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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

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

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

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


	Unaudited									Unaudited
	March 31,						December 31,			June 30,						December 31, 2013
	2014			2013			2013			2014			2013			December 31, 2013
	(Dollars in thousands, except per share amounts)									(Dollars in thousands, except per share amounts)
ASSETS
Cash and due from banks	$	187,101		$	160,699		$	195,094		$	107,240		$	59,245		$	195,094
Interest earning deposits		1,250			1,876			881			3,448			1,647			881

Cash and cash equivalents		188,351			162,575			195,975			110,688			60,892			195,975
Investment securities - available for sale (“AFS”)		687,661			487,648			669,384			892,129			490,748			669,384
Loans and leases		2,778,503			2,157,771			2,632,565
Non-purchased loans and leases											3,171,585			2,443,342			2,632,565
Purchased loans not covered by Federal Deposit Insurance Corporation (“FDIC”) loss share agreements (“purchased non-covered loans”)		488,533			38,071			372,723			1,127,689			31,027			372,723
Loans covered by FDIC loss share agreements (“covered loans”)		304,955			544,268			351,791			276,380			480,752			351,791
Allowance for loan and lease losses		(43,861	)		(38,422	)		(42,945	)		(46,958	)		(39,372	)		(42,945	)

Net loans and leases		3,528,130			2,701,688			3,314,134			4,528,696			2,915,749			3,314,134
FDIC loss share receivable		57,782			132,699			71,854			50,679			112,716			71,854
Premises and equipment, net		254,973			227,458			245,472			265,061			225,838			245,472
Foreclosed assets not covered by FDIC loss share agreements		17,076			11,290			11,851			20,581			10,451			11,851
Foreclosed assets covered by FDIC loss share agreements		43,793			51,040			37,960			35,775			46,157			37,960
Accrued interest receivable		15,486			12,785			14,359			21,143			13,837			14,359
Bank owned life insurance (“BOLI”)		144,601			124,928			143,473			179,277			126,031			143,473
Intangible assets, net		20,993			11,258			19,158			108,640			10,690			19,158
Other, net		70,047			28,449			63,448			85,306			30,523			67,550

Total assets	$	5,028,893		$	3,951,818		$	4,787,068		$	6,297,975		$	4,043,632		$	4,791,170

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Demand non-interest bearing	$	886,341		$	588,841		$	746,320		$	1,058,210		$	591,879		$	746,320
Savings and interest bearing transaction		2,199,545			1,653,886			2,073,497			2,748,929			1,665,789			2,073,497
Time		830,318			748,345			897,210			1,176,758			726,961			897,210

Total deposits		3,916,204			2,991,072			3,717,027			4,983,897			2,984,629			3,717,027
Repurchase agreements with customers		51,140			30,714			53,103			55,999			24,704			53,103
Other borrowings		280,885			280,756			280,895			280,875			391,690			280,895
Subordinated debentures		64,950			64,950			64,950			64,950			64,950			64,950
FDIC clawback payable		26,202			25,384			25,897			26,533			25,596			25,897
Accrued interest payable and other liabilities		32,842			31,810			16,768			32,063			17,493			16,768

Total liabilities		4,372,223			3,424,686			4,158,640			5,444,317			3,509,062			4,158,640


Commitments and contingencies

Stockholders’ equity:
Preferred stock; $0.01 par value; 1,000,000 shares authorized; no shares outstanding at March 31, 2014 and 2013 or at December 31, 2013		0			0			0
Common stock; $0.01 par value; 50,000,000 shares authorized; 36,944,152, 35,366,824 and 36,855,852 shares issued and outstanding at March 31, 2014, March 31, 2013 and December 31, 2013, respectively		369			354			369
Preferred stock; $0.01 par value; 1,000,000 shares authorized; no shares outstanding at June 30, 2014 and 2013 or at December 31, 2013											0			0			0
Common stock; $0.01 par value; 125,000,000 shares authorized; 79,662,150, 70,875,848 and 73,711,704 shares issued and outstanding at June 30, 2014, June 30, 2013 and December 31, 2013, respectively											797			709			737
Additional paid-in capital		147,584			76,102			143,385			315,267			78,746			143,017
Retained earnings		502,044			438,194			484,876			524,134			452,568			488,978
Accumulated other comprehensive income (loss)		3,211			9,029			(3,672	)		10,006			(898	)		(3,672	)

Total stockholders’ equity before noncontrolling interest		653,208			523,679			624,958			850,204			531,125			629,060
Noncontrolling interest		3,462			3,453			3,470			3,454			3,445			3,470

Total stockholders’ equity		656,670			527,132			628,428			853,658			534,570			632,530

Total liabilities and stockholders’ equity	$	5,028,893		$	3,951,818		$	4,787,068		$	6,297,975		$	4,043,632		$	4,791,170


	Three Months Ended						Three Months Ended						Six Months Ended
	March 31,						June 30,						June 30,
	2014			2013			2014			2013			2014			2013
	(Dollars in thousands, except per share amounts)						(Dollars in thousands, except per share amounts)
Interest income:
Loans and leases	$	33,412		$	29,880
Non-purchased loans and leases							$	36,833		$	30,719		$	70,247		$	60,598
Purchased non-covered loans		7,480			989			13,998			724			21,478			1,713
Covered loans		9,405			12,864			11,130			11,480			20,535			24,344
Investment securities:
Taxable		2,360			1,285			2,790			1,183			5,149			2,468
Tax-exempt		4,397			3,744			4,974			3,849			9,371			7,593
Deposits with banks and federal funds sold		3			7			35			2			38			10

Total interest income		57,057			48,769			69,760			47,957			126,818			96,726


Interest expense:
Deposits		1,581			1,546			1,827			1,374			3,408			2,920
Repurchase agreements with customers		12			7			13			6			25			13
Other borrowings		2,655			2,649			2,692			2,684			5,347			5,332
Subordinated debentures		413			428			427			428			840			857

Total interest expense		4,661			4,630			4,959			4,492			9,620			9,122


Net interest income		52,396			44,139			64,801			43,465			117,198			87,604
Provision for loan and lease losses		(1,304	)		(2,728	)		(5,582	)		(2,666	)		(6,887	)		(5,394	)

Net interest income after provision for loan and lease losses		51,092			41,411			59,219			40,799			110,311			82,210


Non-interest income:
Service charges on deposit accounts		5,639			4,722			6,605			5,074			12,244			9,796
Mortgage lending income		954			1,741			1,126			1,643			2,080			3,384
Trust income		1,316			883			1,364			865			2,681			1,748
BOLI income		1,130			1,083			1,278			1,104			2,408			2,186
Accretion of FDIC loss share receivable, net of amortization of FDIC clawback payable		692			2,392
Accretion (amortization) of FDIC loss share receivable, net of amortization of FDIC clawback payable								(741	)		2,481			(49	)		4,873
Other income from loss share and purchased non-covered loans, net		3,311			2,155			3,629			3,689			6,940			5,844
Net gains on investment securities		5			156			18			0			23			156
Gains on sales of other assets		974			1,974			1,448			3,110			2,422			5,084
Gain on merger and acquisition transaction		4,667			0			0			0			4,667			0
Other		1,672			1,251			2,661			1,021			4,333			2,273

Total non-interest income		20,360			16,357			17,388			18,987			37,749			35,344


Non-interest expense:
Salaries and employee benefits		17,689			15,694			18,831			15,294			36,520			30,989
Net occupancy and equipment		5,044			4,514			5,707			4,370			10,751			8,884
Other operating expenses		14,721			9,023			13,340			10,237			28,062			19,259

Total non-interest expense		37,454			29,231			37,878			29,901			75,333			59,132


Income before taxes		33,998			28,537			38,729			29,885			72,727			58,422
Provision for income taxes		8,730			8,526			12,251			9,506			20,981			18,032

Net income		25,268			20,011			26,478			20,379			51,746			40,390
Earnings attributable to noncontrolling interest		8			(11	)		8			8			16			(3	)

Net income available to common stockholders	$	25,276		$	20,000		$	26,486		$	20,387		$	51,762		$	40,387


Basic earnings per common share	$	0.68		$	0.57		$	0.35		$	0.29		$	0.69		$	0.57


Diluted earnings per common share	$	0.68		$	0.56		$	0.34		$	0.29		$	0.68		$	0.57


Dividends declared per common share	$	0.22		$	0.15		$	0.115		$	0.085		$	0.225		$	0.16


							Three Months Ended						Six Months Ended
	Three Months Ended						June 30,						June 30,
	March 31,						2014			2013			2014			2013
	2014			2013			(Dollars in thousands)
	(Dollars in thousands)
Net income	$	25,268		$	20,011		$	26,478		$	20,379		$	51,746		$	40,390
Other comprehensive income (loss):
Unrealized gains and losses on investment securities AFS		11,330			(2,729	)		10,786			(16,335	)		22,529			(19,063	)
Tax effect of unrealized gains and losses on investment securities AFS		(4,444	)		1,069			(4,231	)		6,408			(8,837	)		7,476
Reclassification of gains and losses on investment securities AFS included in net income		(5	)		(156	)		(18	)		0			(23	)		(156	)
Tax effect of reclassification of gains and losses on investment securities AFS included in net income		2			62			7			0			9			62

Total other comprehensive income (loss)		6,883			(1,754	)		6,544			(9,927	)		13,678			(11,681	)

Total comprehensive income	$	32,151		$	18,257		$	33,022		$	10,452		$	65,424		$	28,709


	Common Stock		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Non- Controlling Interest			Total			Common Stock		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Non-Controlling Interest			Total
	(Dollars in thousands)																(Dollars in thousands)
Balances – January 1, 2013	$	353	$	73,043	$	423,485		$	10,783		$	3,442		$	511,106		$	706	$	72,690	$	423,485		$	10,783		$	3,442		$	511,106
Net income		0		0		20,011			0			0			20,011			0		0		40,390			0			0			40,390
Earnings attributable to noncontrolling interest		0		0		(11	)		0			11			0			0		0		(3	)		0			3			0
Total other comprehensive income (loss)		0		0		0			(1,754	)		0			(1,754	)		0		0		0			(11,681	)		0			(11,681	)
Common stock dividends		0		0		(5,291	)		0			0			(5,291	)		0		0		(11,304	)		0			0			(11,304	)
Issuance of 95,100 shares of common stock for exercise of stock options		1		1,367		0			0			0			1,368
Issuance of 332,400 split-adjusted shares of common stock for exercise of stock options																		3		2,436		0			0			0			2,439
Excess tax benefit on exercise and forfeiture of stock options		0		700		0			0			0			700			0		1,374		0			0			0			1,374
Stock-based compensation expense		0		992		0			0			0			992			0		2,246		0			0			0			2,246

Balances – March 31, 2013	$	354	$	76,102	$	438,194		$	9,029		$	3,453		$	527,132
Balances – June 30, 2013																	$	709	$	78,746	$	452,568		$	(898	)	$	3,445		$	534,570

Balances – January 1, 2014	$	369	$	143,385	$	484,876		$	(3,672	)	$	3,470		$	628,428

Balances – January 1, 2014, as recast																		737		143,017		488,978			(3,672	)		3,470			632,530
Net income		0		0		25,268			0			0			25,268			0		0		51,746			0			0			51,746
Earnings attributable to noncontrolling interest		0		0		8			0			(8	)		0			0		0		16			0			(16	)		0
Total other comprehensive income (loss)		0		0		0			6,883			0			6,883			0		0		0			13,678			0			13,678
Common stock dividends		0		0		(8,108	)		0			0			(8,108	)		0		0		(16,606	)		0			0			(16,606	)
Issuance of 88,300 shares of common stock for exercise of stock options		0		1,505		0			0			0			1,505
Issuance of 185,000 split-adjusted shares of common stock for exercise of stock options																		2		1,570		0			0			0			1,572
Forfeiture of 400 split-adjusted shares of unvested common stock under restricted stock plan																		0		0		0			0			0			0
Excess tax benefit on exercise and forfeiture of stock options		0		1,323		0			0			0			1,323			0		1,373		0			0			0			1,373
Stock-based compensation expense		0		1,371		0			0			0			1,371			0		3,050		0			0			0			3,050
Issuance of 5,765,846 split-adjusted shares of common stock for acquisition of Summit Bancorp, Inc., net of issuance costs of $88,000																		58		166,257		0			0			0			166,315

Balances – March 31, 2014	$	369	$	147,584	$	502,044		$	3,211		$	3,462		$	656,670
Balances – June 30, 2014																	$	797	$	315,267	$	524,134		$	10,006		$	3,454		$	853,658


	Three Months Ended						Six Months Ended
	March 31,						June 30,
	2014			2013			2014			2013
	(Dollars in thousands)						(Dollars in thousands)
Cash flows from operating activities:
Net income	$	25,268		$	20,011		$	51,746		$	40,390
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,855			1,891			3,816			3,530
Amortization		813			568			1,932			1,429
Earnings attributable to noncontrolling interest		8			(11	)		16			(3	)
Provision for loan and lease losses		1,304			2,728			6,887			5,394
Provision for losses on foreclosed assets		64			121			863			191
Net amortization of investment securities AFS		111			106			301			379
Net gains on investment securities AFS		(5	)		(156	)		(23	)		(156	)
Originations of mortgage loans held for sale		(38,748	)		(59,880	)		(90,110	)		(121,484	)
Proceeds from sales of mortgage loans held for sale		38,535			76,103			83,337			138,764
Accretion of covered loans		(9,405	)		(12,864	)		(20,535	)		(24,344	)
Accretion of purchased non-covered loans		(7,480	)		(989	)		(21,478	)		(1,713	)
Accretion of FDIC loss share receivable, net of amortization of FDIC clawback payable		(692	)		(2,392	)
(Accretion)/amortization of FDIC loss share receivable, net of amortization of FDIC clawback payable								49			(4,873	)
Gains on sales of other assets		(974	)		(1,974	)		(2,422	)		(5,084	)
Gain on merger and acquisition transaction		(4,667	)		0			(4,667	)		0
Deferred income tax (benefit) expense		(242	)		67
Deferred income tax benefit								(3,407	)		(245	)
Increase in cash surrender value of BOLI		(1,130	)		(1,083	)		(2,408	)		(2,186	)
Excess tax benefit on exercise and forfeiture of stock options		(1,323	)		(700	)		(1,373	)		(1,374	)
Stock-based compensation expense		1,371			992			3,050			2,246
Changes in assets and liabilities:
Accrued interest receivable		(813	)		416			(2,049	)		(635	)
Other assets, net		(285	)		1,017			3,449			(364	)
Accrued interest payable and other liabilities		14,631			7,374			13,094			3,677

Net cash provided by operating activities		18,196			31,345			20,068			33,539

Cash flows from investing activities:
Proceeds from sales of investment securities AFS		1,224			999			48,394			999
Proceeds from maturities/calls/paydowns of investment securities AFS		13,279			39,540			29,706			52,322
Purchases of investment securities AFS		(18,349	)		(38,249	)		(35,109	)		(74,659	)
Net advances on loans and leases, excluding covered loans and purchased non-covered loans		(148,100	)		(60,050	)
Net advances on non-purchased loans and leases								(539,695	)		(345,499	)
Payments received on purchased non-covered loans		46,846			4,451			138,949			12,220
Payments received on covered loans		39,843			48,633			68,454			110,257
Payments received from FDIC under loss share agreements		10,610			22,565			16,076			45,745
Other net decreases in covered assets and FDIC loss share receivable		5,423			8,322			9,246			14,665
Purchases of premises and equipment		(3,433	)		(4,121	)		(4,586	)		(5,939	)
Proceeds from sales of other assets		11,313			13,294			30,166			27,216
Cash invested in unconsolidated investments		(881	)		(72	)		(2,320	)		(104	)
Net cash received in merger and acquisition transaction		80,656			0
Net cash received in merger and acquisition transactions								121,918			0

Net cash provided by investing activities		38,431			35,312
Net cash used by investing activities								(118,801	)		(162,777	)

Cash flows from financing activities:
Net decrease in deposits		(56,742	)		(109,983	)
Net repayments of other borrowings		(266	)		(7	)
Net (decrease) increase in repurchase agreements with customers		(1,963	)		1,164
Net increase (decrease) in deposits								41,190			(116,426	)
Net (repayments of) proceeds from other borrowings								(464	)		110,926
Net decrease in repurchase agreements with customers								(13,619	)		(4,846	)
Proceeds from exercise of stock options		1,505			1,368			1,572			2,439
Excess tax benefit on exercise and forfeiture of stock options		1,323			700			1,373			1,374
Cash dividends paid on common stock		(8,108	)		(5,291	)		(16,606	)		(11,304	)

Net cash used by financing activities		(64,251	)		(112,049	)
Net cash provided (used) by financing activities								13,446			(17,837	)

Net decrease in cash and cash equivalents		(7,624	)		(45,392	)		(85,287	)		(147,075	)
Cash and cash equivalents – beginning of period		195,975			207,967			195,975			207,967

Cash and cash equivalents – end of period	$	188,351		$	162,575		$	110,688		$	60,892

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 private aircraft and various other entities that hold foreclosed assets or tax credits or engage in other activities. The Company and Bank are subject to the regulation of certain federal and state agencies and undergo periodic examinations by those regulatory authorities. The consolidated financial statements include the accounts of the Company, the Bank, the real estate subsidiary, the aircraft subsidiary and certain of those various other entities in accordance with accounting principles generally accepted in the United States (“GAAP”). Significant intercompany transactions and amounts have been eliminated in consolidation.

At ~~March 31,~~June 30, 2014, the Company had ~~141~~164 offices, including 6688 in Arkansas, 28 in Georgia, 21 in Texas, 1516 in North Carolina, five in Florida, three in Alabama, and one office each in South Carolina, New York and California.

The accompanying consolidated financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) in Article 10 of Regulation S-X and in accordance with the instructions to Form 10-Q and GAAP for interim financial information. Certain information, accounting policies and footnote disclosures normally included in complete financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with such rules and regulations. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. In the opinion of management, all adjustments considered necessary, consisting of normal recurring items, have been included for a fair presentation of the accompanying consolidated financial statements. Operating results for the ~~three~~six months ended ~~March 31,~~June 30, 2014 are not necessarily indicative of the results that may be expected for the full year or future periods.

On June 23, 2014, the Company completed a two-for-one 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 June 13, 2014. 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.

Certain reclassifications of prior period amounts have been made to conform with the current period presentation. These reclassifications had no impact on previously reported net income. Additionally, as provided for under GAAP, management has up to 12 months following the date of a business combination transaction 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”). During the second quarter of 2014, the Company revised its initial estimates regarding the expected recovery of acquired assets with built-in losses in its July 31, 2013 acquisition of The First National Bank of Shelby (“First National Bank”). As a result, certain amounts previously reported in the Company’s financial statements have been recast.

On May 16, 2014, the Company completed its acquisition of Summit Bancorp, Inc. (“Summit”) and Summit Bank, its wholly-owned bank subsidiary, for an aggregate of $42.5 million in cash and 5,765,846 split-adjusted shares of its common stock. The acquisition of Summit expanded the Company’s service area in Central, South and Western Arkansas by adding 23 banking locations and one loan production office in nine Arkansas counties. During the second quarter of 2014, the Company closed one of the banking offices and the one loan production office acquired in the Summit acquisition.

The following table provides a summary of the assets acquired and liabilities assumed as recorded by Summit, the fair value adjustments necessary to adjust those acquired assets and assumed liabilities to estimated fair value, and the resultant fair values of those assets and liabilities as recorded by the Company. As provided for under GAAP, management has up to 12 months following the date of acquisition to finalize the fair values of the acquired assets and assumed liabilities. The fair value adjustments and the resultant fair values shown in the following table continue to be evaluated by management and may be subject to further adjustment.

Goodwill of $73.4 million, which is the excess of the merger consideration over the fair value of net assets acquired, was recorded in the Summit acquisition and is the result of expected operational synergies and other factors. This goodwill is not expected to be deductible for tax purposes.

The Company’s consolidated results of operations include the operating results for Summit beginning May 16, 2014 through the end of the reporting period. Summit’s operating results contributed $5.8 million of net interest income and $2.8 million of net income to the Company’s results of operations for both the three months and six months ended June 30, 2014.

The following unaudited supplemental pro forma information is presented to show the estimated results assuming Summit was acquired as of the beginning of each period presented, adjusted for estimated potential costs savings. These unaudited pro forma results are not necessarily indicative of the operating results that the Company would have achieved had it completed the acquisition as of January 1, 2013 or 2014 and should not be considered as representative of future operating results.

On March 5, 2014, the Company completed its acquisition of Bancshares, Inc. (“Bancshares”) of Houston, Texas and OMNIBANK, N.A., its wholly-owned bank subsidiary for an aggregate of $21.5 million in cash. The acquisition of Bancshares expanded the Company’s service area in South Texas by adding three offices in Houston and one office each in Austin, Cedar Park, Lockhart, and San Antonio.

The following table provides a summary of the assets acquired and liabilities assumed as recorded by Bancshares, the fair value adjustments necessary to adjust those acquired assets and assumed liabilities to estimated fair value, and the resultant fair values of those assets and liabilities as recorded by the Company. As provided for under GAAP, management has up to 12 months following the date of acquisition to finalize the fair values of the acquired assets and assumed liabilities. The fair value adjustments and the resultant fair values shown in the following table continue to be evaluated by management and may be subject to further adjustment.


	March 5, 2014									March 5, 2014
	As Recorded by Bancshares			Fair Value Adjustments			As Recorded by the Company			As Recorded by Bancshares			Fair Value Adjustments			As Recorded by the Company
	(Dollars in thousands)									(Dollars in thousands)
Assets acquired:
Cash and due from banks	$	102,156		$	0		$	102,156		$	102,156		$	0		$	102,156
Investment securities		1,860			(1	)a		1,859			1,860			(1	) a		1,859
Loans and leases		165,939			(10,764	)b		155,175			165,939			(10,764	) b		155,175
Allowance for loan losses		(5,280	)		5,280	b		0			(5,280	)		5,280	b		0
Premises and equipment		6,259			1,619	c		7,878			6,259			1,619	c		7,878
Foreclosed assets		7,634			(2,916	)d		4,718			7,634			(2,916	) d		4,718
Accrued interest receivable and other assets		608			(294	)e		314			608			(294	) e		314
Core deposit intangible asset		0			2,648	f		2,648			0			2,648	f		2,648
Deferred income taxes		7,110			1,881	g		8,991			7,110			1,881	g		8,991

Total assets acquired		286,286			(2,547	)		283,739			286,286			(2,547	)		283,739

Liabilities assumed:
Deposits		255,798			121	h		255,919			255,798			121	h		255,919
Accrued interest payable and other liabilities		1,358			295	i		1,653			1,358			295	i		1,653

Total liabilities assumed		257,156			416			257,572			257,156			416			257,572

Net assets acquired	$	29,130		$	(2,963	)		26,167		$	29,130		$	(2,963	)		26,167

Total cash consideration paid								(21,500	)								(21,500	)

Gain on acquisition							$	4,667								$	4,667

limitations”). Accordingly, as of the date of acquisition, the Company had established a deferred tax asset valuation allowance of approximately ~~$0.4~~$0.5 million to reflect its assessment that the realization of the benefits from the settlement of these acquired net operating losses is expected to be subject to section 382 limitations. To the extent that additional information becomes available, management may be required to adjust its estimates and assumptions regarding the realization of the benefits associated with these acquired net operating losses by adjusting this deferred tax asset valuation allowance.

h-	Adjustment reflects the fair value adjustment based on the Company’s evaluation of the acquired deposits.

i-	Adjustment reflects the amount needed to adjust other liabilities to estimated fair value and to record certain liabilities directly attributable to the acquisition of Bancshares.

The Company’s consolidated results of operations include the operating results for Bancshares beginning March 6, 2014 through the end of the reporting period. For the three months ended June 30, 2014, Bancshares’ operating results contributed ~~$1.0~~$2.4 million of net interest income and ~~$5.1~~$1.3 million of net income to the Company’s results of operations. For the six months ended June 30, 2014, Bancshares’ operating results contributed $3.4 million of net interest income and $6.4 million of net income, including the $4.7 million of tax-exempt bargain purchase gain, to the Company’s results of ~~operations for the three months ended March 31, 2014.~~operations.

On July 31, 2013, the Company completed the First National Bank ~~of Shelby (“First National Bank”)~~ acquisition whereby First National Bank merged with and into the Company’s wholly-owned bank subsidiary ~~in a transaction valued at $68.5 million. The Company issued 1,257,385 shares~~for an aggregate of ~~its common stock valued at $60.1 million, plus~~ $8.4 million in cash ~~in exchange for all outstanding~~and 2,514,770 split-adjusted shares of ~~First National Bank~~its common stock. The Company also acquired certain real property from parties related to First National Bank and on which certain First National Bank offices are located for $3.8 million in cash.

The acquisition of First National Bank expanded the Company’s service area in North Carolina by adding 14 offices in Shelby, North Carolina and the surrounding communities. On September 24, 2013 the Company closed one of the acquired offices in Shelby, North Carolina.

During the second quarter of 2014, management revised its initial estimates and assumptions regarding the expected recovery of acquired assets with built-in losses, specifically the timing of expected charge-offs of purchased non-covered loans, in the First National Bank acquisition. As a result of such revision, management concluded that the deferred tax asset valuation allowance of $4.1 million was not necessary. Because such revision occurred during the first 12 months following the date of acquisition and was not the result of changes in circumstances, management has recast the third quarter 2013 financial statements, along with all subsequent financial statements, to increase the bargain purchase gain on the First National Bank acquisition by $4.1 million to reflect this change in estimate.

The following table provides a summary of the assets acquired and liabilities assumed as recorded by First National Bank, the fair value adjustments necessary to adjust those acquired assets and assumed liabilities to estimated fair value, the recast adjustment described above and the resultant fair values of those assets and liabilities as recorded by the Company. As provided for under GAAP, management has up to 12 months following the date of acquisition to finalize the fair values of the acquired assets and assumed liabilities. The fair value adjustments and the resultant fair values shown in the following table continue to be evaluated by management and may be subject to further adjustment.


	July 31, 2013									July 31, 2013
	As Recorded by First National Bank			Fair Value Adjustments			As Recorded by the Company			As Recorded by First National Bank			Fair Value Adjustments			Recast Adjustment		As Recorded by the Company
	(Dollars in thousands)									(Dollars in thousands)
Assets acquired:
Cash and due from banks	$	69,285		$	0		$	69,285		$	69,285		$	0		$	0	$	69,285
Investment securities		149,943			(599	)a		149,344			149,943			(599	) a		0		149,344
Loans and leases		432,250			(44,183	)b		388,067			432,250			(44,183	) b		0		388,067
Allowance for loan losses		(13,931	)		13,931	b		0			(13,931	)		13,931	b		0		0
Premises and equipment		14,318			5,064	c		19,382			14,318			5,064	c		0		19,382
Foreclosed assets		3,073			(915	)d		2,158			3,073			(915	) d		0		2,158
Accrued interest receivable		1,234			(110	)e		1,124			1,234			(110	) e		0		1,124
BOLI		14,812			0			14,812			14,812			0			0		14,812
Core deposit intangible asset		0			10,136	f		10,136			0			10,136	f		0		10,136
Deferred income taxes		12,179			12,325	g		24,504			12,179			12,325	g		4,102		28,606
Other		4,277			(251	)e		4,026
Other assets											4,277			(251	) e		0		4,026

Total assets acquired		687,440			(4,602	)		682,838			687,440			(4,602	)		4,102		686,940

Liabilities assumed:
Deposits		595,668			4,950	h		600,618			595,668			4,950	h		0		600,618
Repurchase agreements with customers		6,405			0			6,405			6,405			0			0		6,405
Accrued interest payable and other liabilities		1,296			1,164	i		2,460			1,296			1,164	i		0		2,460

Total liabilities assumed		603,369			6,114			609,483			603,369			6,114			0		609,483

Net assets acquired	$	84,071		$	(10,716	)		73,355		$	84,071		$	(10,716	)	$	4,102		77,457

Consideration paid:
Cash								(12,215	)										(12,215	)
Common stock								(60,079	)										(60,079	)

Total consideration paid								(72,294	)										(72,294	)

Gain on acquisition							$	1,061										$	5,163

Beginning August 1, 2013, First National Bank operations are included in the Company’s consolidated results of operations. Accordingly, no revenue or earnings of First National Bank are included in the Company’s results of operations for the three months or six months ended June 30, 2013.

~~On January 30, 2014, the Company entered into~~As a definitive agreement and plan of merger (the “Summit Agreement”) with Summit Bancorp, Inc. (“Summit”), and its wholly-owned bank subsidiary Summit Bank, headquartered in Arkadelphia, Arkansas, whereby the Company will acquire allresult of the ~~outstanding common stock of Summit~~recast adjustment described above, certain amounts previously reported in a transaction valued at approximately $216.0 million. Summit operates 24 branch locations in nine Arkansas counties. At December 31, 2013, Summit’s total assets were $1.2 billion which consisted primarily of $763 million of loans and $315 million of investment securities, its total deposits were $994 million, and its total stockholders’ equity was $135 million.

~~Under the terms of the Summit Agreement, each outstanding share of common stock of Summit will be converted, at the election of each Summit shareholder, into the right to receive shares of~~ the Company’s ~~common stock, plus cash in lieu~~consolidated financial statements have been recast. The following is a summary of ~~any fractional share, or the right to receive cash, all subject to certain conditions and potential adjustments, provided~~those financial statement captions that at least 80% of the merger consideration paid to Summit shareholders will consist of shares of the Company’s common stock. The number of Company shares to be issued will be determined based on Summit shareholder elections and the Company’s 10-day average closing stock price as of the fifth business day prior to the closing date, subject to a minimum price of $43.58 per share and a maximum price of $72.63 per share. Completion of the transaction is subject to certain closing conditions. This acquisition is expected to close on or about May 16, 2014.have been impacted by this recast adjustment.

Basic EPS is computed by dividing ~~reported earnings~~net income available to common stockholders by the weighted-average number of common shares outstanding. Diluted EPS is computed by dividing ~~reported earnings~~net income available to common stockholders by the weighted-average number of common shares outstanding after consideration of the dilutive effect, if any, of the Company’s outstanding common stock options using the treasury stock method. No options to purchase shares of the Company’s common stock for the three months ~~ended March 31, 2014 were excluded from the diluted EPS calculation as all options were dilutive. Options to purchase 254,550 shares of the Company’s common stock for the three~~or six months ended ~~March 31,~~June 30, 2014 and 2013 were excluded from the diluted EPS calculations as ~~inclusion would have been anti-dilutive.~~all options were dilutive for all periods presented.

The following table presents the computation of basic and diluted EPS for the periods indicated.


	Three Months Ended				Three Months Ended				Six Months Ended
	March 31,				June 30,				June 30,
	2014		2013		2014		2013		2014		2013
	(In thousands, except per share amounts)				(In thousands, except per share amounts)
Numerator:
Distributed earnings allocated to common stock	$	8,108	$	5,291	$	8,497	$	6,013	$	16,606	$	11,304
Undistributed earnings allocated to common stock		17,168		14,709		17,989		14,374		35,156		29,083

Net earnings allocated to common stock	$	25,276	$	20,000
Net income available to common stock					$	26,486	$	20,387	$	51,762	$	40,387

Denominator:
Denominator for basic EPS – weighted-average common shares		36,901		35,322		76,743		70,806		75,281		70,726
Effect of dilutive securities – stock options		346		309		723		676		700		616

Denominator for diluted EPS – weighted-average common shares and assumed conversions		37,247		35,631		77,466		71,482		75,981		71,342

Basic EPS	$	0.68	$	0.57	$	0.35	$	0.29	$	0.69	$	0.57

Diluted EPS	$	0.68	$	0.56	$	0.34	$	0.29	$	0.68	$	0.57

At ~~March 31,~~June 30, 2014 and 2013 and at December 31, 2013, the Company classified all of its investment securities portfolio 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 tax, reported as a separate component of stockholders’ equity and included in accumulated other comprehensive income (loss).

The following table presents the amortized cost and estimated fair value of investment securities AFS as of the dates indicated. The Company’s holdings of “other equity securities” include Federal Home Loan Bank of Dallas (“FHLB – Dallas”) and First National Banker’s Bankshares, Inc. (“FNBB”) shares, which do not have readily determinable fair values and are carried at cost.


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(Dollars in thousands)									(Dollars in thousands)
March 31, 2014:
June 30, 2014:
Obligations of state and political subdivisions	$	447,368	$	10,010	$	(4,630	)	$	452,748	$	603,533	$	15,536	$	(2,504	)	$	616,565
U.S. Government agency securities		219,836		3,526		(3,622	)		219,740		254,878		5,613		(2,180	)		258,311
Corporate obligations		686		0		0			686		685		0		0			685
Other equity securities		14,487		0		0			14,487		16,568		0		0			16,568

Total	$	682,377	$	13,536	$	(8,252	)	$	687,661	$	875,664	$	21,149	$	(4,684	)	$	892,129


December 31, 2013:
Obligations of state and political subdivisions	$	438,390	$	6,230	$	(8,631	)	$	435,989	$	438,390	$	6,230	$	(8,631	)	$	435,989
U.S. Government agency securities		222,510		2,352		(5,993	)		218,869		222,510		2,352		(5,993	)		218,869
Corporate obligations		716		0		0			716		716		0		0			716
Other equity securities		13,810		0		0			13,810		13,810		0		0			13,810

Total	$	675,426	$	8,582	$	(14,624	)	$	669,384	$	675,426	$	8,582	$	(14,624	)	$	669,384

March 31, 2013:

June 30, 2013:
Obligations of state and political subdivisions	$	366,753	$	14,441	$	(958	)	$	380,236	$	390,509	$	8,372	$	(7,435	)	$	391,446
U.S. Government agency securities		91,589		1,488		(114	)		92,963		85,449		860		(3,274	)		83,035
Corporate obligations		748		0		0			748		747		0		0			747
Other equity securities		13,701		0		0			13,701		15,520		0		0			15,520

Total	$	472,791	$	15,929	$	(1,072	)	$	487,648	$	492,225	$	9,232	$	(10,709	)	$	490,748

The following table shows estimated fair value of investment securities AFS having gross unrealized losses and the amount of such unrealized losses, aggregated by investment category and length of time that individual investment securities have been in a continuous unrealized loss position, as of the dates indicated.


	Less than 12 Months				12 Months or More				Total				Less than 12 Months				12 Months or More				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
	(Dollars in thousands)												(Dollars in thousands)
March 31, 2014:
June 30, 2014:
Obligations of state and political subdivisions	$	51,961	$	2,048	$	47,890	$	2,582	$	99,851	$	4,630	$	60,769	$	386	$	79,000	$	2,118	$	139,769	$	2,504
U.S. Government agency securities		69,783		3,582		1,038		40		70,821		3,622		15,227		67		58,608		2,113		73,835		2,180

Total temporarily impaired securities	$	121,744	$	5,630	$	48,928	$	2,622	$	170,672	$	8,252	$	75,996	$	453	$	137,608	$	4,231	$	213,604	$	4,684


December 31, 2013:
Obligations of states and political subdivisions	$	132,568	$	7,237	$	10,823	$	1,394	$	143,391	$	8,631	$	132,568	$	7,237	$	10,823	$	1,394	$	143,391	$	8,631
U.S. Government agency securities		127,274		5,993		0		0		127,274		5,993		127,274		5,993		0		0		127,274		5,993

Total temporarily impaired securities	$	259,842	$	13,230	$	10,823	$	1,394	$	270,665	$	14,624	$	259,842	$	13,230	$	10,823	$	1,394	$	270,665	$	14,624

March 31, 2013:

June 30, 2013:
Obligations of state and political subdivisions	$	49,071	$	850	$	7,267	$	108	$	56,338	$	958	$	105,258	$	7,004	$	6,942	$	431	$	112,200	$	7,435
U.S. Government agency securities		21,436		114		0		0		21,436		114		60,685		3,274		0		0		60,685		3,274

Total temporarily impaired securities	$	70,507	$	964	$	7,267	$	108	$	77,774	$	1,072	$	165,943	$	10,278	$	6,942	$	431	$	172,885	$	10,709

In evaluating the Company’s unrealized loss positions for other-than-temporary impairment of its 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 ~~March 31,~~June 30, 2014 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 considers these unrealized losses to be temporary in nature. The Company does not have the intent to sell these investment securities with unrealized losses and, more likely than not, will not be required to sell these investment securities before fair value recovers to amortized cost.

The following table shows the amortized cost and estimated fair value of investment securities AFS by maturity or estimated date of repayment as of the date indicated.


	March 31, 2014				June 30, 2014
Maturity or Estimated Repayment	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(Dollars in thousands)				(Dollars in thousands)
One year or less	$	26,941	$	27,336	$	43,874	$	44,751
After one year to five years		86,815		88,008		136,928		139,251
After five years to ten years		140,304		140,653		197,779		200,213
After ten years		428,317		431,664		497,083		507,914

Total	$	682,377	$	687,661	$	875,664	$	892,129

For purposes of this maturity distribution, all investment securities AFS are shown based on their contractual maturity date or estimated date of repayment, except (i) FHLB – Dallas and FNBB stock with no contractual maturity date are shown in the longest maturity category and (ii) U.S. Government agency securities and municipal housing authority securities backed by residential mortgages are allocated among various maturities based on an estimated repayment schedule utilizing Bloomberg median prepayment speeds or other estimates of prepayment speeds and interest rate levels at the measurement date. 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.

The following table is a summary of sales activities in the Company’s investment securities AFS for the periods indicated.


	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013		2014		2013
	(Dollars in thousands)				(Dollars in thousands)
Sales proceeds	$	1,224	$	999	$	47,170	$	0	$	48,394	$	999


Gross realized gains	$	5	$	156	$	18	$	0	$	23	$	156
Gross realized losses		0		0		0		0		0		0

Net gains on investment securities	$	5	$	156	$	18	$	0	$	23	$	156

~~6. Allowance for Loan and Lease Losses (“ALLL”) and Credit Quality Indicators~~

The following table is a summary of activity within the ALLL for the periods indicated.


	Three Months Ended March 31,						Three Months Ended June 30,							Six Months Ended June 30,
	2014			2013			2014			2013				2014			2013
	(Dollars in thousands)						(Dollars in thousands)
Beginning balance	$	42,945		$	38,738		$	43,861		$	38,422			$	42,945		$	38,738
Non-covered loans and leases charged off		(920	)		(1,347	)
Recoveries of non-covered loans and leases previously charged off		736			331
Non-purchased loans and leases charged off								(1,650	)		(1,101	)			(2,569	)		(2,449	)
Recoveries of non-purchased loans and leases previously charged off								247			451				982			783

Net non-covered loans and leases charged off		(184	)		(1,016	)
Net non-purchased loans and leases charged off								(1,403	)		(650	)			(1,587	)		(1,666	)
Covered loans charged off		(204	)		(2,028	)		(515	)		(1,066	)			(720	)		(3,094	)
Purchased non-covered loans charged off								(567	)		0				(567	)		0

Net charge-offs – total loans and leases		(388	)		(3,044	)		(2,485	)		(1,716	)			(2,874	)		(4,760	)
Provision for loan and lease losses:													��
Non-covered loans and leases		1,100			700
Non-purchased loans and leases								4,500			1,600				5,600			2,300
Covered loans		204			2,028			515			1,066				720			3,094
Purchased non-covered loans								567			0				567			0

Total provision		1,304			2,728			5,582			2,666				6,887			5,394

Ending balance	$	43,861		$	38,422		$	46,958		$	39,372			$	46,958		$	39,372

At ~~March 31,~~June 30, 2014 and 2013, the Company identified covered loans acquired in its FDIC-assisted acquisitions 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 ~~$0.2~~$0.5 million for such loans during the second quarter of 2014 and $0.7 million for such loans during the first ~~quarter~~six months of ~~2014 and $2.0 million for such loans during the first quarter of 2013.~~2014. The Company also recorded provision for loan and lease losses of ~~$0.2~~$0.5 million during the second quarter of 2014 and $0.7 million during the first ~~quarter~~six months of 2014 ~~and $2.0 million during the first quarter of 2013~~ to cover such charge-offs. In addition to those net charge-offs, the Company transferred certain of these covered loans to covered foreclosed assets. As a result, the Company had ~~$29.3~~$20.3 million and ~~$51.2~~$52.6 million, respectively, of impaired covered loans at ~~March 31,~~June 30, 2014 and 2013.

As of ~~and for the three months ended March 31,~~June 30, 2014, ~~and 2013,~~ the Company had noidentified purchased non-covered loans where the expected performance had deteriorated from management’s performance expectations established in conjunction with the determination of the Day 1 Fair Values or where current information indicates it is probable that the Company will not be able to collect all amounts according to the contractual terms thereon. As a result, the Company recorded partial charge-offs totaling $0.6 million for both the second quarter and first six months of 2014 compared to none for the comparable periods in 2013. The Company also recorded provision for loan and lease losses of $0.6 million for both the second quarter and first six months of 2014 compared to none during the second quarter and first six months of 2013 to cover such charge-offs. At June 30, 2014, the Company had $0.9 million of impaired purchased non-covered loans compared to none at both June 30, 2013 and ~~recorded no charge-offs, partial charge-offs or provision for such loans.~~December 31, 2013.

The following table is a summary of the Company’s ALLL for the periods indicated.


	Beginning Balance		Charge-offs			Recoveries		Provision			Ending Balance		Beginning Balance		Charge-offs			Recoveries		Provision			Ending Balance
	(Dollars in thousands)												(Dollars in thousands)
Three months ended March 31, 2014:
Three months ended June 30, 2014:
Real estate:
Residential 1-4 family	$	4,701	$	(199	)	$	22	$	98		$	4,622	$	4,622	$	(142	)	$	49	$	231		$	4,760
Non-farm/non-residential		13,633		(73	)		3		450			14,013		14,013		(1,181	)		1		2,003			14,836
Construction/land development		12,306		0			8		514			12,828		12,828		(14	)		0		2,650			15,464
Agricultural		3,000		(15	)		5		28			3,018		3,018		0			6		(116	)		2,908
Multifamily residential		2,504		0			0		(75	)		2,429		2,429		0			0		(657	)		1,772
Commercial and industrial		2,855		(374	)		628		(371	)		2,738		2,738		(48	)		135		23			2,848
Consumer		917		(41	)		18		(63	)		831		831		(56	)		18		133			926
Direct financing leases		2,266		(146	)		6		312			2,438		2,438		(121	)		8		247			2,572
Other		763		(72	)		46		207			944		944		(88	)		30		(14	)		872
Covered loans		0		(204	)		0		204			0		0		(515	)		0		515			0
Purchased non-covered loans		0		0			0		0			0		0		(567	)		0		567			0

Total	$	42,945	$	(1,124	)	$	736	$	1,304		$	43,861	$	43,861	$	(2,732	)	$	247	$	5,582		$	46,958

Year ended December 31, 2013:

Six months ended June 30, 2014:
Real estate:
Residential 1-4 family	$	4,820	$	(837	)	$	106	$	612		$	4,701	$	4,701	$	(341	)	$	71	$	329		$	4,760
Non-farm/non-residential		10,107		(1,111	)		122		4,515			13,633		13,633		(1,254	)		4		2,453			14,836
Construction/land development		12,000		(137	)		174		269			12,306		12,306		(14	)		8		3,164			15,464
Agricultural		2,878		(261	)		14		369			3,000		3,000		(15	)		11		(88	)		2,908
Multifamily residential		2,030		(4	)		4		474			2,504		2,504		0			0		(732	)		1,772
Commercial and industrial		3,655		(922	)		433		(311	)		2,855		2,855		(422	)		763		(348	)		2,848
Consumer		1,015		(214	)		104		12			917		917		(97	)		36		70			926
Direct financing leases		2,050		(482	)		33		665			2,266		2,266		(267	)		14		559			2,572
Other		183		(359	)		144		795			763		763		(159	)		75		193			872
Covered loans		0		(4,675	)		0		4,675			0		0		(720	)		0		720			0
Purchased non-covered loans		0		0			0		0			0		0		(567	)		0		567			0

Total	$	38,738	$	(9,002	)	$	1,134	$	12,075		$	42,945	$	42,945	$	(3,856	)	$	982	$	6,887		$	46,958

Three months ended March 31, 2013:
Real estate:
Residential 1-4 family	$	4,820	$	(280	)	$	95	$	(78	)	$	4,557
Non-farm/non-residential		10,107		(41	)		102		893			11,061
Construction/land development		12,000		(58	)		5		(631	)		11,316
Agricultural		2,878		0			2		23			2,903
Multifamily residential		2,030		0			0		(40	)		1,990
Commercial and industrial		3,655		(716	)		9		113			3,061
Consumer		1,015		(61	)		58		22			1,034
Direct financing leases		2,050		(80	)		9		161			2,140
Other		183		(111	)		51		237			360
Covered loans		0		(2,028	)		0		2,028			0
Purchased non-covered loans		0		0			0		0			0

Total	$	38,738	$	(3,375	)	$	331	$	2,728		$	38,422

The following table is a summary of the Company’s ALLL for the periods indicated.

The following table is a summary of the Company’s ALLL and recorded investment in loans and leases, excluding purchased non-covered loans and covered loans (“non-purchased loans and leases”), as of the dates indicated.


	Allowance for Loan and Lease Losses						Loans and Leases, Excluding Purchased Non-Covered Loans and Covered Loans						Allowance for Non-Purchased Loan and Lease Losses						Non-Purchased Loans and Leases
	ALLL for Individually Evaluated Impaired Loans and Leases		ALLL for All Other Loans and Leases		Total ALLL		Individually Evaluated Impaired Loans and Leases		All Other Loans and Leases		Total Loans and Leases		ALLL for Individually Evaluated Impaired Loans and Leases		ALLL for All Other Loans and Leases		Total ALLL		Individually Evaluated Impaired Loans and Leases		All Other Loans and Leases		Total Loans and Leases
	(Dollars in thousands)												(Dollars in thousands)
March 31, 2014:
June 30, 2014:
Real estate:
Residential 1-4 family	$	385	$	4,237	$	4,622	$	3,811	$	248,977	$	252,788	$	411	$	4,349	$	4,760	$	3,245	$	263,252	$	266,497
Non-farm/non-residential		29		13,984		14,013		1,627		1,142,856		1,144,483		13		14,823		14,836		2,363		1,287,811		1,290,174
Construction/land development		2		12,826		12,828		325		795,801		796,126		2		15,462		15,464		9,738		1,039,420		1,049,158
Agricultural		243		2,775		3,018		817		43,091		43,908		200		2,708		2,908		845		44,696		45,541
Multifamily residential		0		2,429		2,429		0		195,332		195,332		0		1,772		1,772		491		136,462		136,953
Commercial and industrial		624		2,114		2,738		626		137,038		137,664		553		2,295		2,848		689		166,195		166,884
Consumer		3		828		831		48		23,721		23,769		3		923		926		42		28,632		28,674
Direct financing leases		0		2,438		2,438		0		92,856		92,856		0		2,572		2,572		0		98,768		98,768
Other		0		944		944		10		91,567		91,577		0		872		872		9		88,927		88,936

Total	$	1,286	$	42,575	$	43,861	$	7,264	$	2,771,239	$	2,778,503	$	1,182	$	45,776	$	46,958	$	17,422	$	3,154,163	$	3,171,585


December 31, 2013:
Real estate:
Residential 1-4 family	$	438	$	4,263	$	4,701	$	4,047	$	245,509	$	249,556	$	438	$	4,263	$	4,701	$	4,047	$	245,509	$	249,556
Non-farm/non-residential		15		13,618		13,633		2,159		1,101,955		1,104,114		15		13,618		13,633		2,159		1,101,955		1,104,114
Construction/land development		2		12,304		12,306		236		722,321		722,557		2		12,304		12,306		236		722,321		722,557
Agricultural		229		2,771		3,000		883		44,313		45,196		229		2,771		3,000		883		44,313		45,196
Multifamily residential		0		2,504		2,504		0		208,337		208,337		0		2,504		2,504		0		208,337		208,337
Commercial and industrial		652		2,203		2,855		686		123,382		124,068		652		2,203		2,855		686		123,382		124,068
Consumer		3		914		917		50		26,132		26,182		3		914		917		50		26,132		26,182
Direct financing leases		0		2,266		2,266		0		86,321		86,321		0		2,266		2,266		0		86,321		86,321
Other		2		761		763		26		66,208		66,234		2		761		763		26		66,208		66,234

Total	$	1,341	$	41,604	$	42,945	$	8,087	$	2,624,478	$	2,632,565	$	1,341	$	41,604	$	42,945	$	8,087	$	2,624,478	$	2,632,565

March 31, 2013:

June 30, 2013:
Real estate:
Residential 1-4 family	$	440	$	4,117	$	4,557	$	2,681	$	253,947	$	256,628	$	428	$	4,225	$	4,653	$	2,728	$	258,840	$	261,568
Non-farm/non-residential		36		11,025		11,061		3,166		820,525		823,691		11		12,453		12,464		10,390		1,006,817		1,017,207
Construction/land development		0		11,316		11,316		334		622,968		623,302		0		11,290		11,290		272		680,557		680,829
Agricultural		349		2,554		2,903		1,106		48,354		49,460		194		2,401		2,595		663		48,216		48,879
Multifamily residential		0		1,990		1,990		0		142,714		142,714		0		1,854		1,854		312		145,371		145,683
Commercial and industrial		661		2,400		3,061		853		126,889		127,742		622		2,307		2,929		710		138,363		139,073
Consumer		0		1,034		1,034		49		28,502		28,551		0		993		993		7		28,282		28,289
Direct financing leases		0		2,140		2,140		0		71,420		71,420		0		2,041		2,041		0		76,953		76,953
Other		2		358		360		15		34,248		34,263		1		552		553		12		44,849		44,861

Total	$	1,488	$	36,934	$	38,422	$	8,204	$	2,149,567	$	2,157,771	$	1,256	$	38,116	$	39,372	$	15,094	$	2,428,248	$	2,443,342

The following table is a summary of impaired non-purchased loans and leases, ~~excluding purchased non-covered loans and covered loans,~~ as of and for the three months and six months ended ~~March 31,~~June 30, 2014.


	Principal Balance		Net Charge-offs to Date			Principal Balance, Net of Charge-offs		Specific ALLL		Weighted Average Carrying Value – Three Months Ended March 31, 2014		Principal Balance		Net Charge-offs to Date			Principal Balance, Net of Charge-offs		Specific ALLL		Weighted Average Carrying Value – Three Months Ended June 30, 2014		Weighted Average Carrying Value – Six Months Ended June 30, 2014
	(Dollars in thousands)											(Dollars in thousands)
Impaired loans and leases for which there is a related ALLL:
Real estate:
Residential 1-4 family	$	3,164	$	(1,726	)	$	1,438	$	385	$	1,677	$	3,294	$	(1,721	)	$	1,573	$	411	$	1,505	$	1,642
Non-farm/non-residential		188		(127	)		61		29		53		186		(142	)		44		13		52		50
Construction/land development		38		(22	)		16		2		16		38		(22	)		16		2		16		16
Agricultural		360		(12	)		348		243		409		336		(12	)		324		200		336		380
Commercial and industrial		1,368		(803	)		565		624		588		838		(278	)		560		553		562		579
Consumer		103		(80	)		23		3		23		102		(79	)		23		3		23		23
Other		0		0			0		0		8		0		0			0		0		0		5

Total impaired loans and leases with a related ALLL		5,221		(2,770	)		2,451		1,286		2,774		4,794		(2,254	)		2,540		1,182		2,494		2,695


Impaired loans and leases for which there is not a related ALLL:
Real estate:
Residential 1-4 family		2,845		(472	)		2,373		0		2,252		2,094		(421	)		1,673		0		2,023		2,059
Non-farm/non-residential		2,702		(1,136	)		1,566		0		1,840		3,444		(1,125	)		2,319		0		1,942		1,999
Construction/land development		390		(81	)		309		0		264		9,803		(81	)		9,722		0		5,015		3,417
Agricultural		513		(44	)		469		0		441		554		(33	)		521		0		494		468
Multifamily residential		133		(133	)		0		0		0		624		(133	)		491		0		246		164
Commercial and industrial		220		(159	)		61		0		68		288		(159	)		129		0		95		88
Consumer		34		(9	)		25		0		26		33		(14	)		19		0		22		24
Other		30		(20	)		10		0		10		8		0			8		0		9		9

Total impaired loans and leases without a related ALLL		6,867		(2,054	)		4,813		0		4,901		16,848		(1,966	)		14,882		0		9,846		8,228

Total impaired loans and leases	$	12,088	$	(4,824	)	$	7,264	$	1,286	$	7,675	$	21,642	$	(4,220	)	$	17,422	$	1,182	$	12,340	$	10,923

The following table is a summary of impaired non-purchased loans and leases ~~excluding purchased non-covered loans and covered loans,~~ as of and for the year ended December 31, 2013.


	Principal Balance		Net Charge-offs to Date			Principal Balance, Net of Charge-offs		Specific ALLL		Weighted Average Carrying Value – Year Ended December 31, 2013		Principal Balance		Net Charge-offs to Date			Principal Balance, Net of Charge-offs		Specific ALLL		Weighted Average Carrying Value – Year Ended December 31, 2013
	(Dollars in thousands)											(Dollars in thousands)
Impaired loans and leases for which there is a related ALLL:
Real estate:
Residential 1-4 family	$	3,609	$	(1,692	)	$	1,917	$	438	$	1,638	$	3,609	$	(1,692	)	$	1,917	$	438	$	1,638
Non-farm/non-residential		121		(75	)		46		15		93		121		(75	)		46		15		93
Construction/land development		38		(22	)		16		2		17		38		(22	)		16		2		17
Agricultural		511		(42	)		469		229		514		511		(42	)		469		229		514
Commercial and industrial		2,016		(1,405	)		611		652		578		2,016		(1,405	)		611		652		578
Consumer		178		(156	)		22		3		10		178		(156	)		22		3		10
Other		40		(25	)		15		2		10		40		(25	)		15		2		10

Total impaired loans and leases with a related ALLL		6,513		(3,417	)		3,096		1,341		2,860		6,513		(3,417	)		3,096		1,341		2,860


Impaired loans and leases for which there is not a related ALLL:
Real estate:
Residential 1-4 family		2,939		(808	)		2,131		0		1,541		2,939		(808	)		2,131		0		1,541
Non-farm/non-residential		3,234		(1,120	)		2,114		0		4,344		3,234		(1,120	)		2,114		0		4,344
Construction/land development		300		(81	)		219		0		303		300		(81	)		219		0		303
Agricultural		426		(12	)		414		0		404		426		(12	)		414		0		404
Multifamily residential		133		(133	)		0		0		124		133		(133	)		0		0		124
Commercial and industrial		85		(10	)		75		0		172		85		(10	)		75		0		172
Consumer		39		(12	)		27		0		24		39		(12	)		27		0		24
Other		31		(20	)		11		0		9		31		(20	)		11		0		9

Total impaired loans and leases without a related ALLL		7,187		(2,196	)		4,991		0		6,921		7,187		(2,196	)		4,991		0		6,921

Total impaired loans and leases	$	13,700	$	(5,613	)	$	8,087	$	1,341	$	9,781	$	13,700	$	(5,613	)	$	8,087	$	1,341	$	9,781

The following table is a summary of impaired non-purchased loans and leases ~~excluding purchased non-covered loans and covered loans,~~ as of and for the three months and six months ended ~~March 31,~~June 30, 2013.


	Principal Balance		Net Charge-offs to Date			Principal Balance, Net of Charge-offs		Specific ALLL		Weighted Average Carrying Value – Three Months Ended March 31, 2013		Principal Balance		Net Charge-offs to Date			Principal Balance, Net of Charge-offs		Specific ALLL		Weighted Average Carrying Value – Three Months Ended June 30, 2013		Weighted Average Carrying Value – Six Months Ended June 30, 2013
	(Dollars in thousands)											(Dollars in thousands)
Impaired loans and leases for which there is a related ALLL:
Real estate:
Residential 1-4 family	$	3,046	$	(1,688	)	$	1,358	$	440	$	1,513	$	2,960	$	(1,650	)	$	1,310	$	428	$	1,334	$	1,445
Non-farm/non-residential		175		(8	)		167		36		185		19		(8	)		11		11		89		127
Construction/land development		90		(90	)		0		0		25		90		(90	)		0		0		0		17
Agricultural		711		(12	)		699		349		629		466		(42	)		424		194		561		561
Commercial and industrial		2,323		(1,723	)		600		661		581		2,290		(1,731	)		559		622		580		574
Consumer		12		(12	)		0		0		0		52		(52	)		0		0		0		1
Other		257		(247	)		10		2		10		179		(171	)		8		1		9		9

Total impaired loans and leases with a related ALLL		6,614		(3,780	)		2,834		1,488		2,943		6,056		(3,744	)		2,312		1,256		2,573		2,734


Impaired loans and leases for which there is not a related ALLL:
Real estate:
Residential 1-4 family		1,534		(211	)		1,323		0		1,281		1,738		(320	)		1,418		0		1,371		1,327
Non-farm/non-residential		3,606		(607	)		2,999		0		2,848		11,443		(1,064	)		10,379		0		6,690		5,358
Construction/land development		466		(132	)		334		0		412		465		(193	)		272		0		303		366
Agricultural		610		(203	)		407		0		416		250		(11	)		239		0		323		357
Multifamily residential		133		(133	)		0		0		0		445		(133	)		312		0		156		104
Commercial and industrial		678		(425	)		253		0		226		566		(415	)		151		0		202		201
Consumer		72		(23	)		49		0		40		19		(12	)		7		0		28		29
Other		25		(20	)		5		0		9		24		(20	)		4		0		5		7

Total impaired loans and leases without a related ALLL		7,124		(1,754	)		5,370		0		5,232		14,950		(2,168	)		12,782		0		9,078		7,749

Total impaired loans and leases	$	13,738	$	(5,534	)	$	8,204	$	1,488	$	8,175	$	21,006	$	(5,912	)	$	15,094	$	1,256	$	11,651	$	10,483

Management has determined that certain of the Company’s impaired non-purchased loans and leases do not require any specific allowance at ~~March 31,~~June 30, 2014 and 2013 or at December 31, 2013 because (i) management’s analysis of such individual loans and leases resulted in no impairment or (ii) all identified impairment on such loans and leases has previously been charged off.

Interest income on impaired non-purchased loans and leases is recognized on a cash basis when and if actually collected. Total interest income recognized on impaired non-purchased loans and leases for the three months and six months ended ~~March 31,~~June 30, 2014 and 2013 and for the year ended December 31, 2013 was not material.

Non-Purchased Loans and Leases ~~Excluding Purchased Non-Covered Loans and Covered Loans~~

The following table is a summary of credit quality indicators for the Company’s ~~total~~non-purchased loans and leases as of the dates indicated.


	Satisfactory		Moderate			Watch		Substandard		Total		Satisfactory		Moderate		Watch		Substandard		Total
	(Dollars in thousands)											(Dollars in thousands)
March 31, 2014:
June 30, 2014:
Real estate:
Residential 1-4 family⁽¹⁾	$	244,259	$	0		$	2,449	$	6,080	$	252,788	$	258,098	$	0	$	2,620	$	5,779	$	266,497
Non-farm/non-residential		954,057		130,787			53,658		5,981		1,144,483		1,090,525		139,080		53,478		7,091		1,290,174
Construction/land development		613,474		155,254			23,254		4,144		796,126		846,365		176,977		12,078		13,738		1,049,158
Agricultural		21,228		9,914			9,747		3,019		43,908		22,766		9,785		10,388		2,602		45,541
Multifamily residential		164,062		29,625			389		1,256		195,332		105,366		29,954		385		1,248		136,953
Commercial and industrial		103,039		31,434			1,642		1,549		137,664		127,935		35,769		1,768		1,412		166,884
Consumer⁽¹⁾		23,203		0			220		346		23,769		28,244		0		132		298		28,674
Direct financing leases		91,927		881			0		48		92,856		97,967		727		34		40		98,768
Other⁽¹⁾		89,181		2,253	��		113		30		91,577		85,684		3,036		189		27		88,936

Total	$	2,304,430	$	360,148		$	91,472	$	22,453	$	2,778,503	$	2,662,950	$	395,328	$	81,072	$	32,235	$	3,171,585


December 31, 2013:
Real estate:
Residential 1-4 family⁽¹⁾	$	239,940	$	0		$	3,140	$	6,476	$	249,556	$	239,940	$	0	$	3,140	$	6,476	$	249,556
Non-farm/non-residential		916,304		128,624			52,388		6,798		1,104,114		916,304		128,624		52,388		6,798		1,104,114
Construction/land development		550,436		144,435			23,574		4,112		722,557		550,436		144,435		23,574		4,112		722,557
Agricultural		21,647		11,098			9,788		2,663		45,196		21,647		11,098		9,788		2,663		45,196
Multifamily residential		177,144		30,029			391		773		208,337		177,144		30,029		391		773		208,337
Commercial and industrial		87,568		33,071			1,664		1,765		124,068		87,568		33,071		1,664		1,765		124,068
Consumer⁽¹⁾		25,574		0			230		378		26,182		25,574		0		230		378		26,182
Direct financing leases		85,363		955			0		3		86,321		85,363		955		0		3		86,321
Other⁽¹⁾		63,799		2,237			119		79		66,234		63,799		2,237		119		79		66,234

Total	$	2,167,775	$	350,449		$	91,294	$	23,047	$	2,632,565	$	2,167,775	$	350,449	$	91,294	$	23,047	$	2,632,565

March 31, 2013:

June 30, 2013:
Real estate:
Residential 1-4 family⁽¹⁾	$	249,396	$	0		$	1,641	$	5,591	$	256,628	$	253,479	$	0	$	2,242	$	5,847	$	261,568
Non-farm/non-residential		665,298		97,517			48,170		12,706		823,691		814,428		132,680		51,107		18,992		1,017,207
Construction/land development		438,742		134,417			35,128		15,015		623,302		498,398		135,166		32,634		14,631		680,829
Agricultural		25,658		11,111			9,662		3,029		49,460		25,400		10,940		9,836		2,703		48,879
Multifamily residential		109,268		32,268			399		779		142,714		115,313		28,886		396		1,088		145,683
Commercial and industrial		96,163		27,126			2,355		2,098		127,742		104,876		30,323		1,608		2,266		139,073
Consumer⁽¹⁾		27,919		0			204		428		28,551		27,716		0		168		405		28,289
Direct financing leases		70,187		1,233			0		0		71,420		75,696		1,202		0		55		76,953
Other⁽¹⁾		32,357		1,584			261		61		34,263		41,475		3,102		225		59		44,861

Total	$	1,714,988	$	305,256		$	97,820	$	39,707	$	2,157,771	$	1,956,781	$	342,299	$	98,216	$	46,046	$	2,443,342

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 certain other 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. The risk elements considered by management in its determination of the appropriate grade for individual loans and leases include the following, among others: (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 and

loan-to-cost 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 the 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 following table is an aging analysis of past due non-purchased loans and leases as of the dates indicated.


	30-89 Days Past Due ⁽¹⁾		90 Days or More ⁽²⁾		Total Past Due		Current⁽³⁾		Total		30-89 Days Past Due ⁽¹⁾		90 Days or More ⁽²⁾		Total Past Due		Current⁽³⁾		Total
	(Dollars in thousands)										(Dollars in thousands)
March 31, 2014:
June 30, 2014:
Real estate:
Residential 1-4 family	$	3,167	$	2,108	$	5,275	$	247,513	$	252,788	$	2,890	$	1,521	$	4,411	$	262,086	$	266,497
Non-farm/non-residential		647		1,376		2,023		1,142,460		1,144,483		1,714		1,693		3,407		1,286,767		1,290,174
Construction/land development		7,077		3,950		11,027		785,099		796,126		49		10,060		10,109		1,039,049		1,049,158
Agricultural		495		582		1,077		42,831		43,908		269		436		705		44,836		45,541
Multifamily residential		0		0		0		195,332		195,332		491		0		491		136,462		136,953
Commercial and industrial		891		16		907		136,757		137,664		674		0		674		166,210		166,884
Consumer		240		78		318		23,451		23,769		139		54		193		28,481		28,674
Direct financing leases		59		0		59		92,797		92,856		10		30		40		98,728		98,768
Other		17		9		26		91,551		91,577		0		0		0		88,936		88,936

Total	$	12,593	$	8,119	$	20,712	$	2,757,791	$	2,778,503	$	6,236	$	13,794	$	20,030	$	3,151,555	$	3,171,585


December 31, 2013:
Real estate:
Residential 1-4 family	$	4,228	$	2,004	$	6,232	$	243,324	$	249,556	$	4,228	$	2,004	$	6,232	$	243,324	$	249,556
Non-farm/non-residential		2,093		1,867		3,960		1,100,154		1,104,114		2,093		1,867		3,960		1,100,154		1,104,114
Construction/land development		235		153		388		722,169		722,557		235		153		388		722,169		722,557
Agricultural		517		540		1,057		44,139		45,196		517		540		1,057		44,139		45,196
Multifamily residential		773		0		773		207,564		208,337		773		0		773		207,564		208,337
Commercial and industrial		418		31		449		123,619		124,068		418		31		449		123,619		124,068
Consumer		261		78		339		25,843		26,182		261		78		339		25,843		26,182
Direct financing leases		0		0		0		86,321		86,321		0		0		0		86,321		86,321
Other		18		24		42		66,192		66,234		18		24		42		66,192		66,234

Total	$	8,543	$	4,697	$	13,240	$	2,619,325	$	2,632,565	$	8,543	$	4,697	$	13,240	$	2,619,325	$	2,632,565

March 31, 2013:

June 30, 2013:
Real estate:
Residential 1-4 family	$	2,220	$	943	$	3,163	$	253,465	$	256,628	$	2,483	$	1,460	$	3,943	$	257,625	$	261,568
Non-farm/non-residential		3,427		2,917		6,344		817,347		823,691		8,536		3,369		11,905		1,005,302		1,017,207
Construction/land development		313		107		420		622,882		623,302		385		84		469		680,360		680,829
Agricultural		233		796		1,029		48,431		49,460		315		331		646		48,233		48,879
Multifamily residential		0		0		0		142,714		142,714		0		0		0		145,683		145,683
Commercial and industrial		511		221		732		127,010		127,742		548		203		751		138,322		139,073
Consumer		236		42		278		28,273		28,551		230		23		253		28,036		28,289
Direct financing leases		0		0		0		71,420		71,420		89		15		104		76,849		76,953
Other		10		0		10		34,253		34,263		0		0		0		44,861		44,861

Total	$	6,950	$	5,026	$	11,976	$	2,145,795	$	2,157,771	$	12,586	$	5,485	$	18,071	$	2,425,271	$	2,443,342

The following table is a summary of credit quality indicators for the Company’s covered loans as of the dates indicated.


	FV 1		FV 2		Total Covered Loans		FV 1		FV 2		Total Covered Loans
	(Dollars in thousands)						(Dollars in thousands)
March 31, 2014:
June 30, 2014:
Real estate:
Residential 1-4 family	$	98,333	$	3,621	$	101,954	$	92,486	$	2,306	$	94,792
Non-farm/non-residential		122,022		14,534		136,556		114,869		10,168		125,037
Construction/land development		28,981		10,394		39,375		25,935		6,032		31,967
Agricultural		10,690		339		11,029		10,528		323		10,851
Multifamily residential		7,701		310		8,011		5,901		311		6,212
Commercial and industrial		7,672		130		7,802		6,178		1,119		7,297
Consumer		87		4		91		79		0		79
Other		137		0		137		145		0		145

Total	$	275,623	$	29,332	$	304,955	$	256,121	$	20,259	$	276,380


December 31, 2013:
Real estate:
Residential 1-4 family	$	105,218	$	5,835	$	111,053	$	105,218	$	5,835	$	111,053
Non-farm/non-residential		138,573		25,135		163,708		138,573		25,135		163,708
Construction/land development		33,475		14,267		47,742		33,475		14,267		47,742
Agricultural		10,807		343		11,150		10,807		343		11,150
Multifamily residential		8,709		457		9,166		8,709		457		9,166
Commercial and industrial		8,582		137		8,719		8,582		137		8,719
Consumer		106		5		111		106		5		111
Other		142		0		142		142		0		142

Total	$	305,612	$	46,179	$	351,791	$	305,612	$	46,179	$	351,791

March 31, 2013:

June 30, 2013:
Real estate:
Residential 1-4 family	$	138,427	$	5,872	$	144,299	$	126,659	$	6,507	$	133,166
Non-farm/non-residential		239,511		25,485		264,996		207,789		25,817		233,606
Construction/land development		73,589		18,700		92,289		58,370		18,045		76,415
Agricultural		17,162		1,001		18,163		14,016		1,889		15,905
Multifamily residential		9,755		142		9,897		9,408		285		9,693
Commercial and industrial		13,317		0		13,317		11,601		0		11,601
Consumer		352		43		395		164		43		207
Other		912		0		912		159		0		159

Total	$	493,025	$	51,243	$	544,268	$	428,166	$	52,586	$	480,752

For 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 or exceeding 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.1. For any loan that is exceeding management’s performance expectation established in conjunction with the determination of Day 1 Fair Values, the accretable yield on such loan is adjusted to reflect such increased performance. 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, is considered an impaired loan, and is considered in the determination of the required level of allowance for loan and lease losses.2. At ~~March 31,~~June 30, 2014 and 2013 and December 31, 2013, 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.

The following table is an aging analysis of past due covered loans as of the dates indicated.


	30-89 Days Past Due		90 Days or More		Total Past Due		Current		Total Covered Loans		30-89 Days Past Due		90 Days or More		Total Past Due		Current		Total Covered Loans
	(Dollars in thousands)										(Dollars in thousands)
March 31, 2014:
June 30, 2014:
Real estate:
Residential 1-4 family	$	5,555	$	9,273	$	14,828	$	87,126	$	101,954	$	4,518	$	7,538	$	12,056	$	82,736	$	94,792
Non-farm/non-residential		5,318		22,019		27,337		109,219		136,556		3,533		15,026		18,559		106,478		125,037
Construction/land development		1,616		13,174		14,790		24,585		39,375		531		7,327		7,858		24,109		31,967
Agricultural		974		1,521		2,495		8,534		11,029		36		2,112		2,148		8,703		10,851
Multifamily residential		0		3,145		3,145		4,866		8,011		0		1,365		1,365		4,847		6,212
Commercial and industrial		628		1,674		2,302		5,500		7,802		11		1,246		1,257		6,040		7,297
Consumer		9		0		9		82		91		12		0		12		67		79
Other		0		0		0		137		137		0		0		0		145		145

Total	$	14,100	$	50,806	$	64,906	$	240,049	$	304,955	$	8,641	$	34,614	$	43,255	$	233,125	$	276,380


December 31, 2013:
Real estate:
Residential 1-4 family	$	5,341	$	12,409	$	17,750	$	93,303	$	111,053	$	5,341	$	12,409	$	17,750	$	93,303	$	111,053
Non-farm/non-residential		6,954		32,462		39,416		124,292		163,708		6,954		32,462		39,416		124,292		163,708
Construction/land development		2,173		20,914		23,087		24,655		47,742		2,173		20,914		23,087		24,655		47,742
Agricultural		237		1,328		1,565		9,585		11,150		237		1,328		1,565		9,585		11,150
Multifamily residential		375		3,240		3,615		5,551		9,166		375		3,240		3,615		5,551		9,166
Commercial and industrial		605		2,001		2,606		6,113		8,719		605		2,001		2,606		6,113		8,719
Consumer		10		0		10		101		111		10		0		10		101		111
Other		0		0		0		142		142		0		0		0		142		142

Total	$	15,695	$	72,354	$	88,049	$	263,742	$	351,791	$	15,695	$	72,354	$	88,049	$	263,742	$	351,791

March 31, 2013:

June 30, 2013:
Real estate:
Residential 1-4 family	$	10,263	$	19,527	$	29,790	$	114,509	$	144,299	$	6,989	$	19,230	$	26,219	$	106,947	$	133,166
Non-farm/non-residential		12,416		50,173		62,589		202,407		264,996		15,059		44,768		59,827		173,779		233,606
Construction/land development		7,404		38,357		45,761		46,528		92,289		6,425		30,629		37,054		39,361		76,415
Agricultural		1,614		3,441		5,055		13,108		18,163		829		4,284		5,113		10,792		15,905
Multifamily residential		1,557		2,670		4,227		5,670		9,897		1,926		2,728		4,654		5,039		9,693
Commercial and industrial		676		3,772		4,448		8,869		13,317		260		3,505		3,765		7,836		11,601
Consumer		178		8		186		209		395		0		43		43		164		207
Other		0		0		0		912		912		0		0		0		159		159

Total	$	34,108	$	117,948	$	152,056	$	392,212	$	544,268	$	31,488	$	105,187	$	136,675	$	344,077	$	480,752

At ~~March 31,~~June 30, 2014 and 2013 and December 31, 2013, a significant ~~portion~~portions of the Company’s covered loans were contractually past due, including many that were 90 days or more past due. However, the elevated level of delinquencies of covered loans at the dates of acquisition was considered in the Company’s performance expectations used in its determination of the Day 1 Fair Values for all covered loans. Accordingly, all covered loans continue to accrete interest income and all covered loans rated FV 1 continue to perform in accordance with or better than management’s expectations established in conjunction with the determination of the Day 1 Fair Values.

The following table is a summary of credit quality indicators for the Company’s purchased non-covered loans as of the dates indicated.


	Purchased Non-Covered Loans Without Evidence of Credit Deterioration at Acquisition										Purchased Non-Covered Loans With Evidence of Credit Deterioration at Acquisition				Total Purchased Non-Covered		Purchased Non-Covered Loans Without Evidence of Credit Deterioration at Acquisition										Purchased Non-Covered Loans With Evidence of Credit Deterioration at Acquisition				Total Purchased Non-Covered
	FV 33		FV 44		FV 55		FV 36		FV 77		FV 66		FV 88		Loans		FV 33		FV 44		FV 55		FV 36		FV 77		FV 66		FV 88		Loans
	(Dollars in thousands)																(Dollars in thousands)
March 31, 2014:
June 30, 2014:
Real estate:
Residential 1-4 Family	$	27,899	$	37,442	$	21,933	$	34,004	$	0	$	17,374	$	0	$	138,652
Residential 1-4 family																	$	81,102	$	84,839	$	32,286	$	79,449	$	10	$	18,620	$	0	$	296,306
Non-farm/non-residential		59,720		102,836		32,160		2,701		0		18,911		0		216,328		211,896		198,937		40,193		3,704		0		33,622		81		488,433
Construction/land development		9,880		18,384		10,605		4,550		0		11,094		0		54,513		32,850		37,840		12,447		10,878		9		10,096		0		104,120
Agricultural		1,260		7,490		842		146		0		360		0		10,098		15,058		29,337		3,185		1,744		0		456		0		49,780
Multifamily residential		3,216		5,903		5,002		1,046		0		3,098		0		18,265		10,505		13,418		7,453		1,030		67		2,853		779		36,105

Total real estate		101,975		172,055		70,542		42,447		0		50,837		0		437,856		351,411		364,371		95,564		96,805		86		65,647		860		974,744
Commercial and industrial		10,766		14,526		5,138		2,648		0		5,303		0		38,381		27,269		49,175		9,702		14,637		0		5,193		0		105,976
Consumer		1,448		204		332		4,065		0		560		0		6,609		3,215		1,165		670		20,204		0		536		0		25,790
Other		1,204		2,835		529		200		0		919		0		5,687		5,762		9,292		935		4,391		0		799		0		21,179

Total	$	115,393	$	189,620	$	76,541	$	49,360	$	0	$	57,619	$	0	$	488,533	$	387,657	$	424,003	$	106,871	$	136,037	$	86	$	72,175	$	860	$	1,127,689


December 31, 2013:
Real estate:
Residential 1-4 Family	$	27,111	$	32,259	$	21,035	$	35,733	$	0	$	14,947	$	0	$	131,085
Residential 1-4 family																	$	27,111	$	32,259	$	21,035	$	35,733	$	0	$	14,947	$	0	$	131,085
Non-farm/non-residential		42,193		72,621		20,685		1,191		0		16,258		0		152,948		42,193		72,621		20,685	��	1,191		0		16,258		0		152,948
Construction/land development		5,930		8,106		2,137		4,553		0		4,907		0		25,633		5,930		8,106		2,137		4,553		0		4,907		0		25,633
Agricultural		1,547		6,619		823		164		0		365		0		9,518		1,547		6,619		823		164		0		365		0		9,518
Multifamily residential		3,531		5,565		5,268		959		0		1,887		0		17,210		3,531		5,565		5,268		959		0		1,887		0		17,210

Total real estate		80,312		125,170		49,948		42,600		0		38,364		0		336,394		80,312		125,170		49,948		42,600		0		38,364		0		336,394
Commercial and industrial		9,592		9,730		2,250		1,879		0		1,483		0		24,934		9,592		9,730		2,250		1,879		0		1,483		0		24,934
Consumer		1,013		141		171		4,794		0		736		0		6,855		1,013		141		171		4,794		0		736		0		6,855
Other		1,202		2,897		157		237		0		47		0		4,540		1,202		2,897		157		237		0		47		0		4,540

Total	$	92,119	$	137,938	$	52,526	$	49,510	$	0	$	40,630	$	0	$	372,723	$	92,119	$	137,938	$	52,526	$	49,510	$	0	$	40,630	$	0	$	372,723

March 31, 2013:

June 30, 2013:
Real estate:
Residential 1-4 Family	$	3,290	$	6,883	$	5,164	$	864	$	0	$	2,533	$	0	$	18,734
Residential 1-4 family																	$	0	$	185	$	0	$	0	$	0	$	0	$	0	$	185
Non-farm/non-residential		395		920		2,663		54		0		359		0		4,391		294		792		794		1		0		332		0		2,213
Construction/land development		389		670		129		161		0		576		0		1,925		2,459		6,803		4,907		1,117		0		3,277		0		18,563
Agricultural		767		819		700		139		0		543		0		2,968		1,281		1,027		224		100		0		167		0		2,799

Total real estate		4,841		9,292		8,656		1,218		0		4,011		0		28,018		4,034		8,807		5,925		1,218		0		3,776		0		23,760
Commercial and industrial		325		1,485		1,166		375		0		640		0		3,991		40		1,082		845		248		0		647		0		2,862
Consumer		728		140		67		1,246		0		1,310		0		3,491		512		141		135		2,085		0		1,017		0		3,890
Other		159		114		88		2,020		0		190		0		2,571		0		82		184		51		0		198		0		515

Total	$	6,053	$	11,031	$	9,977	$	4,859	$	0	$	6,151	$	0	$	38,071	$	4,586	$	10,112	$	7,089	$	3,602	$	0	$	5,638	$	0	$	31,027

The following grades are used for purchased non-covered loans without evidence of credit deterioration at the date of acquisition.

FV 33 – Loans in this category are considered to be satisfactory with minimal credit risk and are generally considered collectible.

FV 44 – Loans in this category are considered to be marginally satisfactory with minimal to moderate credit risk and are generally considered collectible.

FV 55 – Loans in this category exhibit weakness and are considered to have elevated credit risk and elevated risk of repayment.

FV 36 – Loans in this category were not individually reviewed at the date of purchase and are assumed to have characteristics similar to the characteristics of the aggregate acquired portfolio.

FV 77 – Loans in this category have deteriorated since the date of purchase and are considered impaired.

The following grades are used for purchased non-covered loans with evidence of credit deterioration at the date of acquisition.

FV 66 – Loans in this category are performing in accordance with or exceeding management’s performance expectations established in conjunction with the determination of Day 1 Fair Values.

FV 88 – Loans in this category have deteriorated from management’s performance expectations established in conjunction with the determination of Day 1 Fair Values.

The Company had no ~~loans rated FV 77 or FV 88 at March 31, 2014 and 2013 or December 31, 2013. Additionally, the Company had no~~ allowance for its purchased non-covered loans at ~~March 31,~~June 30, 2014 and 2013 or December 31, 2013 as (i) all such loans were performing in accordance with management’s expectations established in conjunction with the determination of the Day 1 Fair Values or (ii) all losses on purchased non-covered loans whose performance had deteriorated from management’s expectations established in conjunction with the deterioration of the Day 1 Fair Values had been charged off.

The following table is an aging analysis of past due purchased non-covered loans as of the dates indicated.


	30-89 Days Past Due			90 Days or More		Total Past Due		Current		Total Purchased Non-Covered Loans		30-89 Days Past Due		90 Days or More		Total Past Due		Current		Total Purchased Non-Covered Loans
	(Dollars in thousands)											(Dollars in thousands)
March 31, 2014:
June 30, 2014:
Real estate:
Residential 1-4 family	$	5,902		$	5,985	$	11,887	$	126,765	$	138,652	$	6,348	$	6,536	$	12,884	$	283,422	$	296,306
Non-farm/non-residential		3,842			7,126		10,968		205,360		216,328		1,396		10,544		11,940		476,493		488,433
Construction/land development		363			3,363		3,726		50,787		54,513		615		2,439		3,054		101,066		104,120
Agriculture		155			26		181		9,917		10,098		129		148		277		49,503		49,780
Multifamily residential		0			1,994		1,994		16,271		18,265		0		1,229		1,229		34,876		36,105
Commercial and industrial		400			304		704		37,677		38,381		381		487		868		105,108		105,976
Consumer		170			179		349		6,260		6,609		158		183		341		25,449		25,790
Other		8			19		27		5,660		5,687		16		19		35		21,144		21,179

Total	$	10,840		$	18,996	$	29,836	$	458,697	$	488,533	$	9,043	$	21,585	$	30,628	$	1,097,061	$	1,127,689


December 31, 2013:
Real estate:
Residential 1-4 family	$	6,615		$	4,703	$	11,318	$	119,767	$	131,085	$	6,615	$	4,703	$	11,318	$	119,767	$	131,085
Non-farm/non-residential		4,886			5,779		10,665		142,283		152,948		4,886		5,779		10,665		142,283		152,948
Construction/land development		265			4,045		4,310		21,323		25,633		265		4,045		4,310		21,323		25,633
Agriculture		134			25		159		9,359		9,518		134		25		159		9,359		9,518
Multifamily residential		421	��		1,225		1,646		15,564		17,210		421		1,225		1,646		15,564		17,210
Commercial and industrial		614			388		1,002		23,932		24,934		614		388		1,002		23,932		24,934
Consumer		411			237		648		6,207		6,855		411		237		648		6,207		6,855
Other		0			33		33		4,507		4,540		0		33		33		4,507		4,540

Total	$	13,346		$	16,435	$	29,781	$	342,942	$	372,723	$	13,346	$	16,435	$	29,781	$	342,942	$	372,723

March 31, 2013:

June 30, 2013:
Real estate:
Residential 1-4 family	$	1,277		$	540	$	1,817	$	18,570	$	20,387	$	0	$	0	$	0	$	185	$	185
Non-farm/non-residential													184		68		252		1,961		2,213
Construction/land development		442			112		554		4,108		4,662		785		1,022		1,807		16,756		18,563
Agriculture		79			442		521		2,448		2,969		75		24		99		2,700		2,799
Multifamily residential		0			0		0		0		0
Commercial and industrial		346			84		430		3,561		3,991		89		211		300		2,562		2,862
Consumer		197			136		333		3,158		3,491		203		209		412		3,478		3,890
Other		220			81		301		2,270		2,571		151		50		201		314		515

Total	$	2,561		$	1,395	$	3,956	$	34,115	$	38,071	$	1,487	$	1,584	$	3,071	$	27,956	$	31,027

The following table is a summary of 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 as of the dates indicated.


	March 31,						December 31,			June 30,						December 31, 2013
	2014			2013			2013			2014			2013			December 31, 2013
	(Dollars in thousands)									(Dollars in thousands)
Deferred tax assets:
Allowance for loan and lease losses	$	16,842		$	14,830		$	16,576		$	18,116		$	15,197		$	16,576
Differences in amounts reflected in financial statements and income tax basis of purchased non-covered loans		18,453			1,288			17,167			26,024			1,288			17,167
Stock-based compensation		1,415			1,358			2,400			3,364			2,408			2,400
Deferred compensation		1,888			1,818			1,775			1,890			1,925			1,775
Foreclosed assets		4,831			3,047			3,165			5,624			2,812			3,165
Investment securities AFS		600			0			5,056			0			0			5,056
Differences in amounts reflected in financial statements and income tax basis of assets acquired and liabilities assumed in FDIC-assisted acquisitions		5,393			0			3,424			7,397			0			3,424
Acquired net operating losses		13,180			0			7,509			13,662			0			7,509
Other, net		4,891			0			3,858			5,950			0			3,858

Total gross deferred tax assets		67,493			22,341			60,930			82,027			23,630			60,930
Less valuation allowance		(4,529	)		0			(4,102	)		(474	)		0			0

Net deferred tax asset		62,964			22,341			56,828			81,553			23,630			60,930

Deferred tax liabilities:
Accelerated depreciation on premises and equipment		17,954			14,851			17,459			18,028			15,022			17,459
Investment securities AFS		0			6,952			0			5,022			545			0
Differences in amounts reflected in financial statements and income tax basis of assets acquired and liabilities assumed in FDIC-assisted acquisitions		0			6,103			0			0			6,103			0
Acquired intangible assets		5,066			616			4,227			10,847			594			4,227
Other, net		0			1,600			0			0			2,428			0

Total gross deferred tax liabilities		23,020			30,122			21,686			33,897			24,692			21,686

Net deferred tax assets (liabilities)	$	39,944		$	(7,781	)	$	35,142		$	47,656		$	(1,062	)	$	39,244

Net operating losses were acquired from the First National Bank, Bancshares and ~~Bancshares~~Summit transactions. The net operating losses acquired from the First National Bank transaction totaled ~~$19.0~~$20.0 million, of which ~~$11.5~~$12.5 million expires in 2032 and $7.5 million expires in 2033. The net operating losses acquired from the Bancshares transaction totaled ~~$16.3~~$16.4 million, which will expire at various dates from 2030 through 2034. The net operating losses acquired from the Summit transaction totaled $6.5 million and will expire in 2019.

As a result of recording, at fair value, acquired assets and assumed liabilities pursuant to business combinations, differences in amounts reported for financial statement purposes and their related basis for federal and state income tax purposes are created. Such differences are recorded as deferred tax assets and liabilities using enacted tax rates in effect for the year or years in which the differences are expected to be recovered or settled. Business combination transactions may result in the acquisition of net operating loss carryforwards and other assets with built-in losses, the realization of which are subject to section 382 limitations. In determining the section 382 limitation associated with a business combination, management must make a number of estimates and assumptions regarding the ability to utilize acquired net operating loss carryforwards and the expected timing of future recoveries or settlements of acquired assets with built-in losses. To the extent that information available as of the date of acquisition results in a determination by management that some portion of net operating loss carryforwards cannot be utilized or assets with built-in losses is expected to be settled or recovered in future periods in which the ability to realize the benefits will be subject to section 382 limitations, a deferred tax asset valuation allowance is established for the estimated amount of the deferred tax assets subject to the section 382 limitation. To the extent that information becomes available, during the first 12 months following the consummation of a business combination transaction, that results in changes in management’s initial estimates and assumptions regarding the expected utilization of net operating loss carryforwards or the expected settlement or recovery of acquired assets with built-in losses subject to section 382 limitations, an increase or decrease of the deferred tax asset valuation allowance will be recorded as an adjustment to bargain purchase gain or goodwill. To the extent that such information becomes available 12 months or more after the consummation of a business combination transaction, or additional information becomes available during the first 12 months as a result of changes in circumstances since the date of the consummation of a business combination transaction, an increase or decrease of the deferred tax asset valuation allowance will be recorded as an adjustment to deferred income tax expense (benefit).

In connection with the acquisitions of First National Bank and Bancshares, management determined that net operating loss carryforwards and other assets with built-in losses are expected to be settled or otherwise recovered in future periods where the realization of such benefits would be subject to section 382 limitations. Accordingly, ~~at March 31, 2014,~~ the Company had established a deferred tax asset valuation allowance of ~~approximately $4.5 million, of which~~ $4.1 million ~~relates to~~on the date of acquisition of First National Bank and $0.5 million on the date of acquisition ~~and $0.4 million relates to the~~of Bancshares, ~~acquisition,~~ to reflect its initial assessment that the realization of the benefits from the settlement or recovery of certain of these acquired assets and net operating losses is expected to be subject to section 382 limitations.

As disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, the fair value adjustments and the resultant fair values for the First National Bank acquisition continued to be evaluated by management and could be subject to further adjustment. During the second quarter of 2014, management revised its initial estimates and assumptions regarding the expected recovery of acquired assets with built-in losses, specifically the timing of expected charge-offs of purchased non-covered loans, in the First National Bank acquisition. As a result of such revision, management concluded that the deferred tax asset valuation allowance of $4.1 million was not necessary. Because such revision occurred during the first 12 months following the date of acquisition and was not the result of changes in circumstances, management has recast the third quarter 2013 financial statements, along with all subsequent financial statements, to reflect this change in estimate.

To the extent that additional information becomes available regarding the settlement or recovery of acquired net operating loss carryforwards or assets with built-in losses acquired in each of its acquisitions, management may be required to ~~adjust~~make adjustments to its ~~estimates and assumptions regarding the realization of the benefits associated with these acquired assets by adjusting the~~ deferred tax asset valuation ~~allowance.~~allowance, which adjustments could affect bargain purchase gain, goodwill or deferred income tax expense (benefit).

The following table provides supplemental cash flow information for the periods indicated.


	Three Months Ended
	March 31,					Six Months Ended June 30,
	2014		2013			2014		2013
	(Dollars in thousands)					(Dollars in thousands)
Cash paid during the period for:
Interest	$	4,782	$	4,606		$	9,808	$	9,159
Taxes		772		4,552			17,690		25,099
Supplemental schedule of non-cash investing and financing activities:
Net change in unrealized gains/losses on investment securities AFS		11,325		(2,885	)		22,506		19,219
Loans and other assets transferred to foreclosed assets not covered by FDIC loss share agreements		2,205		915			7,801		2,930
Loans advanced for sales of foreclosed assets not covered by FDIC loss share agreements		0		41			258		2,455
Covered loans transferred to covered foreclosed assets		15,229		8,036			23,212		16,081
Unsettled AFS investment security purchases		2,267		4,006			1,465		0
Unsettled AFS investment security sales							1,815		0
Common stock issued in merger and acquisition transaction							166,315		0

Outstanding standby letters of credit are contingent commitments issued by the Company generally to guarantee the performance of a customer in third party arrangements. The maximum amount of future payments the Company could be required to make under these guarantees at ~~March 31,~~June 30, 2014 was ~~$4.8~~$5.3 million. The Company holds collateral to support guarantees when deemed necessary. Collateralized commitments at ~~March 31,~~June 30, 2014 totaled $4.3 million.

At ~~March 31,~~June 30, 2014 the Company had outstanding commitments to extend credit, excluding mortgage interest rate lock commitments, totaling ~~$1.42~~$1.83 billion. While many of these commitments are expected to be disbursed within the next 12 months, the following table shows the contractual maturities of outstanding commitments to extend credit as of the date indicated.

The Company has a nonqualified stock option plan for certain employees 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 ~~March 31,~~June 30, 2014 were issued with a vesting date three years after issuance and an expiration date seven years after issuance.

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 2,000 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 2,000 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 period indicated.


Three Months Ended March 31, 2014:	Options			Weighted- Average Exercise Price/Share		Weighted-Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (in thousands)
											Options			Weighted- Average Exercise Price/Share		Weighted-Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (in thousands)

Six Months Ended June 30, 2014:
Outstanding – January 1, 2014		883,300		$	31.67							1,766,600		$	15.84
Granted		0			0.00							52,000			29.05
Exercised		(88,300	)		17.05							(185,000	)		8.50
Forfeited		(8,150	)		34.90							(25,900	)		17.64

Outstanding – March 31, 2014		786,850			33.28		5.4	$	27,368	⁽¹⁾
Outstanding – June 30, 2014												1,607,700			17.08		5.4	$	26,321	⁽¹⁾

Fully vested and exercisable – March 31, 2014		152,800		$	21.11		4.5	$	7,174	⁽¹⁾

Fully vested and exercisable – June 30, 2014												349,200			13.37		5.2	$	7,011	⁽¹⁾

Expected to vest in future periods		507,640										1,007,600

Fully vested and expected to vest – March 31, 2014⁽²⁾		660,440		$	32.73		5.4	$	23,336	⁽¹⁾
Fully vested and expected to vest – June 30, 2014⁽²⁾												1,356,800			16.89		5.4	$	22,466	⁽¹⁾

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 the ~~three~~six months ended ~~March 31,~~June 30, 2014 and 2013 was ~~$3.9~~$4.1 million and ~~$2.2~~$4.3 million, respectively.

~~No options~~Options to purchase 52,000 split-adjusted shares and 44,000 split-adjusted shares of the Company’s stock were issued during the ~~three~~six months ended ~~March 31,~~June 30, 2014 ~~or 2013.~~and 2013, respectively. Stock-based compensation expense for stock options included in non-interest expense was ~~$0.4~~$0.8 million and $0.6 million for ~~each of~~ the quarters ended ~~March 31,~~June 30, 2014 and ~~2013.~~2013, respectively, and $1.2 million and $1.0 million for the six months ended June 30, 2014 and 2013, respectively. Total unrecognized compensation cost related to non-vested stock option grants was ~~$3.1~~$2.7 million at ~~March 31,~~June 30, 2014 and is expected to be recognized over a weighted-average period of ~~2.1~~1.9 years.

The Company has a restricted stock plan that permits issuance of up to ~~800,000~~1,600,000 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. All restricted stock awards outstanding at ~~March 31,~~June 30, 2014 were issued with a vesting date of three years after issuance.

The following table summarizes non-vested restricted stock activity for the period indicated.


	Three Months Ended
	March 31, 2014		Six Months Ended June 30, 2014
Outstanding – January 1, 2014		308,050		616,100
Granted		0		0
Forfeited		0		(400	)
Vested		0		0

Outstanding – March 31, 2014		308,050
Outstanding – June 30, 2014				615,700

Weighted-average grant date fair value	$	35.97	$	17.99

The fair value of the restricted stock awards is amortized to compensation expense over the vesting period 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 $0.9 million and $0.6 million for the ~~three~~quarters ended June 30, 2014 and 2013, respectively, and $1.8 million and $1.3 million for the six months ended ~~March 31,~~June 30, 2014 and 2013, respectively. Unrecognized compensation expense for non-vested restricted stock awards was ~~$7.0~~$6.0 million at ~~March 31,~~June 30, 2014 and is expected to be recognized over a weighted-average period of ~~2.2~~2.0 years.

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 following table sets forth the Company’s assets for the dates indicated that are accounted for at fair value.


	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(Dollars in thousands)								(Dollars in thousands)
March 31, 2014:
June 30, 2014:
Investment securities AFS⁽¹⁾:
Obligations of state and political subdivisions	$	0	$	434,201	$	18,547	$	452,748	$	0	$	595,965	$	20,600	$	616,565
U.S. Government agency securities		0		219,740		0		219,740		0		258,311		0		258,311
Corporate obligations		0		686		0		686		0		685		0		685

Total investment securities AFS		0		654,627		18,547		673,174		0		854,961		20,600		875,561
Impaired non-covered loans and leases		0		0		5,978		5,978
Impaired non-purchased loans and leases										0		0		16,240		16,240
Impaired covered loans		0		0		29,332		29,332		0		0		20,259		20,259
Impaired purchased non-covered loans										0		0		946		946
Foreclosed assets not covered by FDIC loss share agreements		0		0		17,076		17,076		0		0		20,581		20,581
Foreclosed assets covered by FDIC loss share agreements		0		0		43,793		43,793		0		0		35,775		35,775

Total assets at fair value	$	0	$	654,627	$	114,726	$	769,353	$	0	$	854,961	$	114,401	$	969,362


December 31, 2013:
Investment securities AFS⁽¹⁾:
Obligations of state and political subdivisions	$	0	$	417,307	$	18,682	$	435,989	$	0	$	417,307	$	18,682	$	435,989
U.S. Government agency securities		0		218,869		0		218,869		0		218,869		0		218,869
Corporate obligations		0		716		0		716		0		716		0		716

Total investment securities AFS		0		636,892		18,682		655,574		0		636,892		18,682		655,574
Impaired non-covered loans and leases		0		0		8,087		8,087
Impaired non-purchased loans and leases										0		0		6,746		6,746
Impaired covered loans		0		0		46,179		46,179		0		0		46,179		46,179
Foreclosed assets not covered by FDIC loss share agreements		0		0		11,851		11,851		0		0		11,851		11,851
Foreclosed assets covered by FDIC loss share agreements		0		0		37,960		37,960		0		0		37,960		37,960

Total assets at fair value	$	0	$	636,892	$	122,759	$	759,651	$	0	$	636,892	$	121,418	$	758,310

March 31, 2013:

June 30, 2013:
Investment securities AFS⁽¹⁾:
Obligations of state and political subdivisions	$	0	$	359,009	$	21,227	$	380,236	$	0	$	372,117	$	19,329	$	391,446
U.S. Government agency securities		0		66,089		26,874		92,963		0		83,035		0		83,035
Corporate obligations		0		748		0		748		0		747		0		747

Total investment securities AFS		0		425,846		48,101		473,947		0		455,899		19,329		475,228
Impaired non-covered loans and leases		0		0		6,716		6,716
Impaired non-purchased loans and leases										0		0		13,838		13,838
Impaired covered loans		0		0		51,243		51,243		0		0		52,586		52,586
Foreclosed assets not covered by FDIC loss share agreements		0		0		11,290		11,290		0		0		10,451		10,451
Foreclosed assets covered by FDIC loss share agreements		0		0		51,040		51,040		0		0		46,157		46,157

Total assets at fair value	$	0	$	425,846	$	168,390	$	594,236	$	0	$	455,899	$	142,361	$	598,260

The following table presents information related to Level 3 non-recurring fair value measurements as of the date indicated.


Description	Fair Value at March 31, 2014		Technique	Unobservable Inputs	Fair Value at June 30, 2014		Technique		Unobservable Inputs
(Dollars in thousands)
Impaired non-covered loans and leases	$	5,978	Third party appraisal⁽¹⁾ or discounted cash flows	1. Management discount based on underlying collateral characteristics and market conditions 2. Life of loan

Impaired non-purchased loans and leases					$	16,240	Third party appraisal⁽¹⁾ or discounted cash flows		1.		Management discount based on underlying collateral characteristics and market conditions
								2.		Life of loan

Impaired covered loans	$	29,332	Third party appraisal⁽¹⁾ and/or discounted cash flows	1. Life of loan 2. Discount rate	$	20,259	Third party appraisal⁽¹⁾ or discounted cash flows	Third party appraisal⁽¹⁾ and/or discounted cash flows		1.		Management discount based on underlying collateral characteristics and market conditions
									2.		Life of loan
									3.		Discount rate

Impaired purchased non-covered loans					$	946	Third party appraisal⁽¹⁾and/or discounted cash flows		1.		Management discount based on underlying collateral characteristics and market conditions
								2.		Discount rate
								3.		Holding period

Foreclosed assets not covered by FDIC loss share agreements	$	17,076	Third party appraisal,⁽¹⁾ broker price opinions and/or discounted cash flows	1. Management discount based on asset characteristics and market conditions 2. Discount rate 3. Holding period	$	20,581		Third party appraisal,⁽¹⁾ broker price opinions and/or discounted cash flows		1.		Management discount based on asset characteristics and market conditions
									2.		Discount rate
									3.		Holding period

Foreclosed assets covered by FDIC loss share agreements	$	43,793	Third party appraisal,⁽¹⁾ broker price opinions and/or discounted cash flows	1. Management discount based on asset characteristics and market conditions 2. Discount rate 3. Holding period	$	35,775		Third party appraisal,⁽¹⁾ broker price opinions and/or discounted cash flows		1.		Management discount based on asset characteristics and market conditions
									2.		Discount rate
									3.		Holding period

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. As a result, the Company receives estimates of fair values from at least two independent pricing sources for the majority of its individual securities within its investment portfolio. 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, 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. All fair value estimates of the Company’s investment securities are reviewed and approved on a quarterly basis by the Company’s Investment Portfolio Manager and its Chief Financial Officer.

The Company has determined that certain of its investment securities had a limited to non-existent trading market at ~~March 31,~~June 30, 2014. 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 primarily of certain unrated private placement bonds (the “private placement bonds”) in the amount of ~~$18.5~~$20.6 million at ~~March 31,~~June 30, 2014 were 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 individually 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 ~~March 31,~~June 30, 2014, the third parties’ pricing matrices valued the Company’s portfolio of private placement bonds at ~~$18.6~~$20.6 million which ~~exceeded~~was equal to the aggregate ~~of the lower of the matrix pricing or~~ par value of the private placement ~~bonds by $0.1 million.~~bonds. Accordingly, at ~~March 31,~~June 30, 2014, the Company reported the private placement bonds at ~~$18.5 million, which was the lower of the matrix pricing or par value.~~$20.6 million.

Impaired ~~non-covered~~non-purchased loans and leases – Fair values are measured on a nonrecurring 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. At ~~March 31,~~June 30, 2014 the Company had reduced the carrying value of its impaired non-purchased loans and leases (all of which are included in nonaccrual loans and leases) by ~~$6.1~~$5.4 million to the estimated fair value of ~~$6.0~~$16.2 million. The ~~$6.1~~$5.4 million adjustment to reduce the carrying value of impaired non-purchased loans and leases to estimated fair value consisted of ~~$4.8~~$4.2 million of partial charge-offs and ~~$1.3~~$1.2 million of specific loan and lease loss allocations.

Impaired covered loans – Impaired covered loans are measured at fair value on a non-recurring basis. In determining such fair value, management considers a number of factors including, among other things, the remaining life of the loan, estimated collateral value, estimated holding period and net present value of cash flows expected to be received. As a result, impaired covered loans include both a non-accretable difference (the credit component of the impaired loan) and an accretable difference (the yield component of the impaired loan). 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. The accretable difference is the difference between the expected cash flows and the net present value of expected cash flows and is accreted into earnings using the effective yield method. In determining the net present value of expected cash flows, the Company used discount rates ranging from 6.0% to 9.5% per annum. As of ~~March 31,~~June 30, 2014, the Company identified purchased loans covered by FDIC loss share agreements acquired in its FDIC-assisted acquisitions 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 ~~$0.2~~$0.5 million ~~for such loans~~during the second quarter and $0.7 million during the first six months of 2014 for such loans. The Company also recorded provision for loan and lease losses of $0.5 million during the second quarter and $0.7 million during the first six months of 2014 to cover such charge-offs. At June 30, 2014, the Company had $20.3 million of impaired covered loans.

Impaired purchased non-covered loans – Impaired purchased non-covered loans are measured at fair value on a non-recurring basis. In determining the Day 1 Fair Values of purchased non-covered loans without evidence of credit deterioration at the date of acquisition, management includes an adjustment of the unpaid principal balance to reflect an appropriate market rate of interest, given the risk profile and grade assigned to each loan. In determining the estimated fair value of purchased non-covered loans with evidence of credit deterioration, 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. In determining the Day 1 Fair Values of purchased non-covered loans with evidence of credit deterioration, 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. The accretable difference on purchased non-covered loans with evidence of credit deterioration is the difference between the expected cash flows and the net present value of expected cash flows. In determining the net present value of the expected cash flows for purposes of establishing the Day 1 Fair Values, the Company used discount rates ranging from 6.0% to 9.5% per annum depending on the risk characteristics of each individual loan.

As of June 30, 2014, the Company had identified purchased non-covered loans where the expected performance had deteriorated from management’s performance expectations established in conjunction with the determination of the Day 1 Fair Values or where current information indicates it is probable that the Company will not be able to collect all amounts according to the contractual terms thereon. As a result, the Company recorded partial charge-offs totaling $0.6 million for both the second quarter and first six months of 2014. The Company also recorded provision for loan and lease losses of ~~$0.2~~$0.6 million ~~during~~for both the second quarter and first ~~quarter~~six months of 2014 to cover such charge-offs. At ~~March 31,~~June 30, 2014, the Company had ~~$29.3~~$0.9 million of impaired ~~covered~~purchased non-covered loans.

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 (generally 8% to 10%) 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 are generally based on third party appraisals, broker price opinions or other valuations of the property.

Foreclosed assets covered by FDIC loss share agreements – Foreclosed assets covered by FDIC loss share agreements, or covered foreclosed assets are initially recorded at Day 1 Fair Values. In estimating the Day 1 Fair Values of covered foreclosed assets, management considers a number of factors including, among others, appraised value, estimated selling prices, 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 for purposes of establishing the Day 1 Fair

Values. Valuations of these assets are periodically reviewed by management with the carrying value of such assets adjusted through non-interest income to the then estimated fair value net of estimated selling costs, if lower, until disposition. Fair values of foreclosed assets held for sale are generally based on third party appraisals, broker price opinions or other valuations of property, resulting in a Level 3 classification.

The following table presents additional information for the periods indicated about assets measured at fair value on a recurring basis and for which the Company has utilized Level 3 inputs to determine fair value.


	Investment Securities AFS			Investment Securities AFS
	(Dollars in thousands)			(Dollars in thousands)
Balance – January 1, 2014	$	18,682		$	18,682
Total realized gains (losses) included in earnings		0			0
Total unrealized gains (losses) included in comprehensive income		248			403
Acquired					1,907
Paydowns and maturities		(383	)		(392	)
Sales		0			0
Transfers in and/or out of Level 3		0			0

Balance – March 31, 2014	$	18,547
Balance – June 30, 2014				$	20,600


Balance – January 1, 2013	$	104,172		$	104,172
Total realized gains (losses) included in earnings		0			0
Total unrealized gains (losses) included in comprehensive income		(108	)		(1,867	)
Paydowns and maturities		(27,570	)		(32,189	)
Sales		0			0
Transfers in and/or out of Level 3		(28,393	)		(50,787	)

Balance – March 31, 2013	$	48,101
Balance – June 30, 2013				$	19,329

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 which are measured on a recurring basis. As a result, the Company receives estimates of fair values from at least two independent pricing sources for the majority of its individual securities within its investment portfolio. 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, 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. All fair value estimates of the Company’s investment securities are reviewed and approved on a quarterly basis by the Company’s Investment Portfolio Manager and its Chief Financial Officer. The Company’s investments in the common stock of the FHLB – Dallas and FNBB totaling ~~$14.5~~$16.6 million at ~~March 31,~~June 30, 2014, $13.8 million at December 31, 2013 and ~~$13.7~~$15.5 million at ~~March 31,~~June 30, 2013, do not have readily determinable fair values and are carried at cost.

Loans and leases – The fair value of loans and leases, including covered loans and purchased non-covered loans, is estimated by discounting the contractual cash flows to be received in future periods 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.

Clawback payable – The fair value of the FDIC clawback payable is based on the net present value of future cash payments expected to be remitted to the FDIC in accordance with the provisions of the loss share agreements using a discount rate that is based on current market rates.

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.

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 ~~March 31,~~June 30, 2014 and 2013 or at December 31, 2013.

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 represent values at which the respective financial instruments could be sold individually or in the aggregate.

The following table presents the carrying amounts and estimated fair values for the dates indicated and the fair value hierarchy of the Company’s financial instruments.


			March 31,												Fair Value Hierarchy		June 30,
			2014				2013				December 31, 2013					2014						2013						December 31, 2013
	Fair Value Hierarchy		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value			Carrying Amount			Estimated Fair Value			Carrying Amount			Estimated Fair Value			Carrying Amount			Estimated Fair Value
			(Dollars in thousands)															(Dollars in thousands)
Financial assets:
Cash and cash equivalents		Level 1	$	188,351	$	188,351	$	162,575	$	162,575	$	195,975	$	195,975	Level 1		$	110,688		$	110,688		$	60,892		$	60,892		$	195,975		$	195,975
Investment securities AFS		Levels 2 and 3		687,661		687,661		487,648		487,648		669,384		669,384	Levels 2 and 3			892,129			892,129			490,748			490,748			669,384			669,384
Loans and leases, net of ALLL		Level 3		3,528,130		3,496,946		2,701,688		2,688,826		3,314,134		3,286,600	Level 3			4,528,696			4,480,221			2,915,749			2,884,141			3,314,134			3,286,600
FDIC loss share receivable		Level 3		57,782		57,722		132,699		132,470		71,854		71,770	Level 3			50,679			50,600			112,716			112,662			71,854			71,770

Financial liabilities:
Demand, savings and interest bearing transaction deposits		Level 1	$	3,085,886	$	3,085,886	$	2,242,727	$	2,242,727	$	2,819,817	$	2,819,817	Level 1		$	3,807,139		$	3,807,139		$	2,257,668		$	2,257,668		$	2,819,817		$	2,819,817
Time deposits		Level 2		830,318		830,583		748,345		748,918		897,210		897,708	Level 2			1,176,758			1,177,108			726,961			727,822			897,210			897,708
Repurchase agreements with customers		Level 1		51,140		51,140		30,714		30,714		53,103		53,103	Level 1			55,999			55,999			24,704			24,704			53,103			53,103
Other borrowings		Level 2		280,885		317,186		280,756		326,367		280,895		319,650	Level 2			280,875			304,381			391,690			435,719			280,895			319,650
FDIC clawback payable		Level 3		26,202		26,202		25,384		25,384		25,897		25,897	Level 3			26,533			26,533			25,596			25,596			25,897			25,897
Subordinated debentures		Level 2		64,950		32,767		64,950		30,603		64,950		30,974	Level 2			64,950			32,554			64,950			30,735			64,950			30,974

~~13. Changes In and Reclassifications From Accumulated Other Comprehensive Income (“AOCI”)~~


	Three Months Ended
	March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013			2014			2013
	(Dollars in thousands)						(Dollars in thousands)
Beginning balance of AOCI – unrealized gains and losses on investment securities AFS	$	(3,672	)	$	10,783		$	3,211		$	9,029		$	(3,672	)	$	10,783
Other comprehensive income (loss):
Other comprehensive income (loss) before reclassifications		6,886			(1,660	)		6,806			(9,927	)		13,692			(11,587	)
Amounts reclassified from AOCI		(3	)		(94	)		(11	)		0			(14	)		(94	)

Total other comprehensive income (loss)		6,883			(1,754	)		6,795			(9,927	)		13,678			(11,681	)

Ending balance of AOCI – unrealized gains and losses on investment securities AFS	$	3,211		$	9,029		$	10,006		$	(898	)	$	10,006		$	(898	)

Amounts reclassified from AOCI to net gains on investment securities in the consolidated statements of income related entirely to unrealized gains/losses on investment securities AFS. For the three months ended ~~March 31,~~June 30, 2014, ~~and 2013, respectively,~~ amounts reclassified for net gains on investment securities were ~~$5,000 and $156,000,~~$18,000, with related tax effects of ~~$2,000~~$7,000. For the three months ended June 30, 2013, there were no amounts reclassified from AOCI. For the six months ended June 30, 2014 and 2013 amounts reclassified for net gains on investment securities were $23,000 and $156,000, respectively, with tax related tax effects of $9,000 and $62,000, respectively.

In January 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-04“Receivables – Troubled Debt Restructurings by Creditors (Sub topic 310-04) Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure.” The provisions of this ASU clarify when an in substance foreclosure occurs and require a creditor to reclassify a collateralized consumer mortgage loan to real estate owned upon obtaining legal title to the real estate collateral, or a deed in lieu of foreclosure, or similar legal agreement that is voluntarily provided by the borrower to satisfy the loan. ASU 2014-04 iswas effective for reporting periods beginning January 1, 2014. The proposed provisions of ASU 2014-04 did not have a material impact on the Company’s financial position, results of operations, or liquidity.

In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers.” ASU 2014-09 provides guidance that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. ASU 2014-09 is effective for annual and interim periods beginning after December 15, 2016. The Company is currently evaluating the impact, if any, ASU 2014-09 will have on its financial position, results of operations, and its financial statement disclosures.

On July 31, 2014, the Company entered into a definitive agreement and plan of merger (the “Intervest Agreement”) with Intervest Bancshares Corporation (“Intervest”), and its wholly-owned bank subsidiary Intervest National Bank (“INB”), headquartered in New York, New York, whereby the Company will acquire all of the outstanding common stock of Intervest in a transaction valued at approximately $228.5 million. INB operates seven full service banking offices including one in New York City, five in Clearwater, Florida and one in Pasadena, Florida.

Under the terms of the Intervest Agreement, each outstanding share of common stock of Intervest will be converted into the right to receive shares of the Company’s common stock, plus cash in lieu of any fractional share, all subject to certain conditions and potential adjustments. The number of Company shares to be issued will be determined based on the Company’s 10-day average closing stock price as of the fifth business day prior to the closing date, subject to a minimum price of $23.95 per share and a maximum price of $39.91 per share. Upon the closing of the transaction, Intervest will merge into the Company and INB will merge into the Bank. Completion of the transaction is subject to certain closing conditions, including receipt of customary regulatory approvals and the approval of the shareholders of Intervest.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This quarterly report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, other filings made by the Company with the SEC and other oral and written statements or reports by the Company and its management include certain forward-looking statements that are intended to be covered by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management’s expectations as well as certain assumptions and estimates made by, and information available to, management at that time. Those statements are subject to certain risks, uncertainties and other factors that may cause actual results to differ materially from those projected in such forward-looking statements. Forward-looking statements include, 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 merger and acquisition transactions; net FDIC loss share accretion income and amortization expenses; other income from loss share and purchased non-covered loans; 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 acquisitions; problems with integrating or managing acquisitions; the effect of the announcements or completion of any pending or future mergers or acquisitions on customer relationships and operating results; opportunities to profitably deploy capital; plans for opening new offices or relocating or closing existing offices; opportunities and goals for future market share growth; expected capital expenditures; loan, lease and deposit growth, including growth from unfunded closed loans; changes in covered assets; changes in the volume, yield and value of the Company’s investment securities portfolio; conversion of the Company’s core banking software; availability of unused borrowings and other similar forecasts and statements of expectation. Words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “goal,” “hope,” “intend,” “look,” “may,” “plan,” “project,” “seek,” “target,” “trend,” “will,” “would,” and similar expressions, as they relate to the Company or its management, identify forward-looking statements. 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 future 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 and/or close additional acquisitions; problems with integrating or managing acquisitions; opportunities to profitably deploy capital; the ability to attract new or retain existing or acquired deposits, or to retain or grow loans and leases, including growth from unfunded closed loans; 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, and the effect of any such conditions 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, strengthen the capital of financial institutions, 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; the ability to keep pace with technological changes, including changes regarding cyber security; adoption of new accounting standards or changes in existing standards; and adverse results in current or future litigation or regulatory examinations as well as other factors described in this quarterly report on Form 10-Q 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.

The following tables set forth selected consolidated financial data of the Company for the three months and six months ended June 30, 2014 and 2013 and supplemental quarterly financial data of the Company for each of the most recent eight quarters beginning with the third quarter of 2012 through the second quarter of 2014. These tables are qualified in their entirety by the consolidated financial statements and related notes presented elsewhere in this quarterly report on Form 10-Q.

The following discussion explains the financial condition and results of operations of Bank of the Ozarks, Inc. (“the Company”) as of and for the three months and six months ended ~~March 31,~~June 30, 2014. The purpose of this discussion is to focus on information about the Company’s financial condition and results of operations which is not otherwise apparent from the consolidated financial statements. The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes presented elsewhere in this report and the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 previously filed with the Securities and Exchange Commission (“SEC”). Annualized results for these interim periods may not be indicative of results for the full year or future periods.

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 non-purchased loans and leases, purchased loans not covered by Federal Deposit Insurance Corporation (“FDIC”) loss share agreements (“purchased non-covered loans”), loans covered by FDIC loss share agreements (“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~~accretion/amortization of FDIC loss share receivable, net of amortization of FDIC clawback payable, other income from loss share and purchased non-covered loans, gains on investment securities and from sales of other assets, and gains on merger and acquisition transactions.

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 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. The Company’s determination of (i) the provisions to and the adequacy of the allowance for loan and lease losses (“ALLL”), (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 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 ALLL, (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 ALLL.The ALLL is established through a provision for such losses charged against income. All or portions of loans or leases, excluding purchased non-covered loans and covered loans (“non-purchased loans and leases”), deemed to be uncollectible are charged against the ALLL when management believes that collectability 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.

The ALLL is maintained at a level management believes will be adequate to absorb probable incurred losses in the loan and lease portfolio. Provisions 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 these objective criteria, the Company subjectively assesses the adequacy of the ALLL 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 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 ALLL. 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 grades to all non-purchased loans and leases, except residential 1-4 family loans, consumer ~~loans, purchased non-covered loans, covered~~ loans, and certain other loans, with each grade being assigned an allowance allocation percentage. 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-cost 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, consumer loans and certain other 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, consumer loans and certain other 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.

Assets acquired and liabilities assumed in business combinations are recorded at estimated fair value on their purchase date. 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”).

For purchased non-covered loans, management segregates this portfolio into loans that contain evidence of credit deterioration on the date of purchase and loans that do not contain evidence of credit deterioration on the date of purchase. Purchased non-covered loans with evidence of credit deterioration are regularly monitored and are periodically reviewed by management. 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 ALLL. To the extent that a revised loss estimate exceeds the loss estimate established in the determination of Day 1 Fair Values, such determination will result in an allowance allocation or a charge-off.

All other purchased non-covered loans are graded by management at the time of purchase. The grade on these purchased non-covered loans are reviewed regularly as part of the ongoing assessment of such loans. To the extent that current information indicates it is probable that the Company will not be able to collect all amounts according to the contractual terms thereof, such loan is considered in the determination of the required level of ALLL and may result in an allowance allocation or a charge-off.

At ~~March 31,~~June 30, 2014 and 2013 and at December 31, 2013, the Company had no allowance for its purchased non-covered loans and its covered loans because all losses had been charged off on such loans whose performance had deteriorated from management’s expectations established in conjunction with the determination of the Day 1 Fair Values.

The Company generally places a loan or lease, excluding purchased non-covered loans with evidence of credit deterioration on the date of purchase and covered loans, 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 ALLL. 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. For the three months and six months ended ~~March 31,~~June 30, 2014, there were no defaults during the preceding 12 months on any loans that were considered TDRs.

All loans and leases deemed to be impaired are evaluated individually. The Company considers a loan or lease, excluding purchased non-covered loans with evidence of credit deterioration at the date of purchase and covered loans, 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 non-covered loan with evidence of credit deterioration at the date of purchase and a covered loan to be impaired once a decrease in expected cash flows or other deterioration in the loan’s expected performance, 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 purchased non-covered loans and covered loans, 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 ALLL or is charged off as a reduction of the ALLL. The Company’s practice is to charge off any estimated loss as soon as management is able to identify and reasonably quantify such potential loss. Accordingly, only a small portion of the Company’s ALLL is needed for potential losses on nonperforming loans and leases.

The Company also maintains an allowance for certain non-purchased loans and leases ~~excluding purchased non-covered loans and covered loans,~~ 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 ALLL.

The Company also maintains specific ALLL allocations for concentrations of credit to capture the risk associated with having a loan portfolio comprised of both large individual credits and large borrower relationships. This ALLL allocation is applied to every risk-rated loan in a borrower relationship that exceeds $3 million, and is based on the greater of the loan-to-value or loan-to-cost ratio for each individual risk-rated loan comprising such borrower relationship.

The Company also includes specific ALLL allocations for qualitative factors including, ~~among other factors,~~ (i) ~~concentrations of credit, (ii)~~ general economic and business conditions, ~~(iii)~~(ii) trends that could affect collateral values and ~~(iv)~~(iii) 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.allocations.

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

Fair value of the investment securities portfolio. Management determines the appropriate classification of investment securities at the time of purchase and reevaluates such designation as of each balance sheet date. At ~~March 31,~~June 30, 2014 and 2013 and December 31, 2013, 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 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. As a result, the Company receives estimates of fair values from at least two independent pricing sources for the majority of its individual securities within its investment portfolio. 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. Additionally, the valuation of investment securities acquired may include certain unobservable inputs. All fair value estimates received by the Company for its investment securities are reviewed and approved on a quarterly basis by the Company’s Investment Portfolio Manager and its Chief Financial Officer.

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.

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. Loans covered by FDIC loss share agreements, or 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 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 loans acquired in its FDIC-assisted acquisitions.

At the time such covered 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 covered loans (not considering any FDIC loss sharing agreements) and includes no carryover of any previously recorded ALLL. In determining the estimated fair value of covered 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 covered loan 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 covered loan portfolio.

In determining the Day 1 Fair Values of covered loans, management calculates a non-accretable difference (the credit component of the covered loans) and an accretable difference (the yield component of the covered 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 expected cash flows following any previous decrease 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. Any such increase or decrease in expected cash flows will result in a corresponding adjustment of the FDIC loss share receivable and accretion or amortization thereof and the FDIC clawback payable or the amortization thereof for the portion of such reduced or additional loss expected to be collected from the FDIC.

The accretable difference on 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 for purposes of establishing the Day 1 Fair Values, the Company used discount rates ranging from 6.0% to 9.5% per annum depending on the risk characteristics of each individual loan. At ~~March 31,~~June 30, 2014, 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 ~~2.5~~approximately 2.6 years.

Management separately monitors the covered 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 covered loan portfolio. Management separately reviews the performance of the portfolio of covered loans on an annual basis, or more frequently to the extent that material information becomes available regarding the performance of an individual loan, to make determinations of the constituent loans’

performance and to consider whether there has been any significant change in performance since management’s initial expectations established in conjunction with the determination of the Day 1 Fair Values or since management’s most recent review of such portfolio’s performance. To the extent that a loan is performing in accordance with or exceeding management’s expectation established in conjunction with the determination of the Day 1 Fair Values, such loan is rated ~~FV 1,~~FV1, 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 ALLL. For any loan that is exceeding management’s performance expectation established in conjunction with the determination of Day 1 Fair Values, the accretable yield on such loan is adjusted to reflect such increased performance. 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,~~FV2, is included in certain of the Company’s credit quality metrics, is considered an impaired loan, and is considered in the determination of the required level of ALLL. Any improvement in the expected performance of a covered loan would 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.

Purchased non-covered loans include a small volume of non-covered loans acquired in FDIC-assisted acquisitions and loans acquired in the Genala Banc, Inc. (“Genala”), The First National Bank of Shelby (“First National Bank”) ~~and~~, Bancshares Inc. (“Bancshares”) and Summit Bancshares, Inc. (“Summit”) acquisitions and are initially recorded at estimated fair value on the date of purchase. Purchased non-covered loans that contain evidence of credit deterioration on the date of purchase are carried at the net present value of expected future proceeds. All other purchased non-covered loans are recorded at their initial estimated fair value, adjusted for subsequent advances, pay downs, amortization or accretion of any premium or discount on purchase, charge-offs and any other adjustment to carrying value.

At the time of acquisition of purchased non-covered loans, management individually evaluates substantially all loans acquired in the transaction. For those purchased loans without evidence of credit deterioration, management evaluates each reviewed loan using an internal grading system with a grade assigned to each loan at the date of acquisition. To the extent that any purchased non-covered loan without evidence of credit deterioration is not specifically reviewed, such loan is assumed to have characteristics similar to the characteristics of the aggregate acquired ~~portfolio.~~portfolio of purchased non-covered loans without evidence of credit deterioration. The grade for each purchased non-covered loan is reviewed subsequent to the date of acquisition any time a loan is renewed or extended or at any time information becomes available to the Company that provides material insight regarding the loan’s performance, the borrower or the underlying collateral. To the extent that current information indicates it is probable that the Company will collect all amounts according to the contractual terms thereof, such loan is not considered impaired and is not considered in the determination of the required ALLL. To the extent that current information indicates it is probable that the Company will not be able to collect all amounts according to the contractual terms thereof, such loan is considered impaired and is considered in the determination of the required level of ALLL.

In determining the Day 1 Fair Values of purchased non-covered loans without evidence of credit deterioration at the date of acquisition, management includes (i) no ~~carry over~~carry-over of any previously recorded ALLL and (ii) an adjustment of the unpaid principal balance to reflect an appropriate market rate of interest, given the risk profile and grade assigned to each loan. This adjustment ~~will be~~is accreted into earnings as a yield adjustment, using the effective yield method, over the remaining life of each loan.

Purchased non-covered loans that contain evidence of credit deterioration on the date of purchase are accounted for in accordance with the provisions of GAAP applicable to loans acquired with deteriorated credit quality. At the time such purchased non-covered loans with evidence of credit deterioration are acquired, management individually evaluates each loan to determine the estimated fair value of each loan. This evaluation includes no carryover of any previously recorded ALLL. In determining the estimated fair value of purchased non-covered loans with evidence of credit deterioration, 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.

In determining the Day 1 Fair Values of purchased non-covered loans with evidence of credit deterioration, 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 increases in expected cash flows will result in an adjustment to accretable yield, which

will have a positive impact on interest income. Subsequent decreases to the expected cash flows will generally result in a provision for loan and lease losses. Subsequent increases in expected cash flows following any previous decrease 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.

The accretable difference on purchased non-covered loans with evidence of credit deterioration 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 for purposes of establishing the Day 1 Fair Values, the Company used discount rates ranging from 6.0% to 9.5% per annum depending on the risk characteristics of each individual loan.

Management separately monitors purchased non-covered loans with evidence of credit deterioration on the date of purchase and periodically reviews such loans contained within this portfolio against the factors and assumptions used in determining the Day 1 Fair Values. A loan is reviewed (i) any time it is renewed or extended, (ii) at any other time additional information becomes available to the Company that provides material 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 of each acquired portfolio. Management separately reviews the performance of the portfolio of purchased non-covered loans with evidence of credit deterioration, on an annual basis, or more frequently to the extent that material information becomes available regarding the performance of an individual loan, to make determinations of the constituent loans’ performance and to consider whether there has been any significant change in performance since management’s initial expectations established in conjunction with the determination of the Day 1 Fair Values or since management’s most recent review of such portfolio’s performance. To the extent that a loan is performing in accordance with or exceeding management’s performance expectation established in conjunction with the determination of the Day 1 Fair Values, such loan is rated ~~FV 66,~~FV66, is not included in any of the credit quality ratios, is not considered to be a nonaccrual or impaired loan, and is not considered in the determination of the required ALLL. For any loan that is exceeding management’s performance expectation established in conjunction with the determination of Day 1 Fair Values, the accretable yield on such loan is adjusted to reflect such increased performance. 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 FV88, is included in certain of the Company’s credit quality metrics, is considered an impaired loan, and is considered in the determination of the required level of ALLL. Any improvement in the expected performance of such loan would 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.

Foreclosed assets covered by FDIC loss share agreements, or covered foreclosed assets, are initially recorded at Day 1 Fair Values. In estimating the Day 1 Fair Values 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 for purposes of establishing the Day 1 Fair Values. Valuations of these assets are periodically reviewed by management with the carrying value of such assets adjusted through non-interest income 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.

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 initially measured at Day 1 Fair Values, the FDIC loss share receivable is also initially 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 Day 1 Fair Values 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 and the accretion or amortization thereof is adjusted periodically to reflect changes in expectations of discounted cash flows, expense reimbursements under the loss share agreements and other factors. The Company is accreting or amortizing its FDIC loss share receivable over the shorter of (i) the contractual term of the indemnification agreement (ten years for the single family loss share agreements, and five years for the non-single family loss share agreements) or (ii) the remaining life of the indemnified asset.

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 balance of the FDIC clawback payable and the amortization thereof are adjusted periodically to reflect changes in expected losses on covered assets and the impact of such changes on the clawback payable and other factors.

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. Additionally, these valuations may include certain unobservable inputs. The Day 1 Fair Values of assumed liabilities in business combinations are generally the amounts payable by the Company necessary to completely satisfy the assumed obligations.

differences are recorded as deferred tax assets and liabilities using enacted tax rates in effect for the year or years in which the differences are expected to be recovered or settled. Business combination transactions may result in the acquisition of net operating loss carryforwards and other assets with built-in losses, the realization of which is subject to limitations pursuant to section 382 (“section 382 limitations”) of the Internal Revenue Code (“IRC”). In determining the section 382 limitation associated with a business combination, management must make a number of estimates and assumptions regarding the ability to utilize acquired net operating loss carryforwards and the expected timing of future recoveries or settlements of acquired assets with built-in losses. To the extent that information available as of the date of acquisition results in a determination by management that some portion of net operating loss carryforwards cannot be utilized or assets with built-in losses are expected to be settled or recovered in future periods in which the ability to realize the benefits will be subject to section 382 limitations, a deferred tax asset valuation allowance is established for the estimated amount of the deferred tax assets subject to the section 382 limitation. To the extent that information becomes available, during the first 12 months following the consummation of a business combination transaction, that results in changes in management’s initial estimates and assumptions regarding the expected utilization of net operating loss carryforwards or the expected settlement or recovery of acquired assets with built-in losses subject to section 382 limitations, an increase or decrease of the deferred tax asset valuation allowance will be recorded as an adjustment to bargain purchase gain or goodwill. To the extent that such information becomes available 12 months or more after the consummation of a business combination transaction, or additional information becomes available during the first 12 months as a result of changes in circumstances since the date of the consummation of a business combination transaction, an increase or decrease of the deferred tax asset valuation allowance will be recorded as an adjustment to deferred income tax expense (benefit).

Net income available to common stockholders for the Company was ~~$25.3~~$26.5 million for the ~~first~~second quarter of 2014, a ~~26.4%~~29.9% increase from ~~$20.0~~$20.4 million for the ~~first~~second quarter of 2013. Diluted earnings per common share were ~~$0.68~~$0.34 for the ~~first~~second quarter of 2014, a ~~21.4%~~17.2% increase from ~~$0.56~~$0.29, on a split-adjusted basis, for the second quarter of 2013. For the first six months of 2014, net income available to common stockholders totaled $51.8 million, a 28.2% increase from $40.4 million the first six months of 2013. Diluted earnings per common share for the first ~~quarter~~six months of 2014 were $0.68, a 19.3% increase from $0.57, on a split-adjusted basis, for the first six months of 2013.

On June 23, 2014, the Company completed a two-for-one stock split in the form of a stock dividend, effected by using one share of common stock for each share of such stock outstanding on June 13, 2014. 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 Company’s annualized return on average assets was ~~2.12%~~1.88% for the ~~first~~second quarter of 2014 compared to ~~2.06%~~2.08% for the ~~first~~second quarter of 2013. Its annualized return on average common stockholders’ equity was ~~16.06%~~14.17% for the ~~first~~second quarter of 2014 compared to ~~15.77%~~15.50% for the second quarter of 2013. The Company’s annualized return on average tangible common stockholders’ equity was 15.41% for the second quarter of 2014 compared to 15.82% for the second quarter of 2013. The Company’s annualized return on average assets was 1.99% for the first ~~quarter~~six months of 2014 compared to 2.07% for the first six months of 2013. Its annualized return on average common stockholders’ equity was 14.99% for the first six months of 2014 compared to 15.63% for the first six months of 2013. The Company’s annualized return on average tangible common stockholders’ equity was 15.90% for the first six months of 2014 compared to 15.97% for the first six months of 2013.

Total assets were ~~$5.03~~$6.30 billion at ~~March 31,~~June 30, 2014 compared to $4.79 billion at December 31, 2013. ~~Loans~~Non-purchased loans and leases ~~excluding purchased non-covered loans and covered loans,~~ were ~~$2.78~~$3.17 billion at ~~March 31,~~June 30, 2014 compared to $2.63 billion at December 31, 2013. Total loans and leases ~~including purchased non-covered loans and covered loans,~~ were ~~$3.57~~$4.58 billion at ~~March 31,~~June 30, 2014 compared to $3.36 billion at December 31, 2013. Deposits were ~~$3.92~~$4.98 billion at ~~March 31,~~June 30, 2014 compared to $3.72 billion at December 31, 2013.

Common stockholders’ equity was ~~$653~~$850 million at ~~March 31,~~June 30, 2014 compared to ~~$625~~$629 million at December 31, 2013. Tangible common stockholders’ equity was $742 million at June 30, 2014 compared to $610 million at December 31, 2013. Book value per common share was ~~$17.68~~$10.67 at ~~March 31,~~June 30, 2014 compared to ~~$16.96~~$8.53, on a split-adjusted basis, at December 31, 2013. Tangible book value per common share was ~~$17.11~~$9.31 at ~~March 31,~~June 30, 2014 compared to ~~$16.44~~$8.27, on a split-adjusted basis, at December 31, 2013. Changes in common stockholders’ equity, tangible common stockholders’ equity, book value per common share and tangible book value per common share reflect earnings, dividends paid, stock option and stock grant transactions, changes in unrealized gains and losses on investment securities AFS, and, for tangible common stockholders’ equity and tangible book value per common share, changes in intangible assets.

~~During~~On July 31, 2013, the Company completed its acquisition of First National ~~Bank effective July 31, 2013. A summary of the assets acquired and liabilities assumed in this acquisition is included in Note 3 to the Consolidated Financial Statements.~~Bank. Because the acquisition was effective on July 31, 2013, the Company’s consolidated results of operations for the three months and six months ended ~~March 31,~~June 30, 2013 do not include the acquired operations of First National Bank.

On March 5, 2014, the Company completed its acquisition of ~~Bancshares effective March 5, 2014. A summary of the assets acquired and liabilities assumed in this acquisition is included in Note 3 to the Consolidated Financial Statements.~~Bancshares. Because the acquisition was effective March 5, 2014, the Company’s consolidated results of operations for the three months and six months ended ~~March 31,~~June 30, 2013 do not include the acquired operations of Bancshares. The Company’s consolidated results of operations for the three months and six months ended June 30, 2014 include the acquired operations of Bancshares ~~and~~beginning March 6, 2014.

On May 16, 2014, the Company completed its acquisition of Summit. Because the acquisition was effective May 16, 2014, the Company’s consolidated results of operations for the three months and six months ended ~~March 31, 2014~~June 30, 2013 do not include ~~twenty-six days of~~ the acquired operations of ~~Bancshares.~~Summit. The Company’s consolidated results of operations for the three months and six months ended June 30, 2014 include the acquired operations of Summit beginning May 17, 2014.

A summary of the assets acquired and liabilities assumed in the First National Bank, Bancshares, and Summit acquisitions is included in Note 3 to the Consolidated Financial Statements included elsewhere in this quarterly report on Form 10-Q.

Net interest income is analyzed in this discussion and the following tables on a fully taxable equivalent (“FTE”) basis. The adjustment to convert certain income to a FTE basis consists of dividing federal tax-exempt income by one minus the Company’s statutory federal income tax rate of 35%. The FTE adjustments to net interest income were ~~$2.4~~$2.7 million and ~~$2.0~~$2.1 million for the quarters ended ~~March 31,~~June 30, 2014 and 2013, respectively, and $5.2 million and $4.1 million for the six months ended June 30, 2014 and 2013, respectively. 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 IRC as a result of investment in certain tax-exempt securities.

Net interest income for the ~~first~~second quarter of 2014 increased ~~18.8%~~48.3% to ~~$54.8~~$67.5 million compared to ~~$46.2~~$45.5 million for the ~~first~~second quarter of 2013. Net interest ~~margin was 5.46%~~income for the first ~~quarter~~six months of 2014 increased 33.4% to $122.4 million compared to ~~5.83%~~$91.7 million for the first ~~quarter~~six months of 2013. The increase in net interest income for the second quarter and first ~~quarter~~six months of 2014 compared to the same periods in 2013 was primarily due to the increase in average earning assets, which increased ~~26.6%~~ to ~~$4.07~~$4.82 billion, or 46.8%, for the second quarter and $4.45 billion, or 36.6%, for the first six months of 2014, compared to $3.29 billion for the second quarter and $3.26 billion for the first ~~quarter~~six months of ~~2014 compared to $3.21 billion for the first quarter of 2013, partially offset by the decline in net interest margin.~~2013.

The Company’s net interest margin ~~decreased 37~~for the second quarter of 2014 increased six basis points (“bps”) to ~~5.46 %~~5.62% compared to 5.56% for the second quarter in 2013. This increase was primarily due to a 14 bps reduction in rates paid on interest bearing liabilities, partially offset by an eight bps decrease in yields on average earning assets. The Company’s net interest margin for the first ~~quarter~~six months of 2014 decreased 13 bps to 5.55% compared to ~~5.83%~~5.68% for the first ~~quarter in~~six months of 2013. This decrease was primarily due to a 4827 bps decrease in ~~yields~~the yield on average earning assets, partially offset by a ~~nine~~12 bps reduction in the rates paid on interest bearing liabilities.

Yields on earning assets decreased ~~48 bps~~ to ~~5.93%~~6.03% for the second quarter and 5.98% for the first ~~quarter~~six months of 2014 compared to ~~6.41%~~6.11% for the second quarter and 6.25% for the first ~~quarter~~six months of 2013. The yield on the Company’s portfolio of non-purchased loans and leases ~~excluding purchased non-covered loans~~decreased 42 bps for the second quarter and ~~covered loans, decreased 59~~51 bps for the first ~~quarter~~six months of 2014 compared to the ~~first quarter of~~same periods in 2013. The decrease in yield on the Company’s non-purchased loan and lease portfolio was primarily attributable to the extremely low interest rate environment experienced in recent years and increased pricing competition from many of the Company’s competitors. The yield on the Company’s aggregate investment securities portfolio decreased 5850 bps for the second quarter and 46 bps for the first ~~quarter~~six months of 2014 compared to the same ~~period~~periods in 2013 primarily due to changes in the composition of the Company’s investment securities portfolio between taxable and tax-exempt investment ~~securities as a result of the investment securities acquired in the First National Bank transaction.~~securities. During the second quarter and first ~~quarter~~six months of 2014, taxable investment securities comprised ~~40.7%~~40.5% and 40.6%, respectively, and tax-exempt investment securities comprised ~~59.3%~~59.5% and 59.4%, respectively, of average investment securities. During the second quarter and first ~~quarter~~six months of 2013, taxable investment securities comprised ~~29.6%~~28.8% and 30.0%, respectively, and tax-exempt investment securities comprised ~~70.4%~~71.2% and 70.0%, respectively, of average investment securities. Additionally, the yield on the Company’s purchased non-covered loan portfolio decreased ~~247~~147 bps for the second quarter and 215 bps for the first ~~quarter~~six months of 2014 compared to the ~~first quarter of~~same periods in 2013. This decrease was primarily attributable to the loans acquired in the ~~First National Bank and Bancshares transactions,~~Summit transaction, many of which did not contain evidence of credit deterioration on the date of purchase and were priced at a lower yield compared to the Company’s then existing yield on its purchased non-covered loan portfolio. These decreases were partially offset by the ~~243~~660 bps increase in the yield on covered loans for the second quarter and 439 bps increase for the first ~~quarter~~six months of 2014 compared to the ~~first quarter~~same periods in 2013. The increase in yields on covered loans was primarily due to upward revisions of estimated cash flows of certain covered loans as a result of recent evaluations of the expected performance of such loans. To the extent the Company makes additional upward revisions of estimated cash flow of certain covered loans in future periods to reflect improvement in the expected performance of such loans, these upward revisions of estimated cash flows are expected to result in increased yields on the covered loan portfolio in future periods.

The decrease in rates on average interest bearing liabilities was primarily due to the declines in rates on interest bearing deposits, the largest component of the Company’s interest bearing liabilities. Rates on interest bearing deposits decreased ~~four~~two bps for the second quarter and three bps for the first ~~quarter~~six months of 2014 compared to the ~~first quarter of~~same periods in 2013. This decrease in the rate on interest bearing deposits was principally due to (i) 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;~~repriced and (ii) a change in the mix of savings and interest bearing deposit accounts to ~~71.3%~~71.4% and 71.4%, respectively, of total average interest bearing deposits for the second quarter and first ~~quarter~~six months of 2014 compared to ~~68.6%~~69.2% and 68.9%, respectively, for the second quarter and first ~~quarter~~six months of 2013. During recent quarters, the Company has increased deposit pricing in several target markets to fund growth in loans and leases. To the extent the Company continues to increase deposit pricing in additional markets to fund future growth in earning assets, if any, such increased deposit pricing is expected to result in increased deposit costs in future periods.

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 borrowings and federal funds purchased and (iii) subordinated debentures. The rates on repos increased one bps for the second quarter of 2014 but decreased one bps for the first ~~quarter~~six months of 2014 compared to the ~~first quarter~~same periods of 2013. The rate on the Company’s other borrowings, which consist primarily of fixed rate callable FHLB – Dallas advances, ~~was unchanged~~increased nine bps in the second quarter and five bps for the first ~~quarter~~six months of 2014 compared to the ~~first quarter~~same periods of 2013. 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 ~~nine~~one bps in the second quarter and five bps for the first ~~quarter~~six months of 2014 compared to the ~~first quarter~~same periods of 2013.

The increase in average earning assets for the second quarter and first ~~quarter~~six months of 2014 compared to the ~~first quarter of~~same periods in 2013 was due to increases in the average balances of non-purchased loans and leases of ~~$531~~$671 million ~~an increase~~for the second quarter and $602 million for the first six months of 2014 compared to the same periods in 2013. Additionally, the average ~~balances~~balance of purchased non-covered loans increased $783 million for the second quarter and $574 million for the first six months of ~~$362 million,~~2014 compared to the same periods for 2013, primarily as a result of the First National Bank, Bancshares and ~~Bancshares acquisitions, and an increase in~~Summit acquisitions. The average balances of investment securities increased $300 million for the second quarter and $246 million for the first six months of ~~$205 million,~~2014 compared to the same periods in 2013, primarily as a result of investment securities acquired in the First National Bank ~~acquisition.~~and Summit acquisitions. These increases were partially offset by a decrease in the average balance of covered loans of ~~$241 million.~~$228 million for the second quarter and $234 million for the first six months of 2014 compared to the same periods in 2013.

The following table sets forth certain information relating to the Company’s net interest income for the periods indicated. 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. Average balances are derived from daily average balances for such assets and liabilities. The average balance of loans and leases 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 AFS and other-than-temporary impairment writedowns. The yields on loans and leases 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 and purchased non-covered loans ~~consist of~~include 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.


	Three Months Ended March 31,														Three Months Ended June 30,														Six Months Ended June 30,
	2014							2013							2014							2013							2014							2013
	Average		Income/		Yield/			Average		Income/		Yield/			Average		Income/		Yield/			Average		Income/		Yield/			Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Rate			Balance		Expense		Rate			Balance		Expense		Rate			Balance		Expense		Rate			Balance		Expense		Rate			Balance		Expense		Rate
	(Dollars in thousands)														(Dollars in thousands)
ASSETS
Earning assets:
Interest earning deposits and federal funds sold	$	1,079	$	3		1.19	%	$	2,850	$	7		1.00	%	$	12,398	$	35		1.14	%	$	1,312	$	2		0.84	%	$	6,770	$	38		1.14	%	$	1,090	$	10		1.81	%
Investment securities:
Taxable		276,563		2,360		3.46			140,395		1,285		3.71			320,298		2,790		3.49			141,836		1,183		3.34			298,551		5,149		3.48			147,097		2,468		3.38
Tax-exempt – FTE		403,352		6,764		6.80			334,424		5,760		6.99			471,001		7,652		6.52			349,878		5,921		6.79			437,364		14,416		6.65			343,284		11,681		6.86
Loans and leases – FTE		2,656,050		33,469		5.11			2,124,721		29,884		5.70
Non-purchased loans and leases – FTE																2,913,816		36,892		5.08			2,242,441		30,723		5.50			2,785,645		70,358		5.09			2,183,975		60,606		5.60
Purchased non-covered loans		402,199		7,480		7.54			40,046		989		10.01			817,864		13,998		6.86			34,864		724		8.33			611,179		21,478		7.09			37,373		1,713		9.24
Covered loans		329,302		9,405		11.58			570,105		12,864		9.15			287,380		11,130		15.53			515,547		11,480		8.93			308,225		20,535		13.44			542,675		24,344		9.05

Total earning assets – FTE		4,068,545		59,481		5.93			3,212,541		50,789		6.41			4,822,757		72,497		6.03			3,285,878		50,033		6.11			4,447,734		131,974		5.98			3,255,494		100,822		6.25
Non-interest earning assets		756,325							717,097							837,379							642,650							799,487							676,198

Total assets	$	4,824,870						$	3,929,638						$	5,660,136						$	3,928,528						$	5,247,221						$	3,931,692


LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest bearing liabilities:
Deposits:
Savings and interest bearing transaction	$	2,096,018	$	1,067		0.21	%	$	1,665,324	$	864		0.21	%	$	2,484,649	$	1,271		0.21	%	$	1,654,637	$	806		0.20	%	$	2,291,407	$	2,337		0.21	%	$	1,660,156	$	1,670		0.20	%
Time deposits of $100,000 or more		382,852		235		0.25			334,805		289		0.35
Time deposits of $100,00 or more																488,265		281		0.23			331,094		243		0.29			435,850		516		0.24			332,939		532		0.32
Other time deposits		458,254		279		0.25			426,712		393		0.37			505,260		275		0.22			404,408		325		0.32			481,887		555		0.23			415,499		718		0.35

Total interest bearing deposits		2,937,124		1,581		0.22			2,426,841		1,546		0.26			3,478,174		1,827		0.21			2,390,139		1,374		0.23			3,209,144		3,408		0.21			2,408,594		2,920		0.24
Repurchase agreements with customers		65,045		12		0.08			33,953		7		0.09			58,607		13		0.09			29,815		6		0.08			61,808		25		0.08			31,872		13		0.09
Other borrowings		280,926		2,655		3.83			280,758		2,649		3.83			281,009		2,692		3.84			286,719		2,684		3.75			280,968		5,347		3.84			283,755		5,332		3.79
Subordinated debentures		64,950		413		2.58			64,950		428		2.67			64,950		427		2.64			64,950		428		2.65			64,950		840		2.61			64,950		857		2.66

Total interest bearing liabilities		3,348,045		4,661		0.56			2,806,502		4,630		0.67			3,882,740		4,959		0.51			2,771,623		4,492		0.65			3,616,870		9,620		0.54			2,789,171		9,122		0.66
Non-interest bearing liabilities:
Non-interest bearing deposits		790,861							551,348							964,935							577,930							878,349							567,153
Other non-interest bearing liabilities		44,164							53,966							59,311							47,814							52,180							50,840

Total liabilities		4,183,070							3,411,816							4,906,986							3,397,367							4,547,399							3,407,164
Common stockholders’ equity		638,334							514,378							749,692							527,713							696,360							521,082
Noncontrolling interest		3,466							3,444							3,458							3,448							3,462							3,446

Total liabilities and stockholders’ equity	$	4,824,870						$	3,929,638						$	5,660,136						$	3,928,528						$	5,247,221						$	3,931,692



Net interest income – FTE			$	54,820						$	46,159						$	67,538						$	45,541						$	122,354						$	91,700

Net interest margin – FTE						5.46	%						5.83	%						5.62	%						5.56	%						5.55	%						5.68	%

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—~~income - FTE, interest expense and net interest ~~income—~~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.

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 income from loss share and purchased non-covered loans, gains on investment securities and on sales of other assets and gains on merger and acquisition transactions.

Non-interest income for the first quarter of 2014 increased 24.5% to $20.4 million compared to $16.4 million for the first quarter of 2013. The Company’s results for the first quarter of 2014 included $4.7 million of tax-exempt bargain purchase gain from the acquisition of Bancshares. The Company’s results for the first quarter of 2013 included no bargain purchase gain.

Service charges on deposit accounts increased 19.4% to $5.6 million for the first quarter of 2014 compared to $4.7 million for the first quarter of 2013. The increase in service charges on deposit accounts was primarily a result of growth in the number of transaction accounts and the addition of deposit customers from the Company’s First National Bank and Bancshares acquisitions.

Mortgage lending income decreased 45.2% to $1.0 million for the first quarter of 2014 compared to $1.7 million for the first quarter of 2013. The volume of originations of mortgage loans available for sale decreased 35.3% for the first quarter of 2014 compared to the first quarter in 2013. During the first quarter of 2014, approximately 27% of the Company’s originations of mortgage loans available for sale were related to mortgage refinancings and approximately 73% were related to new home purchases, compared to approximately 64% for refinancings and approximately 36% for new home purchases in the first quarter of 2013.

Trust income was $1.3 million in the first quarter of 2014, an increase of 49.0% from $0.9 million for the first quarter of 2013. The increase in trust income was primarily due to new trust customers added as a result of the First National Bank acquisition.

The Company recognized $0.7 million of income from the accretion of the FDIC loss share receivable, net of amortization of the FDIC clawback payable, during the first quarter of 2014 compared to $2.4 million during the first quarter of 2013. The decrease in income from the accretion of the FDIC loss share receivable for the first quarter of 2014 compared to the first quarter of 2013 was due to both a decrease in the balance of the FDIC loss share receivable and upward revisions of projected cash flows of certain loans whose performance is exceeding management’s expectations established in conjunction with the determination of the Day 1 Fair Values, resulting in reduced accretion and/or increased amortization of the related FDIC loss share receivable over the remaining term of the loan or the loss share agreement, whichever is shorter.

The FDIC loss share receivable reflects the indemnification provided by the FDIC in FDIC-assisted acquisitions, and 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. As the Company collects payments in future periods from the FDIC under the loss share agreements or otherwise has further upward revisions of projected cash flows of certain loans, the balance of the FDIC loss share receivable, absent any significant revisions to the timing or the amounts expected to be collected under the loss share agreements, will decline, resulting in a corresponding decrease in the accretion of, or increase in the amortization 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 quarters.

~~Other income from loss share and purchased non-covered loans was $3.3 million in the first quarter of 2014 compared to $2.2 million in the first quarter of 2013.~~

~~Net gains on sales of other assets were $1.0 million in the first quarter of 2014 compared to $2.0 million in the first quarter of 2013.~~

On March 5, 2014, the Company completed its acquisition of Bancshares for an aggregate of $21.5 million in cash. This acquisition resulted in the Company recognizing a tax-exempt bargain purchase gain of $4.7 million during the first quarter of 2014.

The Company’s non-interest income consists primarily of service charges on deposit accounts, mortgage lending income, trust income, BOLI income, accretion/amortization of FDIC loss share receivable, net of amortization of FDIC clawback payable, other income from loss share and purchased non-covered loans, gains on investment securities and on sales of other assets and gains on merger and acquisition transactions.

Non-interest income for the second quarter of 2014 decreased 8.4% to $17.4 million compared to $19.0 million for the second quarter of 2013. Non-interest income for the first six months of 2014 increased 6.8% to $37.7 million compared to $35.3 million for the first six months of 2013. The Company’s results for the first six months of 2014 included $4.7 million of tax-exempt bargain purchase gain from the acquisition of Bancshares. The Company’s results for the second quarter of 2014 and for the second quarter and first six months of 2013 included no bargain purchase gain.

Service charges on deposit accounts increased 30.2% to $6.6 million for the second quarter of 2014 compared to $5.1 million for the second quarter of 2013. Service charges on deposit accounts increased 25.0% to $12.2 million for the first six months of 2014 compared to $9.8 million for the same period in 2013. The increase in service charges on deposit accounts was primarily a result of growth in the number of transaction accounts and the addition of deposit customers from the Company’s First National Bank, Bancshares and Summit acquisitions.

Mortgage lending income decreased 31.5% to $1.1 million for the second quarter of 2014 compared to $1.6 million for the second quarter of 2013. Mortgage lending income decreased 38.5% to $2.1 million for the first six months of 2014 compared to $3.4 million for the same period in 2013. The volume of originations of mortgage loans available for sale decreased 16.6% to $51.4 million for the second quarter of 2014 compared to $61.6 million for the second quarter of 2013. The volume of originations of mortgage loans available for sale decreased 25.8% to $90.1 million for the first six months of 2014 compared to $121.5 million for the first six months of 2013.

Trust income was $1.4 million in the second quarter of 2014, an increase of 57.7% from $0.9 million for the second quarter of 2013. Trust income was $2.7 million for the first six months of 2014, an increase of 53.4% from $1.7 million for the same period in 2013. The increase in trust income was primarily due to new trust customers added as a result of the First National Bank acquisition.

The Company recognized $0.7 million of amortization expense of the FDIC loss share receivable, including amortization of the FDIC clawback payable, during the second quarter of 2014 compared to accretion income of $2.5 million during the second quarter of 2013. The Company recognized $0.05 million of amortization expense of the FDIC loss share receivables, including amortization of the FDIC clawback payable, during the first six months of 2014 compared to accretion income of $4.9 million during the first six months of 2013. The decrease in income from the accretion of the FDIC loss share receivable for the second quarter and first six months of 2014 compared to the same periods in 2013 was due to both a decrease in the balance of the FDIC loss share receivable and upward revisions of projected cash flows of certain loans whose performance is exceeding management’s expectations established in conjunction with the determination of the Day 1 Fair Values, resulting in reduced accretion and/or increased amortization of the related FDIC loss share receivable over the remaining term of the loan or the loss share agreement, whichever is shorter.

Other income from loss share and purchased non-covered loans was $3.6 million in the second quarter of 2014 compared to $3.7 million in the second quarter of 2013 and $6.9 million in the first six months of 2014 compared to $5.8 million in the first six months of 2013.

Net gains on sales of other assets were $1.4 million in the second quarter of 2014 compared to $3.1 million in the second quarter of 2013. Net gains on sales of other assets were $2.4 million in the first six months of 2014 compared to $5.1 million in the first six months of 2013.


	Three Months Ended June 30,					Six Months Ended June 30,
	2014			2013		2014			2013
	(Dollars in thousands)
Service charges on deposit accounts	$	6,605		$	5,074	$	12,244		$	9,796
Mortgage lending income		1,126			1,643		2,080			3,384
Trust income		1,364			865		2,681			1,748
BOLI income		1,278			1,104		2,408			2,186
Accretion (amortization) of FDIC loss share receivable, net of amortization of FDIC clawback payable		(741	)		2,481		(49	)		4,873
Other income from loss share and purchased non-covered loans, net		3,629			3,689		6,940			5,844
Gains on investment securities		18			—		23			156
Gains on sales of other assets		1,448			3,110		2,422			5,084
Gain on merger and acquisition transaction		—			—		4,667			—
Other		2,661			1,021		4,333			2,273

Total non-interest income	$	17,388		$	18,987	$	37,749		$	35,344

The Company’s non-interest expense consists of salaries and employee benefits, net occupancy and equipment and other operating expenses. Non-interest expense increased ~~28.1%~~26.7% to ~~$37.5~~$37.9 million for the ~~first~~second quarter of 2014 compared to ~~$29.2~~$29.9 million for the second quarter of 2013. Non-interest expense increased 27.4% to $75.3 million for the first ~~quarter~~six months of 2014 compared to $59.1 million for the first six months of 2013. During the second quarter of 2014, the Company incurred pre-tax acquisition-related non-interest expense of approximately $0.8 million. During the first ~~quarter~~six months of 2014, the Company incurred pre-tax non-interest expense of $5.0 million due to the termination of existing core banking software contracts and approximately ~~$0.7~~$1.5 million of acquisition-related ~~costs in connection with the Company’s acquisition of Bancshares and its pending acquisition of Summit Bancorp, Inc. (“Summit”).~~expense. There were no software termination charges or acquisition-related costs in the second quarter or first ~~quarter~~six months of 2013.

Salaries and employee benefits, the Company’s largest components of non-interest expense, increased ~~12.7%~~23.1% to ~~$17.7~~$18.8 million in the ~~first~~second quarter of 2014 compared to ~~$15.7~~$15.3 million in the second quarter of 2013. Salaries and employee benefits increased 17.8% to $36.5 million for the first ~~quarter~~six months of 2014 compared to $31.0 million for the first six months of 2013. The Company had ~~1,306~~1,586 full-time equivalent employees at ~~March 31,~~June 30, 2014, a ~~17.7%~~43.7% increase compared to ~~1,110~~1,104 full-time equivalent employees at ~~March 31,~~June 30, 2013.

Net occupancy and equipment expense for the ~~first~~second quarter of 2014 increased ~~11.7%~~30.6% to ~~$5.0~~$5.7 million compared to ~~$4.5~~$4.4 million for the second quarter of 2013. Net occupancy and equipment expenses increased 21.0% to $10.8 million for the first ~~quarter~~six months of 2014 compared to $8.9 million for the first six months of 2013. At ~~March 31,~~June 30, 2014 the Company had ~~141~~164 offices, a ~~20.5%~~40.2% increase compared to 117 offices at ~~March 31,~~June 30, 2013.

The Company’s efficiency ratio (non-interest expense divided by the sum of net interest income – FTE and non-interest income) was ~~49.8%~~44.6% for the second quarter and 47.1% for the first ~~quarter~~six months of 2014 compared to ~~46.8%~~46.5% for the second quarter and 46.5% for the first ~~quarter~~six months of 2013.


	Three Months Ended
	March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013		2014		2013
	(Dollars in thousands)				(Dollars in thousands)
Salaries and employee benefits	$	17,689	$	15,694	$	18,831	$	15,294	$	36,520	$	30,989
Net occupancy and equipment		5,044		4,514		5,707		4,370		10,751		8,884
Other operating expenses:
Postage and supplies		770		809		852		811		1,623		1,620
Advertising and public relations		400		354		636		511		1,036		865
Telephone and data lines		1,001		823
Telecommunication services						1,191		867		2,207		1,704
Professional and outside services		2,128		1,186		2,353		1,566		4,526		2,752
Software expense		6,024		1,396
Software and data processing						1,662		1,372		2,799		2,856
Travel and meals		556		645		629		740		1,169		1,371
FDIC insurance		503		420		555		435		1,105		855
FDIC and state assessments		260		172		218		175		431		346
ATM expense		210		218		307		223		516		440
Loan collection and repossession expense		460		766		1,528		907		1,987		1,673
Writedowns of foreclosed and other assets		64		121		798		69		877		191
Amortization of intangibles		813		568		1,119		568		1,932		1,137
Other		1,532		1,545		1,492		1,993		7,854		3,449

Total non-interest expense	$	37,454	$	29,231	$	37,878	$	29,901	$	75,333	$	59,132

The provision for income taxes was ~~$8.7~~$12.3 million for the second quarter and $21.0 million for the first ~~quarter~~six months of 2014 compared to ~~$8.5~~$9.5 million for the second quarter and $18.0 million for the first ~~quarter~~six months of 2013. The effective income tax rate was ~~25.7%~~31.6% for the second quarter and 28.8% for the first ~~quarter~~six months of 2014 compared to ~~29.9%~~31.8% for the second quarter and 30.9% for the first ~~quarter~~six months of 2013. The decrease in the effective tax rate for the first ~~quarter~~six months of 2014 compared to the ~~first quarter of~~same period in 2013 was due primarily to the tax-exempt bargain purchase gain of $4.7 million as a result of the Bancshares acquisition. The effective tax rates were also affected by various other factors including non-taxable income and non-deductible expenses.

At ~~March 31,~~June 30, 2014 the Company’s non-purchased loan and lease portfolio ~~excluding purchased non-covered loans and covered loans,~~ was ~~$2.78~~$3.17 billion, compared to $2.63 billion at December 31, 2013 and ~~$2.16~~$2.44 billion at ~~March 31,~~June 30, 2013. Real estate loans, the Company’s largest category of loans, consist of all loans secured by real estate as evidenced by mortgages or other liens, including all loans made to finance the development of real property construction projects, provided such loans are secured by real estate. Total real estate loans were ~~$2.43~~$2.79 billion at ~~March 31,~~June 30, 2014, compared to $2.33 billion at December 31, 2013 and ~~$1.90~~$2.15 billion at ~~March 31,~~June 30, 2013. The amount and type of non-purchased loans and leases outstanding ~~excluding purchased non-covered loans and covered loans,~~ as of the dates indicated, and their respective percentage of the total non-purchased loan and lease portfolio are reflected in the following table.


	March 31,								December 31,				June 30,								December 31, 2013
	2014				2013				2013				2014				2013				December 31, 2013
	(Dollars in thousands)												(Dollars in thousands)
Real estate:
Residential 1-4 family	$	252,788	9.1	%	$	256,628	11.9	%	$	249,556	9.5	%	$	266,497	8.4	%	$	261,568	10.7	%	$	249,556	9.5	%
Non-farm/non-residential		1,144,483	41.2			823,691	38.2			1,104,114	41.9			1,290,174	40.7			1,017,207	41.6			1,104,114	41.9
Construction/land development		796,126	28.7			623,302	28.9			722,557	27.4			1,049,158	33.1			680,829	27.9			722,557	27.4
Agricultural		43,908	1.6			49,460	2.3			45,196	1.7			45,541	1.4			48,879	2.0			45,196	1.7
Multifamily residential		195,332	7.0			142,714	6.6			208,337	8.0			136,953	4.3			145,683	6.0			208,337	8.0

Total real estate		2,432,637	87.6			1,895,795	87.9			2,329,760	88.5			2,788,323	87.9			2,154,166	88.2			2,329,760	88.5
Commercial and industrial		137,664	5.0			127,742	5.9			124,068	4.7			166,884	5.3			139,073	5.7			124,068	4.7
Consumer		23,769	0.9			28,551	1.3			26,182	1.0			28,674	0.9			28,289	1.2			26,182	1.0
Direct financing leases		92,856	3.3			71,420	3.3			86,321	3.3			98,768	3.1			76,953	3.1			86,321	3.3
Other		91,577	3.2			34,263	1.6			66,234	2.5			88,936	2.8			44,861	1.8			66,234	2.5

Total loans and leases	$	2,778,503	100.0	%	$	2,157,771	100.0	%	$	2,632,565	100.0	%	$	3,171,585	100.0	%	$	2,443,342	100.0	%	$	2,632,565	100.0	%

The amount and percentage of the Company’s non-purchased loan and lease portfolio, ~~excluding purchased non-covered loans and covered loans,~~ by office of origination, as of the dates indicated, are reflected in the following table. This table shows the relative productivity of the Company’s offices in each state, but does not necessarily reflect the location of the borrower or collateral.


Loans and Leases	March 31,								December 31,
Attributable to Offices In	2014				2013				2013
Non-Purchased Loans and Leases Attributable to Offices In													June 30,								December 31, 2013
Non-Purchased Loans and Leases Attributable to Offices In													2014				2013				December 31, 2013
	(Dollars in thousands)												(Dollars in thousands)
Texas	$	1,319,150	47.5	%	$	1,039,871	48.2	%	$	1,302,061	49.5	%	$	1,545,366	48.7	%	$	1,177,330	48.2	%	$	1,302,061	49.5	%
Arkansas		1,072,391	38.6			970,145	44.9			1,069,200	40.6			1,072,904	33.8			1,068,206	43.7			1,069,200	40.6
New York														209,388	6.6			—	—			30,837	1.2
North Carolina		178,365	6.4			101,038	4.7			157,938	6.0			200,413	6.3			130,304	5.3			157,938	6.0
Georgia		102,126	3.7			40,146	1.9			57,570	2.1			112,940	3.6			55,438	2.3			57,570	2.1
New York		90,812	3.3			—	—			30,837	1.2
Alabama		13,624	0.4			5,959	0.3			13,073	0.5			14,795	0.5			11,260	0.5			13,073	0.5
California														8,813	0.3			—	—			—	—
South Carolina		1,816	0.1			393	—			1,703	0.1			5,158	0.1			582	0.0			1,703	0.1
Florida		219	—			219	—			183	—			1,808	0.1			222	0.0			183	0.0

Total	$	2,778,503	100.0	%	$	2,157,771	100.0	%	$	2,632,565	100.0	%	$	3,171,585	100	%	$	2,443,342	100.0	%	$	2,632,565	100.0	%

The amount and type of the Company’s non-purchased real estate loans ~~excluding covered loans and purchased non-covered loans,~~ at ~~March 31,~~June 30, 2014, 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 and MSAs is separately presented when aggregate non-purchased real estate ~~loans, excluding covered loans and purchased non-covered~~ loans in that state or MSA exceed $10.0 million.


	Residential 1-4 Family		Non- Farm/Non- Residential		Construction /Land Development		Agricultural		Multifamily Residential		Total		Residential 1-4 Family		Non- Farm/Non- Residential		Construction /Land Development		Agricultural		Multifamily Residential		Total
	(Dollars in thousands)												(Dollars in thousands)
Arkansas:
Little Rock–North Little Rock–Conway, AR MSA	$	95,841	$	201,746	$	114,852	$	7,804	$	13,151	$	433,394	$	100,190	$	204,882	$	125,834	$	8,412	$	14,171	$	453,489
Northern Arkansas⁽¹⁾		41,840		15,767		5,388		15,041		893		78,929		40,602		15,373		4,993		14,468		1,284		76,720
Fort Smith, AR–OK MSA		28,090		25,842		6,091		3,350		8,015		71,388		27,984		24,629		6,321		3,482		8,404		70,820
Western Arkansas⁽²⁾		21,745		29,731		4,834		6,427		1,127		63,864		21,461		29,221		4,820		6,572		1,109		63,183
Fayetteville–Springdale–Rogers, AR–MO MSA		9,132		21,703		16,269		5,044		3,366		55,514		9,290		20,961		15,715		4,728		3,324		54,018
Hot Springs, AR MSA		4,658		22,126		6,938		—		907		34,629		8,557		26,573		6,980		80		756		42,946
All other Arkansas⁽³⁾		5,636		12,125		8,296		2,973		1,646		30,676		6,943		9,955		2,396		4,234		1,691		25,219

Total Arkansas		206,942		329,040		162,668		40,639		29,105		768,394		215,027		331,594		167,059		41,976		30,739		786,395


Texas:
Dallas–Fort Worth–Arlington, TX MSA		16,456		139,662		167,171		—		13,447		336,736		16,657		107,020		221,162		—		6,558		351,397
Houston–The Woodlands–Sugarland, TX MSA		125		29,500		79,359		—		8,345		117,329
San Antonio–New Braunfels, TX MSA		—		2,663		13,789		—		—		16,452
Houston–The Woodlands–Sugar Land, TX MSA														994		26,521		93,385		—		—		120,900
Austin–Round Rock, TX MSA		—		—		41,371		—		—		41,371		157		—		49,989		—		—		50,146
Midland, TX MSA														—		7,878		11,196		—		—		19,074
Texarkana, TX–AR MSA		7,880		8,713		1,004		597		984		19,178		8,273		7,902		890		526		978		18,569
College Station–Bryan, TX MSA		—		—		—		—		17,893		17,893		—		—		—		—		17,775		17,775
Midland, TX MSA		—		7,924		9,553		—		—		17,477
Beaumont–Port Arthur, TX MSA		—		—		—		—		15,730		15,730		—		—		—		—		15,616		15,616
San Antonio–New Braunfels, TX MSA														1,049		100		13,436		—		—		14,585
All other Texas⁽³⁾		1,068		17,823		152		132		4,156		23,331		808		12,513		188		3		232		13,744

Total Texas		25,529		206,285		312,399		729		60,555		605,497		27,938		161,934		390,246		529		41,159		621,806

North Carolina/South Carolina:
Charlotte–Gastonia–Concord, NC–SC MSA		4,532		55,785		30,395		—		1,534		92,246
Wilmington, NC MSA		659		15,769		2,218		—		—		18,646
Raleigh-Cary, NC MSA		—		—		12,240		—		—		12,240
Charleston-North Charleston, SC MSA		—		3,743		724		—		5,863		10,330
All other No. Carolina⁽³⁾		4,410		14,885		39,858		492		—		59,645
All other So. Carolina⁽³⁾		1,392		2,755		14,808		—		—		18,955

Total N. Carolina/S. Carolina		10,993		92,937		100,243		492		7,397		212,062

California:
Los Angeles–Long Beach–Santa Ana, CA MSA		—		100,706		1		—		—		100,707
San Francisco–Oakland–Fremont, CA MSA		—		59,010		—		—		—		59,010
Los Angeles–Long Beach–Anaheim, CA MSA														—		162,449		9,086		—		—		171,535
San Francisco–Oakland–Hayward, CA MSA														—		58,999		—		—		—		58,999
Sacramento–Roseville–Arden–Arcade, CA MSA		—		—		42,113		—		—		42,113		—		—		46,586		—		—		46,586
All other California⁽³⁾		—		8,976		472		—		—		9,448		—		9,123		7,759		—		—		16,882

Total California		—		168,692		42,586		—		—		211,278		—		230,571		63,431		—		—		294,002


North Carolina/South Carolina:
Charlotte–Concord–Gastonia, NC–SC MSA														5,345		58,486		32,791		—		1,507		98,129
Wilmington, NC MSA														1,559		17,088		4,214		463		—		23,324
Raleigh, NC MSA														—		—		17,472		—		—		17,472
Carolina Foothills⁽⁴⁾														5,313		4,131		2,981		28		—		12,453
Charleston–North Charleston, SC MSA														—		3,719		714		—		5,813		10,246
All other N. Carolina⁽³⁾														487		9,404		36,110		—		—		46,001
All other S. Carolina⁽³⁾														1,565		7,380		28,355		—		—		37,300

Total N. Carolina/S. Carolina														14,269		100,208		122,637		491		7,320		244,925

New York–Newark–Jersey City, NY–NJ–PA MSA														—		102,142		109,125		—		—		211,267


	Residential 1-4 Family		Non- Farm/Non- Residential		Construction /Land Development		Agricultural		Multifamily Residential		Total		Residential 1-4 Family		Non- Farm/Non- Residential		Construction /Land Development		Agricultural		Multifamily Residential		Total
	(Dollars in thousands)												(Dollars in thousands)
New York–Northern New Jersey– Long Island, NY–NJ–PA MSA		—		34,906		57,603		—		—		92,509

Georgia:
Atlanta–Sandy Springs–Roswell, GA MSA		2,625		41,538		26,298		186		—		70,647		2,566		99,091		34,046		294		—		135,997
All other Georgia⁽³⁾		2,040		16,579		1,781		790		217		21,407		1,689		16,697		2,421		1,250		212		22,269

Total Georgia		4,665		58,117		28,079		976		217		92,054		4,255		115,788		36,467		1,544		212		158,266

Virginia/West Virginia:
Virginia Beach-Norfolk-Newport News, VA-NC MSA		—		41,507		—		—		—		41,507
Washington–Arlington– Alexandria, DC–VA–MD–WV MSA		—		—		30,058		—		—		30,058
All other West Virginia⁽³⁾		—		10,221		—		—		—		10,221

Total Virginia/West Virginia		—		51,728		30,058		—		—		81,786

Florida:
Miami–Fort Lauderdale– Pompano Beach, FL MSA		—		—		5,767		—		41,375		47,142
Miami–Fort Lauderdale–West Palm Beach, FL MSA														—		23,609		53,479		—		—		77,088
All other Florida⁽³⁾		1,250		7,595		6,663		691		—		16,199		1,344		19,458		6,941		693		473		28,909

Total Florida		1,250		7,595		12,430		691		41,375		63,341		1,344		43,067		60,420		693		473		105,997

Phoenix–Mesa–Glendale, AZ MSA		—		60,477		—		—		—		60,477
Missouri:
St. Louis, MO MSA		—		—		—		—		22,974		22,974

Phoenix–Mesa–Scottsdale, AZ MSA														—		61,319		19		—		—		61,338

Missouri/Kansas:
St. Louis, MO–IL MSA														—		—		115		—		22,941		23,056
Kansas City, MO–KS MSA		118		147		18,762		42		—		19,069		116		91		19,922		—		—		20,129
All other Missouri⁽³⁾		623		2,782		174		266		—		3,845		495		1,085		173		256		—		2,009
All other Kansas⁽³⁾														—		—		1,847		—		—		1,847

Total Missouri		741		2,929		18,936		308		22,974		45,888
Total Missouri/Kansas														611		1,176		22,057		256		22,941		47,041


Tennessee:
Nashville-Davidson-Murfreesboro-Franklin, TN MSA		—		14,301		—		—		—		14,301
Nashville–Davidson–Murfreesboro–Franklin, TN MSA														316		14,283		7,544		—		—		22,143
Memphis, TN–MS–AR MSA		101		19,203		—		—		—		19,304		186		19,270		—		—		—		19,456
All other Tennessee⁽³⁾		—		—		—		—		—		—

Total Tennessee		101		33,504		—		—		—		33,605		502		33,553		7,544		—		—		41,599


Virginia:
Washington–Arlington–Alexandria, DC–VA–MD–WV MSA														—		—		30,207		—		—		30,207
All other Virginia⁽³⁾														—		—		1,169		—		—		1,169

Total Virginia														—		—		31,376		—		—		31,376


Seattle–Tacoma–Bellevue, WA MSA		—		—		—		—		29,935		29,935		—		—		1		—		30,074		30,075

Oklahoma:
Lawton, OK MSA		—		—		22,573		—		—		22,573		—		—		22,891		—		—		22,891
All other Oklahoma⁽³⁾		128		5,389		796		—		—		6,313		125		4,150		2,870		—		—		7,145

Total Oklahoma		128		5,389		23,369		—		—		28,886		125		4,150		25,761		—		—		30,036

Boston–Cambridge–Quincy, MA MSA		—		21,441		—		—		—		21,441

Boston–Cambridge–Newton, MA–NH MSA														—		21,330		—		—		—		21,330

Colorado:
Denver–Aurora–Lakewood, CO MSA														16		11,215		1		—		—		11,232
All other Colorado⁽³⁾														—		6,365		—		—		—		6,365

Total Colorado														16		17,580		1		—		—		17,597


Baltimore–Columbia–Towson, MD MSA		—		17,184		—		—		—		17,184		—		17,341		—		—		—		17,341

The amount and type of non-purchased non-farm/non-residential ~~loans, excluding purchased non-covered loans and covered~~ loans, as of the dates indicated, and their respective percentage of the total non-purchased non-farm/non-residential loan portfolio are reflected in the following table.


	March 31,								December 31,				June 30,								December 31, 2013
	2014				2013				2013				2014				2013				December 31, 2013
	(Dollars in thousands)												(Dollars in thousands)
Retail, including shopping centers and strip centers	$	264,651	23.1	%	$	327,912	39.8	%	$	290,092	26.3	%	$	271,308	21.0	%	$	326,169	32.1	%	$	290,092	26.3	%
Churches and schools		47,546	4.1			41,271	5.0			44,740	4.1			68,672	5.3			45,339	4.5			44,740	4.1
Office, including medical offices		278,058	24.3			128,670	15.6			263,986	23.9			361,471	28.0			190,563	18.7			263,986	23.9
Office warehouse, warehouse and mini-storage		110,757	9.7			37,338	4.5			113,317	10.3			115,927	9.0			40,894	4.0			113,317	10.3
Gasoline stations and convenience stores		10,660	0.9			8,653	1.1			8,150	0.7			11,948	0.9			7,657	0.8			8,150	0.7
Hotels and motels		234,793	20.5			96,539	11.7			192,527	17.4			232,771	18.0			214,372	21.1			192,527	17.4
Restaurants and bars		31,932	2.8			35,766	4.3			33,178	3.0			32,926	2.6			36,853	3.6			33,178	3.0
Manufacturing and industrial facilities		41,948	3.7			38,043	4.6			37,288	3.4			40,999	3.2			38,436	3.8			37,288	3.4
Nursing homes and assisted living centers		42,120	3.7			24,468	3.0			41,317	3.7			42,607	3.3			29,491	2.9			41,317	3.7
Hospitals, surgery centers and other medical		48,303	4.2			49,304	6.0			49,112	4.4			47,491	3.7			51,969	5.1			49,112	4.4
Golf courses, entertainment and recreational facilities		6,503	0.6			9,842	1.2			5,261	0.5			6,320	0.5			10,134	1.0			5,261	0.5
Other non-farm/non residential		27,212	2.4			25,885	3.2			25,146	2.3			57,734	4.5			25,330	2.4			25,146	2.3

Total	$	1,144,483	100.0	%	$	823,691	100.0	%	$	1,104,114	100.0	%	$	1,290,174	100.0	%	$	1,017,207	100.0	%	$	1,104,114	100.0	%

The amount and type of non-purchased construction/land development ~~loans, excluding purchased non-covered loans and covered~~ loans, as of the dates indicated, and their respective percentage of the total non-purchased construction/land development loan portfolio are reflected in the following table.


	March 31,								December 31,				June 30,								December 31, 2013
	2014				2013				2013				2014				2013				December 31, 2013
	(Dollars in thousands)												(Dollars in thousands)
Unimproved land	$	134,733	16.9	%	$	89,716	14.4	%	$	105,739	14.6	%	$	165,392	15.8	%	$	98,246	14.4	%	$	105,739	14.6	%
Land development and lots:
1-4 family residential and multifamily		174,008	21.9			184,733	29.6			176,893	24.5			240,431	22.9			190,691	28.0			176,893	24.5
Non-residential		72,877	9.1			70,803	11.4			68,376	9.5			81,767	7.8			71,842	10.6			68,376	9.5
Construction:
1-4 family residential:
Owner occupied		13,340	1.7			14,585	2.4			12,870	1.8			17,118	1.6			17,680	2.6			12,870	1.8
Non-owner occupied:
Pre-sold		7,947	1.0			6,880	1.1			8,206	1.1			11,682	1.1			7,281	1.1			8,206	1.1
Speculative		53,068	6.7			33,722	5.4			50,030	6.9			59,592	5.7			36,824	5.4			50,030	6.9
Multifamily		201,571	25.3			109,884	17.6			187,409	26.0			287,082	27.4			145,947	21.4			187,409	26.0
Industrial, commercial and other		138,582	17.4			112,979	18.1			113,034	15.6			186,094	17.7			112,318	16.5			113,034	15.6

Total	$	796,126	100.0	%	$	623,302	100.0	%	$	722,557	100.0	%	$	1,049,158	100.0	%	$	680,829	100.0	%	$	722,557	100.0	%

Many of the Company’s non-purchased 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 material loan advances. This ensures that the borrower’s cash equity required to complete the project will 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 borrower’s cash equity in an amount 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. The Company advanced construction period interest on construction and development loans totaling ~~$2.5~~$4.1 million in the ~~first~~second quarter of 2014. 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 non-purchased construction and development loans which provide for the use of interest reserves at ~~March 31,~~June 30, 2014 was approximately ~~$1.57~~$2.1 billion, of which ~~$579 million~~$0.8 billion was outstanding at ~~March 31,~~June 30, 2014 and ~~$988 million~~$1.3 billion remained to be advanced. The weighted average loan-to-cost on such loans, assuming such loans are ultimately fully advanced, will be approximately ~~56%~~53%, which means that the weighted average cash equity contributed on such loans, assuming such loans are ultimately fully advanced, will be approximately ~~44%~~47%. 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 ~~47%~~45%.

The following table reflects non-purchased loans and leases ~~excluding purchased non-covered loans and covered loans,~~ as of ~~March 31,~~June 30, 2014 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 non-purchased loans and leases either by adjusting rates on existing loans and leases or reinvesting principal cash flow in new loans and leases.


				Over 1			Over 2
	1 Year			Through			Through			Over
	or Less			2 Years			3 Years			3 Years			Total			1 Year or Less			Over 1 Through 2 Years			Over 2 Through 3 Years			Over 3 Years			Total
	(Dollars in thousands)															(Dollars in thousands)
Fixed rate	$	290,462		$	167,662		$	162,591		$	365,547		$	986,262		$	274,813		$	168,702		$	185,197		$	368,977		$	997,689
Floating rate (not at a floor or ceiling rate)		100,646			96			122			—			100,864			146,682			136			60			245			147,123
Floating rate (at floor rate)⁽¹⁾		1,681,831			422			3,220			5,904			1,691,377			2,022,214			471			2,289			1,799			2,026,773
Floating rate (at ceiling rate)		—			—			—			—			—			—			—			—			—			—

Total	$	2,072,939		$	168,180		$	165,933		$	371,451		$	2,778,503		$	2,443,709		$	169,309		$	187,546		$	371,021		$	3,171,585


Percentage of total		74.6	%		6.0	%		6.0	%		13.4	%		100.0	%		77.1	%		5.3	%		5.9	%		11.7	%		100.0	%
Cumulative percentage of total		74.6			80.6			86.6			100.0						77.1			82.4			88.3			100.0

The amount and type of purchased non-covered loans outstanding, as of the dates indicated, are reflected in the following table.


	March 31,				December 31,		June 30,				December 31,
	2014		2013		2013		2014		2013		2013
	(Dollars in thousands)						(Dollars in thousands)
Real estate:
Residential 1-4 family	$	138,652	$	18,734	$	131,085	$	296,306	$	16,916	$	131,085
Non-farm/non-residential		216,328		4,391		152,948		488,433		2,213		152,948
Construction/land development		54,513		1,925		25,633		104,120		1,832		25,633
Agricultural		10,098		2,968		9,518		49,780		2,799		9,518
Multifamily residential		18,265		—		17,210		36,105		—		17,210

Total real estate		437,856		28,018		336,394		974,744		23,760		336,394
Commercial and industrial		38,381		3,991		24,934		105,976		2,862		24,934
Consumer		6,609		3,491		6,855		25,790		3,890		6,855
Other		5,687		2,571		4,540		21,179		515		4,540

Total	$	488,533	$	38,071	$	372,723	$	1,127,689	$	31,027	$	372,723

The amount and percentage of the Company’s purchased non-covered loans, by state, as of the dates indicated, are reflected in the following ~~table.~~table, but does not necessarily reflect the location of the borrower or collateral.


	March 31,										December 31,					June 30,										December 31,
Purchased Non-Covered Loans	2014					2013					2013
Attributable to Offices In	Amount		%			Amount		%			Amount		%
Purchased Non-Covered Loans Attributable to Offices In																2014					2013					2013
Purchased Non-Covered Loans Attributable to Offices In																Amount		%			Amount		%			Amount		%
	(Dollars in thousands)															(Dollars in thousands)
Arkansas																$	689,831		61.2	%	$	—		0.0	%	$	—		0.0	%
North Carolina	$	321,617		65.8	%	$	103		0.3	%	$	348,651		93.5	%		290,833		25.8			93		0.3			348,651		93.5
Texas		146,094		29.9			—		—			—		—			128,399		11.4			—		0.0			—		0.0
Alabama		20,291		4.2			36,762		96.6			23,431		6.3			18,143		1.6			30,050		96.9			23,431		6.3
Georgia		434		0.1			1,032		2.7			537		0.1			388		0.0			758		2.4			537		0.1
Florida		97		—			159		0.4			104		0.1			95		0.0			126		0.4			104		0.1
South Carolina		—		—			15		—			—		—

Total	$	488,533		100.0	%	$	38,071		100.0	%	$	372,723		100.0	%	$	1,127,689		100.0	%	$	31,027		100.0	%	$	372,723		100.0	%

The following table presents the amount of unpaid principal balance, the valuation discount and the carrying value of purchased non-covered loans as of the dates ~~indicated are reflected in the following table.~~indicated.


	March 31,						December 31,			June 30,						December 31,
	2014			2013			2013			2014			2013			2013
	(Dollars in thousands)									(Dollars in thousands)
Loans without evidence of credit deterioration at date of purchase:
Unpaid principal balance	$	442,955		$	32,659		$	344,065		$	1,079,330		$	25,955		$	344,065
Valuation discount		(12,041	)		(701	)		(11,972	)		(24,676	)		(566	)		(11,972	)

Carrying value		430,914			31,958			332,093			1,054,654			25,389			332,093

Loans with evidence of credit deterioration at date of purchase:
Unpaid principal balance		94,645			11,211			70,857	��		114,600			10,119			70,857
Valuation discount		(37,026	)		(5,098	)		(30,227	)		(41,565	)		(4,481	)		(30,227	)

Carrying value		57,619			6,113			40,630			73,035			5,638			40,630

Total carrying value	$	488,533		$	38,071		$	372,723		$	1,127,689		$	31,027		$	372,723

The Company completed its acquisition of Bancshares on March 5, 2014 and its acquisition of Summit on May 16, 2014. On the date of ~~the~~each acquisition, ~~Bancshares’~~all outstanding purchased loans were categorized into loans without evidence of credit deterioration and loans with evidence of credit deterioration. The following table presents, by risk rating, the unpaid principal balance, fair value adjustment, Day 1 Fair Value and the weighted-average fair value adjustment applied to the purchased non-covered loans without evidence of credit deterioration in the ~~Bancshares acquisition.~~Company’s 2014 acquisitions.


	Unpaid Principal Balance		Fair Value Adjustment			Day 1 Fair Value		Weighted Average Fair Value Adjustment (in bps)		Unpaid Principal Balance		Fair Value Adjustment			Day 1 Fair Value		Weighted Average Fair Value Adjustment (in bps)
	(Dollars in thousands)									(Dollars in thousands)
Bancshares:
FV 33	$	35,541	$	(375	)	$	35,166		106	$	35,541	$	(375	)	$	35,166		106
FV 44		72,376		(852	)		71,524		118		72,376		(852	)		71,524		118
FV 55		29,210		(584	)		28,626		200		29,210		(584	)		28,626		200
FV 36		908		(222	)		686		2,445		908		(222	)		686		2,445

Total	$	138,035	$	(2,033	)	$	136,002		147	$	138,035	$	(2,033	)	$	136,002		147


Summit:
FV 33										$	304,997	$	(7,312	)	$	297,685		240
FV 44											269,630		(5,202	)		264,428		193
FV 55											40,608		(1,091	)		39,517		269
FV 36											96,802		(2,595	)		94,207		268

Total										$	712,037	$	(16,200	)	$	695,837		228

The following grades are used for purchased non-covered loans without evidence of credit ~~deterioration.~~deterioration at date of acquisition.

FV 33 – Loans in this category are considered to be satisfactory with minimal credit risk and are generally considered collectible.

FV 44 – Loans in this category are considered to be marginally satisfactory with minimal to moderate credit risk and are generally considered collectible.

FV 55 – Loans in this category exhibit weakness and are considered to have elevated credit risk and elevated risk of repayment.

FV 36 – Loans in this category were not individually reviewed at the date of purchase and are assumed to have characteristics similar to the characteristics of the aggregate acquired portfolio.

The following table is a summary of the loans acquired in the Bancshares ~~acquisition~~and Summit acquisitions with evidence of credit deterioration at the date of acquisition.


	March 5, 2014			Bancshares as of March 5, 2014			Summit as of May 16, 2014
	(Dollars in thousands)			(Dollars in thousands)
Contractually required principal and interest	$	30,453		$	30,453		$	31,525
Nonaccretable difference		(8,054	)		(8,054	)		(7,157	)

Cash flows expected to be collected		22,399			22,399			24,368
Accretable difference		(3,226	)		(3,226	)		(3,506	)

Day 1 Fair Value	$	19,173		$	19,173		$	20,862

A summary of changes in the accretable difference on purchased non-covered loans with evidence of credit deterioration at the date of acquisition is shown below for the periods indicated.


	Three Months Ended March 31,						Six Months Ended June 30,
	2014			2013			2014			2013
	(Dollars in thousands)						(Dollars in thousands)
Accretable difference at January 1	$	5,983		$	969		$	5,983		$	969
Accretable difference acquired		3,226			—			6,732			—
Accretion		(847	)		(131	)		(2,115	)		(257	)
Other, net		(33	)		8			(496	)		40

Accretable difference at March 31	$	8,329		$	846
Accretable difference at June 30							$	10,104		$	752

The following table presents purchased non-covered loans grouped by remaining maturities at ~~March 31,~~June 30, 2014 by type and by fixed or floating interest rates. This table is based on contractual maturities and does not reflect amortizations, projected paydowns, the earliest repricing for floating rate loans, accretion or management’s estimate of projected cash flows. Many loans have principal paydowns scheduled in periods prior to the period in which they mature, and many variable rate loans are subject to repricing in periods prior to the period in which they mature. Additionally, because income on purchased non-covered loans with evidence of credit deterioration on the date of acquisition is recognized by accretion of the discount of estimated cash flows, such loans are not considered to be floating or adjustable rate loans and are reported below as fixed rate loans.


			Over 1
	1 Year		Through		Over
	or Less		5 Years		5 Years		Total		1 Year or Less		Over 1 Through 5 Years		Over 5 Years		Total
	(Dollars in thousands)								(Dollars in thousands)
Real estate:
Residential 1-4 family	$	20,641	$	49,587	$	68,424	$	138,652	$	45,096	$	161,787	$	89,423	$	296,306
Non-farm/non-residential		42,001		119,476		54,851		216,328		86,367		319,763		82,303		488,433
Construction/land development		21,819		27,349		5,345		54,513		54,425		43,204		6,491		104,120
Agricultural		1,414		6,982		1,702		10,098		7,553		34,974		7,253		49,780
Multifamily residential		5,896		11,233		1,136		18,265		7,552		26,651		1,902		36,105

Total real estate		91,771		214,627		131,458		437,856		200,993		586,379		187,372		974,744
Commercial and industrial		16,533		18,192		3,656		38,381		29,920		70,486		5,570		105,976
Consumer		2,901		3,526		182		6,609		7,018		17,948		824		25,790
Other		1,499		2,025		2,163		5,687		6,756		9,563		4,860		21,179

Total	$	112,704	$	238,370	$	137,459	$	488,533	$	244,687	$	684,376	$	198,626	$	1,127,689


Fixed rate	$	60,603	$	162,466	$	87,829	$	310,898	$	160,394	$	503,202	$	128,138	$	791,734
Floating rate		52,101		75,904		49,630		177,635		84,293		181,174		70,488		335,955

Total	$	112,704	$	238,370	$	137,459	$	488,533	$	244,687	$	684,376	$	198,626	$	1,127,689

During 2010 and 2011, the Company, through the Bank, acquired substantially all of the assets and assumed substantially all of the deposits and certain other liabilities of seven failed financial institutions in FDIC-assisted acquisitions. A summary of each acquisition is as follows:

Loans comprise the majority of the assets acquired in each of these FDIC–assisted acquisitions and, with the exception of Unity, 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 the Unity acquisition, all loans, including consumer loans, are subject to loss share agreement with the FDIC.

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 or (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 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 directors, officers or employees of Unity, Woodlands, Horizon, Chestatee, Oglethorpe, First Choice or Park Avenue.

The covered loans and covered foreclosed assets (collectively “covered 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.

The following is a summary of the covered assets, the FDIC loss share receivable and the FDIC clawback payable as of the dates indicated.


	March 31,				December 31,		June 30,				December 31,
	2014		2013		2013		2014		2013		2013
	(Dollars in thousands)						(Dollars in thousands)
Covered loans	$	304,955	$	544,268	$	351,791	$	276,380	$	480,752	$	351,791
FDIC loss share receivable		57,782		132,699		71,854		50,679		112,716		71,854
Covered foreclosed assets		43,793		51,040		37,960		35,775		46,157		37,960

Total	$	406,530	$	728,007	$	461,605	$	362,834	$	639,625	$	461,605


FDIC clawback payable	$	26,202	$	25,384	$	25,897	$	26,533	$	25,596	$	25,897

The following table presents a summary, by acquisition, of activity within covered loans during the periods indicated.


	Unity			Woodlands			Horizon			Chestatee			Oglethorpe			First Choice			Park Avenue			Total			Unity			Woodlands			Horizon			Chestatee			Oglethorpe			First Choice			Park Avenue			Total
	(Dollars in thousands)																								(Dollars in thousands)
Carrying value at January 1, 2013	$	72,849		$	99,734		$	63,193		$	56,668		$	48,093		$	91,081		$	164,621		$	596,239		$	72,849		$	99,734		$	63,193		$	56,668		$	48,093		$	91,081		$	164,621		$	596,239
Accretion		1,526			1,980			1,237			1,183			1,205			2,025			3,708			12,864			3,009			3,798			2,397			2,260			2,223			3,809			6,848			24,344
Transfers to covered foreclosed assets		(1,317	)		(1,711	)		(1,320	)		(412	)		(950	)		(82	)		(2,244	)		(8,036	)		(1,458	)		(3,019	)		(1,322	)		(961	)		(3,709	)		(638	)		(4,974	)		(16,081	)
Payments received		(3,502	)		(7,354	)		(2,790	)		(6,451	)		(4,303	)		(6,684	)		(17,549	)		(48,633	)		(9,575	)		(16,112	)		(11,199	)		(13,028	)		(7,887	)		(17,098	)		(35,358	)		(110,257	)
Charge-offs		(2,042	)		(954	)		(502	)		(648	)		(206	)		(1,047	)		(2,864	)		(8,263	)		(2,161	)		(1,625	)		(808	)		(1,339	)		(480	)		(2,153	)		(4,891	)		(13,457	)
Other activity, net		58			(27	)		15			(10	)		60			63			(62	)		97			66			43			47			(39	)		78			(140	)		(91	)		(36	)

Carrying value at March 31, 2013	$	67,572		$	91,668		$	59,833		$	50,330		$	43,899		$	85,356		$	145,610		$	544,268
Carrying value at June 30, 2013																									$	62,730		$	82,819		$	52,308		$	43,561		$	38,318		$	74,861		$	126,155		$	480,752


Carrying value at January 1, 2014	$	48,968		$	62,039		$	41,466		$	26,076		$	27,592		$	61,966		$	83,684		$	351,791		$	48,968		$	62,039		$	41,466		$	26,076		$	27,592		$	61,966		$	83,684		$	351,791
Accretion		1,825			1,548			1,013			750			877			1,549			1,843			9,405			3,580			2,916			1,716			1,416			1,675			4,175			5,057			20,535
Transfers to covered foreclosed assets		(1,024	)		(1,578	)		(532	)		(14	)		—			(3,249	)		(8,832	)		(15,229	)		(3,300	)		(2,259	)		(1,229	)		(1,168	)		(853	)		(4,766	)		(9,637	)		(23,212	)
Payments received		(3,272	)		(6,083	)		(8,468	)		(4,956	)		(3,296	)		(3,609	)		(10,159	)		(39,843	)		(8,756	)		(12,598	)		(10,658	)		(8,415	)		(4,963	)		(6,833	)		(16,231	)		(68,454	)
Charge-offs		(603	)		(64	)		(24	)		—			—			(522	)		(94	)		(1,307	)		(662	)		(500	)		(53	)		—			—			(1,581	)		(1,820	)		(4,616	)
Other activity, net		(35	)		132			42			(71	)		34			(17	)		53			138			110			134			31			(60	)		54			26			41			336

Carrying value at March 31, 2014	$	45,859		$	55,994		$	33,497		$	21,785		$	25,207		$	56,118		$	66,495		$	304,955
Carrying value at June 30, 2014																									$	39,940		$	49,732		$	31,273		$	17,849		$	23,505		$	52,987		$	61,094		$	276,380

The following table presents a summary of the carrying value and type of covered loans as of the dates indicated.


	March 31,				December 31,		June 30,				December 31,
	2014		2013		2013		2014		2013		2013
	(Dollars in thousands)						(Dollars in thousands)
Real estate:
Residential 1-4 family	$	101,954	$	144,299	$	111,053	$	94,792	$	133,166	$	111,053
Non-farm/non-residential		136,556		264,996		163,707		125,037		233,606		163,707
Construction/land development		39,375		92,289		47,743		31,967		76,415		47,743
Agricultural		11,029		18,163		11,150		10,851		15,905		11,150
Multifamily residential		8,011		9,897		9,166		6,212		9,693		9,166

Total real estate		296,925		529,644		342,819		268,859		468,785		342,819
Commercial and industrial		7,802		13,317		8,719		7,297		11,601		8,719
Consumer		91		395		111		79		207		111
Other		137		912		142		145		159		142

Total covered loans	$	304,955	$	544,268	$	351,791	$	276,380	$	480,752	$	351,791

The following table presents covered loans grouped by remaining maturities and by type at ~~March 31,~~June 30, 2014. This table is based on contractual maturities and does not reflect accretion of the accretable difference or management’s estimate of projected cash flows. Most covered loans have scheduled accretion and/or cash flows projected by management to occur in periods prior to maturity. In addition, because income on covered loans is recognized by accretion of the accretable difference, none of the covered loans are considered to be floating or adjustable rate loans.


	1 Year or Less		Over 1 Through 5 Years		Over 5 Years		Total		1 Year or Less		Over 1 Through 5 Years		Over 5 Years		Total
	(Dollars in thousands)								(Dollars in thousands)
Real estate:
Residential 1-4 family	$	30,652	$	45,629	$	25,673	$	101,954	$	28,953	$	42,091	$	23,748	$	94,792
Non-farm/non-residential		63,742		57,719		15,095		136,556		72,010		39,204		13,823		125,037
Construction/land development		30,296		8,069		1,010		39,375		24,377		6,628		962		31,967
Agricultural		6,865		2,686		1,478		11,029		7,429		1,742		1,680		10,851
Multifamily residential		6,326		1,463		222		8,011		4,521		1,471		220		6,212

Total real estate		137,881		115,566		43,478		296,925		137,290		91,136		40,433		268,859
Commercial and industrial		3,592		969		3,241		7,802		3,511		769		3,017		7,297
Consumer		76		15		—		91		66		13		—		79
Other		1		136		—		137		143		2		—		145

Total covered loans	$	141,550	$	116,686	$	46,719	$	304,955	$	141,010	$	91,920	$	43,450	$	276,380

The following table presents a summary, by acquisition, of changes in the accretable difference on covered loans during the periods indicated.


																									Unity			Woodlands			Horizon			Chestatee			Oglethorpe			First Choice			Park Avenue			Total
	Unity			Woodlands			Horizon			Chestatee			Oglethorpe			First Choice			Park Avenue			Total			(Dollars in thousands)
	(Dollars in thousands)
Accretable difference at January 1, 2013	$	8,574		$	17,452		$	16,524		$	5,712		$	11,372		$	9,919		$	27,942		$	97,495		$	8,574		$	17,452		$	16,524		$	5,712		$	11,372		$	9,919		$	27,942		$	97,495
Accretion		(1,526	)		(1,980	)		(1,237	)		(1,183	)		(1,205	)		(2,025	)		(3,708	)		(12,864	)		(3,009	)		(3,798	)		(2,397	)		(2,260	)		(2,223	)		(3,809	)		(6,848	)		(24,344	)
Transfers to covered foreclosed assets		(98	)		(138	)		(24	)		(44	)		(25	)		(6	)		(374	)		(709	)		(98	)		(175	)		(26	)		(76	)		(199	)		(34	)		(717	)		(1,325	)
Covered loans paid off		(226	)		(95	)		(299	)		(269	)		(188	)		(508	)		(1,106	)		(2,691	)		(421	)		(210	)		(1,589	)		(572	)		(374	)		(823	)		(1,667	)		(5,656	)
Cash flow revisions as a result of renewals and/or modifications		2,563			1,550			(294	)		655			419			2,412			671			7,976
Cash flow revisions																										3,527			4,022			(149	)		2,004			1,163			6,294			4,077			20,938
Other, net		16			175			25			95			24			106			230			671			42			12			99			271			63			84			382			953

Accretable difference at March 31, 2013	$	9,303		$	16,964		$	14,695		$	4,966		$	10,397		$	9,898		$	23,655		$	89,878
Accretable difference at June 30, 2013																									$	8,615		$	17,303		$	12,462		$	5,079		$	9,802		$	11,631		$	23,169		$	88,061


Accretable difference at January 1, 2014	$	8,037		$	16,216		$	14,428		$	4,195		$	11,311		$	9,621		$	13,664		$	77,472		$	8,037		$	16,216		$	14,428		$	4,195		$	11,311		$	9,621		$	13,664		$	77,472
Accretion		(1,825	)		(1,548	)		(1,013	)		(750	)		(877	)		(1,549	)		(1,843	)		(9,405	)		(3,580	)		(2,916	)		(1,716	)		(1,416	)		(1,675	)		(4,175	)		(5,057	)		(20,535	)
Transfers to covered foreclosed assets		(42	)		(89	)		(12	)		—			—			(97	)		(357	)		(597	)		(43	)		(96	)		(28	)		(13	)		(45	)		(163	)		(383	)		(771	)
Covered loans paid off		(235	)		(1,293	)		(2,734	)		(399	)		(985	)		(195	)		(377	)		(6,218	)		(393	)		(1,678	)		(3,064	)		(590	)		(1,327	)		(870	)		(557	)		(8,479	)
Cash flow revisions as a result of renewals and/or modifications		2,674			795			53			467			837			941			758			6,525
Cash flow revisions																										2,828			927			436			1,148			1,506			10,681			13,599			31,125
Other, net		(26	)		10			48			42			53			61			28			216			86			(20	)		(11	)		30			56			9			(162	)		(12	)

Accretable difference at March 31, 2014	$	8,583		$	14,091		$	10,770		$	3,555		$	10,339		$	8,782		$	11,873		$	67,993
Accretable difference at June 30, 2014																									$	6,935		$	12,433		$	10,045		$	3,354		$	9,826		$	15,103		$	21,104		$	78,800

The following table presents a summary, by acquisition, of activity within the FDIC loss share receivable during the periods indicated.


	Unity			Woodlands			Horizon			Chestatee			Oglethorpe			First Choice			Park Avenue			Total			Unity			Woodlands			Horizon			Chestatee			Oglethorpe			First Choice			Park Avenue			Total
	(Dollars in thousands)																								(Dollars in thousands)
Carrying value at January 1, 2013	$	19,818		$	22,373		$	16,859		$	11,162		$	23,996		$	17,918		$	40,072		$	152,198		$	19,818		$	22,373		$	16,859		$	11,162		$	23,996		$	17,918		$	40,072		$	152,198
Accretion income		119			238			77			114			234			713			1,204			2,699			119			453			142			267			561			1,384			2,565			5,491
Cash received from FDIC		(2,013	)		(2,524	)		(3,418	)		(2,828	)		(2,325	)		(4,226	)		(5,231	)		(22,565	)		(3,310	)		(5,318	)		(4,250	)		(3,123	)		(6,097	)		(5,653	)		(17,994	)		(45,745	)
Reductions of FDIC loss share receivable for payments on covered loans in excess of carrying value		(614	)		(1,201	)		(503	)		(2,024	)		(615	)		(1,067	)		(2,344	)		(8,368	)		(1,207	)		(1,966	)		(1,220	)		(2,807	)		(1,922	)		(2,406	)		(4,312	)		(15,840	)
Increases in FDIC loss share receivable for:
Charge-offs of covered loans		954			751			401			519			165			838			2,291			5,919			1,049			1,288			646			1,072			384			1,837			3,673			9,949
Writedowns of covered foreclosed assets		74			98			83			234			9			133			75			706			489			195			83			246			15			340			1,910			3,278
Expenses on covered assets reimbursable by FDIC		209			441			347			115			381			239			650			2,382			494			718			576			174			718			586			1,198			4,464
Other activity, net		29			(284	)		(81	)		(177	)		(226	)		(76	)		543			(272	)		(104	)		(164	)		(16	)		(156	)		(1,242	)		(144	)		747			(1,079	)

Carrying value at March 31, 2013	$	18,576		$	19,892		$	13,765		$	7,115		$	21,619		$	14,472		$	37,260		$	132,699
Carrying value at June 30, 2013																									$	17,348		$	17,579		$	12,820		$	6,835		$	16,413		$	13,862		$	27,859		$	112,716


Carrying value at January 1, 2014	$	13,892		$	14,331		$	5,731		$	3,688		$	10,119		$	9,336		$	14,757		$	71,854		$	13,892		$	14,331		$	5,731		$	3,688		$	10,119		$	9,336		$	14,757		$	71,854
Accretion income (amortization expense)		(328	)		(11	)		30			(7	)		60			409			844			997			(676	)		3			159			31			113			63			893			586
Cash received from FDIC		(2,572	)		(1,992	)		(302	)		(646	)		(59	)		(1,851	)		(3,188	)		(10,610	)		(3,560	)		(4,400	)		(1,002	)		(1,009	)		(805	)		(2,052	)		(3,248	)		(16,076	)
Reductions of FDIC loss share receivable for payments on covered loans in excess of carrying value		(645	)		(989	)		(965	)		(823	)		(1,025	)		(897	)		(1,486	)		(6,830	)		(1,466	)		(1,934	)		(1,331	)		(1,144	)		(2,096	)		(1,538	)		(3,392	)		(12,901	)
Increases in FDIC loss share receivable for:
Charge-offs of covered loans		466			51			20			—			—			418			75			1,030			513			399			43			—			—			1,207			1,417			3,579
Writedowns of covered foreclosed assets		30			383			26			3			39			15			96			592			97			524			51			3			39			36			1,757			2,507
Expenses on covered assets reimbursable by FDIC		229			306			171			31			151			364			27			1,279			456			429			428			81			285			649			333			2,661
Other activity, net		5			33			(58	)		148			(102	)		(559	)		3			(530	)		(38	)		372			(107	)		39			(315	)		(1,211	)		(271	)		(1,531	)

Carrying value at March 31, 2014	$	11,077		$	12,112		$	4,653		$	2,394		$	9,183		$	7,235		$	11,128		$	57,782
Carrying value at June 30, 2014																									$	9,218		$	9,724		$	3,972		$	1,689		$	7,340		$	6,490		$	12,246		$	50,679

The following table presents a summary, by acquisition, of activity within covered foreclosed assets during the periods indicated.


																									Unity			Woodlands			Horizon			Chestatee			Oglethorpe			First Choice			Park Avenue			Total
	Unity			Woodlands			Horizon			Chestatee			Oglethorpe			First Choice			Park Avenue			Total			(Dollars in thousands)
	(Dollars in thousands)
Carrying value at January 1, 2013	$	8,187		$	8,050		$	2,538		$	4,211		$	6,797	��	$	3,584		$	19,584		$	52,951		$	8,187		$	8,050		$	2,538		$	4,211		$	6,797		$	3,584		$	19,584		$	52,951
Transfers from covered loans		1,317			1,711			1,320			412			950			82			2,244			8,036			1,458			3,019			1,322			961			3,709			638			4,974			16,081
Sales of covered foreclosed assets		(707	)		(1,096	)		(848	)		(410	)		(2,085	)		(567	)		(3,518	)		(9,231	)		(2,859	)		(3,202	)		(1,789	)		(726	)		(5,523	)		(1,360	)		(5,132	)		(20,591	)
Writedowns of covered foreclosed assets		(105	)		(130	)		(92	)		(270	)		(10	)		(58	)		(51	)		(716	)		(572	)		(235	)		(92	)		(274	)		(34	)		(355	)		(722	)		(2,284	)

Carrying value at March 31, 2013	$	8,692		$	8,535		$	2,918		$	3,943		$	5,652		$	3,041		$	18,259		$	51,040
Carrying value at June 30, 2013																									$	6,214		$	7,632		$	1,979		$	4,172		$	4,949		$	2,507		$	18,704		$	46,157


Carrying value at January 1, 2014	$	3,980		$	6,891		$	3,802		$	2,004		$	4,130		$	2,629		$	14,524		$	37,960		$	3,980		$	6,891		$	3,802		$	2,004		$	4,130		$	2,629		$	14,524		$	37,960
Transfers from covered loans		1,024			1,578			532			14			—			3,249			8,832			15,229			3,300			2,259			1,229			1,168			853			4,766			9,637			23,212
Sales of covered foreclosed assets		(469	)		(1,055	)		(376	)		(1,080	)		(704	)		(2,714	)		(2,373	)		(8,771	)		(1,422	)		(3,957	)		(1,406	)		(1,433	)		(1,383	)		(4,700	)		(8,733	)		(23,034	)
Writedowns of covered foreclosed assets		(68	)		(388	)		(22	)		—			(44	)		(46	)		(57	)		(625	)		(104	)		(555	)		(43	)		—			(44	)		(73	)		(1,544	)		(2,363	)

Carrying value at March 31, 2014	$	4,467		$	7,026		$	3,936		$	938		$	3,382		$	3,118		$	20,926		$	43,793
Carrying value at June 30, 2014																									$	5,754		$	4,638		$	3,582		$	1,739		$	3,556		$	2,622		$	13,884		$	35,775

The following table presents a summary of the carrying value and type of covered foreclosed assets as of the dates indicated.


	March 31,				December 31,		June 30,				December 31,
	2014		2013		2013		2014		2013		2013
	(Dollars in thousands)						(Dollars in thousands)
Real estate:
Residential 1-4 family	$	5,393	$	8,849	$	5,004	$	6,280	$	6,748	$	5,004
Non-farm/non-residential		19,830		11,262		14,301		16,006		9,491		14,301
Construction/land development		17,980		30,419		17,202		13,252		28,756		17,202
Agricultural		517		71		1,054		237		71		1,054
Multifamily residential		73		439		399		—		1,091		399

Total real estate		43,793		51,040		37,960		35,775		46,157		37,960
Repossessions		—		—		—		—		—		—

Total covered foreclosed assets	$	43,793	$	51,040	$	37,960	$	35,775	$	46,157	$	37,960

The following table presents a summary, by acquisition, of activity within the FDIC clawback payable during the periods indicated.

Nonperforming assets 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. Covered loans and covered foreclosed assets are not considered to be nonperforming by the Company for purposes of calculation of the nonperforming loans and leases to total loans and leases ratio and the nonperforming assets to total assets ratio, except for their inclusion in total assets. Because covered loans and covered assets are not included in the 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 or traditional acquisitions.

The following table presents information, excluding purchased non-covered loans and covered assets, concerning nonperforming assets, including nonaccrual loans and leases, TDRs, and foreclosed assets as of the dates indicated.

Non-Purchased Loans and Leases and Foreclosed Assets Not Covered by FDIC Loss Share Agreements


	March 31,						December 31,			June 30,						December 31,
	2014			2013			2013			2014			2013			2013
	(Dollars in thousands)									(Dollars in thousands)
Nonaccrual loans and leases	$	11,783		$	8,564		$	8,737
Accruing loans and leases 90 days or more past due		—			—			—
Nonaccrual non-purchased loans and leases										$	18,393		$	16,136		$	8,737
Accruing non-purchased loans and leases 90 days or more past due											—			—			—
TDRs		—			—			—			—			—			—

Total nonperforming loans and leases		11,783			8,564			8,737
Total nonperforming non-purchased loans and leases											18,393			16,136			8,737
Foreclosed assets not covered by FDIC loss share agreements⁽¹⁾		17,076			11,290			11,851			20,581			10,451			11,851

Total nonperforming assets	$	28,859		$	19,854		$	20,588		$	38,974		$	26,587		$	20,588


Nonperforming loans and leases to total loans and leases⁽²⁾		0.42	%		0.40	%		0.33	%		0.58	%		0.65	%		0.33	%
Nonperforming assets to total assets⁽²⁾		0.57			0.50			0.43			0.62			0.66			0.43

~~The following table presents information concerning nonperforming purchased non-covered loans as of the dates indicated.~~

The Company’s ratio of nonperforming loans and leases, including nonperforming purchased non-covered loans but excluding covered loans, to total loans and leases, including purchased non-covered loans but excluding covered loans, was 0.45% and 0.39% at March 31, 2014 and 2013, respectively, and 0.35% at December 31, 2013.

As of March 31, 2014, the Company had identified covered loans 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 $0.2 million for such loans during the first quarter of 2014 compared to $2.0 million during the first quarter of 2013. The Company also recorded provision for loan and lease losses of $0.2 million during the first quarter of 2014 compared to $2.0 million during the first quarter of 2013 to cover such charge-offs. The Company had $29.3 million of impaired covered loans at March 31, 2014 compared to $51.2 million of impaired covered loans at March 31, 2013 and $46.2 million at December 31, 2013.

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 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 periods and estimated selling costs.

At ~~March 31,~~June 30, 2014, the Company had reduced the carrying value of its non-purchased loans and leases deemed impaired ~~excluding covered loans and purchased non-covered loans,~~ (all of which were included in nonaccrual loans and leases) by ~~$4.1~~$5.4 million to the estimated fair value of such loans and leases of ~~$6.0~~$16.2 million. The adjustment to reduce the carrying value of such impaired loans and leases to estimated fair value consisted of ~~$2.8~~$1.2 million of partial charge-offs and ~~$1.3~~$4.2 million of specific loan and lease loss allocations. These amounts do not include the Company’s ~~$29.3~~$0.9 million of impaired purchased non-covered loans or $20.3 million of impaired covered loans at ~~March 31,~~June 30, 2014.

The following table presents information concerning the geographic location of nonperforming assets, excluding purchased non-covered loans and covered assets, at ~~March 31,~~June 30, 2014. ~~Nonaccrual~~Nonperforming non-purchased 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.


							Nonperforming Non-Purchased Loans and Leases		Foreclosed Assets		Total Nonperforming Assets
	Nonperforming Loans and Leases		Foreclosed Assets		Total Nonperforming Assets		(Dollars in thousands)
	(Dollars in thousands)
Arkansas	$	6,624	$	5,992	$	12,616	$	13,106	$	7,808	$	20,914
Texas		263		5,374		5,637		41		5,334		5,375
North Carolina		3,912		4,022		7,934		3,914		4,298		8,212
South Carolina		968		1,219		2,187		967		1,219		2,186
Georgia		10		90		100		6		1,370		1,376
Alabama		5		340		345		9		459		468
Florida		1		—		1		5		35		40
All other		—		39		39		345		58		403

Total	$	11,783	$	17,076	$	28,859	$	18,393	$	20,581	$	38,974

The following table is a summary of the amount and type of foreclosed assets not covered by FDIC loss share agreements.

The following table presents information concerning nonperforming purchased non-covered loans as of the dates indicated.

The Company’s ratio of nonperforming loans and leases, including nonperforming purchased non-covered loans but excluding covered loans, to total loans and leases, including purchased non-covered loans but excluding covered loans, was 0.51% and 0.67% at June 30, 2014 and 2013, respectively, and 0.35% at December 31, 2013.

As of June 30, 2014, the Company had identified purchased non-covered loans where the expected performance had deteriorated from management’s performance expectations established in conjunction with the determination of the Day 1 Fair Values or where current information indicates it is probable that the Company will not be able to collect all amounts according to the contractual terms thereon. As a result, the Company recorded partial charge-offs totaling $0.6 million for both the second quarter and first six months of 2014 compared to none for the comparable periods in 2013. The Company also recorded provision for loan and lease losses of $0.6 million for both the second quarter and first six months of 2014 compared to none during the second quarter and first six months of 2013 to cover such charge-offs. At June 30, 2014, the Company had $0.9 million of impaired purchased non-covered loans compared to none at both June 30, 2013 and December 31, 2013.

As of June 30, 2014, the Company had identified covered loans 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 $0.5 million for such loans during the second quarter and $0.7 million during the first six months of 2014 compared to $1.1 million during the second quarter and $3.1 million during the first six months of 2013. The Company also recorded provision for loan and lease losses of $0.5 million during the second quarter and $0.7 million during the first six months of 2014 compared to $1.1 million during the second quarter and $3.1 million during the first six months of 2013 to cover such charge-offs. The Company had $20.3 million of impaired covered loans at June 30, 2014 compared to $52.6 million of impaired covered loans at June 30, 2013 and $46.2 million at December 31, 2013.

The Company’s ALLL was ~~$43.9~~$47.0 million, or ~~1.58%~~1.48% of total non-purchased loans and leases ~~excluding purchased non-covered loans and covered loans,~~ at ~~March 31,~~June 30, 2014, compared to $42.9 million, or 1.63% of total non-purchased loans and leases ~~excluding purchased non-covered loans and covered loans,~~ at December 31, 2013 and ~~$38.4~~$39.4 million, or ~~1.78%~~1.61% of total non-purchased loans and leases ~~excluding purchased non-covered loans and covered loans,~~ at ~~March 31,~~June 30, 2013. The Company had no ALLL for purchased non-covered loans or for covered loans at ~~March 31,~~June 30, 2014, December 31, 2013 or ~~March 31,~~June 30, 2013, because all losses had been charged off on purchased non-covered loans and covered loans whose performance had deteriorated from management’s expectations established in conjunction with the determination of the Day 1 Fair Values. ~~Excluding covered loans and purchased non-covered loans, the~~The Company’s ALLL was equal to ~~372%~~255% of its total nonperforming non-purchased loans and leases at ~~March 31,~~June 30, 2014 compared to 492% at December 31, 2013 and ~~449%~~244% at ~~March 31,~~June 30, 2013. While the Company believes the current ALLL is appropriate, changing economic and other conditions may require future adjustments to the ALLL.

The amount of provision to the ALLL is based on the Company’s analysis of the adequacy of the ALLL utilizing the criteria discussed in the Critical Accounting Policies caption of this Management’s Discussion and Analysis. The provision for loan and lease losses for the ~~first~~second quarter of 2014 was ~~$1.3~~$5.6 million, including ~~$1.1~~$4.5 million for non-purchased loans and leases, $0.6 million for purchased non-covered loans and ~~leases and $0.2~~$0.5 million for covered loans, compared to $2.7 million for the ~~first~~second quarter of 2013, including ~~$0.7~~$1.6 million for non-purchased loans and leases, none for purchased non-covered loans and ~~leases and $2.0~~$1.1 million for covered loans. The provision for loan and lease losses for the first six months of 2014 was $6.9 million, including $5.6 million for non-purchased loans and leases, $0.6 million for purchased non-covered loans and $0.7 million for covered loans, compared to $5.4 million for the first six months of 2013, including $2.3 million for non-purchased loans and leases, none for purchased non-covered loans and $3.1 million for covered loans.

The increase in the Company’s provision to the ALLL for non-purchased loans and leases for both the quarter and six months ended June 30, 2014 compared to the same periods in 2013 is primarily the result of provision necessary to cover the growth of the Company’s non-purchased loan and lease portfolio, which increased $393 million during the second quarter and $539 million during the first six months of 2014 and for specific ALLL allocations for concentrations of credit as a result of growth in both the number and volume of large borrower relationships, partially offset by generally decreasing net charge-offs for this portfolio during recent quarters. The Company’s ALLL to non-purchased loans and leases has decreased to 1.48% at June 30, 2014, compared to 1.63% at December 31, 2013 and 1.61% at June 30, 2013 primarily as a result of the generally decreasing net charge-offs in recent quarters and due to generally improving economic conditions in many of the Company’s markets.

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


										Six Months Ended June 30,						Year Ended December 31,
	Three Months Ended March 31,						Year Ended December 31,			2014			2013			2013
	2014			2013			2013			(Dollars in thousands)
	(Dollars in thousands)
Balance, beginning of period	$	42,945		$	38,738		$	38,738		$	42,945		$	38,738		$	38,738
Non-covered loans and leases charged off:
Non-purchased loans and leases charged off:
Real estate:
Residential 1-4 family		(199	)		(280	)		(837	)		(341	)		(417	)		(837	)
Non-farm/non-residential		(73	)		(41	)		(1,111	)		(1,254	)		(593	)		(1,111	)
Construction/land development		—			(58	)		(137	)		(14	)		(129	)		(137	)
Agricultural		(15	)		—			(261	)		(15	)		—			(261	)
Multifamily residential		—			—			(4	)		—			—			(4	)

Total real estate		(287	)		(379	)		(2,350	)		(1,624	)		(1,139	)		(2,350	)
Commercial and industrial		(374	)		(716	)		(922	)		(422	)		(832	)		(922	)
Consumer		(41	)		(61	)		(214	)		(97	)		(119	)		(214	)
Direct financing leases		(146	)		(80	)		(482	)		(267	)		(186	)		(482	)
Other		(72	)		(111	)		(359	)		(159	)		(173	)		(359	)

Total non-covered loans and leases charged off		(920	)		(1,347	)		(4,327	)
Total non-purchased loans and leases charged off											(2,569	)		(2,449	)		(4,327	)

Recoveries of non-covered loans and leases previously charged off:
Recoveries of non-purchased loans and leases previously charged off:
Real estate:
Residential 1-4 family		22			95			106			71			102			106
Non-farm/non-residential		3			102			122			4			118			122
Construction/land development		8			5			174			8			8			174
Agricultural		5			2			14			11			4			14
Multifamily residential		—			—			4			—			—			4

Total real estate		38			204			420			94			232			420
Commercial and industrial		628			9			433			763			375			433
Consumer		18			58			104			36			71			104
Direct financing leases		6			9			33			14			20			33
Other		46			51			144			75			85			144

Total recoveries of non-covered loans and leases previously charged off		736			331			1,134
Total recoveries of non-purchased loans and leases previously charged off											982			783			1,134

Net non-covered loans and leases charged off		(184	)		1,016			(3,193	)
Net non-purchased loans and leases charged off											(1,587	)		(1,666	)		(3,193	)
Purchased non-covered loans charged off											(567	)		—			—
Covered loans charged off		(204	)		2,028			(4,675	)		(720	)		(3,094	)		(4,675	)

Net charge-offs – total loans and leases		(388	)		3,044			(7,868	)		(2,874	)		(4,760	)		(7,868	)
Provision for loan and lease losses:
Non-covered loans and leases		1,100			700			7,400
Non-purchased loans and leases											5,600			2,300			7,400
Purchased non-covered loans											567			—			—
Covered loans		204			2,028			4,675			720			3,094			4,675

Total provision		1,304			2,728			12,075			6,887			5,394			12,075

Balance, end of period	$	43,861		$	38,422		$	42,945		$	46,958		$	39,372		$	42,945

Net charge-offs of non-covered loans and leases to average non-covered loans and leases⁽¹⁾		0.02	%⁽²⁾		0.19	%⁽²⁾		0.13	%
Net charge-offs of total loans and leases, including covered loans and purchased non-covered loans, to total average loans and leases		0.05	%⁽²⁾		0.45	%⁽²⁾		0.26	%
ALLL to total loans and leases⁽³⁾		1.58	%		1.78	%		1.63	%
ALLL to nonperforming loans and leases⁽³⁾		372	%		449	%		492	%
ALLL to total loans and leases⁽¹⁾											1.48	%		1.61	%		1.63	%
ALLL to nonperforming loans and leases^{(1) (2)}											255	%		244	%		492	%

As of and for the three months ended March 31, 2014 and 2013 and as of and for the year ended December 31, 2013, the Company had no impaired purchased non-covered loans and recorded no charge-offs, partial charge-offs or provision for such loans.

At March 31, 2014 and 2013 and at December 31, 2013, the Company classified all of its investment securities portfolio as AFS. Accordingly, its investment securities are stated at estimated fair value in the consolidated financial statements with the unrealized gains and losses, net of related income tax, reported as a separate component of stockholders’ equity and included in accumulated other comprehensive income.Net Charge-Off Ratios

The following table ~~presents the amortized cost and estimated fair value of investment securities AFS as~~provides a summary of the ~~dates~~Company’s annualized net charge-off ratios for its loan and lease portfolio for the periods indicated. The Company’s holdings of “other equity securities” include FHLB – Dallas and First National Banker’s Bankshares, Inc. (“FNBB”) shares which do not have readily determinable fair values and are carried at cost.

At June 30, 2014 and 2013 and at December 31, 2013, the Company classified all of its investment securities portfolio as AFS. Accordingly, its investment securities are stated at estimated fair value in the consolidated financial statements with the unrealized gains and losses, net of related income tax, reported as a separate component of stockholders’ equity and included in accumulated other comprehensive income.

The following table presents the amortized cost and estimated fair value of investment securities AFS as of the dates indicated. The Company’s holdings of “other equity securities” include FHLB – Dallas and First National Banker’s Bankshares, Inc. (“FNBB”) shares which do not have readily determinable fair values and are carried at cost.


	March 31,								December 31,				June 30,								December 31,
	2014				2013				2013				2014				2013				2013
	Amortized		Fair		Amortized		Fair		Amortized		Fair		Amortized		Fair		Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value		Cost		Value		Cost		Value		Cost		Value		Cost		Value
	(Dollars in thousands)												(Dollars in thousands)
Obligations of state and political subdivisions	$	447,368	$	452,748	$	366,753	$	380,236	$	438,390	$	435,989	$	603,533	$	616,565	$	390,509	$	391,446	$	438,390	$	435,989
U.S. Government agency securities		219,836		219,740		91,589		92,963		222,510		218,869		254,878		258,311		85,449		83,035		222,510		218,869
Corporate obligations		686		686		748		748		716		716		685		685		747		747		716		716
Other equity securities		14,487		14,487		13,701		13,701		13,810		13,810		16,568		16,568		15,520		15,520		13,810		13,810

Total	$	682,377	$	687,661	$	472,791	$	487,648	$	675,426	$	669,384	$	875,664	$	892,129	$	492,225	$	490,748	$	675,426	$	669,384

The Company’s investment securities portfolio is reported at estimated fair value, which included gross unrealized gains of ~~$13.5~~$21.1 million and gross unrealized losses of ~~$8.3~~$4.7 million at ~~March 31,~~June 30, 2014; gross unrealized gains of $8.6 million and gross unrealized losses of $14.6 million at December 31, 2013; and gross unrealized gains of ~~$15.9~~$9.2 million and gross unrealized losses of ~~$1.0~~$10.7 million at ~~March 31,~~June 30, 2013. Management believes that all of its unrealized losses on individual investment securities at ~~March 31,~~June 30, 2014 are the result of fluctuations in interest rates and do not reflect deterioration in the credit quality of these investments. Accordingly, management considers these unrealized losses to be temporary in nature. The Company does not have the intent to sell these investment securities with unrealized losses and, more likely than not, will not be required to sell these investment securities before fair value recovers to amortized cost.

The following table presents unaccreted discounts and unamortized premiums of the Company’s investment securities as of the dates indicated.


	Amortized Cost		Unaccreted Discount		Unamortized Premium			Par Value
	(Dollars in thousands)
June 30, 2014:
Obligations of states and political subdivisions	$	603,533	$	8,625	$	(8,762	)	$	603,396
U.S. Government agency securities		254,878		4,561		(4,191	)		255,248
Corporate obligations		685		—		(15	)		670
Other equity securities		16,568		—		—			16,568

Total	$	875,664	$	13,186	$	(12,968	)	$	875,882

December 31, 2013:
Obligations of states and political subdivisions	$	438,390	$	8,298	$	(3,447	)	$	443,241
U.S. Government agency securities		222,510		4,694		(4,436	)		222,768
Corporate obligations		716		—		(18	)		698
Other equity securities		13,810		—		—			13,810

Total	$	675,426	$	12,992	$	(7,901	)	$	680,517

June 30, 2013:
Obligations of states and political subdivisions	$	390,509	$	8,049	$	(2,599	)	$	395,959
U.S. Government agency securities		85,449		187		(4,604	)		81,032
Corporate obligations		747		—		(20	)		727
Other equity securities		15,520		—		—			15,520

Total	$	492,225	$	8,236	$	(7,223	)	$	493,238

The Company had net gains of ~~$5,000~~$18,000 from the sale of ~~$1.2~~$47 million of investment securities in the second quarter of 2014 compared to no sales of investment securities in the second quarter of 2013. The Company had net gains of $23,000 from the sale of $48 million of investment securities in the first ~~quarter~~six months of 2014 compared with net gains of ~~$156,000~~$0.2 million from the sale of $0.8 million of investment securities in the first ~~quarter~~six months of 2013. During the ~~quarters ended March 31,~~second quarter of 2014 and 2013, respectively, investment securities totaling ~~$13.3~~$16 million and ~~$39.5~~$13 million matured, were called or were paid down by the issuer. During the first six months of 2014 and 2013, respectively, investment securities totaling $30 million and $53 million matured, were called or paid down by the issuer. The Company purchased ~~$18.3~~$17 million and ~~$38.2~~$38 million of investment securities during the second quarter of 2014 and 2013, respectively, and purchased $35 million and $75 million of investment securities during the first ~~quarter~~six months of 2014 and 2013, respectively. On March 5, 2014, the Company acquired $1.9 million of investment securities as a result of its acquisition of ~~Bancshares.~~Bancshares, and on May 16, 2014, the Company acquired $242.9 million of investment securities as a result of its acquisition of Summit.

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 decisions to sell or purchase securities, the Company considers credit quality, 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 ~~March 31,~~June 30, 2014 based on credit ratings by one or more nationally-recognized credit rating agency.


																				AAA⁽¹⁾			AA⁽²⁾			A⁽³⁾			BBB⁽⁴⁾			Non- Rated⁽⁵⁾			Total
	AAA⁽¹⁾			AA⁽²⁾			A⁽³⁾			BBB⁽⁴⁾			Non- Rated⁽⁵⁾			Total				(Dollars in thousands)
	(Dollars in thousands)
Obligations of states and political subdivisions	$	6,352		$	151,380		$	61,295		$	53,624		$	180,098		$	452,749			$	10,389		$	224,475		$	91,153		$	45,750		$	244,798		$	616,565
U.S. Government agency securities		—			218,568			—			—			1,171			219,739		��		—			258,311			—			—			—			258,311
Corporate obligations		—			—			686			—			—			686				—			—			685			—			—			685
Other equity securities		—			—			—			—			14,487			14,487				—			—			—			—			16,568			16,568

Total	$	6,352		$	369,948		$	61,981		$	53,624		$	195,756		$	687,661			$	10,389		$	482,786		$	91,838		$	45,750		$	261,366		$	892,129

Percentage of total		0.9	%		53.8	%		9.0	%		7.8	%		28.5	%		100.0	%			1.2	%		54.1	%		10.3	%		5.1	%		29.3	%		100.0	%
Cumulative percentage of total		0.9	%		54.7	%		63.7	%		71.5	%		100.0	%						1.2	%		55.3	%		65.6	%		70.7	%		100.0	%

(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 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 has credit characteristics equivalent to those which 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).

The Company’s lending and investment activities are funded primarily by deposits. The amount and type of deposits outstanding as of the dates indicated and their respective percentage of the total deposits are reflected in the following table. On May 16, 2014, the Company assumed $970 million of deposits as a result of its acquisition of Summit. On March 5, 2014, the Company assumed $256 million of deposits as a result of its acquisition of ~~Bancshares, and on~~Bancshares. On July 31, 2013, the Company assumed $601 million of deposits as a result of its acquisition of First National Bank.


	June 30,										December 31,
	2014				2013						2013
	(Dollars in thousands)
Non-interest bearing	$	1,058,210	21.2	%	$	591,879	19.8	%	$	746,320		20.0	%
Interest bearing:
Transaction (NOW)		1,173,404	23.6			717,317	24.0			839,632		22.6
Savings and money market		1,575,525	31.6			948,472	31.8			1,233,865		33.2
Time deposits less than $100,000		557,632	11.2			388,045	13.0			471,052		12.7
Time deposits of $100,000 or more		619,126	12.4			338,916	11.4			426,158		11.5

Total deposits	$	4,983,897	100.0	%	$	2,984,629	100.0	%	$	3,717,027		100.0	%

The amount and percentage of the Company’s deposits attributable to offices, by state, as of the dates indicated, are reflected in the following table.


Deposits Attributable	March 31,								December 31,
to Offices In	2014				2013				2013
Deposits Attributable to Offices In													June 30,								December 31,
Deposits Attributable to Offices In													2014				2013				2013
	(Dollars in thousands)												(Dollars in thousands)
Arkansas	$	1,640,141	41.9	%	$	1,627,352	54.4	%	$	1,671,498	45.0	%	$	2,736,653	54.9	%	$	1,644,271	55.1	%	$	1,671,498	45.0	%
Texas		749,851	19.2			385,939	12.9			629,241	16.9			728,073	14.6			390,928	13.1			492,069	16.9
Georgia		630,979	16.1			668,697	22.4			634,060	17.1			636,950	12.8			656,579	22.0			634,060	17.1
North Carolina		608,491	15.5			16,007	0.5			124,894	3.4			596,180	12.0			16,794	0.6			629,241	3.4
Alabama		133,641	3.4			149,968	5.0			492,069	13.2			132,271	2.6			139,428	4.7			137,345	13.2
Florida		125,526	3.2			130,688	4.4			137,345	3.7			120,677	2.4			125,870	4.2			124,894	3.7
South Carolina		27,575	0.7			12,421	0.4			27,920	0.7			33,093	0.7			10,759	0.3			27,920	0.7

Total	$	3,916,204	100.0	%	$	2,991,072	100.0	%	$	3,717,027	100.0	%	$	4,983,897	100.0	%	$	2,984,629	100.0	%	$	3,717,027	100.0	%

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

The following table reflects the average balance and rate paid for each category of other interest bearing liabilities for the periods indicated.


											Three Months Ended June 30,										Six Months Ended June 30,
	Three Months Ended March 31,										2014					2013					2014					2013
	2014					2013					Average Balance		Rate Paid			Average Balance		Rate Paid			Average Balance		Rate Paid			Average Balance		Rate Paid
	Average Balance		Rate Paid			Average Balance		Rate Paid			(Dollars in thousands)
	(Dollars in thousands)
Repurchase agreements with customers	$	65,045		0.08	%	$	33,953		0.09	%	$	58,607		0.09	%	$	29,815		0.08	%	$	61,808		0.08	%	$	31,872		0.09	%
Other borrowings⁽¹⁾		280,993		3.83			280,758		3.83			281,009		3.84			286,719		3.75			280,968		3.84			283,755		3.79
Subordinated debentures		64,950		2.58			64,950		2.67			64,950		2.64			64,950		2.65			64,950		2.61			64,950		2.66

Total other interest bearing liabilities	$	410,988		3.04	%	$	379,661		3.29	%	$	404,566		3.11	%	$	381,484		3.28	%	$	407,726		3.10	%	$	380,577		3.29	%

Subordinated Debentures. At ~~March 31,~~June 30, 2014, the Company had an aggregate of $64.9 million of subordinated debentures and related trust preferred securities outstanding consisting of (i) $20.6 million of subordinated debentures and securities issued in 2006 that bear interest, adjustable quarterly, at LIBOR plus 1.60%; (ii) $15.4 million of subordinated debentures and securities issued in 2004 that bear interest, adjustable quarterly, at LIBOR plus 2.22%; and (iii) $28.9 million of subordinated debentures and securities issued in 2003 that bear interest, adjustable quarterly, at a weighted-average rate of LIBOR plus 2.93%. 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.

Common Stockholders’ Equity and Tangible Common Stockholder’s Equity.The Company uses its common stockholders’ equity ratio, its tangible common stockholders’ equity ratio, ~~and~~its book value per common share, its tangible book value per common share and its return on tangible common stockholders’ equity as the principal measures of the strength of its ~~capital.~~capital and its ability to generate earnings on its tangible common equity invested by its shareholders. The following table reconciles the calculation of tangible common stockholders’ equity to total tangible assets ratio to GAAP financial measures as reflected in the Company’s consolidated financial statements as of the dates indicated.


							June 30,						December 31, 2013
	March 31,						2014			2013			December 31, 2013
	2014			2013			(Dollars in thousands)
	(Dollars in thousands)
Total common stockholders’ equity before noncontrolling interest	$	653,208		$	523,679		$	850,204		$	531,125		$	629,060
Less intangible assets:
Goodwill		(5,243	)		(5,243	)		(78,669	)		(5,243	)		(5,243	)
Core deposit and bank charter intangibles, net of accumulated amortization		(15,750	)		(6,015	)		(29,971	)		(5,447	)		(13,915	)

Total intangibles		(20,993	)		(11,258	)		(108,640	)		(10,690	)		(19,158	)


Total tangible common stockholders’ equity	$	632,215		$	512,421		$	741,564		$	520,435		$	609,902


Total assets	$	5,028,893		$	3,951,818		$	6,297,975		$	4,043,632		$	4,791,170
Less intangible assets:
Goodwill		(5,243	)		(5,243	)		(78,669	)		(5,243	)		(5,243	)
Core deposit and bank charter intangibles, net of accumulated amortization		(15,750	)		(6,015	)		(29,971	)		(5,447	)		(13,915	)

Total intangibles		(20,993	)		(11,258	)		(108,640	)		(10,690	)		(19,158	)


Total tangible assets	$	5,007,900		$	3,940,560		$	6,189,335		$	4,032,942		$	4,772,012


Ratio of total tangible common stockholders’ equity to total tangible assets		12.62	%		13.00	%		11.98	%		12.90	%		12.78	%

The following table reconciles the tangible book value per common share to GAAP financial measures as reflected in the Company’s consolidated financial statements as of the dates indicated.


	March 31,						June 30,						December 31,
	2014			2013			2014			2013			2013
	(In thousands, except per share amounts)						(In thousands, except per share amounts)
Total common stockholders’ equity before noncontrolling interest	$	653,208		$	523,679		$	850,204		$	531,125		$	629,060
Less intangible assets:
Goodwill		(5,243	)		(5,243	)		(78,669	)		(5,243	)		(5,243	)
Core deposit and bank charter intangibles, net of accumulated amortization		(15,750	)		(6,015	)		(29,971	)		(5,447	)		(13,915	)

Total intangibles		(20,993	)		(11,258	)		(108,640	)		(10,690	)		(19,158	)


Total tangible common stockholders’ equity	$	632,215		$	512,421		$	741,564		$	520,435		$	609,902

Shares of common stock outstanding		36,944			35,367

Tangible book value per share	$	17.11		$	14.49
Shares of common stock outstanding⁽¹⁾								79,662			70,876			73,712

Tangible book value per common share							$	9.31		$	7.34		$	8.27

The following table reconciles the calculation of the return on average tangible common stockholders’ equity to GAAP financial measures as reflected in the Company’ consolidated financial statements for the periods indicated.

Common Stock Dividend Policy. During the quarter ended ~~March 31,~~June 30, 2014, the Company paid a dividend of ~~$0.22~~$0.115 per split-adjusted common share compared to ~~$0.15~~$0.085 per split-adjusted common share in the quarter ended ~~March 31,~~June 30, 2013. On ~~April~~July 1, 2014, the Company’s board of directors approved a dividend of ~~$0.23~~$0.12 per common share that was paid on ~~April~~July 18, 2014. The determination of future dividends on the Company’s common stock will depend on conditions existing at that time and approval of the Company’s board of directors.

Regulatory Capital Requirements.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 (i.e. common stockholders’ equity excluding goodwill, certain intangibles and net unrealized gains and losses on AFS investment securities, and including, subject to limitations, trust preferred securities (“TPS”), certain types of preferred stock and other qualifying items) to risk-weighted assets and (2) total capital (Tier 1 capital plus Tier 2 capital, including the qualifying portion of the allowance for loan and lease losses and the portion of TPS not counted as Tier 1 capital) to risk-weighted assets. The leverage ratio is measured as Tier 1 capital to adjusted quarterly average assets.

The Company’s and the Bank’s risk-based capital and leverage ratios exceeded these minimum requirements, as well as the minimum requirements to be considered “well capitalized,” at both ~~March 31,~~June 30, 2014 and December 31, ~~2012,~~2013, and are presented in the following tables.


	March 31,			December 31,
	2014			2013			June 30, 2014			December 31, 2013⁽¹⁾
	(Dollars in thousands)						(Dollars in thousands)
Tier 1 capital:
Common stockholders’ equity before noncontrolling interest	$	653,208		$	624,958		$	850,204		$	629,060
Allowed amount of trust preferred securities		63,000			63,000			63,000			63,000
Net unrealized (gains) losses on investment securities AFS		(3,211	)		3,672
Net unrealized (gains) losses on investment securities AFS included in common stockholders’ equity								(10,006	)		3,672
Less goodwill and certain intangible assets		(20,993	)		(19,158	)		(108,640	)		(19,158	)

Total tier 1 capital		692,004			672,472			794,558			676,574

Tier 2 capital:
Qualifying allowance for loan and lease losses		43,861			42,945			46,958			42,945

Total risk-based capital	$	735,865		$	715,417		$	841,516		$	719,519


Risk-weighted assets	$	4,552,401		$	4,185,142		$	5,928,679		$	4,189,244


Adjusted quarterly average assets	$	4,803,877		$	4,763,746		$	5,551,496		$	4,767,848


Ratios at end of period:
Tier 1 leverage		14.41	%		14.12	%		14.31	%		14.19	%
Tier 1 risk-based capital		15.20			16.07			13.40			16.15
Total risk-based capital		16.16			17.09			14.19			17.18

Minimum ratio guidelines:
Tier 1 leverage⁽¹⁾		3.00	%		3.00	%		3.00	%		3.00	%
Tier 1 risk-based capital		4.00			4.00			4.00			4.00
Total risk-based capital		8.00			8.00			8.00			8.00

Minimum ratio guidelines to be “well capitalized”:
Tier 1 leverage		5.00	%		5.00	%		5.00	%		5.00	%
Tier 1 risk-based capital		6.00			6.00			6.00			6.00
Total risk-based capital		10.00			10.00			10.00			10.00


	March 31, 2014			December 31, 2013			June 30, 2014			December 31, 2013⁽¹⁾
	(Dollars in thousands)						(Dollars in thousands)
Stockholders’ equity – Tier 1	$	672,202		$	655,793		$	759,897		$	659,895
Tier 1 leverage ratio		14.03	%		13.78	%		13.76	%		13.85	%
Tier 1 risk-based capital ratio		14.78			15.69			12.84			15.77
Total risk-based capital ratio		15.75			16.72			13.63			16.80

Basel III. On July 9, 2013, the FDIC and other federal banking regulators issued a final rule that will substantially revise the risk-based capital requirements applicable to bank holding companies and insured depository institutions, including the Company and the Bank, to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision (“Basel III”) and certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The final rule applies to all depository institutions, top-tier bank holding companies with total consolidated assets of $500 million or more and top-tier savings and loan holding companies.

The rule establishes a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), increases the minimum Tier 1 capital to risk-based assets requirement (from 4.0% to 6.0% of risk-weighted assets) and assigns a higher risk weight (150%) to exposures that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property.

The rule also includes changes in what constitutes regulatory capital, some of which are subject to a two-year transition period. These changes include the phasing-out of certain instruments as qualifying capital. In addition, Tier 2 capital is no longer limited to the amount of Tier 1 capital included in total capital. Mortgage servicing rights, certain deferred tax assets and investments in unconsolidated subsidiaries over designated percentages of common stock will be required to be deducted from capital, subject to a two-year transition period. Finally, the new rules allow for insured depository institutions to make a one-time election not to include most elements of accumulated other comprehensive income in regulatory capital and instead effectively use the existing treatment under the general risk-based capital rules. Insured depository institutions, including the Company and Bank, must make their accumulated other comprehensive income opt-out election in the first Consolidated Reports of Condition and Income, Consolidated Financial Statements for Bank Holding Companies and Parent Company Only Financial Statements for Large Bank Holding Companies reports that are filed for the first quarter of 2015.

The new capital requirements also include changes in the risk-weights of assets to better reflect credit risk and other risk exposures. These include a 150% risk weight (up from 100%) for certain high volatility commercial real estate acquisition, development and construction loans and the unsecured portion of non-residential mortgage loans that are 90 days past due or otherwise on nonaccrual status; a 20% (up from 0%) credit conversion factor for the unused portion of a commitment with an original maturity of one year or less that is not unconditionally cancellable; a 250% risk weight (up from 100%) for mortgage servicing rights and deferred tax assets that are not deducted from capital; and increased risk weights (from 0% to up to 600%) for equity exposures.

Finally, the rule limits capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements.

The final rule becomes effective on January 1, 2015. The capital conservation buffer requirement will be phased in beginning January 1, 2016, at 0.625% of risk-weighted assets, increasing each year until fully implemented at 2.5% on January 1, 2019.

Bank 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 an interest rate risk, liquidity and funds management policy and a contingency funding plan that, among other things, include policies and procedures for managing liquidity risk. Generally the Company relies on deposits, repayments of loans, leases, covered loans and purchased non-covered loans, 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-Dallas advances, 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 generally 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 orlay-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 growth in loans and leases and deposit withdrawal demands or otherwise fund operations. Such secondary sources include FHLB-Dallas advances, secured and unsecured federal funds lines of credit from correspondent banks, wholesale deposit sources and FRB borrowings.

At ~~March 31,~~June 30, 2014 the Company had substantial unused borrowing availability. This availability was primarily comprised of the following four options: (1) ~~$761~~$747 million of available blanket borrowing capacity with the FHLB-Dallas, (2) ~~$162~~$212 million of investment securities available to pledge for federal funds or other borrowings, (3) $144 million of available unsecured federal funds borrowing lines and (4) up to ~~$102~~$117 million of available borrowing capacity from borrowing programs of the FRB.

The Company anticipates it will continue to rely primarily on deposits, repayments of loans and leases, covered loans and purchased non-covered loans, and repayments of its investment securities to provide liquidity, as well as other funding sources as appropriate. Additionally, where necessary, the sources of borrowed funds described above will be used to augment the Company’s primary funding sources.

Sources and Uses of Funds.Operating activities provided ~~$18.2~~$20.1 million for the first ~~quarter~~six months of 2014 and ~~provided $31.3~~$33.5 million for the first ~~quarter~~six months of 2013. Net cash used or provided by operating activities is comprised primarily of net income, adjusted for non-cash items and for changes in operating assets and liabilities.

Investing activities ~~provided $38.4~~used $118.8 million and $162.8 million in the ~~quarter ended March 31,~~first six months of 2014 and ~~$35.3 million in the quarter ended March 31, 2013.~~2013, respectively. Net activity in the Company’s investment securities portfolio ~~used $3.8~~provided $43.0 million and ~~provided $2.3~~used $21.3 million in the ~~quarters ended March 31,~~first six months of 2014 and 2013, respectively. Net non-purchased loans and leases ~~excluding covered loans and purchased non-covered loans,~~ used ~~$148.1~~$539.7 million and ~~$60.1~~$345.5 million in the ~~quarters ended March 31,~~first six months of 2014 and 2013, respectively. Payments received on purchased non-covered loans provided ~~$46.8~~$138.9 million and ~~$4.5~~$12.2 million for the ~~quarters ended March 31,~~first six months of 2014 and 2013, respectively. Payments received on covered loans provided ~~$39.8~~$68.3 million and ~~$48.6~~$110.3 million for the ~~quarters ended March 31,~~first six months of 2014 and 2013, respectively, and payments received from the FDIC under loss share agreements provided ~~$10.6~~$16.1 million and ~~$22.6~~$45.7 million for the ~~quarters ended March 31,~~first six months of 2014 and 2013, respectively. Other loss share activity provided ~~$5.4~~$9.2 million and ~~$8.3~~$14.7 million infor the ~~quarters ended March 31,~~first six months of 2014 and 2013, respectively. The Company had proceeds from sales of other assets of ~~$11.3~~$30.2 million and ~~$13.3~~$27.2 million in the ~~quarters ended March 31,~~first six months of 2014 and 2013, respectively. Purchases of premises and equipment used ~~$3.4~~$4.6 million and ~~$4.1~~$5.9 million in the ~~quarters ended March 31,~~first six months of 2014 and 2013, respectively. Net cash invested in unconsolidated investments used $2.3 million and $0.1 million in the first six months of 2014 and 2013, respectively. Net cash received in merger and acquisition transactions totaled ~~$80.7~~$121.9 million for the ~~quarter ended March 31,~~first six months of 2014 (none in the ~~quarter ended March 31,~~first six months of 2013).

Financing activities ~~used $64.3~~provided $13.4 million and ~~$112.0~~used $17.8 million in the ~~quarters ended March 31,~~first six months of 2014 and 2013, respectively. Net changes in deposit accounts ~~used $56.7~~provided $41.2 million and ~~$110.0~~used $116.4 million in the ~~quarters ended March 31,~~in the first six months of 2014 and 2013, respectively. Net repayments of other borrowings and repurchase agreements with customers used ~~$2.2~~$14.1 million and provided ~~$1.2~~$106.1 million in the ~~quarters ended March 31,~~in the first six months of 2014 and 2013, respectively. The Company paid common stock cash dividends of ~~$8.1~~$16.6 million and ~~$5.3~~$11.3 million in the ~~quarters ended March 31,~~in the first six months of 2014 and 2013, respectively. Proceeds from and excess tax benefits on exercise and forfeiture of stock options provided ~~$2.8~~$2.9 million and ~~$2.1~~$3.8 million ~~during~~in the ~~quarters ended March 31,~~first six months of 2014 and 2013, respectively.

Off-Balance Sheet Commitments.The Company is 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 primarily include commitments to extend credit and standby letters of credit. See Note 9 to the Consolidated Financial Statements for more information about the Company’s outstanding guarantees and commitments as of ~~March 31,~~June 30, 2014.

The Company is continuing its growth andde novobranching strategy. On January 2, 2014, the Company opened a loan production office for its Real Estate Specialties Group (“RESG”) in Houston, Texas, and on February 24, 2014, it opened an RESG loan production office in Los Angeles, California. On February 26, 2014, the Company relocated its Savannah, Georgia office from a leased facility to a bank-owned facility and on March 11, 2014, opened a third retail banking office in Bradenton, Florida. On May 19, 2014, the Company opened a retail banking office in Cornelius, North Carolina. In the ~~second~~third quarter of 2014, the Company expects to open a loan production office in Asheville, North Carolina, and in the fourth quarter of 2014, it expects to open a retail banking office in ~~Cornelius, North~~Hilton Head Island, South Carolina.

Opening new offices is subject to local banking market conditions, availability of suitable sites, hiring qualified personnel, obtaining regulatory and other approvals and many other conditions and contingencies that the Company cannot predict with certainty. The Company may increase or decrease its expected number of new office openings 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 the first ~~quarter~~six months of 2014, the Company spent ~~$3.4~~$4.6 million on capital expenditures for premises and equipment. The Company’s capital expenditures for 2014 are expected to be in the range of $12 million to $20 million, including progress payments on construction projects expected to be completed in 2014 and 2015, furniture and equipment costs and acquisition of sites for future development. 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 acquisitions, if any, and other factors.

On March 5, 2014, the Company completed its acquisition of Bancshares and its wholly-owned bank subsidiary OMNIBANK, N.A. ~~for an aggregate of $21.5 million in cash.~~ The acquisition of Bancshares expanded the Company’s service area in south Texas by adding offices in Houston (3), San Antonio, Austin, Cedar Park and Lockhart.

On ~~January 30,~~May 16, 2014, the Company completed its acquisition of Summit and its wholly-owned bank subsidiary, Summit Bank. The acquisition of Summit expanded the Company’s service area by adding 23 retail banking offices in central, western and southwestern Arkansas, and a loan production office in Ft. Smith, Arkansas. On May 19, 2014, the Company closed the loan production office in Ft. Smith, and on June 20, 2014, the Company closed one of the retail banking offices in Conway, Arkansas. The Company continues to evaluate its retail banking offices in Arkansas, including the offices acquired in the Summit acquisition, and expects to close up to an additional eight Arkansas offices in the remainder of 2014 or in the first half of 2015.

On July 31, 2014, the Company entered into a definitive agreement and plan of merger ~~(“Summit~~(the “Intervest Agreement”) with ~~Summit~~Intervest Bancshares Corporation (“Intervest”), and its wholly-owned bank subsidiary ~~Summit~~Intervest National Bank (“INB”), headquartered in New York, New York, whereby the Company will acquire all of the outstanding common stock of Intervest in a transaction valued at approximately ~~$216~~$228.5 million. ~~Summit Bank~~INB operates 24seven full service banking offices including one in ~~central, western~~New York City, five in Clearwater, Florida and ~~southwestern Arkansas.~~ one in Pasadena, Florida.

Under the terms of the ~~Summit~~Intervest Agreement, each outstanding share of common stock of ~~Summit~~Intervest will be converted ~~at the election of each Summit shareholder,~~ into the right to receive shares of the Company’s common stock, plus cash in lieu of any fractional share, ~~or the right to receive cash,~~ all subject to certain conditions and potential ~~adjustments, provided that at least 80% of the merger consideration paid to Summit shareholders will consist of shares of the Company’s common stock.~~adjustments. The number of Company shares to be issued will be determined based on ~~Summit shareholder elections and~~ the Company’s 10-day average closing stock price as of the fifth business day prior to the closing date, subject to a minimum price of ~~$43.58~~$23.95 per share and a maximum price of ~~$72.63~~$39.91 per share. Upon the closing of the transaction, ~~Summit~~Intervest will merge ~~with and~~ into the Company and ~~Summit Bank~~INB will merge ~~with and~~ into the Bank. Completion of the transaction is subject to certain closing ~~conditions. The transaction is expected to close on or about May 16, 2014.~~conditions, including receipt of customary regulatory approvals and the approval of the shareholders of Intervest.

The Company expects to continue growing through both itsde novo branching strategy and traditional acquisitions. With respect to itsde novo branching strategy, futurede novo branches are expected to be focused in the seven states in which the Company has retail banking offices, including Arkansas, Georgia, Texas, North Carolina, Florida, Alabama and South Carolina. With respect to traditional acquisitions, the Company is focusing primarily on opportunities in the seven states in which it operates retail banking offices, although the Company may consider opportunities outside this seven state area. The Company is seeking acquisitions that are either immediately accretive to book value, tangible book value, net income and diluted earnings per common share, or strategic in location, or both.

See Note 14 to the Consolidated Financial Statements for a discussion of certain recently issued and recently adopted accounting pronouncements.

This quarterly report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, other filings made by the Company with the SEC and other oral and written statements or reports by the Company and its management include certain forward-looking statements that are intended to be covered by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management’s expectations as well as certain assumptions and estimates made by, and information available to, management at that time. Those statements are subject to certain risks, uncertainties and other factors that may cause actual results to differ materially from those projected in such forward-looking statements. Forward-looking statements include, 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 merger and acquisition transactions; income from accretion of the FDIC loss share receivable, net of amortization of the FDIC clawback payable; other income from loss share and purchased non-covered loans; 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 acquisitions; problems with integrating or managing acquisitions; the effect of the announcements or completion of any pending or future mergers or acquisitions on customer relationships and operating results; opportunities to profitably deploy capital; plans for opening new offices or relocating or closing existing offices; opportunities and goals for future market share growth; expected capital expenditures; loan, lease and deposit growth, including growth from unfunded closed loans; changes in covered assets; changes in the volume, yield and value of the Company’s investment securities portfolio; conversion of the Company’s core banking software; availability of unused borrowings and other similar forecasts and statements of expectation. Words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “goal,” “hope,” “intend,” “look,” “may,” “plan,” “project,” “seek,” “target,” “trend,” “will,” “would,” and similar expressions, as they relate to the Company or its management, identify forward-looking statements. 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.

retain or grow loans and leases, including growth from unfunded closed loans; 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, and the effect of any such conditions 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, strengthen the capital of financial institutions, 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; the ability to keep pace with technological changes, including changes regarding cyber security; 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 quarterly report on Form 10-Q 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.

The following tables set forth selected consolidated financial data of the Company for the three months ended March 31, 2014 and 2013 and supplemental quarterly financial data of the Company for each of the most recent eight quarters beginning with the second quarter of 2012 through the first quarter of 2014. These tables are qualified in their entirety by the consolidated financial statements and related notes presented elsewhere in this report.

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 ALCO, which reports to the board of directors.

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, 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 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 additional 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 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) the timing and amount of cash flows expected to be received on covered loans, purchased non-covered loans, and the FDIC loss share receivable and (8) 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 typically 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, down 200 bps, down 300 bps and down 400 bps. Based on current conditions, the Company believes that modeling its change in net interest income assuming interest rates go down 100 bps, down 200 bps, down 300 bps and down 400 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 ~~April~~July 1, 2014. 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 or the impact of any ~~pending or~~ possible future acquisitions.

In the event of a shift in interest rates, management 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, leases and deposits.

An evaluation as of the end of the period covered by this quarterly report was carried out under the supervision and with the participation of the Company’s management, including the Company’s Chairman and Chief Executive Officer and the Company’s Chief Financial Officer and Chief Accounting Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures,” which are defined under SEC rules as controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within required time periods. Based upon that evaluation, the Company’s Chairman and Chief Executive Officer and its Chief Financial Officer and Chief Accounting Officer concluded that the Company’s disclosure controls and procedures were effective.

The Company’s management, including the Company’s Chairman and Chief Executive Officer and the Company’s Chief Financial Officer and Chief Accounting Officer, has evaluated any changes in the Company’s internal control over financial reporting that occurred during the quarterly period covered by this report and has concluded that there was no change during the quarterly period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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, styledRobert Walker, Ann B. Hines and Judith Belk vs. Bank of the Ozarks, Inc. and Bank of the Ozarks, Case No. CV-2011-777. In addition, on December 21, 2012, the Bank was served with a summons and complaint filed on December 20, 2012, in the Circuit Court of Pulaski County, Arkansas, Ninth Division, styledAudrey Muzingo v. Bank of the Ozarks, Case No. 60 CV 12-6043. The complaint in each case alleges that the Company and/or Bank have harmed the plaintiffs, current or former customers of the Bank, by improper, unfair and unconscionable assessment and collection of excessive overdraft fees from the plaintiffs. According to the complaints, 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. The complaint in each case 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 complaint in theWalker case also includes a count for conversion. Each of the complaints seeks to have the cases certified by the court as a class action for all Bank account holders similarly situated, and seeks 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 (defined as all Bank customers residing in Arkansas) as a result of the actions cited in the complaints, disgorgement of profits as a result of the alleged wrongful actions, and unspecified compensatory and statutory or punitive damages, together with pre-judgment interest, costs and plaintiffs’ attorneys’ fees.

The Company and Bank filed a motion to dismiss and to compel arbitration in theWalker case. The trial court denied the motion and found that the arbitration provision contained in the controlling Consumer Deposit Account Agreement was unconscionable and thus unenforceable on the grounds that the provision was the result of unequal bargaining power. The Company and Bank appealed the trial court’s ruling to the Arkansas Court of Appeals on an interlocutory basis. On September 18, 2013, a three-judge panel of the Arkansas Court of Appeals reversed the trial court’s ruling and remanded the case to the trial court for the purpose of entering an order compelling arbitration. On October 7, 2013, the plaintiffs filed petitions for reconsideration and review before the Arkansas Court of Appeals and Arkansas Supreme Court, respectively. On October 30, 2013, the Arkansas Court of Appeals denied the plaintiffs’ petition for reconsideration. In January 2014, the Arkansas Supreme Court granted the plaintiff’s petition for review. Oral arguments were presented to the Arkansas Supreme Court on May 1, 2014. On May 15, 2014, ~~and the Company and Bank expect a ruling from~~ the Arkansas Supreme Court vacated the Arkansas Court of Appeals’ decision, reversing and remanding the case to the trial court to determine, in the ~~second or~~first instance, whether there is a valid agreement to arbitrate disputes between the named plaintiffs and the Bank.

At this stage, the trial court must determine (i) whether there is a valid and binding agreement to arbitrate between the named plaintiffs and the Bank, (ii) whether the dispute at issue in theWalker case falls within the scope of the agreement to arbitrate, and, then, (iii) whether the named plaintiffs have a defense, such as unconscionability, to invalidate the agreement to arbitrate. The parties are in the process of conducting discovery related to the issue of arbitration in preparation for an evidentiary hearing to be conducted by the trial court on this issue. To date, an evidentiary hearing has not been scheduled, but one is expected to be conducted in the third quarter of 2014. ~~During the pendency of the appeal and review process, the plaintiff~~

The Plaintiff in theMuzingo case has agreed to stay the proceedings in that case pending the outcome of the hearing in theWalkercase. The Company and the Bank believe the ~~plaintiffs’~~Plaintiffs’ claims in each of these cases are unfounded and subject to meritorious defenses and intend to vigorously 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, (“district court”) 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 sought 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 added the Bank as a defendant in its petition 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.

On June 15, 2012, the district court granted the Bank’s motion for summary judgment. Subsequent to the district court’s granting of the Bank’s motion for summary judgment, the plaintiff filed a notice of nonsuit with prejudice with respect to its claims against the other two defendants, which was granted. In response, the Bank filed a notice of nonsuit without prejudice with respect to the Bank’s claim for attorneys’ fees and costs against the plaintiff as to its claims under the Texas Deceptive Trade Practices Act, which resulted in dismissal of that claim without prejudice. On or about August 23, 2012, the

plaintiff filed a Notice of Appeal with the district court, which appealed the summary judgment ruling to the Court of Appeals for the Fifth District of Texas at Dallas (“Court of Appeals”). On or about November 28, 2012, plaintiff filed an appellant’s brief with the Court of Appeals. Oral arguments were heard by the Court of Appeals on February 5, 2014. On March 18, 2014, the Court of Appeals affirmed the district court’s order granting the Bank’s motion for summary judgment. The plaintiff did not timely file a motion for rehearing with the Court of Appeals. Similarly, the plaintiff did not timely file a petition for review with the Supreme Court of Texas. Nevertheless, untimely requests for review may be granted by the Supreme Court of Texas for good cause shown. In the absence of an untimely request for review being granted by the Supreme Court of Texas, all matters related to this litigation have been concluded.

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. 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.

The discussion of the Company’s business and operations should be read together with the risk below and the risk factors contained in Item 1A of its Annual Report on Form 10-K for the year ended December 31, 2013, which describes various risks and uncertainties to which the Company is or may be subject. These risks and uncertainties have the potential to affect the Company’s business, financial condition, results of operations, and prospects in a material adverse manner.

The Company May Be Subject to Claims and Litigation Pertaining to Fiduciary Responsibility.

From time to time as part of the Company’s normal course of business, customers may make claims and take legal action against the Company based on its actions or inactions related to the Bank’s fiduciary responsibilities of its Trust and Wealth Management Division. If such claims and legal actions are not resolved in a manner favorable to the Company, they may result in financial liability and/or adversely affect the market perception of the Company and its products and services. Any financial liability or reputation damage could have a material adverse effect on the Company’s business, which, in turn, could have a material adverse effect on its financial condition and results of operations.

The Company had no unregistered sales of equity securities and did not purchase any shares of its common stock during the period covered by this report.

Reference is made to the Exhibit Index set forth immediately following the signature page of this report.

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



11.1		Earnings Per Share Computation (included in Note 4 to the Consolidated Financial Statements).

31.1		Certification of Chairman and Chief Executive Officer, pursuant to Section 302 of the Sarbanes Oxley Act of 2002, filed herewith.

31.2		Certification of Chief Financial Officer and Chief Accounting Officer, pursuant to Section 302 of the Sarbanes Oxley Act of 2002, filed herewith.

32.1		Certification of Chairman and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.

32.2		Certification of Chief Financial Officer and Chief Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation Linkbase

101.DEF		XBRL Taxonomy Definition Linkbase

101.LAB		XBRL Extension Label Linkbase

101.PRE		XBRL Taxonomy Extension Presentation Linkbase


ARKANSAS		71-0556208
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)


17901 CHENAL PARKWAY, LITTLE ROCK, ARKANSAS		72223
(Address of principal executive offices)		(Zip Code)


Class		Outstanding at ~~March 31,~~June 30, 2014
Common Stock, $0.01 par value per share		~~36,944,152~~79,662,150


PART I.	Financial Information

Item 1.	Financial Statements

	Consolidated Balance Sheets as of ~~March 31,~~June 30, 2014 and 2013 and December 31, 2013	1

	Consolidated Statements of Income for the Three Months Ended ~~March 31,~~June 30, 2014 and 2013 and the Six Months Ended June 30, 2014 and 2013	2

	Consolidated Statements of Comprehensive Income for the Three Months Ended ~~March 31,~~June 30, 2014 and 2013 and the Six Months Ended June 30, 2014 and 2013	3

	Consolidated Statements of Stockholders’ Equity for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2014 and 2013	4

	Consolidated Statements of Cash Flows for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2014 and 2013	5

	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34

	~~Selected and Supplemental Financial Data~~	7437

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	7683

Item 4.	Controls and Procedures	7784

PART II.	Other Information

Item 1.	Legal Proceedings	7885

Item 1A.	Risk Factors	7985

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7986

Item 3.	Defaults Upon Senior Securities	7986

Item 4.	Mine Safety Disclosures	7986

Item 5.	Other Information	7986

Item 6.	Exhibits	7986

Signature		8087

Exhibit Index		8188


	May 16, 2014
	As Recorded by Summit			Fair Value Adjustments			As Recorded by the Company
	(Dollars in thousands)
Assets acquired:
Cash, due from banks and interest earning deposits	$	84,106		$	(304	) a	$	83,802
Investment securities		242,149			765	b		242,914
Loans and leases		742,546			(24,718	) c		717,828
Allowance for loan losses		(13,183	)		13,183	c		0
Premises and equipment		13,773			(1,108	) d		12,665
Foreclosed assets		3,094			(1,088	) e		2,006
Accrued interest receivable and other assets		11,016			1,461	f		12,477
Bank owned life insurance		33,398			0			33,398
Core deposit intangible asset		0			15,340	g		15,340
Deferred income taxes		3,878			953	h		4,831

Total assets acquired		1,120,777			4,484			1,125,261


Liabilities assumed:
Deposits		965,687			4,074	i		969,761
Repurchase agreements with customers		16,515			0			16,515
Accrued interest payable and other liabilities		2,352			1,206	j		3,558

Total liabilities assumed		984,554			5,280			989,834

Net assets acquired	$	136,223		$	(796	)		135,427

Consideration paid:
Cash								42,451
Stock								166,402

Total consideration paid								208,853

Goodwill							$	73,426


	As Previously Reported			Recast Adjustment		As Recast
	(Dollars in thousands, except per share amounts)
December 31, 2013:
Deferred income tax asset valuation allowance	$	(4,102	)	$	4,102	$	0
Total stockholders’ equity before noncontrolling interest		846,102			4,102		850,204
Gain on merger and acquisition transaction		1,061			4,102		5,163
Net income available to common stockholders		87,135			4,102		91,237
Diluted earnings per common share	$	1.20		$	0.06	$	1.26


Contractual Maturities at March 31, 2014
Maturity	Amount
(Dollars in thousands)
2014	$	122,993
2015		150,413
2016		484,602
2017		430,883
2018		200,667
Thereafter		25,641

Total	$	1,415,199


Contractual Maturities at June 30, 2014
Maturity	Amount
(Dollars in thousands)
2014	$	89,442
2015		192,358
2016		475,201
2017		809,291
2018		226,279
Thereafter		40,903

Total	$	1,833,474


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.


	9/30/12			12/31/12			3/31/13			6/30/13			9/30/13			12/31/13			3/31/14			6/30/14
	(Dollars in thousands, except per share amounts)
Earnings Summary:
Net interest income	$	44,444		$	43,771		$	44,139		$	43,465		$	50,633		$	55,282		$	52,396		$	64,801
Federal tax (FTE) adjustment		2,087			2,009			2,020			2,076			2,161			2,372			2,424			2,737

Net interest income (FTE)		46,531			45,780			46,159			45,541			52,794			57,654			54,820			67,538
Provision for loan and lease losses		(3,080	)		(2,533	)		(2,728	)		(2,666	)		(3,818	)		(2,863	)		(1,304	)		(5,582	)
Non-interest income		14,491			18,848			16,357			18,987			22,102			18,592			20,360			17,388
Non-interest expense		(28,682	)		(29,891	)		(29,231	)		(29,901	)		(32,208	)		(34,728	)		(37,454	)		(37,878	)

Pretax income (FTE)		29,260			32,204			30,557			31,961			38,870			38,655			36,422			41,466
FTE adjustment		(2,087	)		(2,009	)		(2,020	)		(2,076	)		(2,161	)		(2,372	)		(2,424	)		(2,737	)
Provision for income taxes		(7,883	)		(9,519	)		(8,526	)		(9,506	)		(10,224	)		(11,893	)		(8,730	)		(12,251	)
Noncontrolling interest		(15	)		(9	)		(11	)		8			(33	)		8			8			8

Net income available to common stockholders	$	19,275		$	20,667		$	20,000		$	20,387		$	26,452		$	24,398		$	25,276		$	26,486

Earnings per common share – diluted*	$	0.28		$	0.29		$	0.28		$	0.29		$	0.36		$	0.33		$	0.34		$	0.34
Non-interest Income:
Service charges on deposit accounts	$	5,000		$	4,799		$	4,722		$	5,074		$	5,817		$	6,031		$	5,639		$	6,605
Mortgage lending income		1,672			1,483			1,741			1,643			1,276			967			954			1,126
Trust income		865			928			883			865			1,060			1,289			1,316			1,364
BOLI income		598			1,027			1,083			1,104			1,179			1,164			1,130			1,278
Accretion of FDIC loss share receivable, net of amortization of FDIC clawback payable		1,699			1,336			2,392			2,481			1,396			901			692			(741	)
Other income from loss share and purchased non-covered loans, net		2,270			3,194			2,155			3,689			2,484			4,825			3,311			3,629
Gains on investment securities		—			55			156			—			—			4			5			18
Gains on sales of other assets		1,425			2,431			1,974			3,110			2,501			1,801			974			1,448
Gains on merger and acquisition transactions		—			2,403			—			—			5,163			—			4,667			—
Other		962			1,192			1,251			1,021			1,226			1,610			1,672			2,661

Total non-interest income	$	14,491		$	18,848		$	16,357		$	18,987		$	22,102		$	18,592		$	20,360		$	17,388

Non-interest Expense:
Salaries and employee benefits	$	15,040		$	15,362		$	15,694		$	15,294		$	16,456		$	17,381		$	17,689		$	18,831
Net occupancy expense		4,105			4,160			4,514			4,370			4,786			5,039			5,044			5,707
Other operating expenses		9,028			9,860			8,455			9,669			10,178			11,427			13,908			12,221
Amortization of intangibles		509			509			568			568			788			881			813			1,119

Total non-interest expense	$	28,682		$	29,891		$	29,231		$	29,901		$	32,208		$	34,728		$	37,454		$	37,878

Allowance for Loan and Lease Losses:
Balance at beginning of period	$	38,862		$	38,672		$	38,738		$	38,422		$	39,372		$	41,660		$	42,945		$	43,861
Net charge-offs		(3,270	)		(2,467	)		(3,044	)		(1,716	)		(1,530	)		(1,578	)		(388	)		(2,485	)
Provision for loan and lease losses		3,080			2,533			2,728			2,666			3,818			2,863			1,304			5,582

Balance at end of period	$	38,672		$	38,738		$	38,422		$	39,372		$	41,660		$	42,945		$	43,861		$	46,958

Selected Ratios:
Net interest margin - FTE**		5.97	%		5.84	%		5.83	%		5.56	%		5.55	%		5.63	%		5.46	%		5.62	%
Efficiency ratio		47.00			46.25			46.76			46.34			43.00			45.55			49.82			44.60
Net charge-offs to average loans and leases**(1)		0.31			0.28			0.19			0.12			0.10			0.14			0.03			0.19
Nonperforming loans and leases to total loans and leases(2)		0.43			0.43			0.40			0.66			0.41			0.33			0.42			0.58
Nonperforming assets to total assets(2)		0.59			0.57			0.50			0.66			0.47			0.43			0.57			0.62
Allowance for loan and lease losses to total loans and leases(2)		1.90			1.83			1.78			1.61			1.65			1.63			1.58			1.48
Loans and leases past due 30 days or more, including past due non-accrual loans and leases, to total loans and leases(2)		0.61			0.73			0.56			0.74			0.54			0.45			0.75			0.63


	Three Months Ended March 31, 2014 Over Three Months Ended March 31, 2013
				Yield/			Net
	Volume			Rate			Change
	(Dollars in thousands)
Increase (decrease) in:
Interest income – FTE:
Interest earning deposits and federal funds sold	$	(5	)	$	1		$	(4	)
Investment securities:
Taxable		1,163			(88	)		1,075
Tax-exempt – FTE		1,156			(152	)		1,004
Loans and leases – FTE		6,694			(3,109	)		3,585
Purchased non-covered loans		6,735			(244	)		6,491
Covered loans		(6,878	)		3,419			(3,459	)

Total interest income – FTE		8,865			(173	)		8,692

Interest expense:
Savings and interest bearing transaction		219			(16	)		203
Time deposits of $100,000 or more		30			(84	)		(54	)
Other time deposits		19			(133	)		(114	)
Repurchase agreements with customers		6			(1	)		5
Other borrowings		1			5			6
Subordinated debentures		—			(15	)		(15	)

Total interest expense		275			(244	)		31

Increase in net interest income – FTE	$	8,590		$	71		$	8,661


	Three Months Ended June 30, 2014 Over Three Months Ended June 30, 2013									Six Months Ended June 30, 2014 Over Six Months Ended June 30, 2013
	Volume			Yield/ Rate			Net Change			Volume			Yield/ Rate			Net Change
	(Dollars in thousands)
Increase (decrease) in:
Interest income – FTE:
Interest earning deposits and federal funds sold	$	32		$	1		$	33		$	32		$	(4	)	$	28
Investment securities:
Taxable		1,554			53			1,607			2,612			69			2,681
Tax-exempt – FTE		1,968			(237	)		1,731			3,101			(366	)		2,735
Non-purchased loans and leases – FTE		8,500			(2,331	)		6,169			15,197			(5,445	)		9,752
Purchased non-covered loans		13,401			(127	)		13,274			20,164			(399	)		19,765
Covered loans		(8,836	)		8,486			(350	)		(15,620	)		11,811			(3,809	)

Total interest income – FTE		16,619			5,845			22,464			25,486			5,666			31,152


Interest expense:
Savings and interest bearing transaction		425			40			465			644			23			667
Time deposits of $100,000 or more		91			(53	)		38			122			(138	)		(16	)
Other time deposits		55			(105	)		(50	)		76			(239	)		(163	)
Repurchase agreements with customers		6			1			7			12			—			12
Other borrowings		(55	)		63			8			(53	)		68			15
Subordinated debentures		—			(1	)		(1	)		—			(17	)		(17	)

Total interest expense		522			(55	)		467			801			(303	)		498


Increase in net interest income – FTE	$	16,097		$	5,900		$	21,997		$	24,685		$	5,969		$	30,654


	Three Months Ended March 31,
	2014		2013
	(Dollars in thousands)
Service charges on deposit accounts	$	5,639	$	4,722
Mortgage lending income		954		1,741
Trust income		1,316		883
BOLI income		1,130		1,083
Accretion of FDIC loss share receivable, net of amortization of FDIC clawback payable		692		2,392
Other income from loss share and purchased non-covered loans, net		3,311		2,155
Gains on investment securities		5		156
Gains on sales of other assets		974		1,974
Gain on merger and acquisition transaction		4,667		—
Other		1,672		1,251

Total non-interest income	$	20,360	$	16,357


Date of FDIC-Assisted Acquisition	Failed Financial Institution	Headquarters Location
March 26, 2010	Unity National Bank (“Unity”)	Cartersville, Georgia
July 16, 2010	Woodlands Bank (“Woodlands”)	Bluffton, South Carolina
September 10, 2010	Horizon Bank (“Horizon”)	Bradenton, Florida
December 17, 2010	Chestatee State Bank (“Chestatee”)	Dawsonville, Georgia
January 14, 2011	Oglethorpe Bank (“Oglethorpe”)	Brunswick, Georgia
April 29, 2011	First Choice Community Bank (“First Choice”)	Dallas, Georgia
April 29, 2011	The Park Avenue Bank (“Park Avenue”)	Valdosta, Georgia


	6/30/12			9/30/12			12/31/12			3/31/13			6/30/13			9/30/13			12/31/13			3/31/14
Earnings Summary:
Net interest income	$	42,298		$	44,444		$	43,771		$	44,139		$	43,465		$	50,633		$	55,282		$	52,396
Federal tax (FTE) adjustment		2,151			2,087			2,009			2,020			2,076			2,161			2,372			2,424

Net interest income (FTE)		44,449			46,531			45,780			46,159			45,541			52,794			57,654			54,820
Provision for loan and lease losses		(3,055	)		(3,080	)		(2,533	)		(2,728	)		(2,666	)		(3,818	)		(2,863	)		(1,304	)
Non-interest income		15,710			14,491			18,848			16,357			18,987			18,000			18,592			20,360
Non-interest expense		(27,282	)		(28,682	)		(29,891	)		(29,231	)		(29,901	)		(32,208	)		(34,728	)		(37,454	)

Pretax income (FTE)		29,822			29,260			32,204			30,557			31,961			34,768			38,655			36,422
FTE adjustment		(2,151	)		(2,087	)		(2,009	)		(2,020	)		(2,076	)		(2,161	)		(2,372	)		(2,424	)
Provision for income taxes		(8,584	)		(7,883	)		(9,519	)		(8,526	)		(9,506	)		(10,224	)		(11,893	)		(8,730	)
Noncontrolling interest		5			(15	)		(9	)		(11	)		8			(33	)		8			8

Net income available to common stockholders	$	19,092		$	19,275		$	20,667		$	20,000		$	20,387		$	22,350		$	24,398		$	25,276

Earnings per common share – diluted	$	0.55		$	0.55		$	0.59		$	0.56		$	0.57		$	0.61		$	0.66		$	0.68
Non-interest Income:
Service charges on deposit accounts	$	4,908		$	5,000		$	4,799		$	4,722		$	5,074		$	5,817		$	6,031		$	5,639
Mortgage lending income		1,328			1,672			1,483			1,741			1,643			1,276			967			954
Trust income		888			865			928			883			865			1,060			1,289			1,316
BOLI income		567			598			1,027			1,083			1,104			1,179			1,164			1,130
Accretion of FDIC loss share receivable, net of amortization of FDIC clawback payable		2,035			1,699			1,336			2,392			2,481			1,396			901			692
Other income from loss share and purchased non-covered loans, net		3,197			2,270			3,194			2,155			3,689			2,484			4,825			3,311
Gains on investment securities		402			—			55			156			—			—			4			5
Gains on sales of other assets		1,397			1,425			2,431			1,974			3,110			2,501			1,801			974
Gains on merger and acquisition transactions		—			—			2,403			—			—			1,061			—			4,667
Other		988			962			1,192			1,251			1,021			1,226			1,610			1,672

Total non-interest income	$	15,710		$	14,491		$	18,848		$	16,357		$	18,987		$	18,000		$	18,592		$	20,360

Non-interest Expense:
Salaries and employee benefits	$	14,574		$	15,040		$	15,362		$	15,694		$	15,294		$	16,456		$	17,381		$	17,689
Net occupancy expense		3,650			4,105			4,160			4,514			4,370			4,786			5,039			5,044
Other operating expenses		8,549			9,028			9,860			8,455			9,669			10,178			11,427			13,908
Amortization of intangibles		509			509			509			568			568			788			881			813

Total non-interest expense	$	27,282		$	28,682		$	29,891		$	29,231		$	29,901		$	32,208		$	34,728		$	37,454

Allowance for Loan and Lease Losses:
Balance at beginning of period	$	38,632		$	38,862		$	38,672		$	38,738		$	38,422		$	39,373		$	41,660		$	42,945
Net charge-offs		(2,825	)		(3,270	)		(2,467	)		(3,044	)		(1,715	)		(1,531	)		(1,578	)		(388	)
Provision for loan and lease losses		3,055			3,080			2,533			2,728			2,666			3,818			2,863			1,304

Balance at end of period	$	38,862		$	38,672		$	38,738		$	38,422		$	39,373		$	41,660		$	42,945		$	43,861

Selected Ratios:
Net interest margin—FTE*		5.84	%		5.97	%		5.84	%		5.83	%		5.56	%		5.55	%		5.63	%		5.46	%
Efficiency ratio		45.35			47.00			46.25			46.76			46.34			45.49			45.55			49.82
Net charge-offs to average loans and leases*(1)		0.18			0.32			0.28			0.19			0.11			0.09			0.12			0.02
Nonperforming loans and leases to total loans and leases(2)		0.49			0.43			0.43			0.40			0.66			0.41			0.33			0.42
Nonperforming assets to total assets(2)		0.63			0.59			0.57			0.50			0.66			0.47			0.43			0.57
Allowance for loan and lease losses to total loans and leases(2)		1.96			1.90			1.83			1.78			1.61			1.65			1.63			1.58
Loans and leases past due 30 days or more, including past due non-accrual loans and leases, to total loans and leases(2)		0.74			0.61			0.73			0.56			0.74			0.54			0.45			0.75


Shift in	~~% Change in~~
Interest Rates	~~Projected Baseline~~
~~(in~~ (in bps)	% Change in Projected Baseline Net Interest Income
+400		~~6.1~~8.0	%
+300		~~4.1~~5.6
+200		~~2.2~~3.1
+100		~~0.8~~1.2
-100		Not meaningful
-200		Not meaningful
-300		Not meaningful
-400		Not meaningful


						Bank of the Ozarks, Inc.

DATE: ~~May 9,~~August 7, 2014						/s/ Greg McKinney
						Greg McKinney
						Chief Financial Officer and
						Chief Accounting Officer


Exhibit Number

2.1		Agreement and Plan of Merger among Bank of the Ozarks, Inc., Bank of the Ozarks and The First National Bank of Shelby, dated as of January 24, 2013 (previously filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K, as amended, filed with the Commission on January 25, 2013, and incorporated herein by this reference).

2.2		Amendment No. 1 to the Agreement and Plan of Merger among Bank of the Ozarks, Inc. Bank of the Ozarks and The First National Bank of Shelby, dated as of February 5, 2013 (previously filed as Exhibit 2(b) to the Company’s Annual Report on Form 10-K filed with the Commission on February 28, 2013, and incorporated herein by this reference).

2.3		Agreement and Plan of Merger among Bank of the Ozarks, Inc., Bank of the Ozarks, Summit Bancorp, Inc. and Summit Bank, dated as of January 30, 2014 (previously filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 30, 2014, and incorporated herein by this reference). Pursuant to Item 601(b)(2) of Regulation S-K, certain schedules to this agreement have not been filed with this exhibit. The schedules contain various items relating to the business of and the representations and warranties made by Summit Bancorp, Inc. and Summit Bank. The Company agrees to furnish supplementally any omitted schedule to the Commission upon request.

2.4		Agreement and Plan of Merger among Bank of the Ozarks, Inc., Bank of the Ozarks, Intervest Bancshares Corporation and Intervest National Bank, dated as of July 31, 2014 (previously filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 31, 2014, and incorporated herein by this reference).

3.1		Amended and Restated Articles of Incorporation of the Registrant, dated May 22, 1997 (previously filed as Exhibit 3.1 to the Company’s Registration Statement on Form S-1 filed with the Commission on May 22, 1997, as amended, Commission File No. 333-27641, and incorporated herein by this reference).

3.2		Articles of Amendment to the Amended and Restated Articles of Incorporation of the Registrant dated December 9, 2003 (previously filed as Exhibit 3.2 to the Company’s Annual Report on Form 10-K filed with the Commission on March 12, 2004 for the year ended December 31, 2003, and incorporated herein by this reference).

3.3		Articles of Amendment to the Amended and Restated Articles of Incorporation of the Registrant dated December 10, 2008 (previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on December 10, 2008, and incorporated herein by this reference).

3.4		Articles of Amendment to the Amended and Restated Articles of Incorporation of Registrant dated May 19, 2014 (previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on May 20, 2014).

3.5		Amended and Restated Bylaws of the Registrant dated December 11, 2007 (previously filed as Exhibit 3(ii) to the Company’s Current Report on Form 8-K filed with the Commission on December 11, 2007, and incorporated herein by this reference).

3.6		Amendment No. 1 to the Amended and Restated Bylaws of Registrant dated May 19, 2014 (previously filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the Commission on May 20, 2014).

10.1		Bank of the Ozarks, Inc. 2009 Restricted Stock and Incentive Plan, as amended and restated effective May 19, 2014 (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on May 20, 2014).

10.2		Amendment to the Bank of the Ozarks, Inc. Stock Option Plan adopted May 19, 2014 (previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on May 20, 2014).

10.3		Bank of the Ozarks, Inc. 2014 Stock-Based Performance Award Plan (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on June 25, 2014).

10.4		Bank of the Ozarks, Inc. 2014 Executive Cash Bonus Plan (previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on June 25, 2014).

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