrial ..............
Consumer ........................................
Direct financing leases ....................
Other ...............................................
Unallocated .....................................
Total ........................................

  $     33
71
508
403
-
928
33
-
 44
-
$2,020

$  2,966 $  2,999
8,313
10,565
2,569
1,320
4,142
2,051
1,726
201
6,344
$38,210 $40,230

8,242
10,057
2,166
1,320
3,214
2,018
1,726
157
6,344

$     945
3,096
4,086
2,456
-
947
183
-
114
-
$11,827

$   265,069 $   266,014
678,465
496,737
81,736
103,875
120,038
54,401
42,754
12,409
-
$1,844,602 $1,856,429

675,369
492,651
79,280
103,875
119,091
54,218
42,754
12,295
-

(1) Includes one individually evaluated loan classified as a TDR totaling $1.0 million with an ALLL of $0.3 million

allocated for such loan.

86

s
n
a
o
L
d
e
r
e
v
o
C

s
e
s
a
e
L
d
n
a
s
n
a
o
L
d
e
r
e
v
o
c
-
n
o
N

s
n
a
o
l

d
e
r
e
v
o
c
-
n
o
n

d
n
a

d
e
r
e
v
o
c

g
n

i
d
u
l
c
n

i

,
s
e
s
a
e
l

d
n
a

s
n
a
o

l

l
a
t
o
t

s
’
y
n
a
p
m
o
C

e
h
t

r
o
f

s
r
o
t
a
c
i
d
n

i

y
t
i
l
a
u
q

t
i
d
e
r
c

f
o

y
r
a
m
m
u
s

a

s
i

e
l

b
a
t

i

g
n
w
o
l
l
o
f

e
h
T

.

0
1
0
2

d
n
a

1
1
0
2

,

1
3

r
e
b
m
e
c
e
D
f
o

s
a

,
s
e
s
a
e
l

d
n
a

l
a
t
o
T

s
n
a
o
L

d
n
a

s
e
s
a
e
L

l
a
t
o
T

d
e
r
e
v
o
C

s
n
a
o
L

l
a
t
o
T

d
e
r
e
v
o
c
-
n
o
N

s
n
a
o
L

)
s
d
n
a
s
u
o
h
t

n

i

s
r
a
l
l
o
D
(

)
2
(
2
V
F

)
1
(
1
V
F

s
e
s
a
e
L
d
n
a

d
r
a
d
n
a
t
s
b
u
S

h
c
t
a
W

e
t
a
r
e
d
o
M

y
r
o
t
c
a
f
s
i
t
a
S

:

1
1
0
2

,

1
3

r
e
b
m
e
c
e
D

:
e
t
a
t
s
e

l
a
e
R

4
9
0

,

3
6
4

$

1
2
6

,

2
0
2
$

-

$

1
2
6

,

2
0
2
$

3
7
4

,

0
6
2

$

7
5
7

,

1

$

9
4
4

,

2

$

-

$ 

7
6
2

,

6
5
2

$

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.

)
3
(
y
l
i

m
a
f

4
-
1

l
a
i
t
n
e
d
i
s
e
R

8
7
9

,

8
3
6

2
6
2

,

5
9

5
2
0

,

8
5
1

8
2
4

,

0
5
1

0
2
1

,

1
4

5
4
7

,

4
5

1
3
0

,

2
1

3
2
5

,

8
7
0

,

1

7
5
7

,

9
6
3

2
7
8

,

0
6
1

4
0
1

,

4
2

4
9
8

,

5
1

9
4
7

,

9
2

-

8
5
9

9
6
9

,

2

-

-

-

-

-

8
1
5

5
3
1

1
0
2

,

1

6
5
5

,

8
6
3

7
3
7

,

0
6
1

4
0
1

,

4
2

6
7
3

,

5
1

9
4
7

,

9
2

-

8
5
9

9
6
9

,

2

6
6
7

,

8
0
7

6
0
1

,

8
7
4

8
5
1

,

1
7

1
3
1

,

2
4
1

9
7
6

,

0
2
1

2
6
1

,

0
4

5
4
7

,

4
5

2
6
0

,

9

6
1
7

,

8

5
0
0

,

7

7
8
7

6
1
4

,

4

9
1
6

,

6
1

9
7
2

0
2
3

6
2
1

6
7
9

,

3
5

1
4
7

,

1
4

1
4
3

,

6
9

0
0
5

,

4
6
1

0
3
8

,

1
4
5

9
4
1

,

3
6
2

.
.
.
.
.
.
.
.
.
.
.
.
.

l
a
i
t
n
e
d
i
s
e
r
-
n
o
n
/
m
r
a
f
-
n
o
N

.
.
.
.

t
n
e
m
p
o
l
e
v
e
d

d
n
a
l
/
n
o
i
t
c
u
r
t
s
n
o
C

8
2
3

,

7

3
7
6

,

3

3
9
0

,

3

2
3
0

,

1

6
2

5
8
3

9
4
5

,

1
1

2
2
6

,

3
4

6
9
9

,

0
3

-

0
7
0

,

2

4
2
7

,

1

6
7
2

,

5
4

9
4
0

,

4
9

4
7
1

,

2
8

1
5
8

,

8
3

9
2
3

,

2
5

7
2
8

,

6

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.

l
a
r
u
t
l
u
c
i
r
g
A

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
l
a
i
t
n
e
d
i
s
e
r

y
l
i

m
a
f
i
t
l
u
M

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.

l
a
i
r
t
s
u
d
n

i

d
n
a

l
a
i
c
r
e
m
m
o
C

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.

)
3
(
r
e
m
u
s
n
o
C

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
e
s
a
e
l

g
n
i
c
n
a
n
i
f

t
c
e
r
i
D

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
)
3
(
r
e
h
t
O

6
0
2

,

2
9
6

,

2
$

4
2
9

,

6
0
8
$

4
5
8

,

1
$

0
7
0

,

5
0
8
$

2
8
2

,

5
8
8

,

1
$

5
2
0

,

0
4
$

3
0
7

,

3
1
1
$

2
0
8

,

0
5
3
$

2
5
7

,

0
8
3

,

1
$

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.

l
a
t
o
T

0
0
9

,

2
9
8

6
3
8

,

8
9
5

9
7
3

,

1
9

4
8
5

,

4
1
1

7
3
0

,

8
3
1

9
4
6

,

5
5

4
5
7

,

2
4

6
3
6

,

3
1

5
3
4

,

4
1
2

9
9
0

,

2
0
1

3
4
6

,

9

9
0
7

,

0
1

9
9
9

,

7
1

8
4
2

,

1

-

7
2
2

,

1

2
2
1

,

8
9
3

$

8
0
1

,

2
3
1
$

7
9
8

,

5
4
3

,

2
$

8
6
4

,

9
8
4
$

-

-

-

-

-

-

-

-

-

-

$

8
0
1

,

2
3
1
$

4
1
0

,

6
6
2

$

6
2
7

$

9
0
8

,

3

$

-

$ 

9
7
4

,

1
6
2

$

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.

)
3
(
y
l
i

m
a
f

4
-
1

l
a
i
t
n
e
d
i
s
e
R

5
3
4

,

4
1
2

9
9
0

,

2
0
1

3
4
6

,

9

9
0
7

,

0
1

9
9
9

,

7
1

8
4
2

,

1

-

7
2
2

,

1

5
6
4

,

8
7
6

7
3
7

,

6
9
4

6
3
7

,

1
8

5
7
8

,

3
0
1

8
3
0

,

0
2
1

1
0
4

,

4
5

4
5
7

,

2
4

9
0
4

,

2
1

3
8
1

,

8
1

1
3
6

,

5
1

9
5
7

,

8

7
9
8

9
7
1

,

4

4
8

6
4
1

2
4
2

6
7
4

,

2
3

5
3
1

,

1
2

3
8
8

,

2
2
1

8
3
0

,

1
0
2

3
2
9

,

4
0
5

3
3
9

,

8
5
2

.
.
.
.
.
.
.
.
.
.
.
.
.

l
a
i
t
n
e
d
i
s
e
r
-
n
o
n
/
m
r
a
f
-
n
o
N

.
.
.
.

t
n
e
m
p
o
l
e
v
e
d

d
n
a
l
/
n
o
i
t
c
u
r
t
s
n
o
C

9
0
6

,

3

9
9
6

,

3

9
5
6

,

1

7
8
1

,

1

6
7
6

7
5
1

9
8
4

,

0
1

9
7
5

,

8

4
7
2

,

4
3

-

8
2
3

,

3

6
3
8

,

1

9
7
8

,

8
5

0
0
7

,

0
9

6
2
9

,

9
7

8
6
0

,

3
5

6
6
6

,

8
3

4
7
1

,

0
1

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.

l
a
r
u
t
l
u
c
i
r
g
A

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
l
a
i
t
n
e
d
i
s
e
r

y
l
i

m
a
f
i
t
l
u
M

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.

l
a
i
r
t
s
u
d
n

i

d
n
a

l
a
i
c
r
e
m
m
o
C

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.

)
3
(
r
e
m
u
s
n
o
C

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
e
s
a
e
l

g
n
i
c
n
a
n
i
f

t
c
e
r
i
D

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
)
3
(
r
e
h
t
O

$

8
6
4

,

9
8
4
$

9
2
4

,

6
5
8

,

1
$

7
4
8

,

8
4
$

7
0
4

,

8
6

$

7
2
4

,

2
8
3
$

8
4
7

,

6
5
3

,

1
$

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.

l
a
t
o
T

9
8

o
t

0
3

d
n
a

i

g
n
m
r
o
f
r
e
p

e
r
a

y
e
h
t

f
i

-

h
c
t
a
w
)
i
i
(

,
e
u
d

t
s
a
p

s
y
a
d

0
3

n
a
h
t

s
s
e
l

d
n
a

i

g
n
m
r
o
f
r
e
p

e
r
a

y
e
h
t

f
i

-

y
r
o
t
c
a
f
s
i
t
a
s

)
i
(

e
b

o
t

s
n
a
o
l

h
c
u
s

s
r
e
d
i
s
n
o
c

y
n
a
p
m
o
C

e
h
t

,
e
l

b
a
t

e
v
o
b
a

e
h
t

f
o

s
e
s
o
p
r
u
p

r
o
f

,
r
e
v
e
w
o
H

.
s
n
a
o
l

”
r
e
h
t
o
“

n

i
a
t
r
e
c

d
n
a

,
s
n
a
o
l

r
e
m
u
s
n
o
c

s
t
i

,
s
n
a
o
l

y
l
i

m
a
f

4
-
1

l
a
i
t
n
e
d
i
s
e
r

s
t
i

e
t
a
r

k
s
i
r

t
o
n

s
e
o
d

y
n
a
p
m
o
C

e
h
T

)
3
(

e
h
t

h
t
i

w
n
o
i
t
c
n
u
n
o
c

j

n

i

d
e
h
s
i
l

b
a
t
s
e

s
n
o
i
t
a
t
c
e
p
x
e

s
’
t
n
e
m
e
g
a
n
a
m
m
o
r
f

d
e
t
a
r
o
i
r
e
t
e
d

s
a
h

e
c
n
a
m
r
o
f
r
e
p

e
s
o
h
w
s
n
a
o
l

d
e
r
e
v
o
c

l
l
a

e
r
a

2
V
F

d
e
t
a
r

s
n
a
o

l

d
e
r
e
v
o
C

)
2
(

.

n
a
o

l

d
e
r
e
v
o
c

h
c
u
s

f
o

l
l
a

r
o

n
o
i
t
r
o
p

e
m
o
s

f
o

f
f
o
-
e
g
r
a
h
c

a

r
o

n
o
i
t
a
c
o
l
l
a

e
c
n
a
w
o
l
l
a

n
a

n

i

g
n

i
t
l
u
s
e
r

s
e
u
l
a
V
r
i
a
F

1

y
a
D
e
h
t

f
o

i

n
o
i
t
a
n
m
r
e
t
e
d

.
e
u
d

t
s
a
p

e
r
o
m

r
o

s
y
a
d

0
9

r
o

i

g
n
m
r
o
f
r
e
p
-
n
o
n

e
r
a

y
e
h
t

f
i

-

d
r
a
d
n
a
t
s
b
u
s

)
i
i
i
(

r
o

e
u
d

t
s
a
p

s
y
a
d

e
h
t

h
t
i

w
n
o
i
t
c
n
u
n
o
c

j

n

i

d
e
h
s
i
l

b
a
t
s
e

s
n
o
i
t
a
t
c
e
p
x
e

s
’
t
n
e
m
e
g
a
n
a
m
h
t
i

w
e
c
n
a
d
r
o
c
c
a

n

i

i

g
n
m
r
o
f
r
e
p

e
r
a

t
a
h
t

s
n
a
o
l

d
e
r
e
v
o
c

l
l
a

e
r
a

1
V
F

d
e
t
a
r

s
n
a
o

l

d
e
r
e
v
o
C

)
1
(

.
s
e
u
l
a
V
r
i
a
F

1

y
a
D
e
h
t

f
o

i

n
o
i
t
a
n
m
r
e
t
e
d

:

0
1
0
2

,

1
3

r
e
b
m
e
c
e
D

:
e
t
a
t
s
e

l
a
e
R

87

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Company’s credit quality indicators consist of an internal grading system used to assign grades to all
loans and leases except residential 1-4 family loans, consumer loans and purchased loans, including covered
loans. The grade for each individual loan or lease is determined by the account officer and other approving
officers at the time the loan or lease is made and changed from time to time to reflect an ongoing assessment
of loan or lease risk. Grades are reviewed on specific loans and leases from time to time by senior management
and as part of the Company’s internal loan review process. These risk elements include the following: (1) for
non-farm/non-residential, multifamily residential, and agricultural real estate loans, the debt service coverage
ratio (income from the property in excess of operating expenses compared to loan repayment requirements),
operating results of the owner in the case of owner-occupied properties, the loan-to-value ratio, the age,
condition, value, nature and marketability of the collateral and the specific risks and volatility of income,
property value and operating results typical of properties of that type; (2) for construction and land
development loans, the perceived feasibility of the project including the ability to sell developed lots or
improvements constructed for resale or ability to lease property constructed for lease, the quality and nature
of contracts for presale or preleasing, if any, experience and ability of the developer and loan-to-value ratios;
(3) for commercial and industrial loans and leases, the operating results of the commercial, industrial or
professional enterprise, the borrower’s or lessee’s business, professional and financial ability and expertise,
the specific risks and volatility of income and operating results typical for businesses in the applicable
industry and the age, condition, value, nature and marketability of collateral; and (4) for other loans and
leases, the operating results, experience and ability of the borrower or lessee, historical and expected market
conditions and the age, condition, value, nature and marketability of collateral. In addition, for each category
the Company considers secondary sources of income and the financial strength of the borrower or lessee and
any guarantors. The following categories of credit quality indicators are used by the Company.

Satisfactory – Loans and leases in this category are considered to be a satisfactory credit risk and are

generally considered to be collectible in full.

Moderate – Loans and leases in this category are considered to be a marginally satisfactory credit risk and

are generally considered to be collectible in full.

Watch – Loans and leases in this category are presently protected from apparent loss, however weaknesses

exist which could cause future impairment of repayment of principal or interest.

Substandard – Loans and leases in this category are characterized by deterioration in quality exhibited by

a number of weaknesses requiring corrective action and posing risk of some loss.

The Company does not use these same credit quality indicators in its grading of covered loans. Instead, for

purchased loans, including covered loans, management separately monitors this portfolio and periodically
reviews loans contained within this portfolio against the factors and assumptions used in determining the
Day 1 Fair Values. To the extent that a loan is performing in accordance with management’s expectation
established in conjunction with the determination of the Day 1 Fair Values, such loan is rated FV 1, is not
included in any of the Company’s credit quality ratios, is not considered to be an impaired loan and is not
considered in the determination of the required allowance for loan and lease losses. To the extent that a
loan’s performance has deteriorated from management’s expectation established in conjunction with the
determination of the Day 1 Fair Values, such loan is rated FV 2, is included in certain of the Company’s credit
quality metrics, may be considered an impaired loan, and is considered in the determination of the required
level of allowance for loan and lease losses. At December 31, 2011 and 2010, the Company had no allowance
for its covered loans because all losses had been charged off on covered loans whose performance had
deteriorated from management’s expectations established in conjunction with the determination of the
Day 1 Fair Values.

88

The following table is a summary of impaired loans and leases, excluding loans covered by FDIC loss

share agreements, as of and for the years ended December 31, 2011 and 2010.

Principal
Balance

Net
 Charge-offs
to Date

Principal
Balance,
Net of

Specific

Charge-offs Allowance

Average
Carrying
Value

                     (Dollars in thousands)

December 31, 2011:
Impaired loans and leases for which
   there is a related ALLL:
      Real estate:
         Residential 1-4 family ............................... $  3,200
2,931
         Non-farm/non-residential ..........................
238
         Construction/land development .................
9
         Agricultural ...............................................
3,071
      Commercial and industrial ............................
101
      Consumer .....................................................
      Other ............................................................
46
        Total impaired loans and leases
           with a related ALLL .................................
Impaired loans and leases for which
   there is not a related ALLL:
      Real estate:
         Residential 1-4 family ...............................
         Non-farm/non-residential ..........................
         Construction/land development .................
         Agricultural ...............................................
         Multifamily residential ...............................
      Commercial and industrial ............................
      Consumer .....................................................
      Other ............................................................
        Total impaired loans and leases
           without a related ALLL ............................
10,850
Total impaired loans and leases .......................... $20,446

2,121
1,159
6,254
842
133
294
47
-

9,596

December 31, 2010:
Impaired loans and leases for which
   there is a related ALLL:
      Real estate:
         Residential 1-4 family ............................... $     305
654
         Non-farm/non-residential ..........................
1,835
         Construction/land development .................
1,336
         Agricultural ...............................................
1,490
      Commercial and industrial ............................
176
      Consumer .....................................................
      Other ............................................................
364
        Total impaired loans and leases
           with a related ALLL .................................
Impaired loans and leases for which
   there is not a related ALLL:
      Real estate:
         Residential 1-4 family ...............................
         Non-farm/non-residential ..........................
         Construction/land development .................
         Agricultural ...............................................
         Multifamily residential ...............................
      Commercial and industrial ............................
      Consumer .....................................................
      Other ............................................................
        Total impaired loans and leases
           without a related ALLL ............................
12,898
Total impaired loans and leases .......................... $19,058

     851
3,481
6,139
1,392
133
764
93
45

6,160

89

$(1,675)
(146)
(90)
(9)
(1,775)
(28)
(35)

$  1,525
2,785
148
-
1,296
73
11

$     415
410
31
-
868
57
2

  $     504
1,173
882
575
844
81
30

(3,758)

5,838

1,783

4,089

  (407)
(107)
(3,401)
(105)
(133)
(200)
(33)
-

    1,714
1,052
2,853
737
-
94
14
-

-
-
-
-
-
-
-
-

1,239
1,633
5,833
1,000
15
194
15
5

(4,386)
$(8,144)

 6,464
$12,302

-
$  1,783

9,934
$14,023

$     (84)
(210)
(92)
(131)
(786)
(30)
(277)

$    221
444
1,743
1,205
704
146
87

$       33
71
508
403
928
33
44

$     457
298
854
912
317
195
101

(1,610)

4,550

2,020

3,134

(127)
(829)
(3,796)
(141)
(133)
(521)
(56)
(18)

724
2,652
2,343
1,251
-
243
37
27

-
-
-
-
-
-
-
-

1,333
4,490
3,603
1,229
-
1,554
53
56

(5,621)
$(7,231)

7,277
$11,827

-
$  2,020

12,318
$15,452

Interest income on impaired loans and leases is recognized on a cash basis when and if actually collected.
Total interest income recognized on impaired loans and leases for the years ended December 31, 2011, 2010
and 2009 was not material.

The following table is an aging analysis of past due loans and leases, excluding loans covered by FDIC

loss share agreements, at December 31, 2011 and 2010.

30-89

90

Days Past Days or
More(2)

Due(1)

Total
Past Due

Current(3)

(Dollars in thousands)

Total
Loans and
Leases

December 31, 2011:

Real estate:
   Residential 1-4 family .................................. $  2,449
3,448
   Non-farm/non-residential .............................
10,453
   Construction/land development ....................
275
   Agricultural ..................................................
   Multifamily residential ..................................
319
1,477
Commercial and industrial ...............................
1,032
Consumer .........................................................
 42
Direct financing leases .....................................
Other ................................................................
 79
        Total ........................................................ $19,574

December 31, 2010:

Real estate:
   Residential 1-4 family .................................. $  3,809
6,261
   Non-farm/non-residential .............................
11,104
   Construction/land development ....................
956
   Agricultural ..................................................
881
   Multifamily residential ..................................
1,639
Commercial and industrial ...............................
1,187
Consumer .........................................................
 -
Direct financing leases .....................................
Other ................................................................
 201
        Total ........................................................ $26,038

$  1,757
3,448
2,827
727
-
469
279
277
-
$  9,784

$  4,206
6,896
13,280
1,002
319
1,946
1,311
319
79
$29,358

$   256,267 $   260,473
708,766
478,106
71,158
142,131
120,679
40,162
54,745
9,062
$1,855,924 $1,885,282

701,870
464,826
70,156
141,812
118,733
38,851
54,426
8,983

$     726
3,337
4,249
2,108
-
881
146
84
-
$11,531

$  4,535
9,598
15,353
3,064
881
2,520
1,333
84
201
$37,569

$   261,479 $   266,014
678,465
496,737
81,736
103,875
120,038
54,401
42,754
12,409
$1,818,860 $1,856,429

668,867
481,384
78,672
102,994
117,518
53,068
42,670
12,208

(1) Includes $1.0 million and $1.2 million of loans and leases, excluding loans covered by FDIC loss share agreements,

on nonaccrual status at December 31, 2011 and 2010, respectively.

(2) All loans and leases greater than 90 days past due, excluding loans covered by FDIC loss share agreements, were on

nonaccrual status at December 31, 2011 and 2010.

(3) Includes $1.4 million and $1.3 million of loans and leases, excluding loans covered by FDIC loss share agreements,

on nonaccrual status at December 31, 2011 and 2010, respectively.

90

The following table is an aging analysis of past due loans covered by FDIC loss share agreements at

December 31, 2011 and 2010.

30-89
Days Past
Due

90
Days or
More

Total
Past Due
 (Dollars in thousands)

Current

December 31, 2011:

Real estate:
   Residential 1-4 family .......................... $12,013
26,023
   Non-farm/non-residential .....................
15,335
   Construction/land development ............
3,111
   Agricultural ..........................................
288
   Multifamily residential ..........................
795
Commercial and industrial .......................
246
Consumer .................................................
Other ........................................................
 14
        Total ................................................ $57,825

December 31, 2010:

Real estate:
   Residential 1-4 family .......................... $  9,631
10,923
   Non-farm/non-residential .....................
17,153
   Construction/land development ............
98
   Agricultural ..........................................
892
   Multifamily residential ..........................
734
Commercial and industrial .......................
356
Consumer .................................................
Other ........................................................
 643
        Total ................................................ $40,430

$  34,075
71,898
54,165
4,390
4,208
4,390
14
133
$173,273

$  17,062
14,187
24,788
602
1,808
798
25
-
$  59,270

$  46,088
97,921
69,500
7,501
4,496
5,185
260
147
$231,098

$  26,693
25,110
41,941
700
2,700
1,532
381
643
$  99,700

$156,533
271,836
91,372
16,603
11,398
24,564
698
2,822
$575,826

$105,415
189,325
60,158
8,943
8,009
16,467
867
584
$389,768

Total
Covered
Loans

$202,621
369,787
160,872
24,104
15,894
29,749
958
2,969
$806,924

$132,108
214,435
102,099
9,643
10,709
17,999
1,248
1,227
$489,468

At December 31, 2011 and 2010, a significant portion of the Company’s covered loans were past due,
including many that were 90 days or more past due. However, such delinquencies were included in the
Company’s performance expectations in determining the Day 1 Fair Values. Accordingly, all covered loans
continue to accrete interest income and all covered loans rated “FV 1” continue to perform in accordance
with management’s expectations established in conjunction with the determination of the Day 1 Fair Values.

7. Foreclosed Assets

The following table is a summary of activity within foreclosed assets not covered by FDIC loss share

agreements for the periods indicated.

2011

Year Ended December 31,
2010
(Dollars in thousands)
$61,148

   2009

$10,758

Balance - beginning of year .......................................... $42,216
Loans transferred into foreclosed assets not covered
   by FDIC loss share agreements ...................................
Sales of foreclosed assets not covered
   by FDIC loss share agreements ...................................
Writedowns of foreclosed assets not covered
   by FDIC loss share agreements ...................................
Foreclosed assets acquired in acquisitions -
   not covered by FDIC loss share agreements ................
114
Balance - end of year .................................................... $31,762

10,676

(11,719)

(9,525)

17,095

74,122

(27,152)

(19,723)

(8,960)

(4,009)

85
$42,216

-
$61,148

91

The amount and type of foreclosed assets not covered by FDIC loss share agreements are as follows:

Real estate:
   Residential 1-4 family ...................................
   Non-farm/non-residential .............................
   Construction/land development .......................
   Agricultural ..................................................
         Total real estate ......................................
Commercial and industrial ...............................
Consumer .........................................................
         Foreclosed assets not covered by
            FDIC loss share agreements .................

8. Premises and Equipment

The following table is a summary of premises and equipment.

December 31,

2011

2010

(Dollars in thousands)

$  1,078
2,857
27,675
-
31,610
145
7

$  4,018
3,866
33,701
459
42,044
87
85

$31,762

$42,216

December 31,

2011

   2010

(Dollars in thousands)

Land ................................................................ $  64,226
1,849
Construction in progress ..................................
114,081
Buildings and improvements ...........................
5,147
Leasehold improvements .................................
36,212
Equipment .......................................................
221,515
   Gross premises and equipment .....................
Accumulated depreciation ................................
(34,982)
   Premises and equipment, net ........................ $186,533

$  60,148
3,069
105,741
5,080
26,114
200,152
(29,655)
$170,497

The Company capitalized $0.1 million, $0.1 million and $0.4 million of interest on construction projects

during the years ended December 31, 2011, 2010 and 2009, respectively.

Included in occupancy expense is rent of $2.0 million, $1.1 million and $0.5 million incurred under
noncancelable operating leases in 2011, 2010 and 2009, respectively, for leases of real estate, buildings
and premises. These leases contain certain renewal and purchase options according to the terms of the
agreements. Future amounts due under these noncancelable leases at December 31, 2011 are as follows:
$1.2 million in 2012, $1.0 million in 2013, $0.8 million in 2014, $0.7 million in 2015, $0.5 million in 2016
and $1.8 million thereafter. Rental income recognized during 2011, 2010 and 2009 for leases of buildings
and premises under operating leases was $1.1 million, $1.1 million and $0.5 million, respectively.

9. Deposits

The following table is a summary of the scheduled maturities of all time deposits.

December 31,

2011

   2010

(Dollars in thousands)

Up to one year ................................................. $820,742
63,932
Over one to two years ......................................
21,933
Over two to three years ....................................
7,025
Over three to four years ...................................
4,451
Over four to five years .....................................
Thereafter ........................................................
173
   Total time deposits ........................................ $918,256

$905,818
29,352
3,819
3,159
880
82
$943,110

The aggregate amount of time deposits with a minimum denomination of $100,000 was $409.6 million

and $483.9 million at December 31, 2011 and 2010, respectively.

92

10. Borrowings

Short-term borrowings with original maturities less than one year include FHLB-Dallas advances,

Federal Reserve Bank (“FRB”) borrowings, treasury, tax and loan note accounts and federal funds
purchased. The following table is a summary of information relating to these short-term borrowings.

December 31,

2011

2010

(Dollars in thousands)

Average annual balance ....................................... $14,956
21,050
December 31 balance ...........................................
54,077
Maximum month-end balance during year ...........
Interest rate:
   Weighted-average - year ...................................
   Weighted-average - December 31 ......................

0.33%
0.35

$14,465
1,299
36,353

0.37%
0.00

At both December 31, 2011 and 2010, the Company had fixed rate FHLB-Dallas advances with original
maturities exceeding one year of $280.8 million. These fixed rate advances bear interest at rates ranging
from 1.34% to 5.12% at December 31, 2011, are collateralized by a blanket lien on a substantial portion
of the Company’s real estate loans and are subject to prepayment penalties if repaid prior to maturity date.
At December 31, 2011, the Bank had $647 million of unused FHLB-Dallas borrowing availability.

At December 31, 2011, aggregate annual maturities and weighted-average interest rates of FHLB-Dallas

advances with an original maturity of over one year were as follows:

Maturity

2012
2013
2014
2015
2016
2017
2018
Thereafter
Total

Amount
(Dollars in thousands)
$         33
31
32
33
21
260,022
20,023
602
$280,797

Weighted-Average
Interest Rate

3.40%
3.22
3.24
3.27
4.54
3.90
2.53
4.54
3.80

Included in the above table are $280.0 million of FHLB-Dallas advances that contain quarterly call

features and are callable as follows:

Amount

Weighted-Average
Interest Rate
(Dollars in thousands)

Callable quarterly ............... $260,000
Callable quarterly ...............
20,000
  Total ................................ $280,000

3.90%
2.53
3.80

Maturity

2017
2018

93

11. Subordinated Debentures

At December 31, 2011 the Company had the following issues of trust preferred securities outstanding and

subordinated debentures owed to the Trusts.

Subordinated
Debentures
Owed to Trust

Trust Preferred
Securities
of the Trust

Interest Rate
at
December 31, 2011

        (Dollars in thousands)

Ozark III ...............
Ozark II .................
Ozark IV ...............
Ozark V ................
   Total ..................

$14,434
14,433
15,464
20,619
$64,950

$14,000
14,000
15,000
20,000
$63,000

3.35%
3.48
2.72
2.15

Final Maturity Date

September 25, 2033
September 29, 2033
September 28, 2034
December 15, 2036

On September 25, 2003, Ozark III sold to investors in a private placement offering $14 million of adjustable
rate trust preferred securities, and on September 29, 2003, Ozark II sold to investors in a private placement
offering $14 million of adjustable rate trust preferred securities (collectively, “2003 Securities”). The 2003
Securities bear interest, adjustable quarterly, at 90-day London Interbank Offered Rate (“LIBOR”) plus 2.95%
for Ozark III and 90-day LIBOR plus 2.90% for Ozark II. The aggregate proceeds of $28 million from the 2003
Securities were used to purchase an equal principal amount of adjustable rate subordinated debentures of the
Company that bear interest, adjustable quarterly, at 90-day LIBOR plus 2.95% for Ozark III and 90-day LIBOR
plus 2.90% for Ozark II (collectively,“2003 Debentures”).

On September 28, 2004, Ozark IV sold to investors in a private placement offering $15 million of adjustable
rate trust preferred securities (“2004 Securities”). The 2004 Securities bear interest, adjustable quarterly, at
90-day LIBOR plus 2.22%. The $15 million proceeds from the 2004 Securities were used to purchase an equal
principal amount of adjustable rate subordinated debentures of the Company that bear interest, adjustable
quarterly, at 90-day LIBOR plus 2.22% (“2004 Debentures”).

On September 29, 2006, Ozark V sold to investors in a private placement offering $20 million of adjustable
rate trust preferred securities (“2006 Securities”). The Securities bear interest, adjustable quarterly, at 90-day
LIBOR plus 1.60%. The $20 million proceeds from the 2006 Securities were used to purchase an equal principal
amount of adjustable rate subordinated debentures of the Company that bear interest, adjustable quarterly,
at 90-day LIBOR plus 1.60% (“2006 Debentures”).

In addition to the issuance of these adjustable rate securities, Ozark II and Ozark III collectively sold $0.9

million, Ozark IV sold $0.4 million and Ozark V sold $0.6 million of trust common equity to the Company.
The proceeds from the sales of the trust common equity were used, respectively, to purchase $0.9 million
of 2003 Debentures, $0.4 million of 2004 Debentures and $0.6 million of 2006 Debentures issued by
the Company.

At both December 31, 2011 and 2010, the Company had an aggregate of $64.9 million of subordinated
debentures outstanding and had an asset of $1.9 million representing its investment in the common equity
issued by the Trusts. At both December 31, 2011 and 2010, the sole assets of the Trusts are the respective
adjustable rate debentures and the liabilities of the respective Trusts are the 2003 Securities, the 2004
Securities and the 2006 Securities. The Trusts had aggregate common equity of $1.9 million and did not
have any restricted net assets at both December 31, 2011 and 2010. The Company has, through various
contractual arrangements, fully and unconditionally guaranteed all obligations of the Trusts with respect to
the 2003 Securities, the 2004 Securities and the 2006 Securities. Additionally, there are no restrictions on
the ability of the Trusts to transfer funds to the Company in the form of cash dividends, loans or advances.
The Company has the option to defer interest payments on the subordinated debentures from time to time
for a period not to exceed five consecutive years.

These securities generally mature at or near the 30th anniversary date of each issuance. However, these
securities and debentures may be prepaid at par, subject to regulatory approval, prior to maturity at any time
on or after September 25 and 29, 2008 for the two issues of 2003 Securities and 2003 Debentures; on or
after September 28, 2009 for the 2004 Securities and 2004 Debentures; and on or after December 15, 2011
for the 2006 Securities and 2006 Debentures, or at an earlier date upon certain changes in tax laws,
investment company laws or regulatory capital requirements.

94

12. Income Taxes

The following table is a summary of the components of the provision (benefit) for income taxes.

Current:
    Federal .....................................................................
    State .........................................................................
Total current .................................................................
Deferred:
    Federal .....................................................................
    State .........................................................................
Total deferred ...............................................................
Provision for income taxes ...........................................

 2011

Year Ended December 31,
  2010
 2009
(Dollars in thousands)
$15,696
2,723
18,419

$12,151
2,414
14,565

$33,360
4,982
38,342

10,230
1,636
11,866
$50,208

6,895
1,300
8,195
$26,614

(1,308)
(398)
(1,706)
$12,859

The reconciliation between the statutory federal income tax rate and effective income tax rate is as follows:

Statutory federal income tax rate .................................
Increase (decrease) in taxes resulting from:
    State income taxes, net of federal benefit .................
    Effect of tax-exempt interest income ........................
    Effect of BOLI and other tax-exempt income ............
    Other, net .................................................................
        Effective income tax rate ......................................

Year Ended December 31,
 2010
35.0%

 2011
35.0%

 2009
35.0%

2.8
(3.8)
(0.5)
(0.4)
33.1%

2.9
(7.2)
(0.8)
(0.5)
29.4%

2.3
(12.0)
(2.0)
(0.3)
23.0%

Income tax benefits from the exercise of stock options in the amount of $0.9 million, $0.5 million and

$0.1 million in 2011, 2010 and 2009, respectively, were recorded as an increase to additional paid-in capital.

At December 31, 2011, current income taxes payable of $15.4 million were included in other liabilities.

At December 31, 2010, current income taxes refundable of $0.7 million were included in other assets.

The types of temporary differences between the tax basis of assets and liabilities and their financial

reporting amounts that give rise to deferred income tax assets and liabilities and their approximate tax effects
are as follows:

December 31,

Deferred tax assets:

  2011
 2010
(Dollars in thousands)

Allowance for loan and lease losses ............................................... $ 15,148
1,435
Stock-based compensation .............................................................
1,429
Deferred compensation ..................................................................
5,644
Foreclosed assets ...........................................................................
-
Investment securities AFS ..............................................................
Gross deferred tax assets ...................................................................
23,656
Deferred tax liabilities:

9,562
Accelerated depreciation on premises and equipment ....................
6,020
Investment securities AFS ..............................................................
22,991
Deferred gains on FDIC-assisted acquisitions ................................
950
Other, net .......................................................................................
39,523
Gross deferred tax liabilities ..............................................................
Net deferred tax assets (liabilities) .................................................... $(15,867)

$14,734
1,224
1,256
3,171
108
20,493

7,894
-
9,546
1,408
18,848
$  1,645

13. Preferred Stock

On December 12, 2008, as part of the United States Department of the Treasury’s (the “Treasury”) Capital

Purchase Program made available to certain financial institutions in the U.S. pursuant to the Emergency
Economic Stabilization Act of 2008 (“EESA”), the Company and the Treasury entered into a Letter Agreement
including the Securities Purchase Agreement – Standard Terms incorporated therein (the “Purchase Agreement”)
pursuant to which the Company issued to the Treasury, in exchange for aggregate consideration of $75.0
million, (i) 75,000 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A,

95

par value $0.01 and liquidation preference $1,000 per share (the “Series A Preferred Stock”), and (ii) a
warrant (the “Warrant”) to purchase up to 759,622 split-adjusted shares of the Company’s common stock,
par value $0.01 per share, at a split-adjusted exercise price of $14.81 per share.

On November 4, 2009, the Company redeemed all of the Series A Preferred Stock for $75.0 million, plus
accrued and unpaid dividends, with the approval of the Company’s primary regulator in consultation with the
Treasury. On November 24, 2009, the Company repurchased the Warrant from the Treasury for $2.65 million,
which was charged against the Company’s additional paid-in capital.

Upon receipt of the aggregate consideration from the Treasury on December 12, 2008, the Company
allocated the $75.0 million proceeds on a pro rata basis to the Series A Preferred Stock and the Warrant
based on relative fair values resulting in $3.1 million of the aggregate proceeds assigned to the Warrant and
$71.9 million assigned to the Series A Preferred Stock. The discount assigned to the Series A Preferred Stock
was expected to be amortized over a five-year period, which was the expected life of the Series A Preferred
Stock at the time it was issued, up to the $75.0 million liquidation value of such preferred stock, with the
cost of such amortization being reported as additional preferred stock dividends. This resulted in a total
dividend with a consistent annual effective yield of 5.98% prior to the Company’s redemption of the Series A
Preferred Stock. As a result of the redemption, the remaining unamortized discount of $2.7 million was
recognized as an additional preferred stock dividend in the fourth quarter of 2009.

14. Employee Benefit Plans

The Company maintains a qualified retirement plan (the “401(k) Plan”) with a salary deferral feature
designed to qualify under Section 401 of the Internal Revenue Code (the “Code”). The 401(k) Plan permits
employees of the Company to defer a portion of their compensation in accordance with the provisions of
Section 401(k) of the Code. Matching contributions may be made in amounts and at times determined by
the Company. Certain other statutory limitations with respect to the Company’s contribution under the 401(k)
Plan also apply. Amounts contributed by the Company for a participant vest over six years and are held in
trust until distributed pursuant to the terms of the 401(k) Plan.

Contributions to the 401(k) Plan are invested in accordance with participant elections among certain
investment options. Distributions from participant accounts are not permitted before age 65, except in the
event of death, permanent disability, certain financial hardships or termination of employment. The Company
made matching cash contributions to the 401(k) Plan during 2011, 2010 and 2009 of $0.8 million, $0.6
million and $0.5 million, respectively.

Prior to January 1, 2005, all full-time employees of the Company were eligible to participate in the 401(k)

Plan. Beginning January 1, 2005, certain key employees of the Company have been excluded from further
salary deferrals to the 401(k) Plan, but may make salary deferrals through participation in the Bank of
the Ozarks, Inc. Deferred Compensation Plan (the “Plan”). The Plan, an unfunded deferred compensation
arrangement for the group of employees designated as key employees, including certain of the Company’s
executive officers, was adopted by the Company’s board of directors on December 14, 2004 and became
effective January 1, 2005. Under the terms of the Plan, eligible participants may elect to defer a portion of
their compensation. Such deferred compensation will be distributable in lump sum or specified installments
upon separation from service with the Company or upon other specified events as defined in the Plan. The
Company has the ability to make a contribution to each participant’s account, limited to one half of the first
6% of compensation deferred by the participant and subject to certain other limitations. Amounts deferred
under the Plan are to be invested in certain approved investments (excluding securities of the Company or
its affiliates). Company contributions to the Plan in 2011, 2010 and 2009 totaled $123,000, $117,000 and
$117,000, respectively. At December 31, 2011 and 2010, the Company had Plan assets, along with an equal
amount of liabilities, totaling $3.5 million and $3.1 million, respectively, recorded on the accompanying
consolidated balance sheet.

Effective May 4, 2010, the Company established a Supplemental Executive Retirement Plan (“SERP”) and

certain other benefit arrangements for its Chairman and Chief Executive Officer. Pursuant to the SERP, this
officer is entitled to receive 180 equal monthly payments of $32,197, or $386,360 annually, commencing at
the later of obtaining age 70 or separation from service. If separation from service occurs prior to age 70,
such benefit will be at a reduced amount. The costs of such benefits, assuming a retirement date at age 70,
will be fully accrued by the Company at such retirement date. During 2011 and 2010, respectively, the
Company accrued $148,000 and $89,000 (none in 2009) for the future benefits payable under the SERP.
The SERP is an unfunded plan and is considered a general contractual obligation of the Company.

96

15. Stock-Based Compensation

The Company has a nonqualified stock option plan for certain key employees and officers of the Company.

This plan provides for the granting of nonqualified options to purchase shares of common stock in the
Company. No option may be granted under this plan for less than the fair market value of the common stock,
defined by the plan as the average of the highest reported asked price and the lowest reported bid price, on
the date of the grant. The benefits or amounts that may be received by or allocated to any particular officer
or employee of the Company under this plan will be determined in the sole discretion of the Company’s board
of directors or its personnel and compensation committee. While the vesting period and the termination
date for the employee plan options are determined when options are granted, all such employee options
outstanding at December 31, 2011 were issued with a vesting period of three years and expire seven years
after issuance. At December 31, 2011 there were 826,400 shares available for future grants under this plan.

The Company also has a nonqualified stock option plan for non-employee directors. This plan permits each
director who is not otherwise an employee of the Company, or any subsidiary, to receive options to purchase
1,000 shares of the Company’s common stock on the day following his or her election as a director of the
Company at each annual meeting of stockholders and up to 1,000 shares upon election or appointment for
the first time as a director of the Company. No option may be granted under this plan for less than the fair
market value of the common stock, defined by the plan as the average of the highest reported asked price
and the lowest reported bid price, on the date of the grant. These options are exercisable immediately and
expire ten years after issuance.

All shares issued in connection with options exercised under both the employee and non-employee

director stock option plans are in the form of newly-issued shares.

The following table summarizes stock option activity for both the employee and non-employee director

stock option plans for the year ended December 31, 2011.

Weighted-Average
Exercise
Price/Share

Options

Weighted-Average
Remaining
Contractual Life
(in years)

Aggregate
Intrinsic Value
(in thousands)

Outstanding - January 1, 2011 ......... 1,053,600
235,200
Granted ............................................
(262,500)
Exercised .........................................
(35,000)
Forfeited ..........................................
991,100
Outstanding - December 31, 2011 ....

Fully vested and exercisable at
   December 31, 2011 ........................
Expected to vest in future periods ....

474,200
428,965

$15.53
23.57
15.36
15.37
$17.45

$15.32

Fully vested and expected to vest
   at December 31, 2011 (2) ................

903,165

$17.21

(1) Based on closing price of $29.63 per share on December 31, 2011.

4.6

3.0

4.4

 $12,070(1)

 $  6,787(1)

 $11,217(1)

(2) At December 31, 2011 the Company estimates that options to purchase 87,935 shares of the Company’s common

stock will not vest and will be forfeited prior to their vesting date.

Intrinsic value for stock options is defined as the amount by which the current market price of the
underlying stock exceeds the exercise price. For those stock options where the exercise price exceeds the
current market price of the underlying stock, the intrinsic value is zero. The total intrinsic value of options
exercised during 2011, 2010 and 2009 was $2.2 million, $1.4 million and $0.3 million, respectively.

Options to purchase 235,200 shares, 221,800 shares and 155,200 shares, respectively, were granted
during 2011, 2010 and 2009 with a weighted-average grant date fair value of $7.30, $5.69 and $3.55,
respectively. The fair value for each option grant is estimated on the date of grant using the Black-Scholes
option pricing model that uses the following assumptions. The Company uses the U.S. Treasury yield curve
in effect at the time of the grant to determine the risk-free interest rate. The expected dividend yield is
estimated using the current annual dividend level and recent stock price of the Company’s common stock at
the date of grant. Expected stock volatility is based on historical volatilities of the Company’s common stock.
The expected life of the options is calculated based on the “simplified” method as provided for under Staff
Accounting Bulletin No. 110.

97

The weighted-average assumptions used in the Black-Scholes option pricing model for the years indicated

were as follows:

Risk-free interest rate ..........................
Expected dividend yield .......................
Expected stock volatility ......................
Expected life (years) ............................

 2011
1.15%
1.68%
40.1%
5.0

 2010
1.22%
1.69%
39.0%
5.0

 2009
2.32%
2.13%
37.0%
  5.0

The total fair value of options to purchase shares of the Company’s common stock that vested during

2011, 2010 and 2009 was $0.7 million, $0.7 million and $0.9 million, respectively. Stock-based compensation
expense for stock options included in non-interest expense was $0.8 million, $0.6 million, and $0.7 million
for 2011, 2010 and 2009, respectively. Total unrecognized compensation cost related to nonvested stock-based
compensation was $1.9 million at December 31, 2011 and is expected to be recognized over a weighted-average
period of 2.4 years.

The Company has a restricted stock plan that permits issuance of up to 400,000 shares of restricted stock
or restricted stock units. All officers and employees of the Company are eligible to receive awards under the
restricted stock plan. The benefits or amounts that may be received by or allocated to any particular officer
or employee of the Company under the restricted stock plan will be determined in the sole discretion of the
Company’s board of directors or its personnel and compensation committee. Shares of common stock issued
under the restricted stock plan may be shares of original issuance, shares held in treasury or shares that
have been reacquired by the Company. At December 31, 2011 there were 198,100 shares available for future
grants under this plan.

The following table summarizes non-vested restricted stock activity for the year ended December 31, 2011.

Outstanding - January 1, 2011 .......................................................
Granted ...........................................................................................
Forfeited .........................................................................................
Earned and issued ..........................................................................
Outstanding - December 31, 2011 ..................................................
Weighted-average grant date fair value ..........................................

 Shares

 107,800
 95,700
 (1,600)
 -
201,900
 $20.02

Restricted stock awards of 95,700 shares, 74,600 shares, and 37,200 shares, respectively, were granted
during 2011, 2010 and 2009 with a weighted-average grant date fair value of $23.69, $18.84 and $12.22,
respectively. The fair value of the restricted stock awards is amortized to compensation expense over the
vesting period (generally three years) and is based on the market price of the Company’s common stock at the
date of grant multiplied by the number of shares granted that are expected to vest. Stock-based compensation
expense for restricted stock included in non-interest expense was $0.8 million, $0.2 million and $24,000 for
2011, 2010 and 2009, respectively. Unrecognized compensation expense for nonvested restricted stock
awards was $3.0 million at December 31, 2011 and is expected to be recognized over a weighted-average
period of 2.5 years.

16. Commitments and Contingencies

The Company is a party to financial instruments with off-balance sheet risk in the normal course of

business to meet the financing needs of its customers. These financial instruments include commitments to
extend credit and standby letters of credit.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial
instrument for commitments to extend credit is represented by the contractual amount of those instruments.
The Company has the same credit policies in making commitments and conditional obligations as it does for
on-balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of

any condition established in the contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since these commitments may expire without being
drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The
Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit

98

evaluation of the counterparty. The type of collateral held varies but may include accounts receivable,
inventory, property, plant and equipment, and other real or personal property.

The Company had outstanding commitments to extend credit, excluding mortgage IRLCs, of $312.7 million

and $165.7 million at December 31, 2011 and 2010, respectively. The commitments extend over varying
periods of time with the majority to be disbursed or to expire within a one-year period.

Outstanding standby letters of credit are contingent commitments issued by the Company generally to
guarantee the performance of a customer in third party borrowing arrangements. The terms of the letters of
credit are generally for a period of one year. The maximum amount of future payments the Company could be
required to make under these letters of credit at December 31, 2011 and 2010 is $13.5 million and $6.0 million,
respectively. The Company holds collateral to support letters of credit when deemed necessary. The total of
collateralized commitments at December 31, 2011 and 2010 was $13.2 million and $5.5 million, respectively.

17. Related Party Transactions

The Company has had, in the ordinary course of business, lending transactions with certain of its officers,
directors, director nominees and their related and affiliated parties (related parties). The following table is a
summary of activity of loans to related parties for the periods indicated.

Balance - beginning of year ...........................................
New loans and advances................................................
Repayments ...................................................................
Change in composition of related parties .......................
Balance - end of year .....................................................

2009

2011

Year Ended December 31,
2010
(Dollars in thousands)
$  8,174
9,258
(13,648)
(410)
$  3,374

$  3,374
16,978
(18,202)
-
$  2,150

$  4,434
5,546
(1,793)
(13)
$  8,174

Wiring and cabling installation for certain of the Company’s facilities were performed by an entity whose

ownership includes a member of the Company’s board of directors. Total payments to this entity were
$40,000 in 2011, $68,000 in 2010 and $119,000 in 2009 for such installation contract work.

18. Regulatory Matters

The Company is subject to various regulatory capital requirements administered by federal and state

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

Federal and state regulatory agencies generally require the Company and the Bank to maintain minimum
Tier 1 and total capital to risk-weighted assets of 4.0% and 8.0%, respectively, and Tier 1 capital to average
quarterly assets (Tier 1 leverage ratio) of at least 3.0%. Tier 1 capital generally consists of common equity,
retained earnings, certain types of preferred stock, qualifying minority interest and trust preferred securities,
subject to limitations, and excludes goodwill and various intangible assets. Total capital includes Tier 1
capital, any amounts of trust preferred securities excluded from Tier 1 capital, and the lesser of the ALLL or
1.25% of risk-weighted assets. At December 31, 2011 and 2010 the Company’s and the Bank’s Tier 1 and
total capital ratios and their Tier 1 leverage ratios exceeded minimum requirements.

99

The actual and required regulatory capital amounts and ratios of the Company and the Bank at December

31, 2011 and 2010 are as follows:

               Required

                  To Be Well

For Capital
Adequacy
Purposes

Amount

 Ratio
   (Dollars in thousands)

Capitalized Under
Prompt Corrective
Action Provisions
Ratio
Amount

Actual

Amount

Ratio

478,690 18.23

466,017 17.67
445,789 16.98

December 31, 2011:
Total capital (to risk-weighted assets):
     Company ........................................... $499,055 18.93% $210,950
     Bank .................................................
210,068
Tier 1 capital (to risk-weighted assets):
     Company ...........................................
     Bank .................................................
Tier 1 leverage (to average assets):
     Company ...........................................
     Bank .................................................
December 31, 2010:
Total capital (to risk-weighted assets):
     Company ........................................... $404,838 17.39% $186,260
     Bank .................................................
185,334
Tier 1 capital (to risk-weighted assets):
     Company ...........................................
     Bank .................................................
Tier 1 leverage (to average assets):
     Company ...........................................
     Bank .................................................

375,597 11.88
358,852 11.40

375,597 16.13
358,852 15.49

466,017 12.06
445,789 11.58

105,475
105,034

115,934
115,508

387,949 16.75

94,814
94,437

93,131
92,667

8.00% $263,688 10.00%
8.00

262,585 10.00

4.00
4.00

3.00
3.00

158,213
157,551

193,223
192,514

6.00
6.00

5.00
5.00

8.00% $232,825 10.00%
8.00

231,668 10.00

4.00
4.00

3.00
3.00

139,695
139,001

158,023
157,395

6.00
6.00

5.00
5.00

As of December 31, 2011 and 2010, the most recent notification from the regulators categorized the
Company and the Bank as well capitalized under the regulatory framework for prompt corrective action.
There are no conditions or events since that notification that management believes have changed the
Company’s or the Bank’s category.

The state bank commissioner’s approval is required before the Bank can declare and pay any dividend
of 75% or more of the net profits of the Bank after all taxes for the current year plus 75% of the retained
net profits for the immediately preceding year. At December 31, 2011 and 2010, respectively, $68.4
million and $26.3 million were available for payment of dividends by the Bank without the approval of
regulatory authorities.

Under FRB regulation, the Bank is also limited as to the amount it may loan to its affiliates, including
the Company, and such loans must be collateralized by specific types of collateral. The maximum amount
available for loan from the Bank to the Company is limited to 10% of the Bank’s capital and surplus or
approximately $47 million and $36 million, respectively, at December 31, 2011 and 2010.

The Bank is required by bank regulatory agencies to maintain certain minimum balances of cash or
deposits primarily with the FRB. At December 31, 2011 and 2010, these required balances aggregated
$11.6 million and $14.7 million, respectively.

19. Fair Value Measurements

The Company measures certain of its assets and liabilities on a fair value basis using various valuation
techniques and assumptions, depending on the nature of the asset or liability. Fair value is defined as the
price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Additionally, fair value is used either annually or on a non-
recurring basis to evaluate certain assets and liabilities for impairment or for disclosure purposes.

The Company applies the following fair value hierarchy.
Level 1 - Quoted prices for identical instruments in active markets.
Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar

                  instruments in markets that are not active; and model-derived valuations whose inputs are
                  observable.

Level 3 - Instruments whose inputs are unobservable.

100

The following table sets forth the Company’s assets and liabilities at December 31, 2011 and 2010 that

are accounted for at fair value.

December 31, 2011:
Assets:
   Investment securities AFS(1):

Level 1

Level 2

Level 3

Total

(Dollars in thousands)

  Obligations of state and political subdivisons .......... $         -
  U.S. Government agency residential
     mortgage-backed securities ..................................
        Total investment securities AFS .........................
   Impaired non-covered loans and leases ......................
   Impaired covered loans ...............................................
   Foreclosed assets not covered by
      FDIC loss share agreements .....................................
   Foreclosed assets covered by
      FDIC loss share agreements .....................................
   Derivative assets - IRLC and FSC ................................

-
-
        Total assets at fair value .................................... $         -

-
-
-
-

-

Liabilities:
   Derivative liabilities - IRLC and FSC ........................... $         -
        Total liabilities at fair value ................................ $         -

December 31, 2010:
Assets:
   Investment securities AFS(1):

  Obligations of state and political subdivisons .......... $         -
  U.S. Government agency residential
     mortgage-backed securities ..................................
        Total investment securities AFS .........................
   Impaired non-covered loans and leases ......................
   Foreclosed assets not covered by
      FDIC loss share agreements .....................................
   Foreclosed assets covered by
      FDIC loss share agreements .....................................
   Derivative assets - IRLC and FSC ................................

-
-
        Total assets at fair value .................................... $         -

-
-
-

-

Liabilities:
   Derivative liabilities - IRLC and FSC ........................... $         -
        Total liabilities at fair value ................................ $         -

$348,855

$  24,192

$373,047

48,035
396,890
-
-

-
24,192
10,519
1,854

48,035
421,082
10,519
1,854

-

31,762

31,762

-
-
$396,890

72,907
62
$141,296

72,907
62
$538,186

$           -
$           -

$         62
$         62

$         62
$         62

$358,511

$  20,036

$378,547

1,269
359,780
-

-
20,036
9,807

1,269
379,816
9,807

-

  42,216

  42,216

-
-
$359,780

31,145
55
$103,259

31,145
55
$463,039

$           -
$           -

$         55
$         55

$         55
$         55

(1) Does not include $17.8 million at December 31, 2011 and $18.9 million at December 31, 2010 of shares of FHLB-
Dallas, FHLB-Atlanta and FNBB stock that do not have readily determinable fair values and are carried at cost.

The following methods and assumptions are used to estimate the fair value of the Company’s assets and

liabilities that are accounted for at fair value.

Investment securities - The Company utilizes independent third parties as its principal pricing sources

for determining fair value of investment securities which are measured on a recurring basis. For
investment securities traded in an active market, fair values are based on quoted market prices if
available. If quoted market prices are not available, fair values are based on quoted market prices of
comparable securities, broker quotes or comprehensive interest rate tables, pricing matrices or a combination
thereof. For investment securities traded in a market that is not active, fair value is determined using
unobservable inputs.

The Company has determined that certain of its investment securities had a limited to non-existent
trading market at December 31, 2011 and 2010. As a result, the Company considers these investments as
Level 3 in the fair value hierarchy. Specifically the fair values of certain obligations of state and political
subdivisions consisting of certain unrated private placement bonds (the “private placement bonds”) in
the amount of $24.2 million and $20.0 million at December 31, 2011 and 2010, respectively, were

101

calculated using Level 3 hierarchy inputs and assumptions as the trading market for such securities was
determined to be “not active”. This determination was based on the limited number of trades or, in certain
cases, the existence of no reported trades for the private placement bonds. The private placement bonds are
generally prepayable at par value at the option of the issuer. As a result, management believes the private
placement bonds should be valued at the lower of (i) the matrix pricing provided by the Company’s third
party pricing services for comparable unrated municipal securities or (ii) par value. At December 31, 2011
and 2010, the third party pricing matrices valued the Company’s total portfolio of private placement bonds
at $24.5 million and $21.0 million, respectively, which exceeded the lower of the matrix pricing or par
value of the private placement bonds by $0.3 million and $1.0 million at December 31, 2011 and 2010,
respectively. Accordingly, at December 31, 2011 and 2010 the Company reported the private placement
bonds at $24.2 million and $20.0 million, respectively.

Impaired non-covered loans and leases – For non-covered loans and leases that are deemed impaired,
fair values are measured on a non-recurring basis and are based on the underlying collateral value of the
impaired loan or lease, net of holding and selling costs, or the estimated discounted cash flows for such
loan or lease. The Company has reduced the carrying value of its impaired loans and leases (all of which
are included in nonaccrual loans and leases) by $9.9 million and $9.3 million, respectively, to the estimated
fair value of $10.5 million and $9.8 million, respectively, for such loans and leases at December 31, 2011
and 2010. These adjustments to reduce the carrying value of impaired loans and leases to estimated fair
value during 2011 and 2010 consisted of $8.1 million and $7.3 million, respectively, of partial charge-offs
and $1.8 million and $2.0 million, respectively, of specific loan and lease loss allocations.

Impaired covered loans – The fair values of impaired covered loans are measured on a non-recurring
basis. As of December 31, 2011, the Company had identified purchased loans covered by FDIC loss share
agreements acquired in its FDIC-assisted acquisitions totaling $3.2 million where the expected performance
of such loans had deteriorated from management’s performance expectations established in conjunction
with the determination of the Day 1 Fair Values. As a result the Company recorded partial charge-offs, net
of adjustments to the FDIC loss share receivable and the FDIC clawback payable, totaling $0.3 million for
such loans during the fourth quarter of 2011. The Company also recorded $0.3 million of provision for
loan and lease losses during the fourth quarter of 2011 to cover such charge-offs. In addition to those net
charge-offs, the Company also transferred certain of these covered loans to covered foreclosed assets during
the fourth quarter of 2011. As a result of these actions, the Company had $1.9 million of impaired covered
loans at December 31, 2011 (none at December 31, 2010).

Foreclosed assets not covered by FDIC loss share agreements – Repossessed personal properties and

real estate acquired through or in lieu of foreclosure are measured on a non-recurring basis and are initially
recorded at the lesser of current principal investment or fair value less estimated cost to sell at the date of
repossession or foreclosure. Valuations of these assets are periodically reviewed by management with the
carrying value of such assets adjusted to the then estimated fair value net of estimated selling costs, if
lower, until disposition. Fair values of foreclosed and repossessed assets held for sale are generally based
on third party appraisals, broker price opinions or other valuations of the property, resulting in a Level 3
classification.

Foreclosed assets covered by FDIC loss share agreements – Foreclosed assets covered by FDIC loss share
agreements, or covered foreclosed assets, are recorded at estimated fair value on the date of acquisition. In
estimating the fair value of covered foreclosed assets, management considers a number of factors including,
among others, appraised value, estimated selling prices, estimated selling costs, estimating holding periods
and net present value of cash flows expected to be received. A discount rate ranging from 8.0% to 9.5%
per annum was used to determine the net present value of covered foreclosed assets. Valuations of these
assets are measured on a non-recurring basis and are periodically reviewed by management with the
carrying value of such assets adjusted to the then estimated fair value net of estimated selling costs, if
lower, until disposition.

Derivative assets and liabilities – The fair values of IRLC and FSC derivative assets and liabilities are
measured on a recurring basis and are based primarily on the fluctuation of interest rates between the date
on which the IRLC and FSC were entered and year-end.

102

The following table presents additional information about assets and liabilities measured at fair value on

a recurring basis and for which the Company has utilized Level 3 inputs to determine fair value.

Balances - January 1, 2010 ....................................................
   Total realized gains/(losses) included in earnings ..............
   Total unrealized gains/(losses) included in other

   comprehensive income ....................................................
   Purchases, sales, issuances and settlements, net ................
   Transfers in and/or out of Level 3 ......................................
Balances - December 31, 2010 ..............................................
   Total realized gains/(losses) included in earnings ..............
   Total unrealized gains/(losses) included in other

   comprehensive income ....................................................
   Purchases, sales, issuances and settlements, net ................
   Transfers in and/or out of Level 3 ......................................
Balances - December 31, 2011 ..............................................

Investment
Securities
AFS

$16,690
20

(850)
192
3,984
$20,036
(44)

223
3,247
730
$24,192

Derivative
Assets-IRLC
and FSC
(Dollars in thousands)
$210
(155)

-
-
-
55
7

-
-
-
$  62

Derivative
Liabilities-
IRLC and FSC

$(210)
155

-
-
-
(55)
(7)

-
-
-
$  (62)

During 2011 and 2010, there were no transfers of assets or liabilities measured at fair value between

Level 1 and Level 2 fair value hierarchy.

20. Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of financial instruments.

Cash and due from banks - For these short-term instruments, the carrying amount is a reasonable

estimate of fair value.

Investment securities - The Company utilizes independent third parties as its principal pricing sources
for determining fair value of investment securities that are measured on a recurring basis. For investment
securities traded in an active market, fair values are based on quoted market prices if available. If quoted
market prices are not available, fair values are based on quoted market prices of comparable securities,
broker quotes or comprehensive interest rate tables, pricing matrices or a combination thereof. For
investment securities traded in a market that is not active, fair value is determined using unobservable
inputs. The Company’s investments in the common stock of the FHLB-Dallas, FHLB-Atlanta and FNBB
of $17.8 million at December 31, 2011 and $18.9 million at December 31, 2010 do not have readily
determinable fair values and are carried at cost.

Loans and leases - The fair value of loans and leases, including covered and non-covered loans and leases,

is estimated by discounting the future cash flows using the current rate at which similar loans or leases
would be made to borrowers or lessees with similar credit ratings and for the same remaining maturities.

FDIC loss share receivable – The fair value of the FDIC loss share receivable is based on the net present
value of future cash proceeds expected to be received from the FDIC under the provisions of the loss share
agreements using a discount rate that is based on current market rates.

Deposit liabilities – The fair value of demand deposits, savings accounts, money market deposits and other
transaction accounts is the amount payable on demand at the reporting date. The fair value of fixed maturity
time deposits is estimated using the rate currently available for deposits of similar remaining maturities.

Repurchase agreements – For these short-term instruments, the carrying amount is a reasonable estimate

of fair value.

Other borrowed funds – For these short-term instruments, the carrying amount is a reasonable estimate

of fair value. The fair value of long-term instruments is estimated based on the current rates available to
the Company for borrowings with similar terms and remaining maturities.

Subordinated debentures – The fair values of these instruments are based primarily upon discounted cash

flows using rates for securities with similar terms and remaining maturities.

103

Derivative assets and liabilities – The fair values of IRLC and FSC derivative assets and liabilities are

based primarily on the fluctuation of interest rates between the date on which the IRLC and FSC were
entered and year-end.

Off-balance sheet instruments – The fair values of commercial loan commitments and letters of credit are

based on fees currently charged to enter into similar agreements, taking into account the remaining terms
of the agreements and were not material at December 31, 2011 and 2010.

The fair values of certain of these instruments were calculated by discounting expected cash flows,
which contain numerous uncertainties and involve significant judgments by management. Fair value is
the estimated amount at which financial assets or liabilities could be exchanged in a current transaction
between willing parties other than in a forced or liquidation sale. Because no market exists for certain of
these financial instruments and because management does not intend to sell these financial instruments,
the Company does not know whether the fair values shown below represent values at which the respective
financial instruments could be sold individually or in the aggregate.

The following table presents the estimated fair values of the Company’s financial instruments.

Financial assets:

December 31,

2011

2010

Carrying
Amount

Estimated
Fair Value

Carrying
Amount

Estimated
Fair Value

(Dollars in thousands)

 Cash and cash equivalents ..................................... $     58,927 $     58,927
438,910
 Investment securities AFS ......................................
438,910
2,636,254
 Loans and leases, net of ALLL ............................... 2,653,037
278,443
278,263
 FDIC loss share receivable ......................................
62
62
 Derivative assets - IRLC and FSC ...........................

$     49,029 $     49,029
398,698
2,287,912
158,379
55

 398,698
2,305,667
158,137
55

Financial liabilities:

 Demand, NOW, savings and money market
     account deposits ................................................ $2,025,663 $2,025,663
925,754
 Time deposits .........................................................
32,810
 Repurchase agreements with customers ................
361,373
 Other borrowings ...................................................
30,663
 Subordinated debentures .......................................
62
 Derivative liabilities - IRLC and FSC ......................

918,256
32,810
301,847
64,950
62

$1,597,643 $1,597,643
947,447
43,324
349,964
29,377
55

 943,110
43,324
282,139
64,950
55

21. Supplemental Cash Flow Information

Supplemental cash flow information is as follows:

       Year Ended December 31,

2011

2010

2009

Cash paid during the period for:

      Interest .......................................................................................... $32,202
18,448
      Taxes .............................................................................................

(Dollars in thousands)
$35,476
13,879

$49,692
14,504

Supplemental schedule of non-cash investing
   and financing activities:

         Loans transfered to foreclosed assets not covered by
            FDIC loss share agreements .....................................................
         Loans advanced for sales of foreclosed assets not covered by
            FDIC loss share agreements .....................................................
         Covered loans transferred to covered foreclosed assets ..............
         Net change in unrealized gains and losses on

10,676

17,095

74,122

675
29,014

9,755
5,354

3,132
-

   investment securities AFS ........................................................
      Unsettled AFS investment security purchases ............................

15,622
-

(10,201)
-

(15,783)
8,372

104

22. Other Operating Expenses

The following table is a summary of other operating expenses.

2011

  Year Ended December 31,
 2010
(Dollars in thousands)

 2009

Postage and supplies ...................................................... $  3,091
3,049
Telephone and data lines ................................................
3,571
Advertising and public relations .....................................
4,822
Professional and outside services ...................................
1,022
ATM expense ..................................................................
3,082
Software expense ...........................................................
3,488
Travel and meals ............................................................
2,155
FDIC Insurance ...............................................................
719
FDIC and state assessments ...........................................
7,873
Loan collection and repossession expense .....................
9,525
Writedowns of foreclosed assets ....................................
1,677
Amortization of intangible assets ...................................
7,490
Other ..............................................................................
     Total other operating expenses .................................. $51,564

$  1,981
   2,110
2,076
3,024
881
2,657
1,726
3,238
678
4,001
8,960
431
4,877
$36,640

$  1,530
   1,806
1,083
1,793
745
1,524
666
4,291
673
3,999
4,009
110
4,816
$27,045

23. Earnings Per Common Share (“EPS”)

The following table sets forth the computation of basic and diluted EPS.

Year Ended December 31,
2009
 2010
(In thousands, except per share amounts)

2011

Numerator:
   Distributed earnings allocated to common stock ....... $  12,661
   Undistributed earnings allocated to common stock ...
88,660
       Net earnings allocated to common stock ............... $101,321
Denominator:
   Denominator for basic EPS—
       weighted-average common shares ...........................
   Effect of dilutive securities—stock options ................
       Denominator for diluted EPS—weighted-average
         common shares and assumed conversions ..........

34,260
222

34,482

$10,170
53,831
$64,001

$  8,778
28,048
$36,826

33,938
152

33,760
40

34,090

33,800

Basic EPS ..................................................................... $      2.96

$    1.89

$    1.09

Diluted EPS .................................................................. $      2.94

$    1.88

$    1.09

Options to purchase 213,400 shares, 196,300 shares and 974,700 shares, respectively, of the Company’s

common stock at a weighted-average exercise price of $23.69 per share, $18.84 per share and $15.01 per
share, respectively, were outstanding during 2011, 2010 and 2009, but were not included in the computation
of diluted EPS because the options’ exercise price was greater than the average market price of the common
shares and inclusion would have been antidilutive.

105

24. Litigation Matters

On January 5, 2012, the Company and the Bank were served with a summons and complaint filed on
December 19, 2011 in the Circuit Court of Lonoke County, Arkansas, Division III, styled Robert Walker,
Ann B. Hines and Judith Belk vs. Bank of the Ozarks, Inc. and Bank of the Ozarks, No. CV-2011-777.
The complaint alleges that the defendants have harmed the plaintiffs, former customers of the Bank,
by improper, unfair and unconscionable assessment and collection of excessive overdraft fees from the
plaintiffs. According to the complaint, plaintiffs claim that the Bank employs sophisticated software to
automate its overdraft system, and that this system unfairly and inequitably manipulates and alters
customers’ transaction records in order to maximize overdraft penalties, particularly utilizing a practice of
posting of items in “high-to-low” order, despite the actual sequence in which such items are presented for
payment. Plaintiffs claim that the Bank’s deposit agreements with customers do not adequately disclose
the Bank’s overdraft assessment policies and are ambiguous, deceptive, unfair and misleading. Plaintiffs’
complaint also alleges that these actions and omissions constitute breach of contract, breach of the implied
covenant of good faith and fair dealing, unconscionable conduct, conversion, unjust enrichment and
violation of the Arkansas Deceptive Trade Practices Act. The plaintiffs seek to have the case certified by
the court as a class action for all Bank account holders similarly situated, and seek a declaratory judgment
as to the wrongful nature of the Bank’s overdraft fee policies, restitution of overdraft fees paid by the
plaintiffs and the putative class as a result of the actions cited in the complaint, disgorgement of profits as
a result of the alleged wrongful actions and unspecified compensatory and punitive damages, together with
pre-judgment interest, costs and plaintiffs’ attorneys’ fees. The Company believes the plaintiffs’ claims are
unfounded and intends to defend against these claims.

On April 8, 2011, the Company was served with a petition filed on March 31, 2011 by the Seib Family,

GP, LLC, a Texas limited liability company, as General Partner of Seib Family, LP in the District Court of
Dallas County, Texas, Cause Number 11-04057, against the Company and two entities which the plaintiff
apparently believed had some type of ownership interest in a former borrower of the Bank, alleging,
among other things, that the defendants fraudulently induced the plaintiff to purchase a tract of real estate
consisting of approximately 60 acres located at 318 Cadiz Street in Dallas, Texas, owned by the former
borrower and financed by the Bank. The petition alleges that the defendants knew that a levee protecting
the property from the Trinity River flood plain did not meet federal standards, that the defendants omitted
to disclose that information to plaintiff prior to the sale of the property, and that due to the problems or
potential problems with the levee, the value of the property was significantly impaired, as supported by a
report by the U.S. Corps of Engineers concerning the condition of the levee, released at approximately the
same time as the plaintiff purchased the property from the former borrower and affiliates with the aid and
assistance of the Company. The petition alleges that the plaintiff did not become aware of the U.S. Corps of
Engineers’ report until a month or two after it purchased the property.

The original petition alleged that the defendants’ conduct violated the Texas Securities Act and the Texas

Deceptive Trade Practices Act, and seeks compensatory damages, trebled under the Texas Deceptive Trade
Practices Act, plus exemplary damages, attorneys’ fees, costs, interest, and other relief the court deems
just. Since the original petition was filed, the plaintiff has (i) dropped all claims against the Company, but
substituted the Bank as a defendant and (ii) dropped all claims with respect to the Texas Deceptive Trade
Practices Act. Under its amended petition, the Plaintiff is seeking $15,962,677 in actual damages and
$31,925,354 in exemplary damages. Discovery is currently ongoing with respect to this petition. The
Company believes the allegations of the petition are wholly without merit and intends to defend against
these claims.

The Company is party to various other legal proceedings, as both plaintiff and defendant, arising in the

ordinary course of business, including claims of lender liability, predatory lending, broken promises and
other similar lending-related claims, as well as legal proceedings arising from acquired operations in its
FDIC-assisted acquisitions and third party claims alleging that the Company and the Bank, along with
certain other financial institutions, have infringed certain “business method” patents claimed to be violated
by the institutions’ use of web site authentication software and check imaging and processing software
not authorized by the patent holder claimants. While the ultimate resolution of these various claims and
proceedings cannot be determined at this time, management of the Company believes that such claims and
proceedings, individually or in the aggregate, will not have a material adverse effect on the future results
of operations, financial condition or liquidity of the Company.

106

25. Parent Company Financial Information

The following condensed balance sheets, income statements and statements of cash flows reflect the

financial position, results of operations and cash flows for the parent company.

 Condensed Balance Sheets

Assets:
Cash .................................................................................................................
Investment in consolidated bank subsidiary .....................................................
Investment in unconsolidated Trusts ................................................................
Loans ................................................................................................................
Excess cost over fair value of net assets acquired .............................................
Income taxes receivable ....................................................................................
Other, net ..........................................................................................................
     Total assets ..................................................................................................
Liabilities and Stockholders’ Equity:
Accounts payable ..............................................................................................
Accrued interest payable ...................................................................................
Income taxes payable ........................................................................................
Subordinated debentures ..................................................................................
     Total liabilities .............................................................................................
Stockholders’ equity:
   Common stock ...............................................................................................
   Additional paid-in capital ..............................................................................
   Retained earnings ..........................................................................................
   Accumulated other comprehensive income (loss) ..........................................
     Total stockholders’ equity ............................................................................
       Total liabilities and stockholders’ equity ....................................................

Condensed Statements of Income

December 31,

2011
(Dollars in thousands)

2010

$  11,307
466,232
1,950
8,768
1,092
-
1,612
$490,961

$       115
297
1,048
64,950
66,410

345
51,145
363,734
9,327
424,551
$490,961

$    6,570
365,518
1,950
8,236
1,092
893
1,382
$385,641

   $       163
173
-
64,950
65,286

341
45,107
275,074
(167)
320,355
$385,641

 Year Ended December 31,

2011

2010

2009

(Dollars in thousands)

Income:
  Dividends from Bank ................................................................ $  12,300
52
  Dividends from Trusts ..............................................................
1,145
  Interest .....................................................................................
-
  Other ........................................................................................
Total income ...............................................................................
13,497
Expenses:
  Interest .....................................................................................
  Other operating expenses .........................................................
Total expenses ............................................................................
Net income before income tax benefit and
  equity in undistributed earnings of Bank .................................
Income tax benefit ......................................................................
Equity in undistributed earnings of Bank ...................................
Net income ..................................................................................
Preferred stock dividends and amortization of
  preferred stock discount ...........................................................
-
Net income available to common stockholders............................ $101,321

8,310
1,792
91,219
101,321

1,740
3,447
5,187

$13,200
     53
1,152
-
14,405

1,764
2,853
4,617

9,788
1,527
52,686
64,001

$92,200
     64
984
138
93,386

2,138
2,258
4,396

88,990
1,482
(47,370)
43,102

-
$64,001

(6,276)
$36,826

107

Condensed Statements of Cash Flows

            Year Ended December 31,
 2011

  2010
(Dollars in thousands)

  2009

Cash flows from operating activities:

Net income ........................................................................... $101,321
Adjustments to reconcile net income to net cash

$64,001

$43,102

          provided by operating activities:

      Equity in undistributed earnings of Bank ......................
      Loss (gain) on sale of investment securities AFS ..........
      Deferred income tax expense (benefit) ..........................
      Stock-based compensation expense ...............................
      Tax benefits on exercise of stock options .......................
      Changes in other assets and other liabilities ..................
Net cash provided by operating activities ...................................
Cash flows from investing activities:

Net (fundings) paydowns of portfolio loans ........................
Proceeds from sales of investment securities AFS ...............
Equity contributed to Bank ..................................................
Net cash used by investing activities ..........................................
Cash flows from financing activities:

(91,219)
-
(177)
1,528
(870)
2,445
13,028

(532)
-
-
(532)

4,032
Proceeds from exercise of stock options ...............................
870
Tax benefits on exercise of stock options .............................
-
Redemption of preferred stock .............................................
Repurchase of common stock warrant .................................
-
-
Cash dividends paid on preferred stock ...............................
(12,661)
Cash dividends paid on common stock ................................
(7,759)
Net cash used by financing activities ..........................................
4,737
Net increase (decrease) in cash ..................................................
Cash - beginning of year .............................................................
6,570
Cash - end of year ....................................................................... $  11,307

(52,686)
130
169
834
(535)
(831)
11,082

531
330
(7,000)
(6,139)

2,825
535
-
-
-
(10,170)
(6,810)
(1,867)
8,437
$  6,570

47,370
(162)
(63)
712
(111)
(802)
90,046

(3,880)
1,437
-
(2,443)

258
111
(75,000)
(2,650)
(3,354)
(8,778)
(89,413)
(1,810)
10,247
$  8,437

108

Our Board of Directors’ outstanding 

leadership and vision has moved 

the Company forward and created 

a solid foundation for strong 

future growth and proﬁ tability.

Board of Directors
Standing, left to right: 

George Gleason
Chairman and Chief Executive Ofﬁ cer - Bank of the Ozarks, Inc., Little Rock, Arkansas

Robert Proost
Retired Vice President and Chief Financial Ofﬁ cer - A.G. Edwards, Inc., St. Louis, Missouri

Richard Cisne
Founding Partner - Hudson, Cisne & Co., LLP, Little Rock, Arkansas

R.L. Qualls
Retired President and Chief Executive Ofﬁ cer - Baldor Electric Company, Fort Smith, Arkansas
Jean Arehart
Retired Banker, Newport, Arkansas

Henry Mariani
Chairman - NLC Products, Inc., Little Rock, Arkansas

Seated, left to right:

Linda Gleason
Retired Banker, Little Rock, Arkansas

Robert East
Chairman and Chief Executive Ofﬁ cer - East-Harding, Inc., Little Rock, Arkansas

Kennith Smith
Retired Lumber Company President, Ozark, Arkansas

Walter Kimbrough
President - Philander Smith College, Little Rock, Arkansas

Mark Ross
Vice Chairman and Chief Operating Ofﬁ cer - Bank of the Ozarks, Inc., Little Rock, Arkansas

Little Rock, Arkansas
(501) 978-2265, Fax (501) 978-2224
NASDAQ: OZRK • www.bankozarks.com
For additional information or a copy of the Company’s Form 
10-K ﬁ led with the Securities and Exchange Com mission contact:
Investor Relations, Bank of the Ozarks, Inc.
P.O. Box 8811, Little Rock, AR 72231-8811
Independent Auditors:
Crowe Horwath LLP, Certiﬁ ed Public Accountants
950 East Paces Ferry Road, Suite 3315
Atlanta, Georgia 30326-1388
Transfer Agent:
Bank of the Ozarks Trust and Wealth Management Division
P.O. Box 8811, Little Rock, AR 72231-8811