UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended ~~June~~September 30, 2014

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

For the transition period from to .

Commission File Number 0-22759

BANK OF THE OZARKS, INC.

(Exact name of registrant as specified in its charter)


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)

Registrant’s telephone number, including area code: (501) 978-2265

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.


Class		Outstanding at ~~June~~September 30, 2014
Common Stock, $0.01 par value per share		~~79,662,150~~79,704,950

BANK OF THE OZARKS, INC.

FORM 10-Q

~~June~~September 30, 2014

INDEX



PART I.	Financial Information

Item 1.	Financial Statements

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

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

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

	Consolidated Statements of Stockholders’ Equity for the ~~Six~~Nine Months Ended ~~June~~September 30, 2014 and 2013	4

	Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~June~~September 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	3738

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	8384

Item 4.	Controls and Procedures	8485

PART II.	Other Information

Item 1.	Legal Proceedings	85

~~Item 1A.~~	~~Risk Factors~~	85

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	86

Item 1A.	Risk Factors	87

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	87

Item 3.	Defaults Upon Senior Securities	8687

Item 4.	Mine Safety Disclosures	8687

Item 5.	Other Information	8687

Item 6.	Exhibits	8687

Signature		8788

Exhibit Index		8889

PART I. FINANCIAL INFORMATION

~~PART I.~~

~~FINANCIAL INFORMATION~~

Item 1.

Financial Statements

BANK OF THE OZARKS, INC.

CONSOLIDATED BALANCE SHEETS


	Unaudited									Unaudited
	June 30,						December 31, 2013			September 30,						December 31,
	2014			2013			December 31, 2013			2014			2013			2013
	(Dollars in thousands, except per share amounts)									(Dollars in thousands, except per share amounts)
ASSETS
Cash and due from banks	$	107,240		$	59,245		$	195,094		$	109,877		$	123,291		$	195,094
Interest earning deposits		3,448			1,647			881			2,207			1,167			881

Cash and cash equivalents		110,688			60,892			195,975			112,084			124,458			195,975
Investment securities - available for sale (“AFS”)		892,129			490,748			669,384			859,876			671,393			669,384
Non-purchased loans and leases		3,171,585			2,443,342			2,632,565			3,639,142			2,522,589			2,632,565
Purchased loans not covered by Federal Deposit Insurance Corporation (“FDIC”) loss share agreements (“purchased non-covered loans”)		1,127,689			31,027			372,723			1,030,988			399,058			372,723
Loans covered by FDIC loss share agreements (“covered loans”)		276,380			480,752			351,791			248,802			409,319			351,791
Allowance for loan and lease losses		(46,958	)		(39,372	)		(42,945	)		(49,606	)		(41,660	)		(42,945	)

Net loans and leases		4,528,696			2,915,749			3,314,134			4,869,326			3,289,306			3,314,134
FDIC loss share receivable		50,679			112,716			71,854			36,583			89,642			71,854
Premises and equipment, net		265,061			225,838			245,472			267,888			245,055			245,472
Foreclosed assets not covered by FDIC loss share agreements		20,581			10,451			11,851			14,781			11,647			11,851
Foreclosed assets covered by FDIC loss share agreements		35,775			46,157			37,960			27,882			40,452			37,960
Accrued interest receivable		21,143			13,837			14,359			20,966			15,227			14,359
Bank owned life insurance (“BOLI”)		179,277			126,031			143,473			180,667			142,311			143,473
Intangible assets, net		108,640			10,690			19,158			107,108			20,039			19,158
Other, net		85,306			30,523			67,550			83,199			61,037			67,550

Total assets	$	6,297,975		$	4,043,632		$	4,791,170		$	6,580,360		$	4,710,567		$	4,791,170

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Demand non-interest bearing	$	1,058,210		$	591,879		$	746,320		$	1,089,415		$	724,413		$	746,320
Savings and interest bearing transaction		2,748,929			1,665,789			2,073,497			2,787,958			1,952,617			2,073,497
Time		1,176,758			726,961			897,210			1,262,332			977,656			897,210

Total deposits		4,983,897			2,984,629			3,717,027			5,139,705			3,654,686			3,717,027
Repurchase agreements with customers		55,999			24,704			53,103			73,942			50,254			53,103
Other borrowings		280,875			391,690			280,895			352,616			280,905			280,895
Subordinated debentures		64,950			64,950			64,950			64,950			64,950			64,950
FDIC clawback payable		26,533			25,596			25,897			26,676			25,705			25,897
Accrued interest payable and other liabilities		32,063			17,493			16,768			43,452			18,251			16,768

Total liabilities		5,444,317			3,509,062			4,158,640			5,701,341			4,094,751			4,158,640


Commitments and contingencies

Stockholders’ equity:
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
Preferred stock; $0.01 par value; 1,000,000 shares authorized; no shares outstanding at September 30, 2014 and 2013 or at December 31, 2013											0			0			0
Common stock; $0.01 par value; 125,000,000 shares authorized; 79,704,950, 73,403,418 and 73,711,704 shares issued and outstanding at September 30, 2014, September 30, 2013 and December 31, 2013, respectively											797			735			737
Additional paid-in capital		315,267			78,746			143,017			317,390			139,768			143,017
Retained earnings		524,134			452,568			488,978			546,667			472,288			488,978
Accumulated other comprehensive income (loss)		10,006			(898	)		(3,672	)		10,724			(453	)		(3,672	)

Total stockholders’ equity before noncontrolling interest		850,204			531,125			629,060			875,578			612,338			629,060
Noncontrolling interest		3,454			3,445			3,470			3,441			3,478			3,470

Total stockholders’ equity		853,658			534,570			632,530			879,019			615,816			632,530

Total liabilities and stockholders’ equity	$	6,297,975		$	4,043,632		$	4,791,170		$	6,580,360		$	4,710,567		$	4,791,170

See accompanying notes to consolidated financial statements.

BANK OF THE OZARKS, INC.

CONSOLIDATED STATEMENTS OF INCOME

Unaudited


	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June 30,						June 30,						September 30,						September 30,
	2014			2013			2014			2013			2014			2013			2014			2013
	(Dollars in thousands, except per share amounts)												(Dollars in thousands, except per share amounts)
Interest income:
Non-purchased loans and leases	$	36,833		$	30,719		$	70,247		$	60,598		$	43,153		$	33,183		$	113,400		$	93,782
Purchased non-covered loans		13,998			724			21,478			1,713			18,056			5,653			39,534			7,366
Covered loans		11,130			11,480			20,535			24,344			10,630			10,501			31,166			34,845
Investment securities:
Taxable		2,790			1,183			5,149			2,468			2,986			1,988			8,135			4,456
Tax-exempt		4,974			3,849			9,371			7,593			5,247			4,006			14,617			11,599
Deposits with banks and federal funds sold		35			2			38			10			11			11			50			21

Total interest income		69,760			47,957			126,818			96,726			80,083			55,342			206,902			152,069


Interest expense:
Deposits		1,827			1,374			3,408			2,920			2,285			1,537			5,693			4,457
Repurchase agreements with customers		13			6			25			13			15			7			40			21
Other borrowings		2,692			2,684			5,347			5,332			2,736			2,732			8,083			8,064
Subordinated debentures		427			428			840			857			426			433			1,267			1,290

Total interest expense		4,959			4,492			9,620			9,122			5,462			4,709			15,083			13,832


Net interest income		64,801			43,465			117,198			87,604			74,621			50,633			191,819			138,237
Provision for loan and lease losses		(5,582	)		(2,666	)		(6,887	)		(5,394	)		(3,687	)		(3,818	)		(10,574	)		(9,212	)

Net interest income after provision for loan and lease losses		59,219			40,799			110,311			82,210			70,934			46,815			181,245			129,025


Non-interest income:
Service charges on deposit accounts		6,605			5,074			12,244			9,796			7,356			5,817			19,601			15,613
Mortgage lending income		1,126			1,643			2,080			3,384			1,728			1,276			3,807			4,660
Trust income		1,364			865			2,681			1,748			1,419			1,060			4,099			2,808
BOLI income		1,278			1,104			2,408			2,186			1,390			1,179			3,799			3,365
Accretion (amortization) of FDIC loss share receivable, net of amortization of FDIC clawback payable		(741	)		2,481			(49	)		4,873			(562	)		1,396			(611	)		6,269
Other income from loss share and purchased non-covered loans, net		3,629			3,689			6,940			5,844			3,369			2,484			10,309			8,328
Net gains on investment securities		18			0			23			156			43			0			67			156
Gains on sales of other assets		1,448			3,110			2,422			5,084			1,688			2,501			4,111			7,586
Gain on merger and acquisition transaction		0			0			4,667			0
Gain on merger and acquisition transactions														0			5,163			4,667			5,163
Other		2,661			1,021			4,333			2,273			2,817			1,226			7,147			3,498

Total non-interest income		17,388			18,987			37,749			35,344			19,248			22,102			56,996			57,446


Non-interest expense:
Salaries and employee benefits		18,831			15,294			36,520			30,989			20,876			16,456			57,396			47,445
Net occupancy and equipment		5,707			4,370			10,751			8,884			6,823			4,786			17,574			13,670
Other operating expenses		13,340			10,237			28,062			19,259			14,824			10,966			42,886			30,226

Total non-interest expense		37,878			29,901			75,333			59,132			42,523			32,208			117,856			91,341


Income before taxes		38,729			29,885			72,727			58,422			47,659			36,709			120,385			95,130
Provision for income taxes		12,251			9,506			20,981			18,032			15,579			10,224			36,559			28,255

Net income		26,478			20,379			51,746			40,390			32,080			26,485			83,826			66,875
Earnings attributable to noncontrolling interest		8			8			16			(3	)		13			(33	)		29			(36	)

Net income available to common stockholders	$	26,486		$	20,387		$	51,762		$	40,387		$	32,093		$	26,452		$	83,855		$	66,839


Basic earnings per common share	$	0.35		$	0.29		$	0.69		$	0.57		$	0.40		$	0.36		$	1.09		$	0.94


Diluted earnings per common share	$	0.34		$	0.29		$	0.68		$	0.57		$	0.40		$	0.36		$	1.08		$	0.93


Dividends declared per common share	$	0.115		$	0.085		$	0.225		$	0.16		$	0.12		$	0.095		$	0.345		$	0.255

See accompanying notes to consolidated financial statements.

BANK OF THE OZARKS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Unaudited


	Three Months Ended						Six Months Ended
	June 30,						June 30,						Three Months Ended						Nine Months Ended
	2014			2013			2014			2013			September 30,						September 30,
	(Dollars in thousands)												2014			2013			2014			2013
													(Dollars in thousands)
Net income	$	26,478		$	20,379		$	51,746		$	40,390		$	32,080		$	26,485		$	83,826		$	66,875
Other comprehensive income (loss):
Unrealized gains and losses on investment securities AFS		10,786			(16,335	)		22,529			(19,063	)		1,223			732			23,754			(18,333	)
Tax effect of unrealized gains and losses on investment securities AFS		(4,231	)		6,408			(8,837	)		7,476			(479	)		(287	)		(9,317	)		7,191
Reclassification of gains and losses on investment securities AFS included in net income		(18	)		0			(23	)		(156	)		(43	)		0			(67	)		(156	)
Tax effect of reclassification of gains and losses on investment securities AFS included in net income		7			0			9			62			17			0			26			62

Total other comprehensive income (loss)		6,544			(9,927	)		13,678			(11,681	)		718			445			14,396			(11,236	)
																					��
Total comprehensive income	$	33,022		$	10,452		$	65,424		$	28,709		$	32,798		$	26,930		$	98,222		$	55,639

See accompanying notes to consolidated financial statements.

BANK OF THE OZARKS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Unaudited


	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	$	706	$	72,690	$	423,485		$	10,783		$	3,442		$	511,106		$	706	$	72,690	$	423,485		$	10,783		$	3,442		$	511,106
Net income		0		0		40,390			0			0			40,390			0		0		66,875			0			0			66,875
Earnings attributable to noncontrolling interest		0		0		(3	)		0			3			0			0		0		(36	)		0			36			0
Total other comprehensive income (loss)		0		0		0			(11,681	)		0			(11,681	)
Total other comprehensive loss																		0		0		0			(11,236	)		0			(11,236	)
Common stock dividends		0		0		(11,304	)		0			0			(11,304	)		0		0		(18,036	)		0			0			(18,036	)
Issuance of 332,400 split-adjusted shares of common stock for exercise of stock options		3		2,436		0			0			0			2,439
Issuance of 356,800 split-adjusted shares of common stock for exercise of stock options																		4		2,613		0			0			0			2,617
Excess tax benefit on exercise and forfeiture of stock options		0		1,374		0			0			0			1,374			0		1,458		0			0			0			1,458
Issuance of 2,514,770 split-adjusted shares of common stock for acquisition of The First National Bank of Shelby, net of issuance costs of $285,000																		25		59,769		0			0			0			59,794
Stock-based compensation expense		0		2,246		0			0			0			2,246			0		3,238		0			0			0			3,238

Balances – June 30, 2013	$	709	$	78,746	$	452,568		$	(898	)	$	3,445		$	534,570

Balances – September 30, 2013, as recast																	$	735	$	139,768	$	472,288		$	(453	)	$	3,478		$	615,816

Balances – January 1, 2014, as recast		737		143,017		488,978			(3,672	)		3,470			632,530		$	737	$	143,017	$	488,978		$	(3,672	)	$	3,470		$	632,530
Net income		0		0		51,746			0			0			51,746			0		0		83,826			0			0			83,826
Earnings attributable to noncontrolling interest		0		0		16			0			(16	)		0			0		0		29			0			(29	)		0
Total other comprehensive income (loss)		0		0		0			13,678			0			13,678
Total other comprehensive income																		0		0		0			14,396			0			14,396
Common stock dividends		0		0		(16,606	)		0			0			(16,606	)		0		0		(26,166	)		0			0			(26,166	)
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
Issuance of 228,600 split-adjusted shares of common stock for exercise of stock options																		2		2,065		0			0			0			2,067
Forfeiture of 1,200 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		1,373		0			0			0			1,373			0		1,649		0			0			0			1,649
Stock-based compensation expense		0		3,050		0			0			0			3,050			0		4,402		0			0			0			4,402
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
Issuance of 5,765,846 split-adjusted shares of common stock for acquisition of Summit Bancorp, Inc., net of issuance costs of $87,000																		58		166,257		0			0			0			166,315

Balances – June 30, 2014	$	797	$	315,267	$	524,134		$	10,006		$	3,454		$	853,658
Balances – September 30, 2014																	$	797	$	317,390	$	546,667		$	10,724		$	3,441		$	879,019

See accompanying notes to consolidated financial statements

BANK OF THE OZARKS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited


	Six Months Ended						Nine Months Ended
	June 30,						September 30,
	2014			2013			2014			2013
	(Dollars in thousands)						(Dollars in thousands)
Cash flows from operating activities:
Net income	$	51,746		$	40,390		$	83,826		$	66,875
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		3,816			3,530			5,968			5,317
Amortization		1,932			1,429			3,464			1,924
Earnings attributable to noncontrolling interest		16			(3	)		29			(36	)
Provision for loan and lease losses		6,887			5,394			10,574			9,212
Provision for losses on foreclosed assets		863			191			862			1,072
Net amortization of investment securities AFS		301			379			431			450
Net gains on investment securities AFS		(23	)		(156	)		(67	)		(156	)
Originations of mortgage loans held for sale		(90,110	)		(121,484	)		(152,767	)		(172,210	)
Proceeds from sales of mortgage loans held for sale		83,337			138,764			154,409			191,570
Accretion of covered loans		(20,535	)		(24,344	)		(31,166	)		(34,845	)
Accretion of purchased non-covered loans		(21,478	)		(1,713	)		(39,534	)		(7,366	)
(Accretion)/amortization of FDIC loss share receivable, net of amortization of FDIC clawback payable		49			(4,873	)		611			(6,269	)
Gains on sales of other assets		(2,422	)		(5,084	)		(4,111	)		(7,586	)
Gain on merger and acquisition transaction		(4,667	)		0
Gain on merger and acquisition transactions								(4,667	)		(5,163	)
Deferred income tax benefit		(3,407	)		(245	)		(6,625	)		(2,070	)
Increase in cash surrender value of BOLI		(2,408	)		(2,186	)		(3,799	)		(3,365	)
Excess tax benefit on exercise and forfeiture of stock options		(1,373	)		(1,374	)		(1,649	)		(1,458	)
Stock-based compensation expense		3,050			2,246			4,402			3,238
Changes in assets and liabilities:
Accrued interest receivable		(2,049	)		(635	)		(1,872	)		(900	)
Other assets, net		3,449			(364	)		5,496			2,473
Accrued interest payable and other liabilities		13,094			3,677			24,396			2,137

Net cash provided by operating activities		20,068			33,539			48,211			42,844

Cash flows from investing activities:
Proceeds from sales of investment securities AFS		48,394			999			54,957			999
Proceeds from maturities/calls/paydowns of investment securities AFS		29,706			52,322			68,349			71,860
Purchases of investment securities AFS		(35,109	)		(74,659	)		(46,618	)		(124,193	)
Net advances on non-purchased loans and leases		(539,695	)		(345,499	)		(1,017,513	)		(428,273	)
Payments received on purchased non-covered loans		138,949			12,220			253,347			37,666
Payments received on covered loans		68,454			110,257			97,915			177,094
Payments received from FDIC under loss share agreements		16,076			45,745			24,810			66,993
Other net decreases in covered assets and FDIC loss share receivable		9,246			14,665			15,267			21,634
Purchases of premises and equipment		(4,586	)		(5,939	)		(10,352	)		(7,815	)
Proceeds from sales of other assets		30,166			27,216			54,350			47,975
Cash invested in unconsolidated investments		(2,320	)		(104	)
Cash received from (invested) in unconsolidated investments								1,320			(571	)
Net cash received in merger and acquisition transactions		121,918			0			121,918			56,786

Net cash used by investing activities		(118,801	)		(162,777	)		(382,250	)		(79,845	)

Cash flows from financing activities:
Net increase (decrease) in deposits		41,190			(116,426	)		196,998			(46,987	)
Net (repayments of) proceeds from other borrowings		(464	)		110,926
Net decrease in repurchase agreements with customers		(13,619	)		(4,846	)
Net proceeds from other borrowings								71,276			142
Net increase in repurchase agreements with customers								4,324			14,298
Proceeds from exercise of stock options		1,572			2,439			2,067			2,617
Excess tax benefit on exercise and forfeiture of stock options		1,373			1,374			1,649			1,458
Cash dividends paid on common stock		(16,606	)		(11,304	)		(26,166	)		(18,036	)

Net cash provided (used) by financing activities		13,446			(17,837	)		250,148			(46,508	)

Net decrease in cash and cash equivalents		(85,287	)		(147,075	)		(83,891	)		(83,509	)
Cash and cash equivalents – beginning of period		195,975			207,967			195,975			207,967

Cash and cash equivalents – end of period	$	110,688		$	60,892		$	112,084		$	124,458

See accompanying notes to consolidated financial statements.

BANK OF THE OZARKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

1.	Organization and Principles of Consolidation

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 ~~June~~September 30, 2014, the Company had ~~164~~165 offices, including 88 in Arkansas, 28 in Georgia, 21 in Texas, 1617 in North Carolina, five in Florida, three in Alabama, and one office each in South Carolina, New York and California.

2.	Basis of Presentation

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 ~~six~~nine months ended ~~June~~September 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.

3.	Acquisitions

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. At September 30, 2014, INB reported approximately $1.51 billion in total assets, approximately $1.18 billion in loans, approximately $0.31 million in investment securities and approximately $1.21 billion in deposits.

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 Intervest’s stockholders.

Summit Bancorp, Inc.

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.


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

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


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

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

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

Consideration paid:
Cash								42,451									42,451
Stock								166,402									166,402

Total consideration paid								208,853									208,853

Goodwill							$	73,426								$	73,426

Explanation of fair value adjustments


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

Adjustment reflects the fair value adjustment based on the Company’s pricing of the acquired investment securities portfolio.

Adjustment reflects the fair value adjustment based on the Company’s evaluation of the acquired loan portfolio and to eliminate the recorded allowance for loan losses.

Adjustment reflects the fair value adjustment based on the Company’s evaluation of the premises and equipment acquired.

Adjustment reflects the fair value adjustment based on the Company’s evaluation of the acquired foreclosed assets.

Adjustment reflects the fair value adjustment based on the Company’s evaluation of accrued interest receivable and other assets.

Adjustment reflects the fair value adjustment for the core deposit intangible asset recorded as a result of the acquisition.

This adjustment reflects the differences in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes.

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

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

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~~$10.9 million of net interest income and ~~$2.8~~$5.0 million of net income to the Company’s results of operations for ~~both~~ the three months ended September 30, 2014, and ~~six~~contributed $16.6 million of net interest income and $7.4 million of net income to the Company’s results of operations for the nine months ended ~~June~~September 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.


	Six Months Ended June 30,
	2014		2013		Nine Months Ended September 30,
	(Dollars in thousands, except per share amounts)				2014		2013
					(Dollars in thousands, except per share amounts)
Net interest income – pro forma (unaudited)	$	133,828	$	109,995	$	208,758	$	171,824
Net income – pro forma (unaudited)	$	58,954	$	49,352	$	91,402	$	81,787
Diluted earnings per common share – pro forma (unaudited)	$	0.73	$	0.64	$	1.14	$	1.05

Bancshares, Inc.

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

Explanation of fair value adjustments


a-		Adjustment reflects the fair value adjustment based on the Company’s pricing of the acquired investment securities portfolio.

Adjustment reflects the fair value adjustment based on the Company’s evaluation of the acquired loan portfolio and to eliminate the recorded allowance for loan losses.

Adjustment reflects the fair value adjustment based on the Company’s evaluation of the premises and equipment acquired.

Adjustment reflects the fair value adjustment based on the Company’s evaluation of the acquired foreclosed assets.

Adjustment reflects the fair value adjustment based on the Company’s evaluation of accrued interest receivable and other assets.

Adjustment reflects the fair value adjustment for the core deposit intangible asset recorded as a result of the acquisition.

g-
g-
This adjustment reflects the differences in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes. Management has determined that acquired net operating loss carryforwards are expected to be settled in future periods where the realization of such benefits would be subject to limitations under section 382 of the Internal Revenue Code (“section 382

limitations”). Accordingly, as of the date of acquisition, the Company had established a deferred tax asset valuation allowance of approximately $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~~September 30, 2014, Bancshares’ operating results contributed ~~$2.4~~$2.1 million of net interest income and ~~$1.3~~$1.1 million of net income to the Company’s results of operations. For the ~~six~~nine months ended ~~June~~September 30, 2014, Bancshares’ operating results contributed ~~$3.4~~$5.5 million of net interest income and ~~$6.4~~$7.5 million of net income, including the $4.7 million of tax-exempt bargain purchase gain, to the Company’s results of operations.

The First National Bank of Shelby

On July 31, 2013, the Company completed the First National Bank acquisition whereby First National Bank merged with and into the Company’s wholly-owned bank subsidiary for an aggregate of $8.4 million in cash and 2,514,770 split-adjusted shares of 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.


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

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

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

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

Net assets acquired	$	84,071		$	(10,716	)	$	4,102		77,457		$	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									$	5,163											$	5,163

Explanation of fair value adjustments


a-		Adjustment reflects the fair value adjustment based on the Company’s pricing of the acquired investment securities portfolio.

b-		Adjustment reflects the fair value adjustment based on the Company’s evaluation of the acquired loan portfolio and to eliminate the
		recorded allowance for loan losses.

Adjustment reflects the fair value adjustment based on the Company’s evaluation of the premises and equipment acquired.

Adjustment reflects the fair value adjustment based on the Company’s evaluation of the acquired foreclosed assets.

Adjustment reflects the fair value adjustment based on the Company’s evaluation of accrued interest receivable and other assets.

Adjustment reflects the fair value adjustment for the core deposit intangible asset recorded as a result of the acquisition.

g-		This adjustment reflects the differences in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes. Management initially determined that acquired net operating loss carryforwards and other acquired assets with built-in losses ~~are~~were 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 the date of acquisition, the Company established a deferred tax asset valuation allowance of approximately $4.1 million 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 iswas expected to be subject to section 382 limitations. During the second quarter of 2014, management determined such valuation allowance was not necessary. Accordingly, the Company’s acquisition of
		First National Bank has been recast to reflect such determination.

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

Adjustment reflects the amount needed to adjust other liabilities to estimated fair value and to record certain liabilities directly attributable to the acquisition of First National Bank.

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.~~

As a result of the recast adjustment described above, certain amounts previously reported in the Company’s consolidated financial statements have been recast. The following is a summary of those financial statement captions that have been impacted by this recast adjustment.


	As Previously Reported			Recast Adjustment		As Recast		As Previously Reported			Recast Adjustment		As Recast
	(Dollars in thousands, except per share amounts)							(Dollars in thousands, except per share amounts)
December 31, 2013:
September 30, 2013:
Deferred income tax asset valuation allowance	$	(4,102	)	$	4,102	$	0	$	(4,102	)	$	4,102	$	0
Total stockholders’ equity before noncontrolling interest		846,102			4,102		850,204		608,236			4,102		612,338
Gain on merger and acquisition transaction		1,061			4,102		5,163		1,061			4,102		5,163
Net income available to common stockholders		87,135			4,102		91,237		62,737			4,102		66,839
Diluted earnings per common share	$	1.20		$	0.06	$	1.26
Diluted earnings per common share, split adjusted								$	0.87		$	0.06	$	0.93

4.	Earnings Per Common Share (“EPS”)

Basic EPS is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding. Diluted EPS is computed by dividing 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 ~~or six~~and nine months ended ~~June~~September 30, 2014 and the three months ended September 30, 2013 were excluded from the diluted EPS calculations as all options were ~~dilutive for all periods presented.~~dilutive. For the nine months ended September 30, 2013, options to purchase 4,000 split-adjusted shares of the Company’s common stock were excluded from the diluted EPS calculations as inclusion of these options would have been anti-dilutive.

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


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	June 30,				June 30,				September 30,				September 30,
	2014		2013		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	$	8,497	$	6,013	$	16,606	$	11,304	$	9,560	$	6,732	$	26,166	$	18,036
Undistributed earnings allocated to common stock		17,989		14,374		35,156		29,083		22,533		19,720		57,689		48,803

Net income available to common stock	$	26,486	$	20,387	$	51,762	$	40,387	$	32,093	$	26,452	$	83,855	$	66,839

Denominator:
Denominator for basic EPS – weighted-average common shares		76,743		70,806		75,281		70,726		79,678		72,544		76,763		71,338
Effect of dilutive securities – stock options		723		676		700		616		767		752		706		650

Denominator for diluted EPS – weighted-average common shares and assumed conversions		77,466		71,482		75,981		71,342		80,445		73,296		77,469		71,988

Basic EPS	$	0.35	$	0.29	$	0.69	$	0.57	$	0.40	$	0.36	$	1.09	$	0.94

Diluted EPS	$	0.34	$	0.29	$	0.68	$	0.57	$	0.40	$	0.36	$	1.08	$	0.93

5.	Investment Securities

At ~~June~~September 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)
June 30, 2014:
September 30, 2014:
Obligations of state and political subdivisions	$	603,533	$	15,536	$	(2,504	)	$	616,565	$	572,070	$	16,610	$	(1,101	)	$	587,579
U.S. Government agency securities		254,878		5,613		(2,180	)		258,311		251,926		4,427		(2,291	)		254,062
Corporate obligations		685		0		0			685		655		0		0			655
Other equity securities		16,568		0		0			16,568		17,580		0		0			17,580

Total	$	875,664	$	21,149	$	(4,684	)	$	892,129	$	842,231	$	21,037	$	(3,392	)	$	859,876


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


June 30, 2013:
September 30, 2013:
Obligations of state and political subdivisions	$	390,509	$	8,372	$	(7,435	)	$	391,446	$	432,362	$	7,423	$	(8,217	)	$	431,568
U.S. Government agency securities		85,449		860		(3,274	)		83,035		225,263		4,077		(4,029	)		225,311
Corporate obligations		747		0		0			747		717		0		0			717
Other equity securities		15,520		0		0			15,520		13,797		0		0			13,797

Total	$	492,225	$	9,232	$	(10,709	)	$	490,748	$	672,139	$	11,500	$	(12,246	)	$	671,393

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)
June 30, 2014:
September 30, 2014:
Obligations of state and political subdivisions	$	60,769	$	386	$	79,000	$	2,118	$	139,769	$	2,504	$	40,386	$	146	$	53,628	$	955	$	94,014	$	1,101
U.S. Government agency securities		15,227		67		58,608		2,113		73,835		2,180		44,958		226		57,610		2,065		102,568		2,291

Total temporarily impaired securities	$	75,996	$	453	$	137,608	$	4,231	$	213,604	$	4,684	$	85,344	$	372	$	111,238	$	3,020	$	196,582	$	3,392


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


June 30, 2013:
September 30, 2013:
Obligations of state and political subdivisions	$	105,258	$	7,004	$	6,942	$	431	$	112,200	$	7,435	$	122,614	$	7,523	$	8,020	$	694	$	130,634	$	8,217
U.S. Government agency securities		60,685		3,274		0		0		60,685		3,274		60,861		4,029		0		0		60,861		4,029

Total temporarily impaired securities	$	165,943	$	10,278	$	6,942	$	431	$	172,885	$	10,709	$	183,475	$	11,552	$	8,020	$	694	$	191,495	$	12,246

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 ~~June~~September 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.


	June 30, 2014				September 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	$	43,874	$	44,751	$	37,664	$	38,291
After one year to five years		136,928		139,251		138,870		140,563
After five years to ten years		197,779		200,213		194,325		196,655
After ten years		497,083		507,914		471,372		484,367

Total	$	875,664	$	892,129	$	842,231	$	859,876

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 June 30,				Six Months Ended June 30,				Three Months Ended September 30,					Nine Months Ended September 30,
	2014		2013		2014		2013		2014			2013		2014			2013
	(Dollars in thousands)								(Dollars in thousands)
Sales proceeds	$	47,170	$	0	$	48,394	$	999	$	6,563		$	0	$	54,957		$	999


Gross realized gains	$	18	$	0	$	23	$	156	$	58		$	0	$	82		$	156
Gross realized losses		0		0		0		0		(15	)		0		(15	)		0

Net gains on investment securities	$	18	$	0	$	23	$	156	$	43		$	0	$	67		$	156

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

Allowance for Loan and Lease Losses

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


	Three Months Ended June 30,							Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013				2014			2013			2014			2013			2014			2013
	(Dollars in thousands)													(Dollars in thousands)
Beginning balance	$	43,861		$	38,422			$	42,945		$	38,738		$	46,958		$	39,372		$	42,945		$	38,738
Non-purchased loans and leases charged off		(1,650	)		(1,101	)			(2,569	)		(2,449	)		(737	)		(754	)		(3,306	)		(3,203	)
Recoveries of non-purchased loans and leases previously charged off		247			451				982			783			185			142			1,167			925

Net non-purchased loans and leases charged off		(1,403	)		(650	)			(1,587	)		(1,666	)		(552	)		(612	)		(2,139	)		(2,278	)
Covered loans charged off		(515	)		(1,066	)			(720	)		(3,094	)		(205	)		(918	)		(925	)		(4,012	)
Purchased non-covered loans charged off		(567	)		0				(567	)		0			(282	)		0			(849	)		0

Net charge-offs – total loans and leases		(2,485	)		(1,716	)			(2,874	)		(4,760	)		(1,039	)		(1,530	)		(3,913	)		(6,290	)
Provision for loan and lease losses:							��
Non-purchased loans and leases		4,500			1,600				5,600			2,300			3,200			2,900			8,800			5,200
Covered loans		515			1,066				720			3,094			205			918			925			4,012
Purchased non-covered loans		567			0				567			0			282			0			849			0

Total provision		5,582			2,666				6,887			5,394			3,687			3,818			10,574			9,212

Ending balance	$	46,958		$	39,372			$	46,958		$	39,372		$	49,606		$	41,660		$	49,606		$	41,660

At ~~June~~September 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 ~~$0.5~~$0.2 million for such loans during the ~~second~~third quarter of 2014 and ~~$0.7~~$0.9 million for such loans during the first ~~six~~nine months of ~~2014.~~2014 compared to $0.9 million for such loans during the third quarter of 2013 and $4.0 million for such loans during the first nine months of 2013. The Company also recorded provision for loan and lease losses of ~~$0.5~~$0.2 million during the ~~second~~third quarter of 2014 and ~~$0.7~~$0.9 million during the first ~~six~~nine months of 2014 compared to $0.9 million for such loans during the third quarter of 2013 and $4.0 million for such loans during the first nine months 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 ~~$20.3~~$13.6 million and $52.6 million, respectively, of impaired covered loans at ~~June~~September 30, 2014 and 2013.

As of ~~June~~September 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~~$0.3 million ~~for both~~during the ~~second~~third quarter and $0.9 million during the first ~~six~~nine 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~~$0.3 million ~~for both~~during the ~~second~~third quarter and $0.9 million during the first ~~six~~nine months of 2014 to cover such charge-offs compared to none during the ~~second~~third quarter and first ~~six~~nine months of ~~2013 to cover such charge-offs.~~2013. At ~~June~~September 30, 2014, the Company had ~~$0.9~~$1.7 million of impaired purchased non-covered loans compared to none at both ~~June~~September 30, 2013 and 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 June 30, 2014:
Three months ended September 30, 2014:
Real estate:
Residential 1-4 family	$	4,622	$	(142	)	$	49	$	231		$	4,760	$	4,760	$	(115	)	$	47	$	610		$	5,302
Non-farm/non-residential		14,013		(1,181	)		1		2,003			14,836		14,836		(90	)		15		3,267			18,028
Construction/land development		12,828		(14	)		0		2,650			15,464		15,464		0			4		(950	)		14,518
Agricultural		3,018		0			6		(116	)		2,908		2,908		(198	)		2		(98	)		2,614
Multifamily residential		2,429		0			0		(657	)		1,772		1,772		0			0		(161	)		1,611
Commercial and industrial		2,738		(48	)		135		23			2,848		2,848		(55	)		38		108			2,939
Consumer		831		(56	)		18		133			926		926		(29	)		14		(89	)		822
Direct financing leases		2,438		(121	)		8		247			2,572		2,572		(151	)		29		371			2,821
Other		944		(88	)		30		(14	)		872		872		(99	)		36		142			951
Covered loans		0		(515	)		0		515			0		0		(205	)		0		205			0
Purchased non-covered loans		0		(567	)		0		567			0		0		(282	)		0		282			0

Total	$	43,861	$	(2,732	)	$	247	$	5,582		$	46,958	$	46,958	$	(1,224	)	$	185	$	3,687		$	49,606


Six months ended June 30, 2014:
Nine months ended September 30, 2014:
Real estate:
Residential 1-4 family	$	4,701	$	(341	)	$	71	$	329		$	4,760	$	4,701	$	(456	)	$	118	$	939		$	5,302
Non-farm/non-residential		13,633		(1,254	)		4		2,453			14,836		13,633		(1,344	)		19		5,720			18,028
Construction/land development		12,306		(14	)		8		3,164			15,464		12,306		(14	)		12		2,214			14,518
Agricultural		3,000		(15	)		11		(88	)		2,908		3,000		(213	)		13		(186	)		2,614
Multifamily residential		2,504		0			0		(732	)		1,772		2,504		0			0		(893	)		1,611
Commercial and industrial		2,855		(422	)		763		(348	)		2,848		2,855		(477	)		801		(240	)		2,939
Consumer		917		(97	)		36		70			926		917		(126	)		50		(19	)		822
Direct financing leases		2,266		(267	)		14		559			2,572		2,266		(418	)		43		930			2,821
Other		763		(159	)		75		193			872		763		(258	)		111		335			951
Covered loans		0		(720	)		0		720			0		0		(925	)		0		925			0
Purchased non-covered loans		0		(567	)		0		567			0		0		(849	)		0		849			0

Total	$	42,945	$	(3,856	)	$	982	$	6,887		$	46,958	$	42,945	$	(5,080	)	$	1,167	$	10,574		$	49,606

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)
Year ended December 31, 2013:
Real estate:
Residential 1-4 family	$	4,820	$	(837	)	$	106	$	612		$	4,701	$	4,820	$	(837	)	$	106	$	612		$	4,701
Non-farm/non-residential		10,107		(1,111	)		122		4,515			13,633		10,107		(1,111	)		122		4,515			13,633
Construction/land development		12,000		(137	)		174		269			12,306		12,000		(137	)		174		269			12,306
Agricultural		2,878		(261	)		14		369			3,000		2,878		(261	)		14		369			3,000
Multifamily residential		2,030		(4	)		4		474			2,504		2,030		(4	)		4		474			2,504
Commercial and industrial		3,655		(922	)		433		(311	)		2,855		3,655		(922	)		433		(311	)		2,855
Consumer		1,015		(214	)		104		12			917		1,015		(214	)		104		12			917
Direct financing leases		2,050		(482	)		33		665			2,266		2,050		(482	)		33		665			2,266
Other		183		(359	)		144		795			763		183		(359	)		144		795			763
Covered loans		0		(4,675	)		0		4,675			0		0		(4,675	)		0		4,675			0
Purchased non-covered loans		0		0			0		0			0

Total	$	38,738	$	(9,002	)	$	1,134	$	12,075		$	42,945	$	38,738	$	(9,002	)	$	1,134	$	12,075		$	42,945


Three months ended June 30, 2013:
Three months ended September 30, 2013:
Real estate:
Residential 1-4 family	$	4,557	$	(136	)	$	6	$	226		$	4,653	$	4,653	$	(111	)	$	11	$	294		$	4,847
Non-farm/non-residential		11,061		(552	)		16		1,939			12,464		12,464		(19	)		0		304			12,749
Construction/land development		11,316		(71	)		3		42			11,290		11,290		(7	)		13		1,434			12,730
Agricultural		2,903		0			2		(310	)		2,595		2,595		(260	)		5		182			2,522
Multifamily residential		1,990		0			0		(136	)		1,854		1,854		0			0		203			2,057
Commercial and industrial		3,061		(116	)		366		(382	)		2,929		2,929		(55	)		56		(172	)		2,758
Consumer		1,034		(58	)		13		4			993		993		(57	)		19		(13	)		942
Direct financing leases		2,140		(106	)		11		(4	)		2,041		2,041		(152	)		9		262			2,160
Other		360		(62	)		34		221			553		553		(93	)		29		406			895
Covered loans		0		(1,066	)		0		1,066			0		0		(918	)		0		918			0

Total	$	38,422	$	(2,167	)	$	451	$	2,666		$	39,372	$	39,372	$	(1,672	)	$	142	$	3,818		$	41,660


Six months ended June 30, 2013:
Nine months ended September 30, 2013:
Real estate:
Residential 1-4 family	$	4,820	$	(417	)	$	102	$	148		$	4,653	$	4,820	$	(528	)	$	113	$	442		$	4,847
Non-farm/non-residential		10,107		(593	)		118		2,832			12,464		10,107		(612	)		118		3,136			12,749
Construction/land development		12,000		(129	)		8		(589	)		11,290		12,000		(136	)		21		845			12,730
Agricultural		2,878		0			4		(287	)		2,595		2,878		(260	)		9		(105	)		2,522
Multifamily residential		2,030		0			0		(176	)		1,854		2,030		0			0		27			2,057
Commercial and industrial		3,655		(832	)		375		(269	)		2,929		3,655		(887	)		431		(441	)		2,758
Consumer		1,015		(119	)		71		26			993		1,015		(176	)		90		13			942
Direct financing leases		2,050		(186	)		20		157			2,041		2,050		(338	)		29		419			2,160
Other		183		(173	)		85		458			553		183		(266	)		114		864			895
Covered loans		0		(3,094	)		0		3,094			0		0		(4,012	)		0		4,012			0

Total	$	38,738	$	(5,543	)	$	783	$	5,394		$	39,372	$	38,738	$	(7,215	)	$	925	$	9,212		$	41,660

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”),~~leases, as of the dates indicated.


	Allowance for Non-Purchased Loan and Lease Losses						Non-Purchased Loans and Leases						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)
June 30, 2014:
September 30, 2014:
Real estate:
Residential 1-4 family	$	411	$	4,349	$	4,760	$	3,245	$	263,252	$	266,497	$	345	$	4,957	$	5,302	$	2,360	$	275,981	$	278,341
Non-farm/non-residential		13		14,823		14,836		2,363		1,287,811		1,290,174		24		18,004		18,028		2,300		1,370,994		1,373,294
Construction/land development		2		15,462		15,464		9,738		1,039,420		1,049,158		2		14,516		14,518		10,191		1,223,062		1,233,253
Agricultural		200		2,708		2,908		845		44,696		45,541		30		2,584		2,614		376		46,345		46,721
Multifamily residential		0		1,772		1,772		491		136,462		136,953		0		1,611		1,611		0		155,940		155,940
Commercial and industrial		553		2,295		2,848		689		166,195		166,884		606		2,333		2,939		578		312,714		313,292
Consumer		3		923		926		42		28,632		28,674		3		819		822		32		25,367		25,399
Direct financing leases		0		2,572		2,572		0		98,768		98,768		0		2,821		2,821		0		109,059		109,059
Other		0		872		872		9		88,927		88,936		0		951		951		8		103,835		103,843

Total	$	1,182	$	45,776	$	46,958	$	17,422	$	3,154,163	$	3,171,585	$	1,010	$	48,596	$	49,606	$	15,845	$	3,623,297	$	3,639,142


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


June 30, 2013:
September 30, 2013:
Real estate:
Residential 1-4 family	$	428	$	4,225	$	4,653	$	2,728	$	258,840	$	261,568	$	490	$	4,357	$	4,847	$	3,535	$	247,491	$	251,026
Non-farm/non-residential		11		12,453		12,464		10,390		1,006,817		1,017,207		6		12,743		12,749		3,572		1,032,046		1,035,618
Construction/land development		0		11,290		11,290		272		680,557		680,829		2		12,728		12,730		217		713,981		714,198
Agricultural		194		2,401		2,595		663		48,216		48,879		187		2,335		2,522		951		47,002		47,953
Multifamily residential		0		1,854		1,854		312		145,371		145,683		0		2,057		2,057		310		163,606		163,916
Commercial and industrial		622		2,307		2,929		710		138,363		139,073		613		2,145		2,758		739		121,424		122,163
Consumer		0		993		993		7		28,282		28,289		4		938		942		33		27,265		27,298
Direct financing leases		0		2,041		2,041		0		76,953		76,953		0		2,160		2,160		0		81,984		81,984
Other		1		552		553		12		44,849		44,861		1		894		895		20		78,413		78,433

Total	$	1,256	$	38,116	$	39,372	$	15,094	$	2,428,248	$	2,443,342	$	1,303	$	40,357	$	41,660	$	9,377	$	2,513,212	$	2,522,589

The following table is a summary of impaired non-purchased loans and leases as of and for the three months and ~~six~~nine months ended ~~June~~September 30, 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		Principal Balance		Net Charge-offs to Date			Principal Balance, Net of Charge-offs		Specific ALLL		Weighted Average Carrying Value – Three Months Ended September 30, 2014		Weighted Average Carrying Value – Nine Months Ended September 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	$	3,294	$	(1,721	)	$	1,573	$	411	$	1,505	$	1,642	$	2,984	$	(1,654	)	$	1,330	$	345	$	1,452	$	1,564
Non-farm/non-residential		186		(142	)		44		13		52		50		415		(216	)		199		24		121		87
Construction/land development		38		(22	)		16		2		16		16		36		(22	)		14		2		16		16
Agricultural		336		(12	)		324		200		336		380		116		(12	)		104		30		214		311
Commercial and industrial		838		(278	)		560		553		562		579		1,314		(764	)		550		606		555		571
Consumer		102		(79	)		23		3		23		23		101		(84	)		17		3		20		22
Other		0		0			0		0		0		5		0		(0	)		0		0		0		4

Total impaired loans and leases with a related ALLL		4,794		(2,254	)		2,540		1,182		2,494		2,695		4,966		(2,752	)		2,214		1,010		2,378		2,575


Impaired loans and leases for which there is not a related ALLL:
Real estate:
Residential 1-4 family		2,094		(421	)		1,673		0		2,023		2,059		1,343		(313	)		1,030		0		1,352		1,802
Non-farm/non-residential		3,444		(1,125	)		2,319		0		1,942		1,999		2,826		(725	)		2,101		0		2,210		2,025
Construction/land development		9,803		(81	)		9,722		0		5,015		3,417		10,258		(81	)		10,177		0		9,949		5,107
Agricultural		554		(33	)		521		0		494		468		474		(202	)		272		0		397		419
Multifamily residential		624		(133	)		491		0		246		164		133		(133	)		0		0		246		123
Commercial and industrial		288		(159	)		129		0		95		88		187		(159	)		28		0		79		73
Consumer		33		(14	)		19		0		22		24		20		(5	)		15		0		17		21
Other		8		0			8		0		9		9		8		(0	)		8		0		8		9

Total impaired loans and leases without a related ALLL		16,848		(1,966	)		14,882		0		9,846		8,228		15,249		(1,618	)		13,631		0		14,258		9,579

Total impaired loans and leases	$	21,642	$	(4,220	)	$	17,422	$	1,182	$	12,340	$	10,923	$	20,215	$	(4,370	)	$	15,845	$	1,010	$	16,636	$	12,154

The following table is a summary of impaired non-purchased loans and leases 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 as of and for the three months and ~~six~~nine months ended ~~June~~September 30, 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		Principal Balance		Net Charge-offs to Date			Principal Balance, Net of Charge-offs		Specific ALLL		Weighted Average Carrying Value – Three Months Ended September 30, 2013		Weighted Average Carrying Value – Nine Months Ended September 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	$	2,960	$	(1,650	)	$	1,310	$	428	$	1,334	$	1,445	$	3,601	$	(1,662	)	$	1,939	$	490	$	1,624	$	1,569
Non-farm/non-residential		19		(8	)		11		11		89		127		37		0			37		6		24		105
Construction/land development		90		(90	)		0		0		0		17		129		(112	)		17		2		8		17
Agricultural		466		(42	)		424		194		561		561		459		(42	)		417		187		421		525
Commercial and industrial		2,290		(1,731	)		559		622		580		574		2,270		(1,713	)		557		613		558		570
Consumer		52		(52	)		0		0		0		1		39		(13	)		26		4		13		7
Other		179		(171	)		8		1		9		9		145		(137	)		8		1		8		9

Total impaired loans and leases with a related ALLL		6,056		(3,744	)		2,312		1,256		2,573		2,734		6,680		(3,679	)		3,001		1,303		2,656		2,802


Impaired loans and leases for which there is not a related ALLL:
Real estate:
Residential 1-4 family		1,738		(320	)		1,418		0		1,371		1,327		2,244		(648	)		1,596		0		1,507		1,394
Non-farm/non-residential		11,443		(1,064	)		10,379		0		6,690		5,358		4,645		(1,110	)		3,535		0		6,957		4,902
Construction/land development		465		(193	)		272		0		303		366		281		(81	)		200		0		236		324
Agricultural		250		(11	)		239		0		323		357		801		(267	)		534		0		386		401
Multifamily residential		445		(133	)		312		0		156		104		443		(133	)		310		0		311		155
Commercial and industrial		566		(415	)		151		0		202		201		397		(215	)		182		0		166		196
Consumer		19		(12	)		7		0		28		29		19		(12	)		7		0		7		23
Other		24		(20	)		4		0		5		7		32		(20	)		12		0		8		8

Total impaired loans and leases without a related ALLL		14,950		(2,168	)		12,782		0		9,078		7,749		8,862		(2,486	)		6,376		0		9,578		7,403

Total impaired loans and leases	$	21,006	$	(5,912	)	$	15,094	$	1,256	$	11,651	$	10,483	$	15,542	$	(6,165	)	$	9,377	$	1,303	$	12,234	$	10,205

Management has determined that certain of the Company’s impaired non-purchased loans and leases do not require any specific allowance at ~~June~~September 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~~nine months ended ~~June~~September 30, 2014 and 2013 and for the year ended December 31, 2013 was not material.

Credit Quality Indicators

Non-Purchased Loans and Leases

The following table is a summary of credit quality indicators for the Company’s 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)
June 30, 2014:
September 30, 2014:
Real estate:
Residential 1-4 family⁽¹⁾	$	258,098	$	0	$	2,620	$	5,779	$	266,497	$	268,707	$	0	$	3,797	$	5,837	$	278,341
Non-farm/non-residential		1,090,525		139,080		53,478		7,091		1,290,174		1,170,334		141,395		54,078		7,487		1,373,294
Construction/land development		846,365		176,977		12,078		13,738		1,049,158		1,016,496		186,496		16,979		13,282		1,233,253
Agricultural		22,766		9,785		10,388		2,602		45,541		24,335		10,202		10,062		2,122		46,721
Multifamily residential		105,366		29,954		385		1,248		136,953		119,765		35,039		382		754		155,940
Commercial and industrial		127,935		35,769		1,768		1,412		166,884		267,178		43,286		1,347		1,481		313,292
Consumer⁽¹⁾		28,244		0		132		298		28,674		24,879		0		263		257		25,399
Direct financing leases		97,967		727		34		40		98,768		108,126		829		32		72		109,059
Other⁽¹⁾		85,684		3,036		189		27		88,936		99,786		3,853		180		24		103,843

Total	$	2,662,950	$	395,328	$	81,072	$	32,235	$	3,171,585	$	3,099,606	$	421,100	$	87,120	$	31,316	$	3,639,142


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


June 30, 2013:
September 30, 2013:
Real estate:
Residential 1-4 family⁽¹⁾	$	253,479	$	0	$	2,242	$	5,847	$	261,568	$	242,202	$	0	$	1,438	$	7,386	$	251,026
Non-farm/non-residential		814,428		132,680		51,107		18,992		1,017,207		839,345		134,754		51,589		9,930		1,035,618
Construction/land development		498,398		135,166		32,634		14,631		680,829		544,324		136,270		29,122		4,482		714,198
Agricultural		25,400		10,940		9,836		2,703		48,879		23,926		11,688		9,317		3,022		47,953
Multifamily residential		115,313		28,886		396		1,088		145,683		132,722		29,716		394		1,084		163,916
Commercial and industrial		104,876		30,323		1,608		2,266		139,073		91,913		26,843		1,210		2,197		122,163
Consumer⁽¹⁾		27,716		0		168		405		28,289		26,763		0		172		363		27,298
Direct financing leases		75,696		1,202		0		55		76,953		80,967		992		0		25		81,984
Other⁽¹⁾		41,475		3,102		225		59		44,861		74,221		4,005		132		75		78,433

Total	$	1,956,781	$	342,299	$	98,216	$	46,046	$	2,443,342	$	2,056,383	$	344,268	$	93,374	$	28,564	$	2,522,589

(1)

The Company does not risk rate its residential 1-4 family loans, its consumer loans, and certain “other” loans. However, for purposes of the above table, the Company considers such loans to be (i) satisfactory – if they are performing and less than 30 days past due, (ii) watch – if they are performing and 30 to 89 days past due or (iii) substandard – if they are nonperforming or 90 days or more past due.

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)
June 30, 2014:
September 30, 2014:
Real estate:
Residential 1-4 family	$	2,890	$	1,521	$	4,411	$	262,086	$	266,497	$	4,203	$	1,230	$	5,433	$	272,908	$	278,341
Non-farm/non-residential		1,714		1,693		3,407		1,286,767		1,290,174		879		1,432		2,311		1,370,983		1,373,294
Construction/land development		49		10,060		10,109		1,039,049		1,049,158		1,854		10,017		11,871		1,221,382		1,233,253
Agricultural		269		436		705		44,836		45,541		1,574		192		1,766		44,955		46,721
Multifamily residential		491		0		491		136,462		136,953		0		0		0		155,940		155,940
Commercial and industrial		674		0		674		166,210		166,884		813		28		841		312,451		313,292
Consumer		139		54		193		28,481		28,674		295		35		330		25,069		25,399
Direct financing leases		10		30		40		98,728		98,768		0		0		0		109,059		109,059
Other		0		0		0		88,936		88,936		12		0		12		103,831		103,843

Total	$	6,236	$	13,794	$	20,030	$	3,151,555	$	3,171,585	$	9,630	$	12,934	$	22,564	$	3,616,578	$	3,639,142


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


June 30, 2013:
September 30, 2013:
Real estate:
Residential 1-4 family	$	2,483	$	1,460	$	3,943	$	257,625	$	261,568	$	1,661	$	2,376	$	4,037	$	246,989	$	251,026
Non-farm/non-residential		8,536		3,369		11,905		1,005,302		1,017,207		2,321		3,312		5,633		1,029,985		1,035,618
Construction/land development		385		84		469		680,360		680,829		1,662		136		1,798		712,400		714,198
Agricultural		315		331		646		48,233		48,879		322		571		893		47,060		47,953
Multifamily residential		0		0		0		145,683		145,683		0		310		310		163,606		163,916
Commercial and industrial		548		203		751		138,322		139,073		349		131		480		121,683		122,163
Consumer		230		23		253		28,036		28,289		177		66		243		27,055		27,298
Direct financing leases		89		15		104		76,849		76,953		111		25		136		81,848		81,984
Other		0		0		0		44,861		44,861		17		0		17		78,416		78,433

Total	$	12,586	$	5,485	$	18,071	$	2,425,271	$	2,443,342	$	6,620	$	6,927	$	13,547	$	2,509,042	$	2,522,589

(1)	Includes ~~$1.8~~$0.9 million, $0.8 million and ~~$7.4~~$0.4 million of loans and leases on nonaccrual status at ~~June~~September 30, 2014, December 31, 2013 and ~~June~~September 30, 2013, respectively.

(2)	All loans and leases greater than 90 days past due were on nonaccrual status at ~~June~~September 30, 2014 and 2013 and December 31, 2013.

(3)	Includes ~~$2.8~~$3.9 million, $3.2 million and ~~$3.2~~$3.1 million of loans and leases on nonaccrual status at ~~June~~September 30, 2014, December 31, 2013 and ~~June~~September 30, 2013, respectively.

Covered Loans

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)
June 30, 2014:
September 30, 2014:
Real estate:
Residential 1-4 family	$	92,486	$	2,306	$	94,792	$	86,067	$	2,208	$	88,275
Non-farm/non-residential		114,869		10,168		125,037		107,046		6,587		113,633
Construction/land development		25,935		6,032		31,967		23,970		3,648		27,618
Agricultural		10,528		323		10,851		9,539		338		9,877
Multifamily residential		5,901		311		6,212		3,513		315		3,828
Commercial and industrial		6,178		1,119		7,297		4,819		535		5,354
Consumer		79		0		79		61		3		64
Other		145		0		145		153		0		153

Total	$	256,121	$	20,259	$	276,380	$	235,168	$	13,634	$	248,802


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


June 30, 2013:
September 30, 2013:
Real estate:
Residential 1-4 family	$	126,659	$	6,507	$	133,166	$	114,163	$	6,378	$	120,541
Non-farm/non-residential		207,789		25,817		233,606		171,886		25,566		197,452
Construction/land development		58,370		18,045		76,415		40,172		19,215		59,387
Agricultural		14,016		1,889		15,905		11,203		1,138		12,341
Multifamily residential		9,408		285		9,693		9,153		215		9,368
Commercial and industrial		11,601		0		11,601		9,877		57		9,934
Consumer		164		43		207		132		6		138
Other		159		0		159		158		0		158

Total	$	428,166	$	52,586	$	480,752	$	356,744	$	52,575	$	409,319

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. 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. At ~~June~~September 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)
June 30, 2014:
September 30, 2014:
Real estate:
Residential 1-4 family	$	4,518	$	7,538	$	12,056	$	82,736	$	94,792	$	3,075	$	7,298	$	10,373	$	77,902	$	88,275
Non-farm/non-residential		3,533		15,026		18,559		106,478		125,037		3,481		8,112		11,593		102,040		113,633
Construction/land development		531		7,327		7,858		24,109		31,967		922		5,008		5,930		21,688		27,618
Agricultural		36		2,112		2,148		8,703		10,851		0		1,652		1,652		8,225		9,877
Multifamily residential		0		1,365		1,365		4,847		6,212		0		0		0		3,828		3,828
Commercial and industrial		11		1,246		1,257		6,040		7,297		9		603		612		4,742		5,354
Consumer		12		0		12		67		79		10		0		10		54		64
Other		0		0		0		145		145		0		0		0		153		153

Total	$	8,641	$	34,614	$	43,255	$	233,125	$	276,380	$	7,497	$	22,673	$	30,170	$	218,632	$	248,802


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


June 30, 2013:
September 30, 2013:
Real estate:
Residential 1-4 family	$	6,989	$	19,230	$	26,219	$	106,947	$	133,166	$	6,260	$	13,658	$	19,918	$	100,623	$	120,541
Non-farm/non-residential		15,059		44,768		59,827		173,779		233,606		8,557		39,841		48,398		149,054		197,452
Construction/land development		6,425		30,629		37,054		39,361		76,415		848		27,584		28,432		30,955		59,387
Agricultural		829		4,284		5,113		10,792		15,905		1,234		1,250		2,484		9,857		12,341
Multifamily residential		1,926		2,728		4,654		5,039		9,693		195		3,689		3,884		5,484		9,368
Commercial and industrial		260		3,505		3,765		7,836		11,601		27		2,961		2,988		6,946		9,934
Consumer		0		43		43		164		207		0		2		2		136		138
Other		0		0		0		159		159		0		0		0		158		158

Total	$	31,488	$	105,187	$	136,675	$	344,077	$	480,752	$	17,121	$	88,985	$	106,106	$	303,213	$	409,319

At ~~June~~September 30, 2014 and 2013 and December 31, 2013, significant 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.

Purchased Non-Covered Loans

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)
June 30, 2014:
September 30, 2014:
Real estate:
Residential 1-4 family	$	81,102	$	84,839	$	32,286	$	79,449	$	10	$	18,620	$	0	$	296,306	$	74,617	$	81,344	$	30,058	$	75,815	$	143	$	17,236	$	60	$	279,273
Non-farm/non-residential		211,896		198,937		40,193		3,704		0		33,622		81		488,433		200,653		194,295		32,819		3,283		505		30,742		87		462,384
Construction/land development		32,850		37,840		12,447		10,878		9		10,096		0		104,120		28,857		33,070		9,607		13,783		9		9,011		0		94,337
Agricultural		15,058		29,337		3,185		1,744		0		456		0		49,780		12,510		26,723		3,053		1,933		0		189		0		44,408
Multifamily residential		10,505		13,418		7,453		1,030		67		2,853		779		36,105		9,877		13,019		7,226		940		72		2,764		781		34,679

Total real estate		351,411		364,371		95,564		96,805		86		65,647		860		974,744		326,514		348,451		82,763		95,754		729		59,942		928		915,081
Commercial and industrial		27,269		49,175		9,702		14,637		0		5,193		0		105,976		23,424		27,645		7,282		13,284		0		5,066		0		76,701
Consumer		3,215		1,165		670		20,204		0		536		0		25,790		2,498		884		627		16,023		0		429		0		20,461
Other		5,762		9,292		935		4,391		0		799		0		21,179		5,105		8,369		735		3,776		0		760		0		18,745

Total	$	387,657	$	424,003	$	106,871	$	136,037	$	86	$	72,175	$	860	$	1,127,689	$	357,541	$	385,349	$	91,407	$	128,837	$	729	$	66,197	$	928	$	1,030,988


December 31, 2013:
Real estate:
Residential 1-4 family	$	27,111	$	32,259	$	21,035	$	35,733	$	0	$	14,947	$	0	$	131,085	$	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


June 30, 2013:
September 30, 2013:
Real estate:
Residential 1-4 family	$	0	$	185	$	0	$	0	$	0	$	0	$	0	$	185	$	28,486	$	34,113	$	21,592	$	36,221	$	0	$	16,311	$	0	$	136,723
Non-farm/non-residential		294		792		794		1		0		332		0		2,213		46,201		71,637		25,591		3,509		0		16,786		0		163,724
Construction/land development		2,459		6,803		4,907		1,117		0		3,277		0		18,563		5,973		8,578		2,495		4,680		0		5,052		0		26,778
Agricultural		1,281		1,027		224		100		0		167		0		2,799		2,109		6,705		851		173		0		242		0		10,080
Multifamily residential																		3,621		5,662		5,322		978		0		2,419		0		18,002

Total real estate		4,034		8,807		5,925		1,218		0		3,776		0		23,760		86,390		126,695		55,851		45,561		0		40,810		0		355,307
Commercial and industrial		40		1,082		845		248		0		647		0		2,862		10,684		10,793		3,150		4,004		0		1,598		0		30,229
Consumer		512		141		135		2,085		0		1,017		0		3,890		1,980		147		181		5,990		0		878		0		9,176
Other		0		82		184		51		0		198		0		515		1,333		2,323		163		329		0		198		0		4,346

Total	$	4,586	$	10,112	$	7,089	$	3,602	$	0	$	5,638	$	0	$	31,027	$	100,387	$	139,958	$	59,345	$	55,884	$	0	$	43,484	$	0	$	399,058

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 allowance for its purchased non-covered loans at ~~June~~September 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)
June 30, 2014:
September 30, 2014:
Real estate:
Residential 1-4 family	$	6,348	$	6,536	$	12,884	$	283,422	$	296,306	$	6,026	$	6,220	$	12,246	$	267,027	$	279,273
Non-farm/non-residential		1,396		10,544		11,940		476,493		488,433		1,706		9,449		11,155		451,229		462,384
Construction/land development		615		2,439		3,054		101,066		104,120		855		1,476		2,331		92,006		94,337
Agriculture		129		148		277		49,503		49,780		211		146		357		44,051		44,408
Multifamily residential		0		1,229		1,229		34,876		36,105		0		1,228		1,228		33,451		34,679
Commercial and industrial		381		487		868		105,108		105,976		791		269		1,060		75,641		76,701
Consumer		158		183		341		25,449		25,790		196		159		355		20,106		20,461
Other		16		19		35		21,144		21,179		73		31		104		18,641		18,745

Total	$	9,043	$	21,585	$	30,628	$	1,097,061	$	1,127,689	$	9,858	$	18,978	$	28,836	$	1,002,152	$	1,030,988


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


June 30, 2013:
September 30, 2013:
Real estate:
Residential 1-4 family	$	0	$	0	$	0	$	185	$	185	$	4,026	$	3,647	$	7,673	$	129,050	$	136,723
Non-farm/non-residential		184		68		252		1,961		2,213		3,319		4,136		7,455		156,269		163,724
Construction/land development		785		1,022		1,807		16,756		18,563		4,601		7,367		11,968		14,810		26,778
Agriculture		75		24		99		2,700		2,799		0		101		101		9,979		10,080
Multifamily residential												177		1,326		1,503		16,499		18,002
Commercial and industrial		89		211		300		2,562		2,862		357		535		892		29,337		30,229
Consumer		203		209		412		3,478		3,890		310		223		533		8,643		9,176
Other		151		50		201		314		515		38		182		220		4,126		4,346

Total	$	1,487	$	1,584	$	3,071	$	27,956	$	31,027	$	12,828	$	17,517	$	30,345	$	368,713	$	399,058

7. Income Taxes

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.


	June 30,						December 31, 2013		September 30,					December 31,
	2014			2013			December 31, 2013		2014			2013		2013
	(Dollars in thousands)								(Dollars in thousands)
Deferred tax assets:
Allowance for loan and lease losses	$	18,116		$	15,197		$	16,576	$	19,052		$	16,080	$	16,576
Differences in amounts reflected in financial statements and income tax basis of purchased non-covered loans		26,024			1,288			17,167		24,769			19,563		17,167
Stock-based compensation		3,364			2,408			2,400		3,811			2,724		2,400
Deferred compensation		1,890			1,925			1,775		1,962			1,792		1,775
Foreclosed assets		5,624			2,812			3,165		5,195			3,318		3,165
Investment securities AFS		0			0			5,056		0			3,116		5,056
Differences in amounts reflected in financial statements and income tax basis of assets acquired and liabilities assumed in FDIC-assisted acquisitions		7,397			0			3,424		8,708			607		3,424
Acquired net operating losses		13,662			0			7,509		13,976			7,905		7,509
Other, net		5,950			0			3,858		7,310			1,950		3,858

Total gross deferred tax assets		82,027			23,630			60,930		84,783			57,055		60,930
Less valuation allowance		(474	)		0			0		(474	)		0		0

Net deferred tax asset		81,553			23,630			60,930		84,309			57,055		60,930

Deferred tax liabilities:
Accelerated depreciation on premises and equipment		18,028			15,022			17,459		17,933			16,952		17,459
Investment securities AFS		5,022			545			0		5,499			0		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
Acquired intangible assets		10,847			594			4,227		10,466			4,390		4,227
Other, net		0			2,428			0

Total gross deferred tax liabilities		33,897			24,692			21,686		33,898			21,342		21,686

Net deferred tax assets (liabilities)	$	47,656		$	(1,062	)	$	39,244	$	50,411		$	35,713	$	39,244

Net operating losses were acquired from the First National Bank, Bancshares and Summit transactions. The net operating losses acquired from the First National Bank transaction totaled $20.0 million, of which $12.5 million ~~expires~~will expire in 2032 and $7.5 million ~~expires~~will expire in 2033. The net operating losses acquired from the Bancshares transaction totaled $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 isare 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, the Company had established a deferred tax asset valuation allowance of $4.1 million on the date of acquisition of First National Bank and $0.5 million on the date of acquisition of Bancshares, 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 make adjustments to its deferred tax asset valuation allowance, which adjustments could affect bargain purchase gain, goodwill or deferred income tax expense (benefit).

8.	Supplemental Data for Cash Flows

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


					Nine Months Ended
	Six Months Ended June 30,				September 30,
	2014		2013		2014		2013
	(Dollars in thousands)				(Dollars in thousands)
Cash paid during the period for:
Interest	$	9,808	$	9,159	$	15,450	$	14,038
Taxes		17,690		25,099		30,834		35,515
Supplemental schedule of non-cash investing and financing activities:
Net change in unrealized gains/losses on investment securities AFS		22,506		19,219		23,687		(18,488	)
Loans and other assets transferred to foreclosed assets not covered by FDIC loss share agreements		7,801		2,930		9,112		4,497
Loans advanced for sales of foreclosed assets not covered by FDIC loss share agreements		258		2,455		258		2,942
Covered loans transferred to covered foreclosed assets		23,212		16,081		30,754		24,306
Unsettled AFS investment security purchases		1,465		0		0		730
Unsettled AFS investment security sales		1,815		0
Common stock issued in merger and acquisition transaction		166,315		0
Common stock issued in merger and acquisition transactions						166,402		60,079

9.	Guarantees and Commitments

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 ~~June~~September 30, 2014 was ~~$5.3~~$9.3 million. The Company holds collateral to support guarantees when deemed necessary. Collateralized commitments at ~~June~~September 30, 2014 totaled ~~$4.3~~$9.1 million.

At ~~June~~September 30, 2014 the Company had outstanding commitments to extend credit, excluding mortgage interest rate lock commitments, totaling ~~$1.83~~$2.58 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.


Contractual Maturities at September 30, 2014
Maturity	Amount
(Dollars in thousands)
2014	$	89,808
2015		209,595
2016		492,517
2017		1,259,690
2018		485,222
Thereafter		47,613

Total	$	2,584,445

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

10. Stock-Based Compensation

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 ~~June~~September 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.


	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:
Nine Months Ended September 30, 2014:
Outstanding – January 1, 2014		1,766,600		$	15.84							1,766,600		$	15.84
Granted		52,000			29.05							52,000			29.05
Exercised		(185,000	)		8.50							(228,600	)		9.05
Forfeited		(25,900	)		17.64							(48,800	)		18.36

Outstanding – June 30, 2014		1,607,700			17.08		5.4	$	26,321	⁽¹⁾
Outstanding – September 30, 2014												1,541,200			17.21		5.2	$	22,058	⁽¹⁾


Fully vested and exercisable – June 30, 2014		349,200			13.37		5.2	$	7,011	⁽¹⁾
Fully vested and exercisable – September 30, 2014												305,600			13.65		5.2	$	5,460	⁽¹⁾

Expected to vest in future periods		1,007,600										989,280

Fully vested and expected to vest – June 30, 2014⁽²⁾		1,356,800			16.89		5.4	$	22,466	⁽¹⁾
Fully vested and expected to vest – September 30, 2014⁽²⁾												1,294,880			17.04		5.2	$	18,744	⁽¹⁾

(1)	Based on closing price of ~~$33.45~~$31.52 per share on ~~June~~September 30, 2014.

(2)	At ~~June~~September 30, 2014 the Company estimated that outstanding options to purchase ~~250,900~~246,320 shares of its common stock would not vest and would be forfeited prior to their vesting date.

Intrinsic value for stock options is defined as the amount by which the current market price of the underlying stock exceeds the exercise price. For those stock options where the exercise price exceeds the current market price of the underlying stock, the intrinsic value is zero. The total intrinsic value of options exercised during the ~~six~~nine months ended ~~June~~September 30, 2014 and 2013 was ~~$4.1~~$5.0 million and ~~$4.3~~$4.7 million, respectively.

Options to purchase 52,000 split-adjusted shares and ~~44,000~~48,000 split-adjusted shares of the Company’s stock were issued during the ~~six~~nine months ended ~~June~~September 30, 2014 and 2013, respectively. Stock-based compensation expense for stock options included in non-interest expense was ~~$0.8~~$0.4 million ~~and $0.6 million~~ for both of the quarters ended ~~June~~September 30, 2014 and 2013 ~~respectively,~~ and ~~$1.2~~$1.6 million and ~~$1.0~~$1.3 million for the ~~six~~nine months ended ~~June~~September 30, 2014 and 2013, respectively. Total unrecognized compensation cost related to non-vested stock option grants was ~~$2.7~~$2.2 million at ~~June~~September 30, 2014 and is expected to be recognized over a weighted-average period of ~~1.9~~1.8 years.

The Company has a restricted stock plan that permits issuance of up to 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 or shares held in treasury ~~or shares~~ that have been reacquired by the Company. All restricted stock awards outstanding at ~~June~~September 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.


				Nine Months Ended
	Six Months Ended June 30, 2014			September 30, 2014
Outstanding – January 1, 2014		616,100			616,100
Granted		0			0
Forfeited		(400	)		(1,200	)
Vested		0			0

Outstanding – June 30, 2014		615,700
Outstanding – September 30, 2014					614,900

Weighted-average grant date fair value	$	17.99		$	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 quarters ended ~~June~~September 30, 2014 and 2013, respectively, and ~~$1.8~~$2.8 million and ~~$1.3~~$1.9 million for the ~~six~~nine months ended ~~June~~September 30, 2014 and 2013, respectively. Unrecognized compensation expense for non-vested restricted stock awards was ~~$6.0~~$5.1 million at ~~June~~September 30, 2014 and is expected to be recognized over a weighted-average period of ~~2.0~~1.8 years.

11.	Fair Value Measurements

The Company measures certain of its assets and liabilities on a fair value basis using various valuation techniques and assumptions, depending on the nature of the asset or liability. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, fair value is used either annually or on a non-recurring basis to evaluate certain assets and liabilities for impairment or for disclosure purposes.

The Company applies the following fair value hierarchy.


Level 1	–	Quoted prices for identical instruments in active markets.

Level 2	–	Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable.

Level 3	–	Instruments whose inputs are unobservable.

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)
June 30, 2014:
September 30, 2014:
Investment securities AFS⁽¹⁾:
Obligations of state and political subdivisions	$	0	$	595,965	$	20,600	$	616,565	$	0	$	568,021	$	19,558	$	587,579
U.S. Government agency securities		0		258,311		0		258,311		0		254,062		0		254,062
Corporate obligations		0		685		0		685		0		655		0		655

Total investment securities AFS		0		854,961		20,600		875,561		0		822,738		19,558	$	842,296
Impaired non-purchased loans and leases		0		0		16,240		16,240		0		0		14,835		14,835
Impaired covered loans		0		0		20,259		20,259		0		0		13,634		13,634
Impaired purchased non-covered loans		0		0		946		946		0		0		1,657		1,657
Foreclosed assets not covered by FDIC loss share agreements		0		0		20,581		20,581		0		0		14,781		14,781
Foreclosed assets covered by FDIC loss share agreements		0		0		35,775		35,775		0		0		27,882		27,882

Total assets at fair value	$	0	$	854,961	$	114,401	$	969,362	$	0	$	822,738	$	92,347	$	915,085


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-purchased loans and leases		0		0		6,746		6,746		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	$	121,418	$	758,310	$	0	$	636,892	$	121,418	$	758,310


June 30, 2013:
September 30, 2013:
Investment securities AFS⁽¹⁾:
Obligations of state and political subdivisions	$	0	$	372,117	$	19,329	$	391,446	$	0	$	412,770	$	18,798	$	431,568
U.S. Government agency securities		0		83,035		0		83,035		0		225,311		0		225,311
Corporate obligations		0		747		0		747		0		717		0		717

Total investment securities AFS		0		455,899		19,329		475,228		0		638,798		18,798		657,596
Impaired non-purchased loans and leases		0		0		13,838		13,838		0		0		8,074		8,074
Impaired covered loans		0		0		52,586		52,586		0		0		52,575		52,575
Foreclosed assets not covered by FDIC loss share agreements		0		0		10,451		10,451		0		0		11,647		11,647
Foreclosed assets covered by FDIC loss share agreements		0		0		46,157		46,157		0		0		40,452		40,452

Total assets at fair value	$	0	$	455,899	$	142,361	$	598,260	$	0	$	638,798	$	131,546	$	770,344

(1)	Does not include ~~$16.6~~$17.6 million at ~~June~~September 30, 2014; $13.8 million at December 31, 2013 and ~~$15.5~~$13.8 million at ~~June~~September 30, 2013 of FHLB – Dallas and FNBB stock that do not have readily determinable fair values and are carried at cost.

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

Description
   Fair Value at
June 30, 2014
Technique
   Unobservable Inputs
(Dollars in thousands)
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
   $ 20,259       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
   $ 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
   $ 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


Description	Fair Value at September 30, 2014	Technique	Unobservable Inputs
(Dollars in thousands)
Impaired non-purchased loans and leases	$14,835	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	$13,634	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	$1,657	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	$14,781	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	$27,882	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

(1)	The Company utilizes valuation techniques consistent with the market, cost, and income approaches, or a combination thereof in determining fair value.

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 ~~June~~September 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 ~~$20.6~~$19.6 million at ~~June~~September 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 ~~June~~September 30, 2014, the

third parties’ pricing matrices valued the Company’s portfolio of private placement bonds at ~~$20.6~~$19.6 million which was equal to the aggregate par value of the private placement bonds. Accordingly, at ~~June~~September 30, 2014, the Company reported the private placement bonds at ~~$20.6~~$19.6 million.

Impaired 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 ~~June~~September 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 $5.4 million to the estimated fair value of ~~$16.2~~$14.8 million. The $5.4 million adjustment to reduce the carrying value of impaired non-purchased loans and leases to estimated fair value consisted of ~~$4.2~~$4.4 million of partial charge-offs and ~~$1.2~~$1.0 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 ~~June~~September 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 ~~$0.5~~$0.2 million during the ~~second~~third quarter and ~~$0.7~~$0.9 million during the first ~~six~~nine months of 2014 for such loans. The Company also recorded provision for loan and lease losses of ~~$0.5~~$0.2 million during the ~~second~~third quarter and ~~$0.7~~$0.9 million during the first ~~six~~nine months of 2014 to cover such charge-offs. At ~~June~~September 30, 2014, the Company had ~~$20.3~~$13.6 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~~September 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~~$0.3 million ~~for both~~during the ~~second~~third quarter and $0.9 million during the first ~~six~~nine months of 2014. The Company also recorded provision for loan and lease losses of ~~$0.6~~$0.3 million ~~for both~~during the ~~second~~third quarter and $0.9 million during the first ~~six~~nine months of 2014 to cover such charge-offs. At ~~June~~September 30, 2014, the Company had ~~$0.9~~$1.7 million of impaired 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		403			497
Acquired		1,907			1,907
Paydowns and maturities		(392	)		(672	)
Sales		0			(856	)
Transfers in and/or out of Level 3		0			0

Balance – June 30, 2014	$	20,600

Balance – September 30, 2014				$	19,558

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		(1,867	)		(1,940	)
Paydowns and maturities		(32,189	)		(32,647	)
Sales		0			0
Transfers in and/or out of Level 3		(50,787	)		(50,787	)

Balance – June 30, 2013	$	19,329
Balance –September 30, 2013				$	18,798

12.	Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of financial instruments.

Cash and due from banks – For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Investment securities – The Company utilizes independent third parties as its principal pricing sources for determining fair value of investment securities 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 ~~$16.6~~$17.6 million at ~~June~~September 30, 2014, $13.8 million at December 31, 2013 and ~~$15.5~~$13.8 million at ~~June~~September 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 ~~June~~September 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.


	Fair Value Hierarchy		June 30,																				September 30,
		2014						2013						December 31, 2013								2014						2013						December 31, 2013
		Carrying Amount			Estimated Fair Value			Carrying Amount			Estimated Fair Value			Carrying Amount			Estimated Fair Value			Fair Value Hierarchy		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		$	110,688		$	110,688		$	60,892		$	60,892		$	195,975		$	195,975		Level 1		$	112,084		$	112,084		$	124,458		$	124,458		$	195,975		$	195,975
Investment securities AFS	Levels 2 and 3			892,129			892,129			490,748			490,748			669,384			669,384		Levels 2 and 3			859,876			859,876			671,393			671,393			669,384			669,384
Loans and leases, net of ALLL	Level 3			4,528,696			4,480,221			2,915,749			2,884,141			3,314,134			3,286,600		Level 3			4,869,329			4,822,383			3,289,306			3,263,428			3,314,134			3,286,600
FDIC loss share receivable	Level 3			50,679			50,600			112,716			112,662			71,854			71,770		Level 3			36,583			36,130			89,642			89,617			71,854			71,770

Financial liabilities:
Demand, savings and interest bearing transaction deposits	Level 1		$	3,807,139		$	3,807,139		$	2,257,668		$	2,257,668		$	2,819,817		$	2,819,817		Level 1		$	3,877,373		$	3,877,373		$	2,677,030		$	2,677,030		$	2,819,817		$	2,819,817
Time deposits	Level 2			1,176,758			1,177,108			726,961			727,822			897,210			897,708		Level 2			1,262,332			1,263,635			977,656			978,202			897,210			897,708
Repurchase agreements with customers	Level 1			55,999			55,999			24,704			24,704			53,103			53,103		Level 1			73,942			73,942			50,254			50,254			53,103			53,103
Other borrowings	Level 2			280,875			304,381			391,690			435,719			280,895			319,650		Level 2			352,616			373,696			280,905			322,171			280,895			319,650
FDIC clawback payable	Level 3			26,533			26,533			25,596			25,596			25,897			25,897		Level 3			26,676			26,676			25,705			25,705			25,897			25,897
Subordinated debentures	Level 2			64,950			32,554			64,950			30,735			64,950			30,974		Level 2			64,950			33,452			64,950			30,815			64,950			30,974

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

The following table presents changes in AOCI for the dates indicated.


													Three Months Ended						Nine Months Ended
	Three Months Ended June 30,						Six Months Ended June 30,						September 30,						September 30,
	2014			2013			2014			2013			2014			2013			2014			2013
	(Dollars in thousands)												(Dollars in thousands)
Beginning balance of AOCI – unrealized gains and losses on investment securities AFS	$	3,211		$	9,029		$	(3,672	)	$	10,783		$	10,006		$	(898	)	$	(3,672	)	$	10,783
Other comprehensive income (loss):
Other comprehensive income (loss) before reclassifications		6,806			(9,927	)		13,692			(11,587	)		744			445			14,437			(11,142	)
Amounts reclassified from AOCI		(11	)		0			(14	)		(94	)		(26	)		0			(41	)		(94	)

Total other comprehensive income (loss)		6,795			(9,927	)		13,678			(11,681	)		718			445			14,396			(11,236	)

Ending balance of AOCI – unrealized gains and losses on investment securities AFS	$	10,006		$	(898	)	$	10,006		$	(898	)	$	10,724		$	(453	)	$	10,724		$	(453	)

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 ~~June~~September 30, 2014, amounts reclassified for net gains on investment securities were ~~$18,000,~~$43,000, with related tax effects of ~~$7,000.~~$17,000. For the three months ended ~~June~~September 30, 2013, there were no amounts reclassified from AOCI. For the ~~six~~nine months ended ~~June~~September 30, 2014 and 2013 amounts reclassified for net gains on investment securities were ~~$23,000~~$67,000 and $156,000, respectively, with tax related tax effects of ~~$9,000~~$26,000 and $62,000, respectively.

14.	Recent Accounting Pronouncements

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 was 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~~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.

~~15.~~

~~Subsequent Event~~

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

FORWARD-LOOKING INFORMATION

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~~the 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, or additional expenses relating to, integrating or managing acquisitions; ~~opportunities to profitably deploy capital;~~ the ability to attract new or retain existing or acquired ~~deposits, or~~deposits; the ability to ~~retain or grow~~achieve growth in 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; an increase in the incidence or severity of fraud, illegal payments, security breaches and other illegal acts impacting the Bank and its customers; 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~~or as detailed from time to time in other Company reports filed with the SEC, including those factors included in the disclosures under the heading “Forward-Looking Information” and ~~statements.~~“Item 1A. Risk Factors” in the Company’s most recent Annual Report on Form 10-K for the year ended December 31, 2013. 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 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.

SELECTED AND SUPPLEMENTAL FINANCIAL DATA

The following tables set forth selected consolidated financial data of the Company for the three months and ~~six~~nine months ended ~~June~~September 30, 2014 and 2013 and supplemental quarterly financial data of the Company for each of the most recent eight quarters beginning with the ~~third~~fourth quarter of 2012 through the ~~second~~third 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.

Selected Consolidated Financial Data


													Three Months Ended						Nine Months Ended
	Three Months Ended June 30,						Six Months Ended June 30,						September 30,						September 30,
	2014			2013			2014			2013			2014			2013			2014			2013
	(Dollars in thousands, except per share amounts)												(Dollars in thousands, except per share amounts)
Income statement data:
Interest income	$	69,760		$	47,957		$	126,818		$	96,726		$	80,083		$	55,342		$	206,902		$	152,069
Interest expense		4,959			4,492			9,620			9,122			5,462			4,709			15,083			13,832
Net interest income		64,801			43,465			117,198			87,604			74,621			50,633			191,819			138,237
Provision for loan and lease losses		5,582			2,666			6,887			5,394			3,687			3,818			10,574			9,212
Non-interest income		17,388			18,987			37,749			35,344			19,248			22,102			56,996			57,446
Non-interest expense		37,878			29,901			75,333			59,132			42,523			32,208			117,856			91,341
Net income available to common stockholders		26,486			20,387			51,762			40,387			32,093			26,452			83,855			66,839
*Common share and per common share data:**
Earnings – diluted	$	0.34		$	0.29		$	0.68		$	0.57		$	0.40		$	0.36		$	1.08		$	0.93
Book value		10.67			7.49			10.67			7.49			10.99			8.34			10.99			8.34
Dividends		0.115			0.085			0.225			0.16			0.12			0.095			0.345			0.255
Weighted-average diluted shares outstanding (thousands)		77,466			71,482			75,981			71,342			80,445			73,296			77,469			71,988
End of period shares outstanding (thousands)		79,662			70,876			79,662			70,876			79,705			73,404			79,705			73,404
Balance sheet data at period end:
Total assets	$	6,297,975		$	4,043,632		$	6,297,975		$	4,043,632		$	6,580,360		$	4,710,567		$	6,580,360		$	4,710,567
Non-purchased loans and leases		3,171,585			2,443,342			3,171,585			2,443,342			3,639,142			2,522,589			3,639,142			2,522,589
Purchased non-covered loans		1,127,689			31,027			1,127,689			31,027			1,030,988			399,058			1,030,988			399,058
Covered loans		276,380			480,752			276,380			480,752			248,802			409,319			248,802			409,319
Allowance for loan and lease losses		46,958			39,372			46,958			39,372			49,606			41,660			49,606			41,660
FDIC loss share receivable		50,679			112,716			50,679			112,716			36,583			89,642			36,583			89,642
Investment securities AFS		892,129			490,748			892,129			490,748			859,876			671,393			859,876			671,393
Covered foreclosed assets		35,775			46,157			35,775			46,157			27,882			40,452			27,882			40,452
Total deposits		4,983,897			2,984,629			4,983,897			2,984,629			5,139,705			3,654,686			5,139,705			3,654,686
Repurchase agreements with customers		55,999			24,704			55,999			24,704			73,942			50,254			73,942			50,254
Other borrowings		280,875			391,690			280,875			391,690			352,616			280,905			352,616			280,905
Subordinated debentures		64,950			64,950			64,950			64,950			64,950			64,950			64,950			64,950
Total common stockholders’ equity		850,204			531,125			850,204			531,125			875,578			612,338			875,578			612,338
Loan and lease (including covered loans and purchasednon-covered loans) to deposit ratio		91.81	%		99.01	%		91.81	%		99.01	%		95.70	%		91.14	%		95.70	%		91.14	%
Average balance sheet data:
Total average assets	$	5,660,136		$	3,928,528		$	5,247,221		$	3,931,692		$	6,435,697		$	4,450,763		$	5,650,230		$	4,098,903
Total average common stockholders’ equity		749,692			527,713			696,360			521,082			860,240			578,382			751,602			540,382
Average common equity to average assets		13.25	%		13.43	%		13.27	%		13.25	%		13.37	%		13.00	%		13.30	%		13.18	%
Performance ratios:
Return on average assets**		1.88	%		2.08	%		1.99	%		2.07	%		1.98	%		2.36	%		1.98	%		2.18	%
Return on average common stockholders’ equity**		14.17			15.50			14.99			15.63			14.80			18.14			14.92			16.54
Return on average tangible common stockholders’ equity**		15.41			15.82			15.90			15.97			16.93			18.70			16.27			16.95
Net interest margin – FTE**		5.62			5.56			5.55			5.68			5.49			5.55			5.52			5.63
Efficiency ratio		44.60			46.34			47.05			46.54			43.95			43.00			45.88			45.23
Common stock dividend payout ratio		33.82			29.49			33.09			27.99			29.79			30.12			31.20			28.75
Asset quality ratios:
Net charge-offs to average total loans and leases**⁽¹⁾		0.19	%		0.12	%		0.11	%		0.15	%		0.07	%		0.09	%		0.11	%		0.13	%
Nonperforming loans and leases to total loans and leases⁽²⁾		0.58			0.65			0.58			0.66			0.49			0.41			0.49			0.41
Nonperforming assets to total assets⁽²⁾		0.62			0.66			0.62			0.66			0.50			0.47			0.50			0.47
Allowance for loan and lease losses as a percentage of:
Total loans and leases⁽²⁾		1.48	%		1.61	%		1.48	%		1.61	%		1.36	%		1.65	%		1.36	%		1.65	%
Nonperforming loans and leases⁽²⁾		255	%		244	%		255	%		244	%		276	%		400	%		276	%		400	%
Capital ratios at period end:
Tier 1 leverage		14.31	%		14.91	%		14.31	%		14.91	%		12.97	%		14.72	%		12.97	%		14.72	%
Tier 1 risk-based capital		13.40			17.12			13.40			17.12			12.28			15.94			12.28			15.94
Total risk-based capital		14.19			18.27			14.19			18.27			13.03			16.96			13.03			16.96

*	Adjusted to give effect to 2-for-1 stock split on June 23, 2014.

**	Ratios annualized based on actual days.

(1)	Excludes covered ~~loans, purchased non-covered~~ loans and net charge-offs related to such loans.

(2)	Excludes purchased non-covered loans, covered loans and covered foreclosed assets, except for their inclusion in total assets.

Supplemental Quarterly Financial Data


	9/30/12			12/31/12			3/31/13			6/30/13			9/30/13			12/31/13			3/31/14			6/30/14			12/31/12			3/31/13			6/30/13			9/30/13			12/31/13			3/31/14			6/30/14			9/30/14
	(Dollars in thousands, except per share amounts)																								(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		$	43,771		$	44,139		$	43,465		$	50,633		$	55,282		$	52,396		$	64,801		$	74,621
Federal tax (FTE) adjustment		2,087			2,009			2,020			2,076			2,161			2,372			2,424			2,737			2,009			2,020			2,076			2,161			2,372			2,424			2,737			2,892

Net interest income (FTE)		46,531			45,780			46,159			45,541			52,794			57,654			54,820			67,538			45,780			46,159			45,541			52,794			57,654			54,820			67,538			77,513
Provision for loan and lease losses		(3,080	)		(2,533	)		(2,728	)		(2,666	)		(3,818	)		(2,863	)		(1,304	)		(5,582	)		(2,533	)		(2,728	)		(2,666	)		(3,818	)		(2,863	)		(1,304	)		(5,582	)		(3,687	)
Non-interest income		14,491			18,848			16,357			18,987			22,102			18,592			20,360			17,388			18,848			16,357			18,987			22,102			18,592			20,360			17,388			19,248
Non-interest expense		(28,682	)		(29,891	)		(29,231	)		(29,901	)		(32,208	)		(34,728	)		(37,454	)		(37,878	)		(29,891	)		(29,231	)		(29,901	)		(32,208	)		(34,728	)		(37,454	)		(37,878	)		(45,523	)

Pretax income (FTE)		29,260			32,204			30,557			31,961			38,870			38,655			36,422			41,466			32,204			30,557			31,961			38,870			38,655			36,422			41,466			50,551
FTE adjustment		(2,087	)		(2,009	)		(2,020	)		(2,076	)		(2,161	)		(2,372	)		(2,424	)		(2,737	)		(2,009	)		(2,020	)		(2,076	)		(2,161	)		(2,372	)		(2,424	)		(2,737	)		(2,892	)
Provision for income taxes		(7,883	)		(9,519	)		(8,526	)		(9,506	)		(10,224	)		(11,893	)		(8,730	)		(12,251	)		(9,519	)		(8,526	)		(9,506	)		(10,224	)		(11,893	)		(8,730	)		(12,251	)		(15,579	)
Noncontrolling interest		(15	)		(9	)		(11	)		8			(33	)		8			8			8			(9	)		(11	)		8			(33	)		8			8			8			13

Net income available to common stockholders	$	19,275		$	20,667		$	20,000		$	20,387		$	26,452		$	24,398		$	25,276		$	26,486		$	20,667		$	20,000		$	20,387		$	26,452		$	24,398		$	25,276		$	26,486		$	32,093

Earnings per common share – diluted*	$	0.28		$	0.29		$	0.28		$	0.29		$	0.36		$	0.33		$	0.34		$	0.34		$	0.29		$	0.28		$	0.29		$	0.36		$	0.33		$	0.34		$	0.34		$	0.40
Non-interest Income:
Service charges on deposit accounts	$	5,000		$	4,799		$	4,722		$	5,074		$	5,817		$	6,031		$	5,639		$	6,605		$	4,799		$	4,722		$	5,074		$	5,817		$	6,031		$	5,639		$	6,605		$	7,356
Mortgage lending income		1,672			1,483			1,741			1,643			1,276			967			954			1,126			1,483			1,741			1,643			1,276			967			954			1,126			1,728
Trust income		865			928			883			865			1,060			1,289			1,316			1,364			928			883			865			1,060			1,289			1,316			1,364			1,419
BOLI income		598			1,027			1,083			1,104			1,179			1,164			1,130			1,278			1,027			1,083			1,104			1,179			1,164			1,130			1,278			1,390
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	)		1,336			2,392			2,481			1,396			901			692			(741	)		(562	)
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			3,194			2,155			3,689			2,484			4,825			3,311			3,629			3,369
Gains on investment securities		—			55			156			—			—			4			5			18			55			156			—			—			4			5			18			43
Gains on sales of other assets		1,425			2,431			1,974			3,110			2,501			1,801			974			1,448			2,431			1,974			3,110			2,501			1,801			974			1,448			1,688
Gains on merger and acquisition transactions		—			2,403			—			—			5,163			—			4,667			—			2,403			—			—			5,163			—			4,667			—			—
Other		962			1,192			1,251			1,021			1,226			1,610			1,672			2,661			1,192			1,251			1,021			1,226			1,610			1,672			2,661			2,817

Total non-interest income	$	14,491		$	18,848		$	16,357		$	18,987		$	22,102		$	18,592		$	20,360		$	17,388		$	18,848		$	16,357		$	18,987		$	22,102		$	18,592		$	20,360		$	17,388		$	19,248

Non-interest Expense:
Salaries and employee benefits	$	15,040		$	15,362		$	15,694		$	15,294		$	16,456		$	17,381		$	17,689		$	18,831		$	15,362		$	15,694		$	15,294		$	16,456		$	17,381		$	17,689		$	18,831		$	20,876
Net occupancy expense		4,105			4,160			4,514			4,370			4,786			5,039			5,044			5,707			4,160			4,514			4,370			4,786			5,039			5,044			5,707			6,823
Other operating expenses		9,028			9,860			8,455			9,669			10,178			11,427			13,908			12,221			9,860			8,455			9,669			10,178			11,427			13,908			12,221			13,292
Amortization of intangibles		509			509			568			568			788			881			813			1,119			509			568			568			788			881			813			1,119			1,532

Total non-interest expense	$	28,682		$	29,891		$	29,231		$	29,901		$	32,208		$	34,728		$	37,454		$	37,878		$	29,891		$	29,231		$	29,901		$	32,208		$	34,728		$	37,454		$	37,878		$	42,523

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		$	38,672		$	38,738		$	38,422		$	39,372		$	41,660		$	42,945		$	43,861		$	46,958
Net charge-offs		(3,270	)		(2,467	)		(3,044	)		(1,716	)		(1,530	)		(1,578	)		(388	)		(2,485	)		(2,467	)		(3,044	)		(1,716	)		(1,530	)		(1,578	)		(388	)		(2,485	)		(1,039	)
Provision for loan and lease losses		3,080			2,533			2,728			2,666			3,818			2,863			1,304			5,582			2,533			2,728			2,666			3,818			2,863			1,304			5,582			3,687

Balance at end of period	$	38,672		$	38,738		$	38,422		$	39,372		$	41,660		$	42,945		$	43,861		$	46,958		$	38,738		$	38,422		$	39,372		$	41,660		$	42,945		$	43,861		$	46,958		$	49,606

Selected Ratios:
Net interest margin - FTE**		5.97	%		5.84	%		5.83	%		5.56	%		5.55	%		5.63	%		5.46	%		5.62	%		5.84	%		5.83	%		5.56	%		5.55	%		5.63	%		5.46	%		5.62	%		5.49	%
Efficiency ratio		47.00			46.25			46.76			46.34			43.00			45.55			49.82			44.60			46.25			46.76			46.34			43.00			45.55			49.82			44.60			43.95
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			0.28			0.19			0.11			0.09			0.12			0.02			0.21			0.07
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			0.43			0.40			0.66			0.41			0.33			0.42			0.58			0.49
Nonperforming assets to total assets(2)		0.59			0.57			0.50			0.66			0.47			0.43			0.57			0.62			0.57			0.50			0.66			0.47			0.43			0.57			0.62			0.50
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			1.83			1.78			1.61			1.65			1.63			1.58			1.48			1.36
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			0.73			0.56			0.74			0.54			0.45			0.75			0.63			0.63

*	Adjusted to give effect to 2-for-1 stock split on June 23, 2014.

**	Annualized based on actual days.

(1)	Excludes covered loans, purchased non-covered loans and net charge-offs related to such loans.

(2)	Excludes purchased non-covered loans, covered loans and covered foreclosed assets, except for their inclusion in total assets.

OVERVIEW

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~~nine months ended ~~June~~September 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/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.

CRITICAL ACCOUNTING POLICIES

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 non-purchased 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 non-purchased 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, 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 over various periods 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 ~~June~~September 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~~nine months ended ~~June~~September 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 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.~~credits. This ALLL allocation is applied to every large risk-rated loan ~~in a borrower relationship~~ that exceeds $3$10 million, and is based on the greater of the loan-to-value or loan-to-cost ratio for each large individual risk-rated ~~loan comprising such borrower relationship.~~loan.

The Company also includes specific ALLL allocations for qualitative factors including, (i) general economic and business conditions, (ii) trends that could affect collateral values and (iii) expectations regarding the current business cycle. The Company may also consider other qualitative factors in future periods for additional allowance 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 ~~June~~September 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 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 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 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 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 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 all loans acquired in ~~the Genala Banc, Inc. (“Genala”), The First National Bank of Shelby (“First National Bank”), Bancshares Inc. (“Bancshares”) and Summit Bancshares, Inc. (“Summit”) acquisitions and~~other acquisitions. Purchased non-covered loans 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 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 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 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 a substantial portion 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 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 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).

ANALYSIS OF RESULTS OF OPERATIONS

General

Net income available to common stockholders for the Company was $26.5 million for the second quarter of 2014, a 29.9% increase from $20.4 million for the second quarter of 2013. Diluted earnings per common share were $0.34 for the second quarter of 2014, a 17.2% increase from $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 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 (“MD&A”) has been adjusted to give effect to this stock split.

Net income available to common stockholders for the Company was $32.1 million for the third quarter of 2014, a 21.3% increase from $26.5 million for the third quarter of 2013. Diluted earnings per common share were $0.40 for the third quarter of 2014, an 11.1% increase from $0.36, on a split-adjusted basis, for the third quarter of 2013. For the first nine months of 2014, net income available to common stockholders totaled $83.9 million, a 25.5% increase from $66.8 million the first nine months of 2013. Diluted earnings per common share for the first nine months of 2014 were $1.08, a 16.1% increase from $0.93, on a split-adjusted basis, for the first nine months of 2013.

The Company’s annualized return on average assets was ~~1.88%~~1.98% for the ~~second~~third quarter of 2014 compared to ~~2.08%~~2.36% for the ~~second~~third quarter of 2013. Its annualized return on average common stockholders’ equity was ~~14.17%~~14.80% for the ~~second~~third quarter of 2014 compared to ~~15.50%~~18.14% for the ~~second~~third quarter of 2013. The Company’s annualized return on average tangible common stockholders’ equity was ~~15.41%~~16.93% for the ~~second~~third quarter of 2014 compared to ~~15.82%~~18.70% for the ~~second~~third quarter of 2013. The Company’s annualized return on average assets was ~~1.99%~~1.98% for the first ~~six~~nine months of 2014 compared to ~~2.07%~~2.18% for the first ~~six~~nine months of 2013. Its annualized return on average common stockholders’ equity was ~~14.99%~~14.92% for the first ~~six~~nine months of 2014 compared to ~~15.63%~~16.54% for the first ~~six~~nine months of 2013. The Company’s annualized return on average tangible common stockholders’ equity was ~~15.90%~~16.27% for the first ~~six~~nine months of 2014 compared to ~~15.97%~~16.95% for the first ~~six~~nine months of 2013. The calculation of the Company’s return on average tangible common stockholders’ equity and the reconciliation to GAAP is included elsewhere in this MD&A.

Total assets were ~~$6.30~~$6.58 billion at ~~June~~September 30, 2014 compared to $4.79 billion at December 31, 2013. Non-purchased loans and leases were ~~$3.17~~$3.64 billion at ~~June~~September 30, 2014 compared to $2.63 billion at December 31, 2013. Total loans and leases were ~~$4.58~~$4.92 billion at ~~June~~September 30, 2014 compared to $3.36 billion at December 31, 2013. Deposits were ~~$4.98~~$5.14 billion at ~~June~~September 30, 2014 compared to $3.72 billion at December 31, 2013.

Common stockholders’ equity was ~~$850~~$876 million at ~~June~~September 30, 2014 compared to $629 million at December 31, 2013. Tangible common stockholders’ equity was ~~$742~~$768 million at ~~June~~September 30, 2014 compared to $610 million at December 31, 2013. Book value per common share was ~~$10.67~~$10.99 at ~~June~~September 30, 2014 compared to $8.53, on a split-adjusted basis, at December 31, 2013. Tangible book value per common share was ~~$9.31~~$9.64 at ~~June~~September 30, 2014 compared to $8.27, on a split-adjusted basis, at December 31, 2013. The calculation of the Company’s tangible common stockholders’ equity and tangible book value per common share and the reconciliation to GAAP is included elsewhere in this MD&A. 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.

On July 31, 2013, the Company completed its acquisition of The First National ~~Bank.~~Bank of Shelby (“First National Bank”). Because the acquisition was effective on July 31, 2013, the Company’s consolidated results of operations for the three months ended September 30, 2013 include only two months of the acquired operations of First National Bank.

On March 5, 2014, the Company completed its acquisition of Bancshares, Inc. (“Bancshares”). Because the acquisition was effective March 5, 2014, the Company’s consolidated results of operations for the three months and ~~six~~nine months ended ~~June~~September 30, 2013 do not include the acquired operations of Bancshares. The Company’s consolidated results of operations for the three months and nine months ended September 30, 2014 include the acquired operations of Bancshares beginning March 6, 2014.

On May 16, 2014, the Company completed its acquisition of Summit Bancorp, Inc. (“Summit”). Because the acquisition was effective May 16, 2014, the Company’s consolidated results of operations for the three months and nine months ended September 30, 2013 do not include the acquired operations of Summit. The Company’s consolidated results of operations for the three months and nine months ended September 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.~~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.

~~On March 5, 2014, the Company completed its acquisition~~Net Interest Income

Net interest income is a significant source of ~~Bancshares. Because the acquisition was effective March 5, 2014,~~ the Company’s ~~consolidated results~~earnings and represents the amount by which interest income on earning assets exceeds the interest expense paid on liabilities. The volume of ~~operations for~~interest earning assets and the ~~three months and six months ended June 30, 2013 do not include~~related funding sources, the ~~acquired operations~~overall mix 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 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 June 30, 2013 do not include the acquired operations of 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~~these assets ~~acquired~~ and liabilities, ~~assumed in~~and the ~~First National Bank, Bancshares, and Summit acquisitions is included in Note 3 to the Consolidated Financial Statements included elsewhere in this quarterly report~~rates paid on ~~Form 10-Q.~~

~~Net Interest Income~~each affect net interest income.

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 ~~$2.7~~$2.9 million and ~~$2.1~~$2.2 million for the quarters ended ~~June~~September 30, 2014 and 2013, respectively, and ~~$5.2~~$8.1 million and ~~$4.1~~$6.3 million for the ~~six~~nine months ended ~~June~~September 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 ~~second~~third quarter of 2014 increased ~~48.3%~~46.8% to ~~$67.5~~$77.5 million compared to ~~$45.5~~$52.8 million for the ~~second~~third quarter of 2013. Net interest income for the ~~first six~~nine months ofended September 30, 2014 increased ~~33.4%~~38.3% to ~~$122.4~~$199.9 million compared to ~~$91.7~~$144.5 million for the ~~first six~~nine months ofended September 30, 2013. The increase in net interest income for the ~~second~~third quarter and first ~~six~~nine months of 2014 compared to the same periods in 2013 was primarily due to the increase in average earning assets, which increased 48.5% to ~~$4.82~~$5.61 billion ~~or 46.8%,~~ for the ~~second~~third quarter and ~~$4.45~~41.0% to $4.84 billion ~~or 36.6%,~~ for the first ~~six~~nine months of 2014, compared to ~~$3.29~~$3.78 billion for the ~~second~~third quarter and ~~$3.26~~$3.43 billion for the first ~~six~~nine months of ~~2013.~~2013, partially offset by decreases in the Company’s net interest margin.

The Company’s net interest margin for the ~~second~~third quarter of 2014 ~~increased~~decreased six basis points (“bps”) to ~~5.62%~~5.49% compared to ~~5.56%~~5.55% for the ~~second~~third quarter in 2013. This ~~increase~~decrease was primarily due to a 1417 bps decrease in yields on average earning assets, partially offset by a 10 bps reduction in rates paid on interest bearing ~~liabilities, partially offset by an eight bps decrease in yields on average earning assets.~~liabilities. The Company’s net interest margin for the first ~~six~~nine months of 2014 decreased 1311 bps to ~~5.55%~~5.52% compared to ~~5.68%~~5.63% for the first ~~six~~nine months of 2013. This decrease was primarily due to a 2723 bps decrease in the yield on average earning assets, partially offset by ~~a 12~~an 11 bps reduction in the rates paid on interest bearing liabilities.

Yields on earning assets decreased to ~~6.03%~~5.87% for the ~~second~~third quarter and ~~5.98%~~5.94% for the first ~~six~~nine months of 2014 compared to ~~6.11%~~6.04% for the ~~second~~third quarter and ~~6.25%~~6.17% for the first ~~six~~nine months of 2013. The yield on the Company’s portfolio of non-purchased loans and leases decreased 4231 bps for the ~~second~~third quarter and 5144 bps for the first ~~six~~nine months of 2014 compared to the 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 5043 bps for the ~~second~~third quarter and 4644 bps for the first ~~six~~nine months of 2014 compared to the same periods in ~~2013 primarily due to changes~~2013. This decrease in the ~~composition~~yield on the Company’s aggregate investment securities portfolio is primarily the result of the low interest rate environment which has resulted in many issuers of investment securities, particularly tax-exempt municipal bonds, calling higher-rate investment securities and refinancing such securities at lower interest rates. Assuming this low interest rate environment continues, the Company expects additional tax-exempt investment securities to be called by their issuers and be refinanced at lower interest rates, likely resulting in continued decreases on the yield of the Company’s investment securities portfolio between taxable and tax-exempt investment securities. During the second quarter and first six months of 2014, taxable investment securities comprised 40.5% and 40.6%, respectively, and tax-exempt investment securities comprised 59.5% and 59.4%, respectively, of average investment securities. During the second quarter and first six months of 2013, taxable investment securities comprised 28.8% and 30.0%, respectively, and tax-exempt investment securities comprised 71.2% and 70.0%, respectively, of average investment securities.portfolio. Additionally, the yield on the Company’s purchased non-covered loan portfolio decreased ~~147~~124 bps for the ~~second~~third quarter and ~~215~~129 bps for the first ~~six~~nine months of 2014 compared to the same periods in 2013. This decrease was primarily attributable to the loans acquired in the 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 ~~660~~679 bps increase in the yield on covered loans for the ~~second~~third quarter and ~~439~~511 bps increase for the first ~~six~~nine months of 2014 compared to the 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 overall decrease in rates on average interest bearing liabilities was primarily due to a shift in the ~~declines in rates on interest bearing deposits, the largest component~~composition of the Company’s interest bearing liabilities. ~~Rates on~~For the three months and nine months ended September 30, 2014, the average balance of interest bearing deposits, ~~decreased two bps~~which are generally one of the cheapest interest bearing funding sources for the ~~second quarter~~Company, increased to 90.4% and three bps for the first six months of 2014 compared to the 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 and (ii) a change in the mix of savings and interest bearing deposit accounts to 71.4% and 71.4%,89.4 %, respectively, of total average interest bearing ~~deposits for the second quarter and first six months of 2014~~liabilities, compared to ~~69.2%~~86.8% and ~~68.9%~~86.5%, respectively, for the ~~second quarter~~three months and ~~first six~~nine months ofended September 30, 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~~has future growth in loans and leases, the Company expects to continue to increase deposit pricing in additional markets to fund ~~future growth~~such growth. Any such increase 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~~two bps for the ~~second~~third quarter of 2014 ~~but decreased~~and one bps for the first ~~six~~nine months of 2014 compared to the same periods of 2013. The rate on the Company’s other borrowings ~~which consist primarily of fixed rate callable FHLB – Dallas advances,~~ increased ~~nine~~12 bps in the ~~second~~third quarter and ~~five~~seven bps for the first ~~six~~nine months of 2014 compared to the 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 ~~one~~four bps in both the ~~second~~third quarter and ~~five bps for~~ the first ~~six~~nine months of 2014 compared to the same periods of 2013.

The increase in average earning assets for the ~~second~~third quarter and first ~~six~~nine months of 2014 compared to the same periods in 2013 was due to increases in the average balances of non-purchased loans and leases of ~~$671~~$940 million for the ~~second~~third quarter and ~~$602~~$716 million for the first ~~six~~nine months of 2014 compared to the same periods in 2013. Additionally, the average balance of purchased non-covered loans increased ~~$783~~$789 million for the ~~second~~third quarter and ~~$574~~$646 million for the first ~~six~~nine months of 2014 compared to the same periods for 2013, primarily as a result of the First National Bank, Bancshares and Summit acquisitions. The average balances of investment securities increased ~~$300~~$279 million for the ~~second~~third quarter and ~~$246~~$257 million for the first ~~six~~nine months of 2014 compared to the same periods in 2013, primarily as a result of investment securities acquired in the First National Bank and Summit acquisitions. These increases were partially offset by a decrease in the average balance of covered loans of ~~$228~~$180 million for the ~~second~~third quarter and ~~$234~~$216 million for the first ~~six~~nine 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 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.

Average Consolidated Balance Sheets and Net Interest Analysis – FTE


	Three Months Ended June 30,														Six Months Ended June 30,														Three Months Ended September 30,															Nine Months Ended September 30,
	2014							2013							2014							2013							2014							2013								2014							2013
	Average		Income/		Yield/			Average		Income/		Yield/			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			Balance		Expense		Rate			Balance		Expense		Rate
	(Dollars in thousands)																												(Dollars in thousands)
ASSETS
Earning assets:
Interest earning deposits and federal funds sold	$	12,398	$	35		1.14	%	$	1,312	$	2		0.84	%	$	6,770	$	38		1.14	%	$	1,090	$	10		1.81	%	$	2,165	$	11		2.08	%	$	1,223		$	11		3.63	%	$	5,218	$	50		1.27	%	$	1,135	$	21		2.47	%
Investment securities:
Taxable		320,298		2,790		3.49			141,836		1,183		3.34			298,551		5,149		3.48			147,097		2,468		3.38			352,281		2,986		3.36			235,216			1,988		3.35			316,658		8,135		3.43			176,793		4,456		3.37
Tax-exempt – FTE		471,001		7,652		6.52			349,878		5,921		6.79			437,364		14,416		6.65			343,284		11,681		6.86			519,546		8,072		6.16			357,438			6,163		6.84			465,059		22,488		6.47			348,054		17,844		6.85
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			3,399,681		43,220		5.04			2,459,427			33,187		5.35			2,992,573		113,577		5.07			2,276,801		93,794		5.51
Purchased non-covered loans		817,864		13,998		6.86			34,864		724		8.33			611,179		21,478		7.09			37,373		1,713		9.24			1,072,675		18,056		6.68			283,364			5,653		7.92			766,701		39,534		6.89			120,339		7,366		8.18
Covered loans		287,380		11,130		15.53			515,547		11,480		8.93			308,225		20,535		13.44			542,675		24,344		9.05			259,022		10,630		16.28			438,913			10,501		9.49			291,644		31,166		14.29			507,708		34,845		9.18

Total earning assets – FTE		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			5,605,370		82,975		5.87			3,775,581			57,503		6.04			4,837,853		214,950		5.94			3,430,830		158,326		6.17
Non-interest earning assets		837,379							642,650							799,487							676,198							830,327							675,182	��							812,377							668,073

Total assets	$	5,660,136						$	3,928,528						$	5,247,221						$	3,931,692						$	6,435,697						$	4,450,763							$	5,650,230						$	4,098,903


LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest bearing liabilities:
Deposits:
Savings and interest bearing transaction	$	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	%	$	2,821,987	$	1,508		0.21	%	$	1,843,060		$	913		0.20	%	$	2,470,211	$	3,845		0.21	%	$	1,721,794	$	2,583		0.20	%
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			626,785		412		0.26			430,586			296		0.27			500,194		928		0.25			365,846		828		0.30
Other time deposits		505,260		275		0.22			404,408		325		0.32			481,887		555		0.23			415,499		718		0.35			564,445		365		0.26			465,759			328		0.28			509,709		920		0.24			432,436		1,046		0.32

Total interest bearing deposits		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			4,013,217		2,285		0.23			2,739,405			1,537		0.22			3,480,114		5,693		0.22			2,520,076		4,457		0.24
Repurchase agreements with customers		58,607		13		0.09			29,815		6		0.08			61,808		25		0.08			31,872		13		0.09			62,430		15		0.09			41,879			7		0.07			62,018		40		0.09			35,244		21		0.08
Other borrowings		281,009		2,692		3.84			286,719		2,684		3.75			280,968		5,347		3.84			283,755		5,332		3.79			299,436		2,736		3.63			308,875			2,732		3.51			287,191		8,083		3.76			292,221		8,064		3.69
Subordinated debentures		64,950		427		2.64			64,950		428		2.65			64,950		840		2.61			64,950		857		2.66			64,950		426		2.60			64,950			433		2.64			64,950		1,267		2.61			64,950		1,290		2.65

Total interest bearing liabilities		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			4,440,033		5,462		0.49			3,155,109			4,709		0.59			3,894,273		15,083		0.52			2,912,491		13,832		0.63
Non-interest bearing liabilities:
Non-interest bearing deposits		964,935							577,930							878,349							567,153							1,064,142							673,215								943,445							601,146
Other non-interest bearing liabilities		59,311							47,814							52,180							50,840							67,698							40,589								57,410							41,431

Total liabilities		4,906,986							3,397,367							4,547,399							3,407,164							5,571,873							3,868,913								4,895,128							3,555,068
Common stockholders’ equity		749,692							527,713							696,360							521,082							860,240							578,382								751,602							540,382
Noncontrolling interest		3,458							3,448							3,462							3,446							3,584							3,468								3,500							3,453

Total liabilities and stockholders’ equity	$	5,660,136						$	3,928,528						$	5,247,221						$	3,931,692						$	6,435,697						$	4,450,763							$	5,650,230						$	4,098,903



Net interest income – FTE			$	67,538						$	45,541						$	122,354						$	91,700						$	77,513							$	52,794						$	199,867						$	144,494

Net interest margin – FTE						5.62	%						5.56	%						5.55	%						5.68	%						5.49	%							5.55	%						5.52	%						5.63	%

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

Analysis of Changes in Net Interest Income – FTE

   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


~~Non-Interest Income~~
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.
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 $3.6 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.
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 following table presents non-interest income for the periods indicated.~~
   Three Months Ended
September 30, 2014
Over
Three Months Ended
September 30, 2013 Nine Months Ended
September 30, 2014
Over
Nine Months Ended
September 30, 2013
   Yield/ Net Yield/ Net
   Volume Rate Change Volume Rate Change
   (Dollars in thousands)
Increase (decrease) in:

Interest income – FTE:

Interest earning deposits and federal funds sold
   $ 5    $ (5 ) $ —      $ 38    $ (9 ) $ 29
Investment securities:

Taxable
   992    6    998    3,593    86    3,679
Tax-exempt – FTE
   2,519    (610 ) 1,909    5,658    (1,014 ) 4,644
Non-purchased loans and leases – FTE
   11,953    (1,920 ) 10,033    27,166    (7,383 ) 19,783
Purchased non-covered loans
   13,286    (883 ) 12,403    33,329    (1,161 ) 32,168
Covered loans
   (7,383 ) 7,512    129    (23,089 ) 19,410    (3,679 )


Total interest income – FTE
   21,372    4,100    25,472    46,695    9,929    56,624


Interest expense:

Savings and interest bearing transaction
   523    72    595    1,165    97    1,262
Time deposits of $100,000 or more
   129    (13 ) 116    249    (149 ) 100
Other time deposits
   64    (27 ) 37    139    (265 ) (126 )
Repurchase agreements with customers
   5    3    8    17    2    19
Other borrowings
   (86 ) 90    4    (142 ) 161    19
Subordinated debentures
   —      (7 ) (7 ) —      (23 ) (23 )


Total interest expense
   635    118    753    1,428    (177 ) 1,251


Increase in net interest income – FTE
   $ 20,737    $ 3,982    $ 24,719    $ 45,267    $ 10,106    $ 55,373


Non-Interest Income

   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




~~Non-Interest Expense~~
The Company’s non-interest ~~expense~~income consists primarily of ~~salaries~~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 ~~employee benefits, net occupancy~~purchased non-covered loans, gains on investment securities and ~~equipment~~on sales of other assets and ~~other operating expenses.~~ gains on merger and acquisition transactions.
Non-interest ~~expense increased 26.7%~~income for the third quarter of 2014 decreased 12.9% to ~~$37.9~~$19.2 million compared to $22.1 million for the ~~second~~third quarter of 2013. Non-interest income for the first nine months of 2014 decreased 0.8% to $57.0 million compared to $57.4 million for the first nine months of 2013. The Company’s results for the first nine months of 2014 included $4.6 million of tax-exempt bargain purchase gain from the acquisition of Bancshares. The Company’s results for the third quarter of 2014 included no bargain purchase gain. The Company’s results for the third quarter of 2013 and for the first nine months of 2013 included $5.2 million of tax-exempt bargain purchase gain from the acquisition of First National Bank.
Service charges on deposit accounts increased 26.5% to $7.4 million for the third quarter of 2014 compared to ~~$29.9~~$5.8 million for the ~~second~~third quarter of 2013. ~~Non-interest expense~~Service charges on deposit accounts increased ~~27.4%~~25.5% to ~~$75.3~~$19.6 million for the first ~~six~~nine months of 2014 compared to ~~$59.1~~$15.6 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 increased 35.0% to $1.7 million for the third quarter of 2014 compared to $1.3 million for the third quarter of 2013. Mortgage lending income decreased 18.3% to $3.8 million for the first ~~six~~nine months of 2014 compared to $4.7 million for the same period in 2013. The volume of originations of mortgage loans available for sale increased 23.5% to $62.7 million for the third quarter of 2014 compared to $50.7 million for the third quarter of 2013. The volume of originations of mortgage loans available for sale decreased 11.3% to $152.8 million for the first nine months of 2014 compared to $172.2 million for the first nine months of 2013. During the ~~second~~third quarter of 2014, approximately 29% of the
Company’s originations of mortgage loans available for sale were related to mortgage refinancings and approximately 71% were related to new home purchases, compared to approximately 40% for refinancings and approximately 60% for new home purchases in the ~~Company incurred pre-tax acquisition-related non-interest expense~~third quarter of ~~approximately $0.8 million.~~2013. During the first ~~six~~nine months of 2014, approximately 30% of the ~~Company incurred pre-tax non-interest expense~~Company’s originations of ~~$5.0 million due~~mortgage loans available for sale were related to ~~the termination of existing core banking software contracts~~mortgage refinancings and approximately ~~$1.5 million of acquisition-related expense. There~~70% were ~~no software termination charges or acquisition-related costs~~related to new home purchases, compared to approximately 51% for refinancings and approximately 49% for new home purchases in the ~~second quarter or~~ first ~~six~~nine months of ~~2013.~~2014.
~~Salaries and employee benefits, the Company’s largest components of non-interest expense, increased 23.1% to $18.8~~Trust income was $1.4 million in the ~~second~~third quarter of 2014, an increase of 33.9% from $1.1 million for the third quarter of 2013. Trust income was $4.1 million for the first nine months of 2014, an increase of 46.0% from $2.8 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 $0.6 million of amortization expense of the FDIC loss share receivable, including amortization of the FDIC clawback payable, during the third quarter of 2014 compared to ~~$15.3~~accretion income of $1.4 million induring the ~~second~~third quarter of 2013. ~~Salaries and employee benefits increased 17.8% to $36.5~~The Company recognized $0.6 million ~~for~~of amortization expense of the FDIC loss share receivables, including amortization of the FDIC clawback payable, during the first ~~six~~nine months of 2014 compared to ~~$31.0~~accretion income of $6.3 million ~~for~~during the first ~~six~~nine months of 2013. The ~~Company had 1,586 full-time equivalent employees at June 30, 2014, a 43.7% increase compared to 1,104 full-time equivalent employees at June 30, 2013.~~
~~Net occupancy and equipment expense~~decrease in income from the accretion of the FDIC loss share receivable for the ~~second~~third quarter ~~of 2014 increased 30.6% to $5.7 million compared to $4.4 million for the second quarter of 2013. Net occupancy~~ and ~~equipment expenses increased 21.0% to $10.8 million for the~~ first ~~six~~nine months of 2014 compared to ~~$8.9~~the same periods in 2013 was primarily due to 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. To the extent 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 is expected to 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 $3.4 million ~~for~~in the third quarter of 2014 compared to $2.5 million in the third quarter of 2013. Other income from loss share and purchased non-covered loans was $10.3 million in the first ~~six months of 2013. At June 30, 2014 the Company had 164 offices, a 40.2% increase compared to 117 offices at 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 44.6% for the second quarter and 47.1% for the first six~~nine months of 2014 compared to ~~46.5% for the second quarter and 46.5% for~~$8.3 million in the first ~~six~~nine months of 2013.
Net gains on sales of other assets were $1.7 million in the third quarter of 2014 compared to $2.5 million in the third quarter of 2013. Net gains on sales of other assets were $4.1 million in the first nine months of 2014 compared to $7.6 million in the first nine months of 2013.
The following table presents non-interest ~~expense~~income for the periods indicated.
Non-Interest Income
   Three Months Ended
September 30,    Nine Months Ended
September 30,
   2014 2013    2014 2013
   (Dollars in thousands)
Service charges on deposit accounts
   $ 7,356    $ 5,817       $ 19,601    $ 15,613
Mortgage lending income
   1,728    1,276       3,807    4,660
Trust income
   1,419    1,060       4,099    2,808
BOLI income
   1,390    1,179       3,799    3,365
Accretion (amortization) of FDIC loss share receivable, net of amortization of FDIC clawback payable
   (562 ) 1,396       (611 ) 6,269
Other income from loss share and purchased non-covered loans, net
   3,369    2,484       10,309    8,328
Gains on investment securities
   43    —         67    156
Gains on sales of other assets
   1,688    2,501       4,111    7,586
Gain on merger and acquisition transaction
   —      5,163       4,667    5,163
Other
   2,817    1,226       7,147    3,498




Total non-interest income
   $ 19,248    $ 22,102       $ 56,996    $ 57,446




Non-Interest Expense
The Company’s non-interest expense consists of salaries and employee benefits, net occupancy and equipment and other operating expenses. Non-interest expense increased 32.0% to $42.5 million for the third quarter of 2014 compared to $32.2 million for the third quarter of 2013. Non-interest expense increased 29.0% to $117.9 million for the first nine months of 2014 compared to $91.3 million for the first nine months of 2013. During the third quarter of 2014, the Company incurred $0.5 million of software and other contract termination charges, $2.2 million of acquisition-related and systems conversion expenses and $0.6 million of fraud losses due to a large retailer’s system breach, compared to $1.4 million of acquisition related expenses during the third quarter of 2013. During the first nine months of 2014, the Company incurred $5.6 million of software and other contract termination charges which are included in “Other” non-interest expense, $3.7 million of acquisition-related expenses and $0.6 million of fraud losses as a result of a large retailer’s system breach, compared to $1.4 million of acquisition-related expenses during the first nine months of 2013.
Salaries and employee benefits, the Company’s largest components of non-interest expense, increased 26.9% to $20.9 million in the third quarter of 2014 compared to $16.5 million in the third quarter of 2013. Salaries and employee benefits increased 21.0% to $57.4 million for the first nine months of 2014 compared to $47.4 million for the first nine months of 2013. The Company had 1,513 full-time equivalent employees at September 30, 2014, a 21.4% increase compared to 1,246 full-time equivalent employees at September 30, 2013.
Net occupancy and equipment expense for the third quarter of 2014 increased 42.5% to $6.8 million compared to $4.8 million for the third quarter of 2013. Net occupancy and equipment expenses increased 28.6% to $17.6 million for the first nine months of 2014 compared to $13.7 million for the first nine months of 2013. At September 30, 2014 the Company had 165 offices, a 26.0% increase compared to 131 offices at September 30, 2013.
The Company’s efficiency ratio (non-interest expense divided by the sum of net interest income – FTE and non-interest income) was 43.9% for the third quarter and 45.9% for the first nine months of 2014 compared to 43.0% for the third quarter and 45.2% for the first nine months of 2013.
The following table presents non-interest expense for the periods indicated.
Non-Interest Expense

   Three Months Ended    Nine Months Ended
   Three Months Ended
June 30,    Six Months Ended
June 30,    September 30,    September 30,
   2014    2013    2014    2013    2014    2013    2014    2013
   (Dollars in thousands)    (Dollars in thousands)
Salaries and employee benefits
   $ 18,831       $ 15,294       $ 36,520       $ 30,989       $ 20,876       $ 16,456       $ 57,396       $ 47,445
Net occupancy and equipment
   5,707       4,370       10,751       8,884       6,822       4,786       17,574       13,670
Other operating expenses:

Postage and supplies
   852       811       1,623       1,620       1,155       775       2,793       2,396
Advertising and public relations
   636       511       1,036       865       887       559       1,923       1,424
Telecommunication services
   1,191       867       2,207       1,704       971       825       3,177       2,529
Professional and outside services
   2,353       1,566       4,526       2,752       3,000       2,212       7,446       4,963
Software and data processing
   1,662       1,372       2,799       2,856       1,643       1,374       4,442       4,106
Travel and meals
   629       740       1,169       1,371       772       788       1,941       2,159
FDIC insurance
   555       435       1,105       855       600       450       1,658       1,305
FDIC and state assessments
   218       175       431       346       234       174       712       521
ATM expense
   307       223       516       440       370       282       886       723
Loan collection and repossession expense
   1,528       907       1,987       1,673       1,212       861       3,227       2,534
Writedowns of foreclosed and other assets
   798       69       877       191       41       502       862       1,072
Amortization of intangibles
   1,119       568       1,932       1,137       1,532       788       3,464       1,924
Other
   1,492       1,993       7,854       3,449       2,408       1,376       10,355       4,570
















Total non-interest expense
   $ 37,878       $ 29,901       $ 75,333       $ 59,132       $ 42,523       $ 32,208       $ 117,856       $ 91,341
















Income Taxes
The provision for income taxes was ~~$12.3~~$15.6 million for the ~~second~~third quarter and ~~$21.0~~$36.6 million for the first ~~six~~nine months of 2014 compared to ~~$9.5~~$10.2 million for the ~~second~~third quarter and ~~$18.0~~$28.3 million for the first ~~six~~nine months of 2013. The effective income tax rate was ~~31.6%~~32.7% for the ~~second~~third quarter and ~~28.8%~~30.4% for the first ~~six~~nine months of 2014 compared to ~~31.8%~~27.9% for the ~~second~~third quarter and ~~30.9%~~29.7% for the first ~~six~~nine months of 2013. The ~~decrease~~increase in the effective tax rate for the third quarter and first ~~six~~nine months of 2014 compared to the same ~~period~~periods in 2013 was due primarily to the decrease in tax-exempt ~~bargain purchase gain of $4.7 million~~income as a ~~result~~percentage of ~~the Bancshares acquisition.~~total income. The effective tax rates were also affected by various other factors including non-taxable income and non-deductible expenses.
ANALYSIS OF FINANCIAL CONDITION
Non-Purchased Loan and Lease Portfolio
At ~~June~~September 30, 2014 the Company’s non-purchased loan and lease portfolio was ~~$3.17~~$3.64 billion, compared to $2.63 billion at December 31, 2013 and ~~$2.44~~$2.52 billion at ~~June~~September 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 ~~$2.79~~$3.09 billion at ~~June~~September 30, 2014, compared to $2.33 billion at December 31, 2013 and ~~$2.15~~$2.21 billion at ~~June~~September 30, 2013. The amount and type of non-purchased loans and leases outstanding as of the dates indicated, and their respective percentage of the total non-purchased loan and lease portfolio are reflected in the following table.
Non-Purchased Loan and Lease Portfolio

   June 30, December 31,
2013    September 30, December 31,
   2014 2013    2014 2013 2013
   (Dollars in thousands)    (Dollars in thousands)
Real estate:

Residential 1-4 family
   $ 266,497       8.4 % $ 261,568       10.7 % $ 249,556       9.5 %    $ 278,341       7.6 % $ 251,026       10.0 % $ 249,556       9.5 %
Non-farm/non-residential
   1,290,174       40.7    1,017,207       41.6    1,104,114       41.9       1,373,294       37.7    1,035,618       41.1    1,104,114       41.9
Construction/land development
   1,049,158       33.1    680,829       27.9    722,557       27.4       1,233,253       33.9    714,198       28.3    722,557       27.4
Agricultural
   45,541       1.4    48,879       2.0    45,196       1.7       46,721       1.3    47,953       1.9    45,196       1.7
Multifamily residential
   136,953       4.3    145,683       6.0    208,337       8.0       155,940       4.3    163,916       6.5    208,337       8.0
















Total real estate
   2,788,323       87.9    2,154,166       88.2    2,329,760       88.5       3,087,549       84.8    2,212,711       87.8    2,329,760       88.5
Commercial and industrial
   166,884       5.3    139,073       5.7    124,068       4.7       313,292       8.6    122,163       4.8    124,068       4.7
Consumer
   28,674       0.9    28,289       1.2    26,182       1.0       25,399       0.7    27,298       1.1    26,182       1.0
Direct financing leases
   98,768       3.1    76,953       3.1    86,321       3.3       109,059       3.0    81,984       3.2    86,321       3.3
Other
   88,936       2.8    44,861       1.8    66,234       2.5       103,843       2.9    78,433       3.1    66,234       2.5
















Total loans and leases
   $ 3,171,585       100.0 % $ 2,443,342       100.0 % $ 2,632,565       100.0 %    $ 3,639,142       100.0 % $ 2,522,589       100.0 % $ 2,632,565       100.0 %
















The amount and percentage of the Company’s non-purchased loan and lease portfolio, 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.
Non-Purchased Loan and Lease Portfolio by State of Originating Office

Non-Purchased Loans and Leases Attributable to Offices In
   June 30, December 31,
2013
2014 2013
Non-Purchased
Loans and Leases
   September 30, December 31,
Attributable to Offices In
   2014 2013 2013
   (Dollars in thousands)    (Dollars in thousands)
Texas
   $ 1,545,366       48.7 % $ 1,177,330       48.2 % $ 1,302,061       49.5 %    $ 1,821,468       50.1 % $ 1,260,015       49.9 % $ 1,302,061       49.5 %
Arkansas
   1,072,904       33.8    1,068,206       43.7    1,069,200       40.6       1,142,869       31.4    1,051,047       41.7    1,069,200       40.6
New York
   209,388       6.6    —         —      30,837       1.2       276,128       7.6    —         —      30,837       1.2
North Carolina
   200,413       6.3    130,304       5.3    157,938       6.0       233,043       6.4    138,093       5.5    157,938       6.0
Georgia
   112,940       3.6    55,438       2.3    57,570       2.1       126,466       3.5    59,450       2.4    57,570       2.1
Alabama
   14,795       0.5    11,260       0.5    13,073       0.5       16,062       0.4    12,885       0.5    13,073       0.5
California
   8,813       0.3    —         —      —         —         15,656       0.4    —         —      —         —
South Carolina
   5,158       0.1    582       0.0    1,703       0.1       5,325       0.1    864       0.0    1,703       0.1
Florida
   1,808       0.1    222       0.0    183       0.0       2,125       0.1    235       0.0    183       0.0
















Total
   $ 3,171,585       100 % $ 2,443,342       100.0 % $ 2,632,565       100.0 %    $ 3,639,142       100.0 % $ 2,522,589       100.0 % $ 2,632,565       100.0 %
















The amount and type of the Company’s non-purchased real estate loans at ~~June~~September 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 in that state or MSA exceed $10.0 million.
Geographic Distribution of Non-Purchased Real Estate Loans

   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
   $ 100,190       $ 204,882       $ 125,834       $ 8,412       $ 14,171       $ 453,489       $ 106,725       $ 214,914       $ 121,605       $ 8,234       $ 16,275       $ 467,753
Northern Arkansas⁽¹⁾
   40,602       15,373       4,993       14,468       1,284       76,720       39,594       14,068       4,845       13,464       1,255       73,226
Fort Smith, AR–OK MSA
   27,984       24,629       6,321       3,482       8,404       70,820       28,186       25,215       6,741       2,736       11,877       74,755
Western Arkansas⁽²⁾
   21,461       29,221       4,820       6,572       1,109       63,183       21,114       28,938       5,826       6,404       1,090       63,369
Fayetteville–Springdale–Rogers, AR–MO MSA
   9,290       20,961       15,715       4,728       3,324       54,018       8,878       25,177       15,866       4,620       3,290       57,831
Hot Springs, AR MSA
   8,557       26,573       6,980       80       756       42,946       9,496       27,597       7,819       0       754       45,666
All other Arkansas⁽³⁾
   6,943       9,955       2,396       4,234       1,691       25,219       8,777       7,839       3,058       3,643       1,665       24,982
























Total Arkansas
   215,027       331,594       167,059       41,976       30,739       786,395       222,770       343,748       165,757       39,101       36,206       807,582
























Texas:

Dallas–Fort Worth–Arlington, TX MSA
   16,657       107,020       221,162       —         6,558       351,397       16,013       115,160       268,587       0       9,148       408,908
Houston–The Woodlands–Sugar Land, TX MSA
   994       26,521       93,385       —         —         120,900       95       34,844       119,794       2,016       0       156,749
San Antonio–New Braunfels, TX MSA
   1,137       0       20,336       0       0       21,473
Austin–Round Rock, TX MSA
   157       —         49,989       —         —         50,146       1,377       3,899       49,867       1,275       49       56,467
Midland, TX MSA
   —         7,878       11,196       —         —         19,074
Texarkana, TX–AR MSA
   8,273       7,902       890       526       978       18,569       7,934       8,681       741       495       975       18,826
College Station–Bryan, TX MSA
   —         —         —         —         17,775       17,775       0       0       0       0       17,704       17,704
Beaumont–Port Arthur, TX MSA
   —         —         —         —         15,616       15,616       0       0       0       0       15,543       15,543
San Antonio–New Braunfels, TX MSA
   1,049       100       13,436       —         —         14,585
Midland, TX MSA
   0       7,846       15,508       0       0       23,354
All other Texas⁽³⁾
   808       12,513       188       3       232       13,744       510       12,396       2,733       0       234       15,873
























Total Texas
   27,938       161,934       390,246       529       41,159       621,806       27,066       182,826       477,566       3,786       43,653       734,897
























California:

Los Angeles–Long Beach–Anaheim, CA MSA
   —         162,449       9,086       —         —         171,535       0       163,674       10,748       0       0       174,422
San Francisco–Oakland–Hayward, CA MSA
   —         58,999       —         —         —         58,999       0       58,895       0       0       0       58,895
Sacramento–Roseville–Arden–Arcade, CA MSA
   —         —         46,586       —         —         46,586       0       0       49,495       0       0       49,495
All other California⁽³⁾
   —         9,123       7,759       —         —         16,882       0       9,740       15,585       0       0       25,325
























Total California
   —         230,571       63,431       —         —         294,002       0       232,309       75,828       0       0       308,137
























New York–Newark–Jersey City, NY–NJ–PA MSA
   0       106,029       135,634       0       43,979       285,642
North Carolina/South Carolina:

Charlotte–Concord–Gastonia, NC–SC MSA
   5,345       58,486       32,791       —         1,507       98,129       6,413       68,548       33,913       303       8,231       117,408
Wilmington, NC MSA
   1,559       17,088       4,214       463       —         23,324       2,386       16,909       6,174       439       271       26,179
Raleigh, NC MSA
   —         —         17,472       —         —         17,472       503       1,564       23,763       0       0       25,830
Myrtle Beach-North Myrtle Beach-Conway, SC MSA
   0       0       11,887       0       0       11,887
Carolina Foothills⁽⁴⁾
   5,313       4,131       2,981       28       —         12,453       5,471       4,908       3,017       26       0       13,422
Charleston–North Charleston, SC MSA
   —         3,719       714       —         5,813       10,246
All other N. Carolina⁽³⁾
   487       9,404       36,110       —         —         46,001       889       10,450       34,836       0       0       46,175
All other S. Carolina⁽³⁾
   1,565       7,380       28,355       —         —         37,300       1,545       11,043       22,629       0       0       35,217
























Total N. Carolina/S. Carolina
   14,269       100,208       122,637       491       7,320       244,925       17,207       113,422       136,219       768       8,502       276,118
























New York–Newark–Jersey City, NY–NJ–PA MSA
   —         102,142       109,125       —         —         211,267
Geographic Distribution of Non-Purchased Real Estate Loans (continued)

   Residential
1-4 Family    Non-
Farm/Non-
Residential    Construction
/Land
Development    Agricultural    Multifamily
Residential    Total
   (Dollars in thousands)    Residential
1-4 Family    Non-
Farm/
Non-
Residential    Construction
/Land
Development    Agricultural    Multifamily
Residential    Total
   (Dollars in thousands)
Georgia:

Atlanta–Sandy Springs–Roswell, GA MSA
   2,566       99,091       34,046       294       —         135,997       3,039       102,731       39,528       275       0       145,573
All other Georgia⁽³⁾
   1,689       16,697       2,421       1,250       212       22,269       2,320       21,185       1,481       938       212       26,136
























Total Georgia
   4,255       115,788       36,467       1,544       212       158,266       5,359       123,916       41,009       1,213       212       171,709
























Florida:

Miami–Fort Lauderdale–West Palm Beach, FL MSA
   —         23,609       53,479       —         —         77,088       0       23,568       54,736       0       0       78,304
All other Florida⁽³⁾
   1,344       19,458       6,941       693       473       28,909       1,841       19,326       7,971       910       0       30,048
























Total Florida
   1,344       43,067       60,420       693       473       105,997       1,841       42,894       62,707       910       0       108,352
























Phoenix–Mesa–Scottsdale, AZ MSA
   0       67,172       18       0       0       67,190
Virginia:

Washington–Arlington– Alexandria, DC–VA–MD–WV MSA
   0       12,835       32,915       0       0       45,750
All other Virginia⁽³⁾
   0       0       2,557       0       0       2,557












Phoenix–Mesa–Scottsdale, AZ MSA
   —         61,319       19       —         —         61,338
Total Virginia
   0       12,835       35,472       0       0       48,307












Missouri/Kansas:

St. Louis, MO–IL MSA
   —         —         115       —         22,941       23,056       0       0       801       0       19,395       20,196
Kansas City, MO–KS MSA
   116       91       19,922       —         —         20,129       114       90       21,549       39       0       21,792
All other Missouri⁽³⁾
   495       1,085       173       256       —         2,009       497       1,070       172       0       0       1,739
All other Kansas⁽³⁾
   —         —         1,847       —         —         1,847       0       0       1,878       0       0       1,878
























Total Missouri/Kansas
   611       1,176       22,057       256       22,941       47,041       611       1,160       24,400       39       19,395       45,605
























Tennessee:

Nashville–Davidson–Murfreesboro–Franklin, TN MSA
   316       14,283       7,544       —         —         22,143       180       19,122       0       0       0       19,302
Memphis, TN–MS–AR MSA
   186       19,270       —         —         —         19,456       0       14,241       5,411       0       0       19,652
























Total Tennessee
   502       33,553       7,544       —         —         41,599       180       33,363       5,411       0       0       38,954












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
   —         —         1       —         30,074       30,075












Oklahoma:

Lawton, OK MSA
   —         —         22,891       —         —         22,891       0       0       23,368       0       0       23,368
All other Oklahoma⁽³⁾
   125       4,150       2,870       —         —         7,145       171       8,427       4,696       0       0       13,294
























Total Oklahoma
   125       4,150       25,761       —         —         30,036       171       8,427       28,064       0       0       36,662
























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

Denver–Aurora–Lakewood, CO MSA
   16       11,215       1       —         —         11,232       15       11,289       1       0       0       11,305
All other Colorado⁽³⁾
   —         6,365       —         —         —         6,365       604       6,353       8,760       0       0       15,717
























Total Colorado
   16       17,580       1       —         —         17,597       619       17,642       8,761       0       0       27,022
























Baltimore–Columbia–Towson, MD MSA
   —         17,341       —         —         —         17,341
Las Vegas–Henderson–Paradise, NV MSA
   0       0       25,562       0       0       25,562
Boston–Cambridge–Newton, MA–NH MSA
   0       21,184       0       0       0       21,184
Geographic Distribution of Non-Purchased Real Estate Loans (continued)

   Residential
1-4 Family    Non-
Farm/Non-
Residential    Construction
/Land
Development    Agricultural    Multifamily
Residential    Total
   (Dollars in thousands)    Residential
1-4 Family    Non-Farm/
Non-
Residential    Construction
/Land
Development    Agricultural    Multifamily
Residential    Total
   (Dollars in thousands)
Alabama:

Mobile, AL MSA
   501       9,654       80       —         300       10,535       111       9,895       80       0       296       10,382
All other Alabama⁽³⁾
   1,365       570       976       52       3,735       6,698       1,939       969       1,187       873       3,697       8,665
























Total Alabama
   1,866       10,224       1,056       52       4,035       17,233       2,050       10,864       1,267       873       3,993       19,047
























LasVegas–Henderson–Paradise, NV MSA
   —         —         10,499       —         —         10,499
Baltimore–Columbia–Towson, MD MSA
   0       17,310       0       0       0       17,310
All other states⁽⁵⁾
   544       38,197       1,459       —         —         40,200       467       38,193       9,578       31       0       48,269
























Total real estate loans
   $ 266,497       $ 1,290,174       $ 1,049,158       $ 45,541       $ 136,953       $ 2,788,323       $ 278,341       $ 1,373,294       $ 1,233,253       $ 46,721       $ 155,940       $ 3,087,549
























(1) This geographic area includes the following counties in Northern Arkansas: Baxter, Boone, Marion, Newton, Searcy and Van Buren.
(2) This geographic area includes the following counties in Western Arkansas: Johnson, Logan, Pope and Yell.
(3) These geographic areas include all MSA and non-MSA areas that are not separately reported.
(4) This geographic area includes the following counties in the North Carolina foothills: Cleveland, Rutherford and ~~Lincolnton.~~Lincoln.
(5) Includes all states not separately presented above.
The amount and type of non-purchased non-farm/non-residential 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.
Non-Purchased Non-Farm/Non-Residential Loans

   June 30, December 31,
2013    September 30, December 31,
2013
   2014 2013    2014 2013
   (Dollars in thousands)    (Dollars in thousands)
Retail, including shopping centers and strip centers
   $ 271,308       21.0 % $ 326,169       32.1 % $ 290,092       26.3 %    $ 279,273       20.3 % $ 308,121       29.8 % $ 290,092       26.3 %
Churches and schools
   68,672       5.3    45,339       4.5    44,740       4.1       55,580       4.0    44,127       4.3    44,740       4.1
Office, including medical offices
   361,471       28.0    190,563       18.7    263,986       23.9       391,812       28.5    245,698       23.7    263,986       23.9
Office warehouse, warehouse and mini-storage
   115,927       9.0    40,894       4.0    113,317       10.3       122,109       8.9    45,220       4.4    113,317       10.3
Gasoline stations and convenience stores
   11,948       0.9    7,657       0.8    8,150       0.7       11,234       0.8    7,498       0.7    8,150       0.7
Hotels and motels
   232,771       18.0    214,372       21.1    192,527       17.4       247,585       18.0    209,127       20.2    192,527       17.4
Restaurants and bars
   32,926       2.6    36,853       3.6    33,178       3.0       30,353       2.2    37,327       3.6    33,178       3.0
Manufacturing and industrial facilities
   40,999       3.2    38,436       3.8    37,288       3.4       57,043       4.2    30,798       3.0    37,288       3.4
Nursing homes and assisted living centers
   42,607       3.3    29,491       2.9    41,317       3.7       42,478       3.1    29,218       2.8    41,317       3.7
Hospitals, surgery centers and other medical
   47,491       3.7    51,969       5.1    49,112       4.4       52,128       3.8    51,787       5.0    49,112       4.4
Golf courses, entertainment and recreational facilities
   6,320       0.5    10,134       1.0    5,261       0.5       6,806       0.6    2,609       0.3    5,261       0.5
Other non-farm/non residential
   57,734       4.5    25,330       2.4    25,146       2.3       76,893       5.6    24,088       2.2    25,146       2.3
















Total
   $ 1,290,174       100.0 % $ 1,017,207       100.0 % $ 1,104,114       100.0 %    $ 1,373,294       100.0 % $ 1,035,618       100.0 % $ 1,104,114       100.0 %
















The amount and type of non-purchased construction/land development 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.
Non-Purchased Construction/Land Development Loans

   June 30, December 31,
2013    June 30, December 31,
   2014 2013    2014 2013 2013
   (Dollars in thousands)    (Dollars in thousands)
Unimproved land
   $ 165,392       15.8 % $ 98,246       14.4 % $ 105,739       14.6 %    $ 188,473       15.3 % $ 96,210       13.5 % $ 105,739       14.6 %
Land development and lots:

1-4 family residential and multifamily
   240,431       22.9    190,691       28.0    176,893       24.5       259,293       21.0    173,554       24.3    176,893       24.5
Non-residential
   81,767       7.8    71,842       10.6    68,376       9.5       84,953       6.9    70,084       9.8    68,376       9.5
Construction:

1-4 family residential:

Owner occupied
   17,118       1.6    17,680       2.6    12,870       1.8       18,959       1.5    14,772       2.1    12,870       1.8
Non-owner occupied:

Pre-sold
   11,682       1.1    7,281       1.1    8,206       1.1       14,742       1.2    6,392       0.9    8,206       1.1
Speculative
   59,592       5.7    36,824       5.4    50,030       6.9       62,677       5.1    48,237       6.7    50,030       6.9
Multifamily
   287,082       27.4    145,947       21.4    187,409       26.0       345,599       28.0    171,617       24.0    187,409       26.0
Industrial, commercial and other
   186,094       17.7    112,318       16.5    113,034       15.6       258,559       21.0    133,332       18.7    113,034       15.6
















Total
   $ 1,049,158       100.0 % $ 680,829       100.0 % $ 722,557       100.0 %    $ 1,233,253       100.0 % $ 714,198       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 ~~$4.1~~$7.0 million in the ~~second~~third 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 ~~June~~September 30, 2014 was approximately ~~$2.1~~$2.7 billion, of which ~~$0.8~~$1.0 billion was outstanding at ~~June~~September 30, 2014 and ~~$1.3~~$1.7 billion remained to be advanced. The weighted average loan-to-cost on such loans, assuming such loans are ultimately fully advanced, will be approximately ~~53%~~54.0%, which means that the weighted average cash equity contributed on such loans, assuming such loans are ultimately fully advanced, will be approximately ~~47%~~46.0%. 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 ~~45%~~45.0%.
The following table reflects non-purchased loans and leases as of ~~June~~September 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.
Non-Purchased Loan and Lease Cash Flows or Repricing

   1 Year
or Less Over 1
Through
2 Years Over 2
Through
3 Years Over
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
   $ 274,813    $ 168,702    $ 185,197    $ 368,977    $ 997,689       $ 290,507    $ 151,709    $ 185,123    $ 468,806    $ 1,096,145
Floating rate (not at a floor or ceiling rate)
   146,682    136    60    245    147,123       150,579    188    132    8    150,907
Floating rate (at floor rate)⁽¹⁾
   2,022,214    471    2,289    1,799    2,026,773       2,385,073    1,363    233    5,421    2,392,090
Floating rate (at ceiling rate)
   —      —      —      —      —         —      —      —      —      —




Total
   $ 2,443,709    $ 169,309    $ 187,546    $ 371,021    $ 3,171,585       $ 2,826,159    $ 153,260    $ 185,488    $ 474,235    $ 3,639,142




Percentage of total
   77.1 % 5.3 % 5.9 % 11.7 % 100.0 %    77.7 % 4.2 % 5.1 % 13.0 % 100.0 %
Cumulative percentage of total
   77.1    82.4    88.3    100.0       77.7    81.9    87.0    100.0

(1) The Company has included a floor rate in many of its loans and leases. As a result of such floor rates, many loans and leases will not immediately reprice in a rising rate environment if the interest rate index and margin on such loans and leases continue to result in a computed interest rate less than the applicable floor rate. The earnings simulation model results included in the Quantitative and Qualitative Disclosures about Market Risk section of this quarterly report on Form 10-Q include consideration of the impact of all interest rate floors and ceilings in loans and leases.
Purchased Non-Covered Loans
The amount and type of purchased non-covered loans outstanding, as of the dates indicated, are reflected in the following table.
Purchased Non-Covered Loan Portfolio

   June 30,    December 31,    September 30,    December 31,
   2014    2013    2013    2014    2013    2013
   (Dollars in thousands)    (Dollars in thousands)
Real estate:

Residential 1-4 family
   $ 296,306       $ 16,916       $ 131,085       $ 279,273       $ 136,723       $ 131,085
Non-farm/non-residential
   488,433       2,213       152,948       462,384       163,724       152,948
Construction/land development
   104,120       1,832       25,633       94,337       26,778       25,633
Agricultural
   49,780       2,799       9,518       44,408       10,080       9,518
Multifamily residential
   36,105       —         17,210       34,679       18,002       17,210












Total real estate
   974,744       23,760       336,394       915,081       355,307       336,394
Commercial and industrial
   105,976       2,862       24,934       76,701       30,229       24,934
Consumer
   25,790       3,890       6,855       20,461       9,176       6,855
Other
   21,179       515       4,540       18,745       4,346       4,540












Total
   $ 1,127,689       $ 31,027       $ 372,723       $ 1,030,988       $ 399,058       $ 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, but does not necessarily reflect the location of the borrower or collateral.
Purchased Non-Covered Loans by State

   June 30, December 31,    September 30, December 31,
Purchased Non-Covered Loans
Attributable to Offices In
   2014 2013 2013
Amount    % Amount    % Amount    %
Purchased Non-Covered Loans    2014 2013 2013
Attributable to Offices In
   Amount    % Amount    % Amount    %
   (Dollars in thousands)    (Dollars in thousands)
Arkansas
   $ 689,831       61.2 % $ —         0.0 % $ —         0.0 %    $ 634,645       61.6 % $ —         0.0 % $ —         0.0 %
North Carolina
   290,833       25.8    93       0.3    348,651       93.5       266,941       25.9    371,573       93.1    348,651       93.5
Texas
   128,399       11.4    —         0.0    —         0.0       113,950       11.1    —         0.0    —         0.0
Alabama
   18,143       1.6    30,050       96.9    23,431       6.3       15,028       1.4    26,737       6.7    23,431       6.3
Georgia
   388       0.0    758       2.4    537       0.1       342       0.0    633       0.2    537       0.1
Florida
   95       0.0    126       0.4    104       0.1       82       0.0    115       0.0    104       0.1
















Total
   $ 1,127,689       100.0 % $ 31,027       100.0 % $ 372,723       100.0 %    $ 1,030,988       100.0 % $ 399,058       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.
Purchased Non-Covered Loans

   June 30, December 31,    September30, 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
   $ 1,079,330    $ 25,955    $ 344,065       $ 983,946    $ 369,538    $ 344,065
Valuation discount
   (24,676 ) (566 ) (11,972 )    (20,084 ) (13,962 ) (11,972 )




Carrying value
   1,054,654    25,389    332,093       963,862    355,576    332,093




Loans with evidence of credit deterioration at date of purchase:

Unpaid principal balance
   114,600    10,119    70,857       104,210    75,936    70,857
Valuation discount
   (41,565 ) (4,481 ) (30,227 )    (37,084 ) (32,453 ) (30,227 )




Carrying value
   73,035    5,638    40,630       67,126    43,483    40,630




Total carrying value
   $ 1,127,689    $ 31,027    $ 372,723       $ 1,030,988    $ 399,059    $ 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 each acquisition, 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 Company’s 2014 acquisitions.
Fair Value Adjustments for Purchased Non-Covered
Loans Without Evidence of Credit Deterioration
At Date of Acquisition ~~of Bancshares~~

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









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









The following grades are used for purchased non-covered loans without evidence of credit 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 and Summit acquisitions with evidence of credit deterioration at the date of acquisition.
Fair Value Adjustments for
Purchased Non-Covered Loans With Evidence of
Credit Deterioration at Date of Acquisition

   Bancshares as of
March 5, 2014 Summit as of
May 16, 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    $ 31,525       $ 30,453    $ 31,525
Nonaccretable difference
   (8,054 ) (7,157 )    (8,054 ) (7,157 )




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




Day 1 Fair Value
   $ 19,173    $ 20,862       $ 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.
Accretable Difference on Non-Covered Loans With Evidence
of Credit Deterioration at Date of Acquisition

   Six Months Ended
June 30,    Nine Months Ended
September 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
   6,732    —         6,732    6,932
Accretion
   (2,115 ) (257 )    (3,453 ) (857 )
Other, net
   (496 ) 40       (1,052 ) (68 )




Accretable difference at June 30
   $ 10,104    $ 752
Accretable difference at September 30
   $ 8,210    $ 6,976




The following table presents purchased non-covered loans grouped by remaining maturities at ~~June~~September 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.
Purchased Non-Covered Loan Maturities

   1 Year
Over 1
Through
   Over
   1 Year
or Less    Over 1
Through
5 Years    Over
5 Years    Total    or Less    5 Years    5 Years    Total
   (Dollars in thousands)    (Dollars in thousands)
Real estate:

Residential 1-4 family
   $ 45,096       $ 161,787       $ 89,423       $ 296,306       $ 45,053       $ 151,138       $ 83,082       $ 279,273
Non-farm/non-residential
   86,367       319,763       82,303       488,433       84,735       298,829       78,820       462,384
Construction/land development
   54,425       43,204       6,491       104,120       46,097       40,646       7,594       94,337
Agricultural
   7,553       34,974       7,253       49,780       7,770       29,674       6,964       44,408
Multifamily residential
   7,552       26,651       1,902       36,105       13,136       20,050       1,493       34,679
















Total real estate
   200,993       586,379       187,372       974,744       196,791       540,337       177,953       915,081
Commercial and industrial
   29,920       70,486       5,570       105,976       26,292       46,089       4,320       76,701
Consumer
   7,018       17,948       824       25,790       5,099       14,838       524       20,461
Other
   6,756       9,563       4,860       21,179       5,773       9,384       3,588       18,745
















Total
   $ 244,687       $ 684,376       $ 198,626       $ 1,127,689       $ 233,955       $ 610,648       $ 186,385       $ 1,030,988
















Fixed rate
   $ 160,394       $ 503,202       $ 128,138       $ 791,734       $ 147,231       $ 460,324       $ 117,751       $ 725,306
Floating rate
   84,293       181,174       70,488       335,955       86,724       150,324       68,634       305,682
















Total
   $ 244,687       $ 684,376       $ 198,626       $ 1,127,689       $ 233,955       $ 610,648       $ 186,385       $ 1,030,988
















Covered Assets, FDIC Loss Share Receivable and FDIC Clawback Payable
FDIC-Assisted Acquisitions
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:
Failed Bank Acquisitions

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
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.
Loss Share Agreements and Other FDIC-Assisted Acquisition Matters
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.
Covered Assets, FDIC Loss Share Receivable and FDIC Clawback Payable

   June 30,    December 31,    September 30,    December 31,
   2014    2013    2013    2014    2013    2013
   (Dollars in thousands)    (Dollars in thousands)
Covered loans
   $ 276,380       $ 480,752       $ 351,791       $ 248,802       $ 409,319       $ 351,791
FDIC loss share receivable
   50,679       112,716       71,854       36,583       89,642       71,854
Covered foreclosed assets
   35,775       46,157       37,960       27,882       40,452       37,960












Total
   $ 362,834       $ 639,625       $ 461,605       $ 313,267       $ 539,413       $ 461,605












FDIC clawback payable
   $ 26,533       $ 25,596       $ 25,897       $ 26,676       $ 25,705       $ 25,897












The Company is currently in discussion with the FDIC regarding the termination of one or more of its loss share agreements. Should an agreement or agreements be reached regarding such termination, loans and foreclosed assets covered by such loss share agreement(s) would be reclassified, respectively, to “purchased non-covered loans” and “foreclosed assets not covered by FDIC loss share agreements.” Any gain or loss on such termination would be determined by comparison of the net cash proceeds to be received or paid by the Company to the related amount of FDIC loss share receivable and FDIC clawback payable at the time of such transaction. The Company is currently unable to provide assurance as to whether or not it will be successful in negotiating the termination of any or all of its loss share agreements with the FDIC.
Covered Loans
The following table presents a summary, by acquisition, of activity within covered loans during the periods indicated.
Covered Loans

   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
   3,009    3,798    2,397    2,260    2,223    3,809    6,848    24,344       4,415    5,756    3,499    3,114    3,153    5,433    9,475    34,845
Transfers to covered foreclosed assets
   (1,458 ) (3,019 ) (1,322 ) (961 ) (3,709 ) (638 ) (4,974 ) (16,081 )    (2,588 ) (3,965 ) (2,809 ) (1,203 ) (4,774 ) (1,524 ) (7,443 ) (24,306 )
Payments received
   (9,575 ) (16,112 ) (11,199 ) (13,028 ) (7,887 ) (17,098 ) (35,358 ) (110,257 )    (18,863 ) (27,551 ) (14,960 ) (21,630 ) (11,774 ) (22,277 ) (60,039 ) (177,094 )
Charge-offs
   (2,161 ) (1,625 ) (808 ) (1,339 ) (480 ) (2,153 ) (4,891 ) (13,457 )    (2,739 ) (3,796 ) (2,713 ) (1,339 ) (542 ) (2,348 ) (5,443 ) (18,920 )
Other activity, net
   66    43    47    (39 ) 78    (140 ) (91 ) (36 )    (390 ) (90 ) (195 ) (142 ) 9    (188 ) (449 ) (1,445 )




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 September 30, 2013
   $ 52,684    $ 70,088    $ 46,015    $ 35,468    $ 34,165    $ 70,177    $ 100,722    $ 409,319


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
   3,580    2,916    1,716    1,416    1,675    4,175    5,057    20,535       4,635    4,660    2,624    2,098    2,498    6,806    7,845    31,166
Transfers to covered foreclosed assets
   (3,300 ) (2,259 ) (1,229 ) (1,168 ) (853 ) (4,766 ) (9,637 ) (23,212 )    (6,520 ) (2,683 ) (2,029 ) (1,229 ) (804 ) (4,984 ) (12,505 ) (30,754 )
Payments received
   (8,756 ) (12,598 ) (10,658 ) (8,415 ) (4,963 ) (6,833 ) (16,231 ) (68,454 )    (12,683 ) (17,851 ) (11,984 ) (10,082 ) (7,157 ) (10,703 ) (27,455 ) (97,915 )
Charge-offs
   (662 ) (500 ) (53 ) —      —      (1,581 ) (1,820 ) (4,616 )    (1,479 ) (299 ) (372 ) 0    (90 ) (1,583 ) (1,824 ) (5,647 )
Other activity, net
   110    134    31    (60 ) 54    26    41    336       177    34    17    (27 ) 86    (185 ) 59    161




Carrying value at June 30, 2014
   $ 39,940    $ 49,732    $ 31,273    $ 17,849    $ 23,505    $ 52,987    $ 61,094    $ 276,380
Carrying value at September 30, 2014
   $ 33,098    $ 45,900    $ 29,722    $ 16,836    $ 22,125    $ 51,317    $ 49,804    $ 248,802




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

   June 30,    December 31,    September 30,    December 31,
   2014    2013    2013    2014    2013    2013
   (Dollars in thousands)    (Dollars in thousands)
Real estate:

Residential 1-4 family
   $ 94,792       $ 133,166       $ 111,053       $ 88,275       $ 120,541       $ 111,053
Non-farm/non-residential
   125,037       233,606       163,707       113,633       197,453       163,707
Construction/land development
   31,967       76,415       47,743       27,618       59,386       47,743
Agricultural
   10,851       15,905       11,150       9,877       12,341       11,150
Multifamily residential
   6,212       9,693       9,166       3,828       9,368       9,166












Total real estate
   268,859       468,785       342,819       243,231       399,089       342,819
Commercial and industrial
   7,297       11,601       8,719       5,354       9,934       8,719
Consumer
   79       207       111       64       138       111
Other
   145       159       142       153       158       142












Total covered loans
   $ 276,380       $ 480,752       $ 351,791       $ 248,802       $ 409,319       $ 351,791












The following table presents covered loans grouped by remaining maturities and by type at ~~June~~September 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.
Covered Loan Maturities

   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
   $ 28,953       $ 42,091       $ 23,748       $ 94,792       $ 25,460       $ 40,550       $ 22,265       $ 88,275
Non-farm/non-residential
   72,010       39,204       13,823       125,037       73,847       27,227       12,559       113,633
Construction/land development
   24,377       6,628       962       31,967       24,005       2,677       936       27,618
Agricultural
   7,429       1,742       1,680       10,851       6,584       2,801       492       9,877
Multifamily residential
   4,521       1,471       220       6,212       1,984       1,629       215       3,828
















Total real estate
   137,290       91,136       40,433       268,859       131,880       74,884       36,467       243,231
Commercial and industrial
   3,511       769       3,017       7,297       1,424       905       3,025       5,354
Consumer
   66       13       —         79       10       54       0       64
Other
   143       2       —         145       153       0       0       153
















Total covered loans
   $ 141,010       $ 91,920       $ 43,450       $ 276,380       $ 133,467       $ 75,843       $ 39,492       $ 248,802
















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

   Unity Woodlands Horizon Chestatee Oglethorpe First
Choice Park
Avenue Total
   (Dollars in thousands)    Unity Woodlands Horizon Chestatee Oglethorpe First
Choice Park
Avenue Total
   (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
   (3,009 ) (3,798 ) (2,397 ) (2,260 ) (2,223 ) (3,809 ) (6,848 ) (24,344 )    (4,415 ) (5,756 ) (3,499 ) (3,114 ) (3,153 ) (5,433 ) (9,475 ) (34,845 )
Transfers to covered foreclosed assets
   (98 ) (175 ) (26 ) (76 ) (199 ) (34 ) (717 ) (1,325 )    (542 ) (220 ) (46 ) (95 ) (260 ) (40 ) (864 ) (2,067 )
Covered loans paid off
   (421 ) (210 ) (1,589 ) (572 ) (374 ) (823 ) (1,667 ) (5,656 )    (645 ) (428 ) (1,722 ) (806 ) (633 ) (1,028 ) (3,563 ) (8,825 )
Cash flow revisions
   3,527    4,022    (149 ) 2,004    1,163    6,294    4,077    20,938       6,127    6,137    4,976    2,376    1,359    7,888    5,478    34,341
Other, net
   42    12    99    271    63    84    382    953       33    170    87    232    119    (24 ) 366    983




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 September 30, 2013
   $ 9,132    $ 17,355    $ 16,320    $ 4,305    $ 8,804    $ 11,282    $ 19,884    $ 87,082


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
   (3,580 ) (2,916 ) (1,716 ) (1,416 ) (1,675 ) (4,175 ) (5,057 ) (20,535 )    (4,635 ) (4,660 ) (2,624 ) (2,098 ) (2,498 ) (6,806 ) (7,845 ) (31,166 )
Transfers to covered foreclosed assets
   (43 ) (96 ) (28 ) (13 ) (45 ) (163 ) (383 ) (771 )    (229 ) (97 ) (28 ) (13 ) (53 ) (168 ) (456 ) (1,044 )
Covered loans paid off
   (393 ) (1,678 ) (3,064 ) (590 ) (1,327 ) (870 ) (557 ) (8,479 )    (653 ) (2,039 ) (3,216 ) (721 ) (1,776 ) (1,119 ) (2,541 ) (12,065 )
Cash flow revisions
   2,828    927    436    1,148    1,506    10,681    13,599    31,125       3,918    5,668    2,233    1,138    2,705    10,969    14,125    40,756
Other, net
   86    (20 ) (11 ) 30    56    9    (162 ) (12 )    27    2    (18 ) 48    72    (23 ) (51 ) 57




Accretable difference at June 30, 2014
   $ 6,935    $ 12,433    $ 10,045    $ 3,354    $ 9,826    $ 15,103    $ 21,104    $ 78,800
Accretable difference at September 30, 2014
   $ 6,465    $ 15,090    $ 10,775    $ 2,549    $ 9,761    $ 12,474    $ 16,896    $ 74,010




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

   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    453    142    267    561    1,384    2,565    5,491       33    366    163    406    814    1,929    3,486    7,197
Cash received from FDIC
   (3,310 ) (5,318 ) (4,250 ) (3,123 ) (6,097 ) (5,653 ) (17,994 ) (45,745 )    (5,942 ) (7,631 ) (6,764 ) (4,260 ) (7,844 ) (10,250 ) (24,302 ) (66,993 )
Reductions of FDIC loss share receivable for payments on covered loans in excess of carrying value
   (1,207 ) (1,966 ) (1,220 ) (2,807 ) (1,922 ) (2,406 ) (4,312 ) (15,840 )    (2,433 ) (2,896 ) (3,078 ) (4,096 ) (3,607 ) (2,848 ) (7,602 ) (26,560 )
Increases in FDIC loss share receivable for:

Charge-offs of covered loans
   1,049    1,288    646    1,072    384    1,837    3,673    9,949       1,511    2,995    2,503    1,072    433    1,993    4,115    14,622
Writedowns of covered foreclosed assets
   489    195    83    246    15    340    1,910    3,278       575    243    83    257    16    340    2,236    3,750
Expenses on covered assets reimbursable by FDIC
   494    718    576    174    718    586    1,198    4,464       791    1,090    842    299    1,015    773    1,913    6,723
Other activity, net
   (104 ) (164 ) (16 ) (156 ) (1,242 ) (144 ) 747    (1,079 )    131    (158 ) (170 ) (268 ) (1,507 ) (200 ) 877    (1,295 )




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 September 30, 2013
   $ 14,484    $ 16,382    $ 10,438    $ 4,572    $ 13,316    $ 9,655    $ 20,795    $ 89,642


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)
   (676 ) 3    159    31    113    63    893    586       (676 ) (162 ) 161    31    172    (251 ) 893    168
Cash received from FDIC
   (3,560 ) (4,400 ) (1,002 ) (1,009 ) (805 ) (2,052 ) (3,248 ) (16,076 )    (4,481 ) (6,070 ) (1,754 ) (1,078 ) (1,468 ) (3,248 ) (6,711 ) (24,810 )
Reductions of FDIC loss share receivable for payments on covered loans in excess of carrying value
   (1,466 ) (1,934 ) (1,331 ) (1,144 ) (2,096 ) (1,538 ) (3,392 ) (12,901 )    (2,362 ) (2,492 ) (1,491 ) (1,431 ) (2,801 ) (1,875 ) (7,090 ) (19,542 )
Increases in FDIC loss share receivable for:

Charge-offs of covered loans
   513    399    43    —      —      1,207    1,417    3,579       1,168    48    312    0    72    1,212    1,420    4,232
Writedowns of covered foreclosed assets
   97    524    51    3    39    36    1,757    2,507       203    634    301    26    51    168    1,918    3,301
Expenses on covered assets reimbursable by FDIC
   456    429    428    81    285    649    333    2,661       885    705    161    332    427    847    314    3,671
Other activity, net
   (38 ) 372    (107 ) 39    (315 ) (1,211 ) (271 ) (1,531 )    (100 ) 523    (347 ) 28    (415 ) (1,231 ) (749 ) (2,291 )




Carrying value at June 30, 2014
   $ 9,218    $ 9,724    $ 3,972    $ 1,689    $ 7,340    $ 6,490    $ 12,246    $ 50,679
Carrying value at September 30, 2014
   $ 8,529    $ 7,517    $ 3,074    $ 1,596    $ 6,157    $ 4,958    $ 4,752    $ 36,583




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

   Unity Woodlands Horizon Chestatee Oglethorpe First
Choice Park
Avenue Total
   (Dollars in thousands)    Unity Woodlands Horizon Chestatee Oglethorpe First
Choice Park
Avenue Total
   (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
   1,458    3,019    1,322    961    3,709    638    4,974    16,081       2,588    3,965    2,809    1,203    4,774    1,524    7,443    24,306
Sales of covered foreclosed assets
   (2,859 ) (3,202 ) (1,789 ) (726 ) (5,523 ) (1,360 ) (5,132 ) (20,591 )    (4,528 ) (3,895 ) (2,142 ) (2,253 ) (6,497 ) (2,656 ) (12,314 ) (34,285 )
Writedowns of covered foreclosed assets
   (572 ) (235 ) (92 ) (274 ) (34 ) (355 ) (722 ) (2,284 )    (653 ) (236 ) (92 ) (294 ) (34 ) (371 ) (840 ) (2,520 )




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 September 30, 2013
   $ 5,594    $ 7,884    $ 3,113    $ 2,867    $ 5,040    $ 2,081    $ 13,873    $ 40,452


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
   3,300    2,259    1,229    1,168    853    4,766    9,637    23,212       6,520    2,683    2,029    1,229    804    4,984    12,505    30,754
Sales of covered foreclosed assets
   (1,422 ) (3,957 ) (1,406 ) (1,433 ) (1,383 ) (4,700 ) (8,733 ) (23,034 )    (2,787 ) (4,946 ) (1,958 ) (1,840 ) (1,997 ) (4,740 ) (19,425 ) (37,693 )
Writedowns of covered foreclosed assets
   (104 ) (555 ) (43 ) —      (44 ) (73 ) (1,544 ) (2,363 )    (230 ) (684 ) (340 ) (21 ) (59 ) (162 ) (1,643 ) (3,139 )




Carrying value at June 30, 2014
   $ 5,754    $ 4,638    $ 3,582    $ 1,739    $ 3,556    $ 2,622    $ 13,884    $ 35,775
Carrying value at September 30, 2014
   $ 7,483    $ 3,944    $ 3,533    $ 1,372    $ 2,878    $ 2,711    $ 5,961    $ 27,882




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

   June 30,    December 31,    September 30,    December 31,
   2014    2013    2013    2014    2013    2013
   (Dollars in thousands)    (Dollars in thousands)
Real estate:

Residential 1-4 family
   $ 6,280       $ 6,748       $ 5,004       $ 6,695       $ 7,929       $ 5,004
Non-farm/non-residential
   16,006       9,491       14,301       10,406       10,837       14,301
Construction/land development
   13,252       28,756       17,202       10,549       20,226       17,202
Agricultural
   237       71       1,054       238       1,053       1,054
Multifamily residential
   —         1,091       399       —         407       399












Total real estate
   35,775       46,157       37,960       27,888       40,452       37,960
Repossessions
   —         —         —         —         —         —












Total covered foreclosed assets
   $ 35,775       $ 46,157       $ 37,960       $ 27,888       $ 40,452       $ 37,960












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

   Unity Woodlands    Horizon    Chestatee    Oglethorpe    First
Choice    Park
Avenue Total
   (Dollars in thousands)
Carrying value at January 1, 2013
   $ 1,644    $ 2,986       $ 1,468       $ 794       $ 1,083       $ 968       $ 16,226    $ 25,169
Amortization expense
   40    66       36       18       26       22       409    617
Changes in FDIC clawback payable related to changes in expected losses on covered assets
   (93 ) —         —         —         —         —         (97 ) (190 )












Carrying value at June 30, 2013
   $ 1,591    $ 3,052       $ 1,504       $ 812       $ 1,109       $ 990       $ 16,538    $ 25,596












Carrying value at January 1, 2014
   $ 1,630    $ 3,036       $ 1,420       $ 751       $ 1,091       $ 1,013       $ 16,956    $ 25,897
Amortization (accretion) expense
   (73 ) 73       48       33       71       38       446    636












Carrying value at June 30, 2014
   $ 1,557    $ 3,109       $ 1,468       $ 784       $ 1,162       $ 1,051       $ 17,402    $ 26,533












~~Nonperforming Assets~~
~~Non-Purchased Loans and Leases and Foreclosed Assets Not Covered by FDIC Loss Share Agreements~~
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.
   Unity Woodlands Horizon Chestatee    Oglethorpe    First
Choice    Park
Avenue Total
   (Dollars in thousands)
Carrying value at January 1, 2013
   $ 1,644    $ 2,986    $ 1,468    $ 794       $ 1,083       $ 968       $ 16,226    $ 25,169
Amortization expense
   59    99    54    27       39       33       617    928
Changes in FDIC clawback payable related to changes in expected losses on covered assets
   (93 ) (82 ) (120 ) —         —         —         (97 ) (392 )








Carrying value at September 30, 2013
   $ 1,610    $ 3,003    $ 1,402    $ 821       $ 1,122       $ 1,001       $ 16,746    $ 25,705








Carrying value at January 1, 2014
   $ 1,630    $ 3,036    $ 1,420    $ 751       $ 1,091       $ 1,013       $ 16,956    $ 25,897
Amortization (accretion) expense
   (73 ) 119    76    33       111       67       446    779








Carrying value at September 30, 2014
   $ 1,557    $ 3,155    $ 1,496    $ 784       $ 1,202       $ 1,080       $ 17,402    $ 26,676








Nonperforming Assets
Non-Purchased Loans and Leases and Foreclosed Assets Not Covered by FDIC Loss Share Agreements
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. Purchased non-covered loans, 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, on the following page, except for their inclusion in total assets. Because purchased non-covered loans, 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.
Nonperforming Assets

   June 30, December 31,    September 30, December 31,
   2014 2013 2013    2014 2013 2013
   (Dollars in thousands)    (Dollars in thousands)
Nonaccrual non-purchased loans and leases
   $ 18,393    $ 16,136    $ 8,737       $ 17,945    $ 10,405    $ 8,737
Accruing non-purchased loans and leases 90 days or more past due
   —      —      —         —      —      —
TDRs
   —      —      —         —      —      —




Total nonperforming non-purchased loans and leases
   18,393    16,136    8,737       17,945    10,405    8,737
Foreclosed assets not covered by FDIC loss share agreements⁽¹⁾
   20,581    10,451    11,851       14,781    11,647    11,851




Total nonperforming assets
   $ 38,974    $ 26,587    $ 20,588       $ 32,726    $ 22,052    $ 20,588




Nonperforming loans and leases to total loans and leases⁽²⁾
   0.58 % 0.65 % 0.33 %    0.49 % 0.41 % 0.33 %
Nonperforming assets to total assets⁽²⁾
   0.62    0.66    0.43       0.50    0.47    0.43

(1) Repossessed personal properties and real estate acquired through or in lieu of foreclosure are initially recorded at the lesser of current principal investment or estimated market value less estimated cost to sell at the date of repossession or foreclosure. Valuations of these assets are periodically reviewed by management with the carrying value of such assets adjusted through non-interest expense to the then estimated market value net of estimated selling costs, if lower, until disposition.
(2) Excludes purchased non-covered loans and covered assets except for their inclusion in total assets.
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 ~~June~~September 30, 2014, the Company had reduced the carrying value of its non-purchased loans and leases deemed impaired (all of which were included in nonaccrual loans and leases) by $5.4 million to the estimated fair value of such loans and leases of ~~$16.2~~$14.8 million. The adjustment to reduce the carrying value of such impaired loans and leases to estimated fair value consisted of ~~$1.2~~$4.4 million of partial charge-offs and ~~$4.2~~$1.0 million of specific loan and lease loss allocations. These amounts do not include the Company’s ~~$0.9~~$1.7 million of impaired purchased non-covered loans or ~~$20.3~~$11.9 million of impaired covered loans at ~~June~~September 30, 2014.
The following table presents information concerning the geographic location of nonperforming assets, excluding purchased non-covered loans and covered assets, at ~~June~~September 30, 2014. 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.
Geographic Distribution of Nonperforming Assets

   Nonperforming
Non-Purchased
Loans and
Leases    Foreclosed
Assets    Total
Nonperforming
Assets
   (Dollars in thousands)    Nonperforming
Non-Purchased
Loans and
Leases    Foreclosed
Assets    Total
Nonperforming
Assets
   (Dollars in thousands)
Arkansas
   $ 13,106       $ 7,808       $ 20,914       $ 16,296       $ 7,603       $ 23,899
Texas
   41       5,334       5,375       299       1,327       1,626
North Carolina
   3,914       4,298       8,212       1,235       5,193       6,428
South Carolina
   967       1,219       2,186       —         128       128
Georgia
   6       1,370       1,376       9       60       69
Alabama
   9       459       468       5       445       450
Florida
   5       35       40       —         —         —
All other
   345       58       403       101       25       126












Total
   $ 18,393       $ 20,581       $ 38,974       $ 17,945       $ 14,781       $ 32,726












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

   June 30,    December 31,    September 30,    December 31,
   2014    2013    2013    2014    2013    2013
   (Dollars in thousands)    (Dollars in thousands)
Real estate:

Residential 1-4 family
   $ 2,829       $ 1,118       $ 1,604       $ 1,758       $ 1,059       $ 1,604
Non-farm/non-residential
   9,395       2,449       4,380       4,557       3,038       4,380
Construction/land development
   8,028       6,673       5,359       8,227       7,320       5,359
Agricultural
   215       143       222       200       22       222
Multifamily residential
   —         —         211       —         —         211












Total real estate
   20,467       10,383       11,776       14,742       11,439       11,776
Commercial and industrial
   103       63       75       39       190       75
Consumer
   11       5       —         —         18       —












Total foreclosed assets not covered by FDIC loss share agreements
   $ 20,581       $ 10,451       $ 11,851       $ 14,781       $ 11,647       $ 11,851












Purchased Non-Covered Loans
The following table presents information concerning nonperforming purchased non-covered loans as of the dates indicated.
Nonperforming Purchased
Non-Covered Loans

   June 30, December 31,    September 30, December 31,
   2014 2013 2013    2014 2013 2013
   (Dollars in thousands)    (Dollars in thousands)
Nonaccrual purchased non-covered loans
   $ 3,160    $ 382    $ 1,696       $ 3,830    $ 1,380    $ 1,696
Accruing purchased non-covered loans 90 days or more past due
   199    —      —         49    125    —




Total nonperforming purchased non-covered loans
   $ 3,359    $ 382    $ 1,696       $ 3,879    $ 1,505    $ 1,696




Nonperforming purchased non-covered loans to total purchased non-covered loans
   0.30 % 1.23 % 0.46 %    0.38 % 0.38 % 0.46 %
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%~~0.47% and ~~0.67%~~0.41% at ~~June~~September 30, 2014 and 2013, respectively, and 0.35% at December 31, 2013.
As of ~~June~~September 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~~$0.3 million ~~for both~~during the ~~second~~third quarter and $0.9 million during the first ~~six~~nine 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~~$0.3 million ~~for both~~during the ~~second~~third quarter and $0.9 million during the first ~~six~~nine months of 2014 to cover such charge-offs compared to none during the ~~second~~third quarter and first ~~six~~nine months of ~~2013 to cover such charge-offs.~~2013. At ~~June~~September 30, 2014, the Company had ~~$0.9~~$1.7 million of impaired purchased non-covered loans compared to none at both ~~June~~September 30, 2013 and December 31, 2013.
Covered Loans
As of ~~June~~September 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~~$0.2 million for such loans during the ~~second~~third quarter and ~~$0.7~~$0.9 million during the first ~~six~~nine months of 2014 compared to ~~$1.1~~$0.9 million during the ~~second~~third quarter and ~~$3.1~~$4.0 million during the first ~~six~~nine months of 2013. The Company also recorded provision for loan and lease losses of ~~$0.5~~$0.2 million during the ~~second~~third quarter and ~~$0.7~~$0.9 million during the first ~~six~~nine months of 2014 to cover such charge-offs compared to ~~$1.1~~$0.9 million during the ~~second~~third quarter and ~~$3.1~~$4.0 million during the first ~~six~~nine months of ~~2013 to cover such charge-offs.~~2013. The Company had ~~$20.3~~$13.6 million of impaired covered loans at ~~June~~September 30, 2014 compared to $52.6 million ~~of impaired covered loans~~ at ~~June~~September 30, 2013 and $46.2 million at December 31, 2013.
Allowance and Provision for Loan and Lease Losses
The Company’s ALLL was ~~$47.0~~$49.6 million, or ~~1.48%~~1.36% of total non-purchased loans and leases at ~~June~~September 30, 2014, compared to $42.9 million, or 1.63% of total non-purchased loans and leases at December 31, 2013 and ~~$39.4~~$41.7 million, or ~~1.61%~~1.65% of total non-purchased loans and leases at ~~June~~September 30, 2013. The Company had no ALLL for purchased non-covered loans or for covered loans at ~~June~~September 30, 2014, December 31, 2013 or ~~June~~September 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. The Company’s ALLL was equal to ~~255%~~276% of its total nonperforming non-purchased loans and leases at ~~June~~September 30, 2014 compared to 492% at December 31, 2013 and ~~244%~~400% at ~~June~~September 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.~~MD&A. The provision for loan and lease losses for the ~~second~~third quarter of 2014 was ~~$5.6~~$3.7 million, including ~~$4.5~~$3.2 million for non-purchased loans and leases, ~~$0.6~~$0.3 million for purchased non-covered loans and ~~$0.5~~$0.2 million for covered loans, compared to ~~$2.7~~$3.8 million for the ~~second~~third quarter of 2013, including ~~$1.6~~$2.9 million for non-purchased loans and leases, none for purchased non-covered loans and ~~$1.1~~$0.9 million for covered loans. The provision for loan and lease losses for the first ~~six~~nine months of 2014 was ~~$6.9~~$10.6 million, including ~~$5.6~~$8.8 million for non-purchased loans and leases, ~~$0.6~~$0.9 million for purchased non-covered loans and ~~$0.7~~$0.9 million for covered loans, compared to ~~$5.4~~$9.2 million for the first ~~six~~nine months of 2013, including ~~$2.3~~$5.2 million for non-purchased loans and leases, none for purchased non-covered loans and ~~$3.1~~$4.0 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~~nine months ended ~~June~~September 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~~$468 million during the ~~second~~third quarter and ~~$539 million~~$1.01 billion during the first ~~six~~nine 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.~~relationships. The Company’s ALLL to non-purchased loans and leases has decreased to ~~1.48%~~1.36% at ~~June~~September 30, 2014, compared to 1.63% at December 31, 2013 and ~~1.61%~~1.65% at ~~June~~September 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. While the Company believes the ALLL at September 30, 2014, and related provision for both the third quarter and first nine months of 2014 were appropriate, changing economic and other conditions may require future adjustments to the ALLL or the amount of provision thereto.
An analysis of the allowance for loan and lease losses for the periods indicated is shown in the following table.
Analysis of the Allowance for Loan and Lease Losses

   Six Months Ended
June 30,
Year Ended
December 31,

   2014 2013 2013    Nine Months Ended
September 30,
Year Ended
December 31,

   (Dollars in thousands)    2014 2013 2013
   (Dollars in thousands)
Balance, beginning of period
   $ 42,945    $ 38,738    $ 38,738       $ 42,945    $ 38,738    $ 38,738
Non-purchased loans and leases charged off:

Real estate:

Residential 1-4 family
   (341 ) (417 ) (837 )    (456 ) (528 ) (837 )
Non-farm/non-residential
   (1,254 ) (593 ) (1,111 )    (1,344 ) (612 ) (1,111 )
Construction/land development
   (14 ) (129 ) (137 )    (14 ) (136 ) (137 )
Agricultural
   (15 ) —      (261 )    (213 ) (260 ) (261 )
Multifamily residential
   —      —      (4 )    —      —      (4 )




Total real estate
   (1,624 ) (1,139 ) (2,350 )    (2,027 ) (1,536 ) (2,350 )
Commercial and industrial
   (422 ) (832 ) (922 )    (477 ) (887 ) (922 )
Consumer
   (97 ) (119 ) (214 )    (126 ) (176 ) (214 )
Direct financing leases
   (267 ) (186 ) (482 )    (418 ) (338 ) (482 )
Other
   (159 ) (173 ) (359 )    (258 ) (266 ) (359 )




Total non-purchased loans and leases charged off
   (2,569 ) (2,449 ) (4,327 )    (3,306 ) (3,203 ) (4,327 )




Recoveries of non-purchased loans and leases previously charged off:

Real estate:

Residential 1-4 family
   71    102    106       118    113    106
Non-farm/non-residential
   4    118    122       19    118    122
Construction/land development
   8    8    174       12    21    174
Agricultural
   11    4    14       13    9    14
Multifamily residential
   —      —      4       —      —      4




Total real estate
   94    232    420       162    261    420
Commercial and industrial
   763    375    433       801    431    433
Consumer
   36    71    104       50    90    104
Direct financing leases
   14    20    33       43    29    33
Other
   75    85    144       111    114    144




Total recoveries of non-purchased loans and leases previously charged off
   982    783    1,134       1,167    925    1,134




Net non-purchased loans and leases charged off
   (1,587 ) (1,666 ) (3,193 )    (2,139 ) (2,278 ) (3,193 )
Purchased non-covered loans charged off
   (567 ) —      —         (849 ) —      —
Covered loans charged off
   (720 ) (3,094 ) (4,675 )    (925 ) (4,012 ) (4,675 )




Net charge-offs – total loans and leases
   (2,874 ) (4,760 ) (7,868 )    (3,913 ) (6,290 ) (7,868 )
Provision for loan and lease losses:

Non-purchased loans and leases
   5,600    2,300    7,400       8,800    5,200    7,400
Purchased non-covered loans
   567    —      —         849    —      —
Covered loans
   720    3,094    4,675       925    4,012    4,675




Total provision
   6,887    5,394    12,075       10,574    9,212    12,075




Balance, end of period
   $ 46,958    $ 39,372    $ 42,945       $ 49,606    $ 41,660    $ 42,945




ALLL to total loans and leases⁽¹⁾
   1.48 % 1.61 % 1.63 %    1.36 % 1.65 % 1.63 %
ALLL to nonperforming loans and leases^{(1) (2)}
   255 % 244 % 492 %    276 % 400 % 492 %

(1) Excludes purchased non-covered loans and covered loans.
(2) 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.
Net Charge-Off Ratios
The following table provides a summary of the Company’s annualized net charge-off ratios for its loan and lease portfolio for the periods indicated.
Annualized Net Charge-Off Ratios

   Three Months Ended Six Months Ended    Three Months Ended Nine Months Ended
   June 30, June 30,    September 30, September 30,
   2014 2013 2014 2013    2014 2013 2014 2013
Non-purchased loans and leases
   0.19 % 0.12 % 0.11 % 0.15 %    0.06 % 0.09 % 0.10 % 0.13 %
Purchased non-covered loans
   0.28    0.00    0.19    0.00       0.10    0.00    0.15    0.00
Covered loans
   0.72    0.83    0.47    1.15       0.31    0.83    0.42    1.06
Total loans and leases, excluding covered loans
   0.21    0.11    0.13    0.15       0.07    0.09    0.11    0.13
Total loans and leases
   0.25    0.25    0.16    0.35       0.09    0.19    0.13    0.29
Investment Securities
At ~~June~~September 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.
Investment Securities

   June 30,    December 31,    September 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
   $ 603,533       $ 616,565       $ 390,509       $ 391,446       $ 438,390       $ 435,989       $ 572,070       $ 587,579       $ 432,362       $ 431,568       $ 438,390       $ 435,989
U.S. Government agency securities
   254,878       258,311       85,449       83,035       222,510       218,869       251,926       254,062       225,263       225,311       222,510       218,869
Corporate obligations
   685       685       747       747       716       716       655       655       717       717       716       716
Other equity securities
   16,568       16,568       15,520       15,520       13,810       13,810       17,580       17,580       13,797       13,797       13,810       13,810
























Total
   $ 875,664       $ 892,129       $ 492,225       $ 490,748       $ 675,426       $ 669,384       $ 842,231       $ 859,876       $ 672,139       $ 671,393       $ 675,426       $ 669,384
























The Company’s investment securities portfolio is reported at estimated fair value, which included gross unrealized gains of ~~$21.1~~$21.0 million and gross unrealized losses of ~~$4.7~~$3.4 million at ~~June~~September 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 ~~$9.2~~$11.5 million and gross unrealized losses of ~~$10.7~~$12.2 million at ~~June~~September 30, 2013. Management believes that all of its unrealized losses on individual investment securities at ~~June~~September 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.
Unaccreted Discounts and Unamortized Premiums

   Amortized
Cost    Unaccreted
Discount    Unamortized
Premium Par
Value    Amortized
Cost    Unaccreted
Discount    Unamortized
Premium Par
Value
   (Dollars in thousands)    (Dollars in thousands)
June 30, 2014:

September 30, 2014:

Obligations of states and political subdivisions
   $ 603,533       $ 8,625       $ (8,762 ) $ 603,396       $ 572,070       $ 8,218       $ (8,218 ) $ 572,070
U.S. Government agency securities
   254,878       4,561       (4,191 ) 255,248       251,926       4,231       (4,167 ) 251,990
Corporate obligations
   685       —         (15 ) 670       655       —         (14 ) 641
Other equity securities
   16,568       —         —      16,568       17,580       —         —      17,580












Total
   $ 875,664       $ 13,186       $ (12,968 ) $ 875,882       $ 842,231       $ 12,449       $ (12,399 ) $ 842,281












December 31, 2013:

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












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












June 30, 2013:

September 30, 2013:

Obligations of states and political subdivisions
   $ 390,509       $ 8,049       $ (2,599 ) $ 395,959       $ 432,362       $ 8,241       $ (3,264 ) $ 437,339
U.S. Government agency securities
   85,449       187       (4,604 ) 81,032       225,263       4,956       (4,644 ) 225,575
Corporate obligations
   747       —         (20 ) 727       717       —         (19 ) 698
Other equity securities
   15,520       —         —      15,520       13,797       —         —      13,797












Total
   $ 492,225       $ 8,236       $ (7,223 ) $ 493,238       $ 672,139       $ 13,197       $ (7,927 ) $ 677,409












The Company had net gains of ~~$18,000~~$43,000 from the sale of ~~$47~~$6.6 million of investment securities in the ~~second~~third quarter of 2014 compared to no sales of investment securities in the ~~second~~third quarter of 2013. The Company had net gains of ~~$23,000~~$67,000 from the sale of ~~$48~~$55.0 million of investment securities in the first ~~six~~nine months of 2014 compared with net gains of $0.2 million from the sale of $0.8 million of investment securities in the first ~~six~~nine months of 2013. During the ~~second~~third quarter of 2014 and 2013, respectively, investment securities totaling ~~$16~~$38.6 million and ~~$13~~$19.5 million matured, were called or were paid down by the issuer. During the first ~~six~~nine months of 2014 and 2013, respectively, investment securities totaling ~~$30~~$68.3 million and ~~$53~~$71.9 million matured, were called or paid down by the issuer. The Company purchased ~~$17~~$10.0 million and ~~$38~~$49.5 million of investment securities during the ~~second~~third quarter of 2014 and 2013, respectively, and purchased ~~$35~~$46.6 million and ~~$75~~$124.1 million of investment securities during the first ~~six~~nine 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, 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 ~~June~~September 30, 2014 based on credit ratings by one or more nationally-recognized credit rating agency.
Credit Ratings of Investment Securities

   AAA⁽¹⁾ AA⁽²⁾ A⁽³⁾ BBB⁽⁴⁾ Non-
Rated⁽⁵⁾ Total
   (Dollars in thousands)    AAA⁽¹⁾ AA⁽²⁾ A⁽³⁾ BBB⁽⁴⁾ Non-Rated⁽⁵⁾ Total
   (Dollars in thousands)
Obligations of states and political subdivisions
   $ 10,389    $ 224,475    $ 91,153    $ 45,750    $ 244,798    $ 616,565       $ 11,129    $ 206,486    $ 81,948    $ 30,630    $ 257,386    $ 587,579
U.S. Government agency securities
�� —      258,311    —      —      —      258,311       —      254,011    51    —      —      254,062
Corporate obligations
   —      —      685    —      —      685       —      —      655    —      —      655
Other equity securities
   —      —      —      —      16,568    16,568       —      —      —      —      17,580    17,580




Total
   $ 10,389    $ 482,786    $ 91,838    $ 45,750    $ 261,366    $ 892,129       $ 11,129    $ 460,497    $ 82,654    $ 30,630    $ 274,966    $ 859,876




Percentage of total
   1.2 % 54.1 % 10.3 % 5.1 % 29.3 % 100.0 %    1.2 % 53.6 % 9.6 % 3.6 % 32.0 % 100.0 %
Cumulative percentage of total
   1.2 % 55.3 % 65.6 % 70.7 % 100.0 %    1.2 % 54.8 % 64.4 % 68.0 % 100.0 %

(1) Includes securities rated Aaa by Moody’s, AAA by Standard & Poor’s (“S&P”) or a comparable rating by other nationally-recognized credit rating agencies.
(2) Includes securities rated Aa1 to Aa3 by Moody’s, AA+ to AA- by S&P or a comparable rating by other nationally-recognized credit rating agencies.
(3) Includes securities rated A1 to A3 by Moody’s, A+ to A- by S&P or a comparable rating by other nationally-recognized credit rating agencies.
(4) Includes securities rated Baa1 to Baa3 by Moody’s, BBB+ to BBB- by S&P or a comparable rating by other nationally-recognized credit rating agencies.
(5) Includes 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).
Deposits
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. On July 31, 2013, the Company assumed $601 million of deposits as a result of its acquisition of First National Bank.
Deposits

   June 30,    December 31,    September 30,    December 31,
   2014 2013    2013    2014 2013    2013
   (Dollars in thousands)    (Dollars in thousands)
Non-interest bearing
   $ 1,058,210       21.2 % $ 591,879       19.8 % $ 746,320       20.0 %    $ 1,089,415       21.2 % $ 724,413       19.8 % $ 746,320       20.0 %
Interest bearing:

Transaction (NOW)
   1,173,404       23.6    717,317       24.0    839,632       22.6       1,019,089       19.8    798,931       21.8    839,632       22.6
Savings and money market
   1,575,525       31.6    948,472       31.8    1,233,865       33.2       1,768,869       34.4    1,153,686       31.5    1,233,865       33.2
Time deposits less than $100,000
   557,632       11.2    388,045       13.0    471,052       12.7       591,119       11.5    502,322       13.8    471,052       12.7
Time deposits of $100,000 or more
   619,126       12.4    338,916       11.4    426,158       11.5       671,213       13.1    475,334       13.1    426,158       11.5
















Total deposits
   $ 4,983,897       100.0 % $ 2,984,629       100.0 % $ 3,717,027       100.0 %    $ 5,139,705       100.0 % $ 3,654,686       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 by State

Deposits Attributable to Offices In
   June 30, December 31,
2014 2013 2013
Deposits
Attributable
   September 30, December 31,
to Offices In
   2014 2013 2013
   (Dollars in thousands)    (Dollars in thousands)
Arkansas
   $ 2,736,653       54.9 % $ 1,644,271       55.1 % $ 1,671,498       45.0 %    $ 2,793,040       54.3 % $ 1,705,560       46.7 % $ 1,671,498       45.0 %
Texas
   728,073       14.6    390,928       13.1    492,069       16.9       808,535       15.7    395,646       10.8    492,069       13.2
Georgia
   636,950       12.8    656,579       22.0    634,060       17.1       648,343       12.6    641,454       17.6    634,060       17.1
North Carolina
   596,180       12.0    16,794       0.6    629,241       3.4       594,726       11.6    626,916       17.1    629,241       16.9
Alabama
   132,271       2.6    139,428       4.7    137,345       13.2       124,593       2.4    137,141       3.8    137,345       3.7
Florida
   120,677       2.4    125,870       4.2    124,894       3.7       129,112       2.5    123,591       3.4    124,894       3.4
South Carolina
   33,093       0.7    10,759       0.3    27,920       0.7       41,356       0.9    24,378       0.6    27,920       0.7
















Total
   $ 4,983,897       100.0 % $ 2,984,629       100.0 % $ 3,717,027       100.0 %    $ 5,139,705       100.0 % $ 3,654,686       100.0 % $ 3,717,027       100.0 %
















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 has future growth in loans and leases, the Company expects to continue to increase deposit pricing in additional markets to fund such growth.
Other Interest Bearing Liabilities
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.
Average Balances and Rates of Other Interest Bearing Liabilities

   Three Months Ended June 30, Six Months Ended June 30,
   2014 2013 2014 2013    Three Months Ended September 30, Nine Months Ended September 30,
   Average
Balance    Rate
Paid Average
Balance    Rate
Paid Average
Balance    Rate
Paid Average
Balance    Rate
Paid    2014 2013 2014 2013
   (Dollars in thousands)    Average
Balance    Rate
Paid Average
Balance    Rate
Paid Average
Balance    Rate
Paid Average
Balance    Rate
Paid
   (Dollars in thousands)
Repurchase agreements with customers
   $ 58,607       0.09 % $ 29,815       0.08 % $ 61,808       0.08 % $ 31,872       0.09 %    $ 62,430       0.09 % $ 41,879       0.07 % $ 62,018       0.09 % $ 35,244       0.08 %
Other borrowings⁽¹⁾
   281,009       3.84    286,719       3.75    280,968       3.84    283,755       3.79       299,436       3.63    308,875       3.51    287,191       3.76    292,221       3.69
Subordinated debentures
   64,950       2.64    64,950       2.65    64,950       2.61    64,950       2.66       64,950       2.60    64,950       2.64    64,950       2.61    64,950       2.65

















Total other interest bearing liabilities
   $ 404,566       3.11 % $ 381,484       3.28 % $ 407,726       3.10 % $ 380,577       3.29 %    $ 426,816       2.95 % $ 415,704       3.03 % $ 414,159       3.03 % $ 392,415       3.19 %














��



(1) Included in other borrowings at ~~June~~September 30, 2014 and 2013 are FHLB – Dallas advances that contain quarterly call features and mature as follows: 2017, $260.0 million at 3.90% weighted-average interest rate and 2018, $20.0 million at 2.53% weighted-average interest rate.
CAPITAL RESOURCES AND LIQUIDITY
Capital Resources
Subordinated Debentures. At ~~June~~September 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, 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 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.
Calculation of the Ratio of Total Tangible Common
Stockholders’ Equity to Total Tangible Assets

   June 30, December 31,
2013
   2014 2013    September 30, December 31,
   (Dollars in thousands)    2014 2013 2013
   (Dollars in thousands)
Total common stockholders’ equity before noncontrolling interest
   $ 850,204    $ 531,125    $ 629,060       $ 875,578    $ 612,338    $ 629,060
Less intangible assets:

Goodwill
   (78,669 ) (5,243 ) (5,243 )    (78,669 ) (5,243 ) (5,243 )
Core deposit and bank charter intangibles, net of accumulated amortization
   (29,971 ) (5,447 ) (13,915 )    (28,439 ) (14,796 ) (13,915 )




Total intangibles
   (108,640 ) (10,690 ) (19,158 )    (107,108 ) (20,039 ) (19,158 )




Total tangible common stockholders’ equity
   $ 741,564    $ 520,435    $ 609,902       $ 768,470    $ 592,299    $ 609,902




Total assets
   $ 6,297,975    $ 4,043,632    $ 4,791,170       $ 6,580,360    $ 4,710,567    $ 4,791,170
Less intangible assets:

Goodwill
   (78,669 ) (5,243 ) (5,243 )    (78,669 ) (5,243 ) (5,243 )
Core deposit and bank charter intangibles, net of accumulated amortization
   (29,971 ) (5,447 ) (13,915 )    (28,439 ) (14,796 ) (13,915 )




Total intangibles
   (108,640 ) (10,690 ) (19,158 )    (107,108 ) (20,039 ) (19,158 )




Total tangible assets
   $ 6,189,335    $ 4,032,942    $ 4,772,012       $ 6,473,252    $ 4,690,528    $ 4,772,012




Ratio of total tangible common stockholders’ equity to total tangible assets
   11.98 % 12.90 % 12.78 %    11.87 % 12.63 % 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.
Calculation of Tangible Book Value Per Common Share

   June 30, December 31,    September 30, December 31,
   2014 2013 2013    2014 2013 2013
   (In thousands, except per share amounts)    (In thousands, except per share amounts)
Total common stockholders’ equity before noncontrolling interest
   $ 850,204    $ 531,125    $ 629,060       $ 875,578    $ 612,338    $ 629,060
Less intangible assets:

Goodwill
   (78,669 ) (5,243 ) (5,243 )    (78,669 ) (5,243 ) (5,243 )
Core deposit and bank charter intangibles, net of accumulated amortization
   (29,971 ) (5,447 ) (13,915 )    (28,439 ) (14,796 ) (13,915 )




Total intangibles
   (108,640 ) (10,690 ) (19,158 )    (107,108 ) (20,039 ) (19,158 )




Total tangible common stockholders’ equity
   $ 741,564    $ 520,435    $ 609,902       $ 768,470    $ 592,299    $ 609,902




Shares of common stock outstanding⁽¹⁾
   79,662    70,876    73,712       79,705    73,404    73,712




Tangible book value per common share
   $ 9.31    $ 7.34    $ 8.27       $ 9.64    $ 8.07    $ 8.27




⁽¹⁾ Adjusted to give effect for 2-for-1 stock split on June 23, 2014.
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.
Calculation of Return on Average Tangible Common Stockholders’ Equity

   Three Months Ended
June 30, Six Months Ended
June 30,    Three Months Ended Nine Months Ended
   2014 2013 2014 2013    September 30, September 30,
   (Dollars in thousands)    2014 2013 2014 2013
   (Dollars in thousands)
Net income available to common stockholders
   $ 26,486    $ 20,387    $ 51,762    $ 40,387       $ 32,093    $ 26,452    $ 83,855    $ 66,839




Average common stockholders’ equity before noncontrolling interest
   $ 749,692    $ 527,713    $ 696,360    $ 521,082       $ 860,240    $ 578,382    $ 751,602    $ 540,382
Less average intangible assets:

Goodwill
   (44,083 ) (5,243 ) (24,770 ) (5,243 )    (78,669 ) (5,243 ) (42,736 ) (5,243 )
Core deposit and bank charter intangibles, net of accumulated amortization
   (16,033 ) (5,780 ) (14,973 ) (6,059 )    (29,363 ) (11,985 ) (19,770 ) (8,056 )




Average tangible common stockholders’ equity before noncontrolling interest
   $ 689,576    $ 516,690    $ 656,617    $ 509,780       $ 752,208    $ 561,154    $ 689,096    $ 527,083




Return on average tangible common stockholders’ equity
   15.41 % 15.83 % 15.90 % 15.98 %    16.93 % 18.70 % 16.27 % 16.95 %




Common Stock Dividend Policy. During the quarter ended ~~June~~September 30, 2014, the Company paid a dividend of ~~$0.115~~$0.12 per split-adjusted common share compared to ~~$0.085~~$0.095 per split-adjusted common share in the quarter ended ~~June~~September 30, 2013. On ~~July~~October 1, 2014, the Company’s board of directors approved a dividend of ~~$0.12~~$0.125 per common share that was paid on ~~July 18,~~October 24, 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.
Capital Compliance
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 ~~June~~September 30, 2014 and December 31, 2013, and are presented in the following tables.
Consolidated Capital Ratios

   September 30, December 31,
   June 30,
2014 December 31,
2013⁽¹⁾    2014 2013⁽¹⁾
   (Dollars in thousands)    (Dollars in thousands)
Tier 1 capital:

Common stockholders’ equity before noncontrolling interest
   $ 850,204    $ 629,060       $ 875,578    $ 629,060
Allowed amount of trust preferred securities
   63,000    63,000       63,000    63,000
Net unrealized (gains) losses on investment securities AFS included in common stockholders’ equity
   (10,006 ) 3,672       (10,724 ) 3,672
Less goodwill and certain intangible assets
   (108,640 ) (19,158 )    (107,108 ) (19,158 )




Total tier 1 capital
   794,558    676,574       820,746    676,574
Tier 2 capital:

Qualifying allowance for loan and lease losses
   46,958    42,945       49,606    42,945




Total risk-based capital
   $ 841,516    $ 719,519       $ 870,352    $ 719,519




Risk-weighted assets
   $ 5,928,679    $ 4,189,244       $ 6,681,078    $ 4,189,244




Adjusted quarterly average assets
   $ 5,551,496    $ 4,767,848       $ 6,328,589    $ 4,767,848




Ratios at end of period:

Tier 1 leverage
   14.31 % 14.19 %    12.97 % 14.19 %
Tier 1 risk-based capital
   13.40    16.15       12.28    16.15
Total risk-based capital
   14.19    17.18       13.03    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

(1) Amounts and ratios as of December 31, 2013 have been adjusted to give effect for the $4.1 million recast discussed in Notes 2, 3 and 7 to the Consolidated Financial Statements presented elsewhere in this quarterly report onForm 10-Q.
(2) Regulatory authorities require institutions to operate at varying levels (ranging from 100-200 bps) above a minimum Tier 1 leverage ratio of 3% depending upon capitalization classification.
Capital Ratios of the Bank

   June 30, 2014 December 31, 2013⁽¹⁾    September 30, 2014 December 31, 2013⁽¹⁾
   (Dollars in thousands)    (Dollars in thousands)
Stockholders’ equity – Tier 1
   $ 759,897    $ 659,895       $ 784,987    $ 659,895
Tier 1 leverage ratio
   13.76 % 13.85 %    12.43 % 13.85 %
Tier 1 risk-based capital ratio
   12.84    15.77       11.76    15.77
Total risk-based capital ratio
   13.63    16.80       12.50    16.80

(1) Amounts and ratios as of December 31, 2013 have been adjusted to give effect for the $4.1 million recast discussed in Notes 2, 3 and 7 to the Consolidated Financial Statements presented elsewhere in this quarterly report on Form 10-Q.
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. While the Company continues to evaluate the impact of these rules, it does not believe the adoption of these new rules will result in the Company or Bank no longer being considered well-capitalized.
Liquidity
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 ~~June~~September 30, 2014 the Company had substantial unused borrowing availability. This availability was primarily comprised of the following four options: (1) ~~$747~~$984 million of available blanket borrowing capacity with the FHLB-Dallas, (2) ~~$212~~$167 million of investment securities available to pledge for federal funds or other borrowings, (3) ~~$144~~$137 million of available unsecured federal funds borrowing lines and (4) up to ~~$117~~$133 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 ~~$20.1~~$48.2 million for the first ~~six~~nine months of 2014 and ~~$33.5~~$42.8 million for the first ~~six~~nine 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 used ~~$118.8~~$382.3 million and ~~$162.8~~$79.8 million in the first ~~six~~nine months of 2014 and 2013, respectively. Net activity in the Company’s investment securities portfolio provided ~~$43.0~~$76.7 million and used ~~$21.3~~$51.3 million in the first ~~six~~nine months of 2014 and 2013, respectively. Net non-purchased loans and leases used ~~$539.7 million~~$1.0 billion and ~~$345.5~~$428.3 million in the first ~~six~~nine months of 2014 and 2013, respectively. Payments received on purchased non-covered loans provided ~~$138.9~~$253.3 million and ~~$12.2~~$37.7 million for the first ~~six~~nine months of 2014 and 2013, respectively. Payments received on covered loans provided ~~$68.3~~$97.9 million and ~~$110.3~~$177.1 million for the first ~~six~~nine months of 2014 and 2013, respectively, and payments received from the FDIC under loss share agreements provided ~~$16.1~~$24.8 million and ~~$45.7~~$67.0 million for the first ~~six~~nine months of 2014 and 2013, respectively. Other loss share activity provided ~~$9.2~~$15.3 million and ~~$14.7~~$21.6 million for the first ~~six~~nine months of 2014 and 2013, respectively. The Company had proceeds from sales of other assets of ~~$30.2~~$54.4 million and ~~$27.2~~$48.0 million in the first ~~six~~nine months of 2014 and 2013, respectively. Purchases of premises and equipment used ~~$4.6~~$10.4 million and ~~$5.9~~$7.8 million in the first ~~six~~nine months of 2014 and 2013, respectively. Net cash invested in unconsolidated investments ~~used $2.3~~provided $1.3 million and ~~$0.1~~used $0.6 million in the first ~~six~~nine months of 2014 and 2013, respectively. Net cash received in merger and acquisition transactions totaled $121.9 million and $56.8 million for the first ~~six~~nine months of 2014 ~~(none in the first six months of 2013).~~and 2013, respectively.
Financing activities provided ~~$13.4~~$250.1 million and used ~~$17.8~~$46.5 million in the first ~~six~~nine months of 2014 and 2013, respectively. Net changes in deposit accounts provided ~~$41.2~~$196.7 million and used ~~$116.4~~$47.1 million in the ~~in the~~ first ~~six~~nine months of 2014 and 2013, respectively. Net repayments of other borrowings and repurchase agreements with customers ~~used $14.1~~provided $75.6 million and ~~provided $106.1~~$14.4 million in the ~~in the~~ first ~~six~~nine months of 2014 and 2013, respectively. The Company paid common stock cash dividends of ~~$16.6~~$26.2 million and ~~$11.3~~$18.0 million in the ~~in the~~ first ~~six~~nine months of 2014 and 2013, respectively. Proceeds from and excess tax benefits on exercise and forfeiture of stock options provided ~~$2.9~~$3.7 million and ~~$3.8~~$4.1 million in the first ~~six~~nine 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 ~~June~~September 30, 2014.
Growth and Expansion
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 third quarter of~~Carolina and on August 26, 2014, the Company ~~expects to open~~opened a loan production office in Asheville, North ~~Carolina, and in~~Carolina. During the fourth quarter of 2014, it expects to open a retail banking office in 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 ~~six~~nine months of 2014, the Company spent ~~$4.6~~$10.3 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~~$15 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. 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 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 (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.~~Intervest’s stockholders.
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.
RECENTLY ISSUED ACCOUNTING STANDARDS
See Note 14 to the Consolidated Financial Statements for a discussion of certain recently issued and recently adopted accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Interest rate risk results from timing differences in the repricing of assets and liabilities or from changes in relationships between interest rate indexes. The Company’s interest rate risk management is the responsibility of 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, (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 ~~July~~October 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 possible future acquisitions.

Shift in
Interest Rates ~~(in~~
(in bps)

% Change in
Projected Baseline
Net Interest Income
+400
   ~~8.0~~ % 8.9%
+300
   ~~5.6~~ 6.3
+200
   ~~3.1~~ 3.5
+100
   ~~1.2~~ 1.4
-100
   Not meaningful
-200
   Not meaningful
-300
   Not meaningful
-400
   Not meaningful
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.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures.
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.
~~(b) Changes in Internal Control over Financial Reporting.~~
(b) Changes in Internal Control over Financial Reporting.
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~~report. In the third quarter of 2014, the Company completed the conversion of its core banking system to Fiserv. Except for those changes, there ~~was~~were no ~~change~~changes 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.
PART II.     OTHER INFORMATION
~~PART II.~~ ~~OTHER INFORMATION~~
Item 1.1. Legal Proceedings
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, the Arkansas Supreme Court vacated the Arkansas Court of Appeals’ decision, reversing and remanding the case to the trial court to determine, in the 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~~An evidentiary hearing ~~to be~~was conducted by the trial court on ~~this issue. To date, an evidentiary hearing~~the arbitration issue on October 1, 2014, and the trial court has ~~not been scheduled, but one is expected to be conducted in~~taken the ~~third quarter of 2014.~~matter under advisement.
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’ claims in each of these cases are unfounded and subject to meritorious defenses and intend to vigorously defend against these claims.
On August 7, 2014, a putative class action complaint, captionedGreentech Research LLC v. Callen, et al. (the “Greentech Action”), was filed in the Supreme Court of the State of New York for New York County, by an entity purporting to be a stockholder of Intervest. On August 19, 2014, a putative class action complaint, captionedSonnenberg v. Intervest Bancshares Corp., et al., was filed in the Supreme Court of the State of New York for New York County, by an individual purporting to be a stockholder of Intervest. Each of the complaints alleges that the directors of Intervest breached their fiduciary duties to Intervest’s stockholders in connection with the proposed merger between Intervest and the Company by approving a transaction pursuant to an allegedly inadequate process that undervalues Intervest and includes preclusive deal protection provisions; and that Intervest and the Company allegedly aided and abetted the Intervest directors in breaching their duties to Intervest’s stockholders. The complaints seek court certification of the respective plaintiffs as class representatives and request that such proceedings proceed as stockholder class actions, and various remedies, including enjoining the merger from being consummated in accordance with its agreed-upon terms, rescission or an award of rescissory damages in the event that the merger is consummated, an accounting by the defendants to the plaintiff class for all damages caused by the defendants, recovery of plaintiffs’ costs and attorneys’ and experts’ fees relating to the lawsuit, and such further relief as the court deems just and proper. As of September 17, 2014, the individual plaintiffs and the defendants stipulated to the court that the two actions, as well
as any further actions brought in the same court, should be consolidated for further proceedings in the same court in order to minimize expense and promote a more efficient proceeding. On October 14, 2014, the plaintiff in the Greentech Action filed an amended complaint alleging, among other things, inadequacy of the disclosures contained in the proxy statement/prospectus included in the Registration Statement on Form S-4 filed by the Company on September 29, 2014. The Company ~~is party~~and the Bank deny the allegations in the complaints and intend to vigorously defend against these lawsuits.
The Company and/or the Bank are parties 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.

Item 1A. Risk Factors
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.

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

Item 3. Defaults Upon Senior Securities
Not Applicable.

Item 4. Mine Safety Disclosures
Not Applicable.

Item 5. Other Information
None.

Item 6. Exhibits
Reference is made to the Exhibit Index set forth immediately following the signature page of this report.
SIGNATURE
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.

Bank of the Ozarks, Inc.
DATE: ~~August~~November 7, 2014
/s/ Greg McKinney
Greg McKinney

Chief Financial Officer and
Chief Accounting Officer
Bank of the Ozarks, Inc.
Exhibit Index

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).
  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).~~
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

8990


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


Description	Fair Value at June 30, 2014		Technique	Unobservable Inputs
(Dollars in thousands)

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
			Third party appraisal⁽¹⁾ or discounted cash flows	2.	Life of loan

Impaired covered loans	$	20,259	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	$	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	$	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


	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 September 30, 2014 Over Three Months Ended September 30, 2013									Nine Months Ended September 30, 2014 Over Nine Months Ended September 30, 2013
				Yield/			Net						Yield/			Net
	Volume			Rate			Change			Volume			Rate			Change
	(Dollars in thousands)
Increase (decrease) in:
Interest income – FTE:
Interest earning deposits and federal funds sold	$	5		$	(5	)	$	—		$	38		$	(9	)	$	29
Investment securities:
Taxable		992			6			998			3,593			86			3,679
Tax-exempt – FTE		2,519			(610	)		1,909			5,658			(1,014	)		4,644
Non-purchased loans and leases – FTE		11,953			(1,920	)		10,033			27,166			(7,383	)		19,783
Purchased non-covered loans		13,286			(883	)		12,403			33,329			(1,161	)		32,168
Covered loans		(7,383	)		7,512			129			(23,089	)		19,410			(3,679	)

Total interest income – FTE		21,372			4,100			25,472			46,695			9,929			56,624

Interest expense:
Savings and interest bearing transaction		523			72			595			1,165			97			1,262
Time deposits of $100,000 or more		129			(13	)		116			249			(149	)		100
Other time deposits		64			(27	)		37			139			(265	)		(126	)
Repurchase agreements with customers		5			3			8			17			2			19
Other borrowings		(86	)		90			4			(142	)		161			19
Subordinated debentures		—			(7	)		(7	)		—			(23	)		(23	)

Total interest expense		635			118			753			1,428			(177	)		1,251

Increase in net interest income – FTE	$	20,737		$	3,982		$	24,719		$	45,267		$	10,106		$	55,373


	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


	Three Months Ended September 30,					Nine Months Ended September 30,
	2014			2013		2014			2013
	(Dollars in thousands)
Service charges on deposit accounts	$	7,356		$	5,817	$	19,601		$	15,613
Mortgage lending income		1,728			1,276		3,807			4,660
Trust income		1,419			1,060		4,099			2,808
BOLI income		1,390			1,179		3,799			3,365
Accretion (amortization) of FDIC loss share receivable, net of amortization of FDIC clawback payable		(562	)		1,396		(611	)		6,269
Other income from loss share and purchased non-covered loans, net		3,369			2,484		10,309			8,328
Gains on investment securities		43			—		67			156
Gains on sales of other assets		1,688			2,501		4,111			7,586
Gain on merger and acquisition transaction		—			5,163		4,667			5,163
Other		2,817			1,226		7,147			3,498

Total non-interest income	$	19,248		$	22,102	$	56,996		$	57,446


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
Non-Purchased Loans and Leases													September 30,								December 31,
Attributable to Offices In													2014				2013				2013
	(Dollars in thousands)												(Dollars in thousands)
Texas	$	1,545,366	48.7	%	$	1,177,330	48.2	%	$	1,302,061	49.5	%	$	1,821,468	50.1	%	$	1,260,015	49.9	%	$	1,302,061	49.5	%
Arkansas		1,072,904	33.8			1,068,206	43.7			1,069,200	40.6			1,142,869	31.4			1,051,047	41.7			1,069,200	40.6
New York		209,388	6.6			—	—			30,837	1.2			276,128	7.6			—	—			30,837	1.2
North Carolina		200,413	6.3			130,304	5.3			157,938	6.0			233,043	6.4			138,093	5.5			157,938	6.0
Georgia		112,940	3.6			55,438	2.3			57,570	2.1			126,466	3.5			59,450	2.4			57,570	2.1
Alabama		14,795	0.5			11,260	0.5			13,073	0.5			16,062	0.4			12,885	0.5			13,073	0.5
California		8,813	0.3			—	—			—	—			15,656	0.4			—	—			—	—
South Carolina		5,158	0.1			582	0.0			1,703	0.1			5,325	0.1			864	0.0			1,703	0.1
Florida		1,808	0.1			222	0.0			183	0.0			2,125	0.1			235	0.0			183	0.0

Total	$	3,171,585	100	%	$	2,443,342	100.0	%	$	2,632,565	100.0	%	$	3,639,142	100.0	%	$	2,522,589	100.0	%	$	2,632,565	100.0	%


	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	$	100,190	$	204,882	$	125,834	$	8,412	$	14,171	$	453,489	$	106,725	$	214,914	$	121,605	$	8,234	$	16,275	$	467,753
Northern Arkansas⁽¹⁾		40,602		15,373		4,993		14,468		1,284		76,720		39,594		14,068		4,845		13,464		1,255		73,226
Fort Smith, AR–OK MSA		27,984		24,629		6,321		3,482		8,404		70,820		28,186		25,215		6,741		2,736		11,877		74,755
Western Arkansas⁽²⁾		21,461		29,221		4,820		6,572		1,109		63,183		21,114		28,938		5,826		6,404		1,090		63,369
Fayetteville–Springdale–Rogers, AR–MO MSA		9,290		20,961		15,715		4,728		3,324		54,018		8,878		25,177		15,866		4,620		3,290		57,831
Hot Springs, AR MSA		8,557		26,573		6,980		80		756		42,946		9,496		27,597		7,819		0		754		45,666
All other Arkansas⁽³⁾		6,943		9,955		2,396		4,234		1,691		25,219		8,777		7,839		3,058		3,643		1,665		24,982

Total Arkansas		215,027		331,594		167,059		41,976		30,739		786,395		222,770		343,748		165,757		39,101		36,206		807,582


Texas:
Dallas–Fort Worth–Arlington, TX MSA		16,657		107,020		221,162		—		6,558		351,397		16,013		115,160		268,587		0		9,148		408,908
Houston–The Woodlands–Sugar Land, TX MSA		994		26,521		93,385		—		—		120,900		95		34,844		119,794		2,016		0		156,749
San Antonio–New Braunfels, TX MSA														1,137		0		20,336		0		0		21,473
Austin–Round Rock, TX MSA		157		—		49,989		—		—		50,146		1,377		3,899		49,867		1,275		49		56,467
Midland, TX MSA		—		7,878		11,196		—		—		19,074
Texarkana, TX–AR MSA		8,273		7,902		890		526		978		18,569		7,934		8,681		741		495		975		18,826
College Station–Bryan, TX MSA		—		—		—		—		17,775		17,775		0		0		0		0		17,704		17,704
Beaumont–Port Arthur, TX MSA		—		—		—		—		15,616		15,616		0		0		0		0		15,543		15,543
San Antonio–New Braunfels, TX MSA		1,049		100		13,436		—		—		14,585
Midland, TX MSA														0		7,846		15,508		0		0		23,354
All other Texas⁽³⁾		808		12,513		188		3		232		13,744		510		12,396		2,733		0		234		15,873

Total Texas		27,938		161,934		390,246		529		41,159		621,806		27,066		182,826		477,566		3,786		43,653		734,897


California:
Los Angeles–Long Beach–Anaheim, CA MSA		—		162,449		9,086		—		—		171,535		0		163,674		10,748		0		0		174,422
San Francisco–Oakland–Hayward, CA MSA		—		58,999		—		—		—		58,999		0		58,895		0		0		0		58,895
Sacramento–Roseville–Arden–Arcade, CA MSA		—		—		46,586		—		—		46,586		0		0		49,495		0		0		49,495
All other California⁽³⁾		—		9,123		7,759		—		—		16,882		0		9,740		15,585		0		0		25,325

Total California		—		230,571		63,431		—		—		294,002		0		232,309		75,828		0		0		308,137


New York–Newark–Jersey City, NY–NJ–PA MSA														0		106,029		135,634		0		43,979		285,642
North Carolina/South Carolina:
Charlotte–Concord–Gastonia, NC–SC MSA		5,345		58,486		32,791		—		1,507		98,129		6,413		68,548		33,913		303		8,231		117,408
Wilmington, NC MSA		1,559		17,088		4,214		463		—		23,324		2,386		16,909		6,174		439		271		26,179
Raleigh, NC MSA		—		—		17,472		—		—		17,472		503		1,564		23,763		0		0		25,830
Myrtle Beach-North Myrtle Beach-Conway, SC MSA														0		0		11,887		0		0		11,887
Carolina Foothills⁽⁴⁾		5,313		4,131		2,981		28		—		12,453		5,471		4,908		3,017		26		0		13,422
Charleston–North Charleston, SC MSA		—		3,719		714		—		5,813		10,246
All other N. Carolina⁽³⁾		487		9,404		36,110		—		—		46,001		889		10,450		34,836		0		0		46,175
All other S. Carolina⁽³⁾		1,565		7,380		28,355		—		—		37,300		1,545		11,043		22,629		0		0		35,217

Total N. Carolina/S. Carolina		14,269		100,208		122,637		491		7,320		244,925		17,207		113,422		136,219		768		8,502		276,118

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


	1 Year or Less			Over 1 Through 2 Years			Over 2 Through 3 Years			Over 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	$	274,813		$	168,702		$	185,197		$	368,977		$	997,689		$	290,507		$	151,709		$	185,123		$	468,806		$	1,096,145
Floating rate (not at a floor or ceiling rate)		146,682			136			60			245			147,123			150,579			188			132			8			150,907
Floating rate (at floor rate)⁽¹⁾		2,022,214			471			2,289			1,799			2,026,773			2,385,073			1,363			233			5,421			2,392,090
Floating rate (at ceiling rate)		—			—			—			—			—			—			—			—			—			—

Total	$	2,443,709		$	169,309		$	187,546		$	371,021		$	3,171,585		$	2,826,159		$	153,260		$	185,488		$	474,235		$	3,639,142


Percentage of total		77.1	%		5.3	%		5.9	%		11.7	%		100.0	%		77.7	%		4.2	%		5.1	%		13.0	%		100.0	%
Cumulative percentage of total		77.1			82.4			88.3			100.0						77.7			81.9			87.0			100.0


	June 30,						December 31,			September30,						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	$	1,079,330		$	25,955		$	344,065		$	983,946		$	369,538		$	344,065
Valuation discount		(24,676	)		(566	)		(11,972	)		(20,084	)		(13,962	)		(11,972	)

Carrying value		1,054,654			25,389			332,093			963,862			355,576			332,093

Loans with evidence of credit deterioration at date of purchase:
Unpaid principal balance		114,600			10,119			70,857			104,210			75,936			70,857
Valuation discount		(41,565	)		(4,481	)		(30,227	)		(37,084	)		(32,453	)		(30,227	)

Carrying value		73,035			5,638			40,630			67,126			43,483			40,630

Total carrying value	$	1,127,689		$	31,027		$	372,723		$	1,030,988		$	399,059		$	372,723


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

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


	Bancshares as of March 5, 2014			Summit as of May 16, 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		$	31,525		$	30,453		$	31,525
Nonaccretable difference		(8,054	)		(7,157	)		(8,054	)		(7,157	)

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

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


									1 Year		Over 1 Through		Over
	1 Year or Less		Over 1 Through 5 Years		Over 5 Years		Total		or Less		5 Years		5 Years		Total
	(Dollars in thousands)								(Dollars in thousands)
Real estate:
Residential 1-4 family	$	45,096	$	161,787	$	89,423	$	296,306	$	45,053	$	151,138	$	83,082	$	279,273
Non-farm/non-residential		86,367		319,763		82,303		488,433		84,735		298,829		78,820		462,384
Construction/land development		54,425		43,204		6,491		104,120		46,097		40,646		7,594		94,337
Agricultural		7,553		34,974		7,253		49,780		7,770		29,674		6,964		44,408
Multifamily residential		7,552		26,651		1,902		36,105		13,136		20,050		1,493		34,679

Total real estate		200,993		586,379		187,372		974,744		196,791		540,337		177,953		915,081
Commercial and industrial		29,920		70,486		5,570		105,976		26,292		46,089		4,320		76,701
Consumer		7,018		17,948		824		25,790		5,099		14,838		524		20,461
Other		6,756		9,563		4,860		21,179		5,773		9,384		3,588		18,745

Total	$	244,687	$	684,376	$	198,626	$	1,127,689	$	233,955	$	610,648	$	186,385	$	1,030,988


Fixed rate	$	160,394	$	503,202	$	128,138	$	791,734	$	147,231	$	460,324	$	117,751	$	725,306
Floating rate		84,293		181,174		70,488		335,955		86,724		150,324		68,634		305,682

Total	$	244,687	$	684,376	$	198,626	$	1,127,689	$	233,955	$	610,648	$	186,385	$	1,030,988


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


	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		3,009			3,798			2,397			2,260			2,223			3,809			6,848			24,344			4,415			5,756			3,499			3,114			3,153			5,433			9,475			34,845
Transfers to covered foreclosed assets		(1,458	)		(3,019	)		(1,322	)		(961	)		(3,709	)		(638	)		(4,974	)		(16,081	)		(2,588	)		(3,965	)		(2,809	)		(1,203	)		(4,774	)		(1,524	)		(7,443	)		(24,306	)
Payments received		(9,575	)		(16,112	)		(11,199	)		(13,028	)		(7,887	)		(17,098	)		(35,358	)		(110,257	)		(18,863	)		(27,551	)		(14,960	)		(21,630	)		(11,774	)		(22,277	)		(60,039	)		(177,094	)
Charge-offs		(2,161	)		(1,625	)		(808	)		(1,339	)		(480	)		(2,153	)		(4,891	)		(13,457	)		(2,739	)		(3,796	)		(2,713	)		(1,339	)		(542	)		(2,348	)		(5,443	)		(18,920	)
Other activity, net		66			43			47			(39	)		78			(140	)		(91	)		(36	)		(390	)		(90	)		(195	)		(142	)		9			(188	)		(449	)		(1,445	)

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 September 30, 2013																									$	52,684		$	70,088		$	46,015		$	35,468		$	34,165		$	70,177		$	100,722		$	409,319

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		3,580			2,916			1,716			1,416			1,675			4,175			5,057			20,535			4,635			4,660			2,624			2,098			2,498			6,806			7,845			31,166
Transfers to covered foreclosed assets		(3,300	)		(2,259	)		(1,229	)		(1,168	)		(853	)		(4,766	)		(9,637	)		(23,212	)		(6,520	)		(2,683	)		(2,029	)		(1,229	)		(804	)		(4,984	)		(12,505	)		(30,754	)
Payments received		(8,756	)		(12,598	)		(10,658	)		(8,415	)		(4,963	)		(6,833	)		(16,231	)		(68,454	)		(12,683	)		(17,851	)		(11,984	)		(10,082	)		(7,157	)		(10,703	)		(27,455	)		(97,915	)
Charge-offs		(662	)		(500	)		(53	)		—			—			(1,581	)		(1,820	)		(4,616	)		(1,479	)		(299	)		(372	)		0			(90	)		(1,583	)		(1,824	)		(5,647	)
Other activity, net		110			134			31			(60	)		54			26			41			336			177			34			17			(27	)		86			(185	)		59			161

Carrying value at June 30, 2014	$	39,940		$	49,732		$	31,273		$	17,849		$	23,505		$	52,987		$	61,094		$	276,380
Carrying value at September 30, 2014																									$	33,098		$	45,900		$	29,722		$	16,836		$	22,125		$	51,317		$	49,804		$	248,802


	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	$	28,953	$	42,091	$	23,748	$	94,792	$	25,460	$	40,550	$	22,265	$	88,275
Non-farm/non-residential		72,010		39,204		13,823		125,037		73,847		27,227		12,559		113,633
Construction/land development		24,377		6,628		962		31,967		24,005		2,677		936		27,618
Agricultural		7,429		1,742		1,680		10,851		6,584		2,801		492		9,877
Multifamily residential		4,521		1,471		220		6,212		1,984		1,629		215		3,828

Total real estate		137,290		91,136		40,433		268,859		131,880		74,884		36,467		243,231
Commercial and industrial		3,511		769		3,017		7,297		1,424		905		3,025		5,354
Consumer		66		13		—		79		10		54		0		64
Other		143		2		—		145		153		0		0		153

Total covered loans	$	141,010	$	91,920	$	43,450	$	276,380	$	133,467	$	75,843	$	39,492	$	248,802


	Nonperforming Non-Purchased Loans and Leases		Foreclosed Assets		Total Nonperforming Assets
	(Dollars in thousands)						Nonperforming Non-Purchased Loans and Leases		Foreclosed Assets		Total Nonperforming Assets
							(Dollars in thousands)
Arkansas	$	13,106	$	7,808	$	20,914	$	16,296	$	7,603	$	23,899
Texas		41		5,334		5,375		299		1,327		1,626
North Carolina		3,914		4,298		8,212		1,235		5,193		6,428
South Carolina		967		1,219		2,186		—		128		128
Georgia		6		1,370		1,376		9		60		69
Alabama		9		459		468		5		445		450
Florida		5		35		40		—		—		—
All other		345		58		403		101		25		126

Total	$	18,393	$	20,581	$	38,974	$	17,945	$	14,781	$	32,726


	Six Months Ended June 30,						Year Ended December 31,
	2014			2013			2013			Nine Months Ended September 30,						Year Ended December 31,
	(Dollars in thousands)									2014			2013			2013
										(Dollars in thousands)
Balance, beginning of period	$	42,945		$	38,738		$	38,738		$	42,945		$	38,738		$	38,738
Non-purchased loans and leases charged off:
Real estate:
Residential 1-4 family		(341	)		(417	)		(837	)		(456	)		(528	)		(837	)
Non-farm/non-residential		(1,254	)		(593	)		(1,111	)		(1,344	)		(612	)		(1,111	)
Construction/land development		(14	)		(129	)		(137	)		(14	)		(136	)		(137	)
Agricultural		(15	)		—			(261	)		(213	)		(260	)		(261	)
Multifamily residential		—			—			(4	)		—			—			(4	)

Total real estate		(1,624	)		(1,139	)		(2,350	)		(2,027	)		(1,536	)		(2,350	)
Commercial and industrial		(422	)		(832	)		(922	)		(477	)		(887	)		(922	)
Consumer		(97	)		(119	)		(214	)		(126	)		(176	)		(214	)
Direct financing leases		(267	)		(186	)		(482	)		(418	)		(338	)		(482	)
Other		(159	)		(173	)		(359	)		(258	)		(266	)		(359	)

Total non-purchased loans and leases charged off		(2,569	)		(2,449	)		(4,327	)		(3,306	)		(3,203	)		(4,327	)

Recoveries of non-purchased loans and leases previously charged off:
Real estate:
Residential 1-4 family		71			102			106			118			113			106
Non-farm/non-residential		4			118			122			19			118			122
Construction/land development		8			8			174			12			21			174
Agricultural		11			4			14			13			9			14
Multifamily residential		—			—			4			—			—			4

Total real estate		94			232			420			162			261			420
Commercial and industrial		763			375			433			801			431			433
Consumer		36			71			104			50			90			104
Direct financing leases		14			20			33			43			29			33
Other		75			85			144			111			114			144

Total recoveries of non-purchased loans and leases previously charged off		982			783			1,134			1,167			925			1,134

Net non-purchased loans and leases charged off		(1,587	)		(1,666	)		(3,193	)		(2,139	)		(2,278	)		(3,193	)
Purchased non-covered loans charged off		(567	)		—			—			(849	)		—			—
Covered loans charged off		(720	)		(3,094	)		(4,675	)		(925	)		(4,012	)		(4,675	)

Net charge-offs – total loans and leases		(2,874	)		(4,760	)		(7,868	)		(3,913	)		(6,290	)		(7,868	)
Provision for loan and lease losses:
Non-purchased loans and leases		5,600			2,300			7,400			8,800			5,200			7,400
Purchased non-covered loans		567			—			—			849			—			—
Covered loans		720			3,094			4,675			925			4,012			4,675

Total provision		6,887			5,394			12,075			10,574			9,212			12,075

Balance, end of period	$	46,958		$	39,372		$	42,945		$	49,606		$	41,660		$	42,945

ALLL to total loans and leases⁽¹⁾		1.48	%		1.61	%		1.63	%		1.36	%		1.65	%		1.63	%
ALLL to nonperforming loans and leases^{(1) (2)}		255	%		244	%		492	%		276	%		400	%		492	%


	Amortized Cost		Unaccreted Discount		Unamortized Premium			Par Value		Amortized Cost		Unaccreted Discount		Unamortized Premium			Par Value
	(Dollars in thousands)									(Dollars in thousands)
June 30, 2014:
September 30, 2014:
Obligations of states and political subdivisions	$	603,533	$	8,625	$	(8,762	)	$	603,396	$	572,070	$	8,218	$	(8,218	)	$	572,070
U.S. Government agency securities		254,878		4,561		(4,191	)		255,248		251,926		4,231		(4,167	)		251,990
Corporate obligations		685		—		(15	)		670		655		—		(14	)		641
Other equity securities		16,568		—		—			16,568		17,580		—		—			17,580

Total	$	875,664	$	13,186	$	(12,968	)	$	875,882	$	842,231	$	12,449	$	(12,399	)	$	842,281

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

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

June 30, 2013:
September 30, 2013:
Obligations of states and political subdivisions	$	390,509	$	8,049	$	(2,599	)	$	395,959	$	432,362	$	8,241	$	(3,264	)	$	437,339
U.S. Government agency securities		85,449		187		(4,604	)		81,032		225,263		4,956		(4,644	)		225,575
Corporate obligations		747		—		(20	)		727		717		—		(19	)		698
Other equity securities		15,520		—		—			15,520		13,797		—		—			13,797

Total	$	492,225	$	8,236	$	(7,223	)	$	493,238	$	672,139	$	13,197	$	(7,927	)	$	677,409


		AAA⁽¹⁾			AA⁽²⁾			A⁽³⁾			BBB⁽⁴⁾			Non- Rated⁽⁵⁾			Total
		(Dollars in thousands)																		AAA⁽¹⁾			AA⁽²⁾			A⁽³⁾			BBB⁽⁴⁾			Non-Rated⁽⁵⁾			Total
																				(Dollars in thousands)
Obligations of states and political subdivisions		$	10,389		$	224,475		$	91,153		$	45,750		$	244,798		$	616,565		$	11,129		$	206,486		$	81,948		$	30,630		$	257,386		$	587,579
U.S. Government agency securities	��		—			258,311			—			—			—			258,311			—			254,011			51			—			—			254,062
Corporate obligations			—			—			685			—			—			685			—			—			655			—			—			655
Other equity securities			—			—			—			—			16,568			16,568			—			—			—			—			17,580			17,580

Total		$	10,389		$	482,786		$	91,838		$	45,750		$	261,366		$	892,129		$	11,129		$	460,497		$	82,654		$	30,630		$	274,966		$	859,876

Percentage of total			1.2	%		54.1	%		10.3	%		5.1	%		29.3	%		100.0	%		1.2	%		53.6	%		9.6	%		3.6	%		32.0	%		100.0	%
Cumulative percentage of total			1.2	%		55.3	%		65.6	%		70.7	%		100.0	%					1.2	%		54.8	%		64.4	%		68.0	%		100.0	%


Deposits Attributable to Offices In	June 30,								December 31,
Deposits Attributable to Offices In	2014				2013				2013
Deposits Attributable													September 30,								December 31,
to Offices In													2014				2013				2013
	(Dollars in thousands)												(Dollars in thousands)
Arkansas	$	2,736,653	54.9	%	$	1,644,271	55.1	%	$	1,671,498	45.0	%	$	2,793,040	54.3	%	$	1,705,560	46.7	%	$	1,671,498	45.0	%
Texas		728,073	14.6			390,928	13.1			492,069	16.9			808,535	15.7			395,646	10.8			492,069	13.2
Georgia		636,950	12.8			656,579	22.0			634,060	17.1			648,343	12.6			641,454	17.6			634,060	17.1
North Carolina		596,180	12.0			16,794	0.6			629,241	3.4			594,726	11.6			626,916	17.1			629,241	16.9
Alabama		132,271	2.6			139,428	4.7			137,345	13.2			124,593	2.4			137,141	3.8			137,345	3.7
Florida		120,677	2.4			125,870	4.2			124,894	3.7			129,112	2.5			123,591	3.4			124,894	3.4
South Carolina		33,093	0.7			10,759	0.3			27,920	0.7			41,356	0.9			24,378	0.6			27,920	0.7

Total	$	4,983,897	100.0	%	$	2,984,629	100.0	%	$	3,717,027	100.0	%	$	5,139,705	100.0	%	$	3,654,686	100.0	%	$	3,717,027	100.0	%


							September 30,			December 31,
	June 30, 2014			December 31, 2013⁽¹⁾			2014			2013⁽¹⁾
	(Dollars in thousands)						(Dollars in thousands)
Tier 1 capital:
Common stockholders’ equity before noncontrolling interest	$	850,204		$	629,060		$	875,578		$	629,060
Allowed amount of trust preferred securities		63,000			63,000			63,000			63,000
Net unrealized (gains) losses on investment securities AFS included in common stockholders’ equity		(10,006	)		3,672			(10,724	)		3,672
Less goodwill and certain intangible assets		(108,640	)		(19,158	)		(107,108	)		(19,158	)

Total tier 1 capital		794,558			676,574			820,746			676,574

Tier 2 capital:
Qualifying allowance for loan and lease losses		46,958			42,945			49,606			42,945

Total risk-based capital	$	841,516		$	719,519		$	870,352		$	719,519


Risk-weighted assets	$	5,928,679		$	4,189,244		$	6,681,078		$	4,189,244


Adjusted quarterly average assets	$	5,551,496		$	4,767,848		$	6,328,589		$	4,767,848


Ratios at end of period:
Tier 1 leverage		14.31	%		14.19	%		12.97	%		14.19	%
Tier 1 risk-based capital		13.40			16.15			12.28			16.15
Total risk-based capital		14.19			17.18			13.03			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


	June 30, 2014			December 31, 2013⁽¹⁾			September 30, 2014			December 31, 2013⁽¹⁾
	(Dollars in thousands)						(Dollars in thousands)
Stockholders’ equity – Tier 1	$	759,897		$	659,895		$	784,987		$	659,895
Tier 1 leverage ratio		13.76	%		13.85	%		12.43	%		13.85	%
Tier 1 risk-based capital ratio		12.84			15.77			11.76			15.77
Total risk-based capital ratio		13.63			16.80			12.50			16.80


Shift in Interest Rates ~~(in~~ (in bps)	% Change in Projected Baseline Net Interest Income
+400		~~8.0~~	% 8.9%
+300		~~5.6~~	6.3
+200		~~3.1~~	3.5
+100		~~1.2~~	1.4
-100		Not meaningful
-200		Not meaningful
-300		Not meaningful
-400		Not meaningful


						Bank of the Ozarks, Inc.

DATE: ~~August~~November 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).

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).~~



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

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