UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended June 30, 2011

¨ 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

None

(Title of Class)

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 smaller reporting company or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Check one:

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

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 30, 2011
Common Stock, $0.01 par value per share	17,118,440

BANK OF THE OZARKS, INC.

FORM 10-Q

June 30, 2011

INDEX

PART I.	Financial Information
Item 1.	Financial Statements
		Consolidated Balance Sheets as of June 30, 2011 and 2010 and December 31, 2010	1
		Consolidated Statements of Income for the Three Months Ended June 30, 2011 and 2010 and the Six Months Ended June 30, 2011 and 2010	2
		Consolidated Statements of Stockholders’ Equity for the Six Months Ended June 30, 2011 and 2010	3
		Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010	4
		Notes to Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
	Selected and Supplemental Financial Data		59
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		61
Item 4.	Controls and Procedures		62
PART II.	Other Information
Item 1.	Legal Proceedings		63
Item 1A.	Risk Factors		63
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		63
Item 3.	Defaults Upon Senior Securities		63
Item 4.	Reserved		63
Item 5.	Other Information		63
Item 6.	Exhibits		63
Signature			64
Exhibit Index			65

PART I. FINANCIAL INFORMATION

Item 1.     Financial Statements

BANK OF THE OZARKS, INC.

CONSOLIDATED BALANCE SHEETS

	Unaudited June 30,						December  31, 2010
	2011			2010
	(Dollars in thousands, except per share amounts)
ASSETS
Cash and due from banks	$	79,712		$	59,453		$	48,024
Interest earning deposits		1,602			710			1,005
Cash and cash equivalents		81,314			60,163			49,029
Investment securities - available for sale (“AFS”)		499,244			453,463			398,698
Loans and leases, excluding covered loans		1,802,127			1,900,174			1,856,429
Allowance for loan and lease losses		(39,124	)		(40,176	)		(40,230	)
Net loans and leases		1,763,003			1,859,998			1,816,199
Covered assets:
Loans		908,698			124,546			496,090
Other real estate owned		78,047			8,541			31,145
Federal Deposit Insurance Corporation (“FDIC”) loss share receivable		351,723			44,147			154,150
Premises and equipment, net		181,010			162,992			170,497
Foreclosed and repossessed assets held for sale, net		36,348			44,680			42,216
Accrued interest receivable		13,242			15,247			13,899
Bank owned life insurance		60,914			58,618			59,771
Intangible assets, net		13,220			7,072			7,925
Other, net		40,078			38,805			33,951
Total assets	$	4,026,841		$	2,878,272		$	3,273,570
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Demand non-interest bearing	$	418,742		$	258,927		$	298,585
Savings and interest bearing transaction		1,644,402			1,109,954			1,299,058
Time		1,107,339			789,690			943,110
Total deposits		3,170,483			2,158,571			2,540,753
Repurchase agreements with customers		39,403			51,677			43,324
Other borrowings		292,682			281,788			282,139
Subordinated debentures		64,950			64,950			64,950
Accrued interest payable and other liabilities		70,217			25,375			18,634
Total liabilities		3,637,735			2,582,361			2,949,800
Commitments and contingencies
Stockholders’ equity:
Common stock; $0.01 par value; 50,000,000 shares authorized; 17,118,440, 16,956,290, and 17,053,640 shares issued and outstanding at June 30, 2011, June 30, 2010 and December 31, 2010, respectively		171			170			170
Additional paid-in capital		48,239			43,424			45,278
Retained earnings		333,943			243,181			275,074
Accumulated other comprehensive income (loss)		3,330			5,712			(167	)
Total stockholders’ equity before noncontrolling interest		385,683			292,487			320,355
Noncontrolling interest		3,423			3,424			3,415
Total stockholders’ equity		389,106			295,911			323,770
Total liabilities and stockholders’ equity	$	4,026,841		$	2,878,272		$	3,273,570

See accompanying notes to consolidated financial statements.

1

BANK OF THE OZARKS, INC.

CONSOLIDATED STATEMENTS OF INCOME

Unaudited

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
	(Dollars in thousands, except per share amounts)
Interest income:
Loans and leases	$	28,046		$	29,832		$	55,922		$	59,327
Covered loans		17,607			2,584			29,030			2,739
Investment securities:
Taxable		1,057			1,416			1,484			3,065
Tax-exempt		4,139			4,739			8,432			9,650
Deposits with banks and federal funds sold		25			9			28			11
Total interest income		50,874			38,580			94,896			74,792
Interest expense:
Deposits		5,191			5,194			9,972			10,109
Repurchase agreements with customers		57			101			118			210
Other borrowings		2,718			3,124			5,389			6,698
Subordinated debentures		432			432			858			853
Total interest expense		8,398			8,851			16,337			17,870
Net interest income		42,476			29,729			78,559			56,922
Provision for loan and lease losses		(3,750	)		(3,400	)		(6,000	)		(7,600	)
Net interest income after provision for loan and lease losses		38,726			26,329			72,559			49,322
Non-interest income:
Service charges on deposit accounts		4,586			3,933			8,424			7,135
Mortgage lending income		634			815			1,315			1,343
Trust income		803			794			1,585			1,716
Bank owned life insurance income		575			534			1,143			997
Gains on investment securities		199			2,052			351			3,749
Gains (losses) on sales of other assets		705			38			1,112			(35	)
Accretion of FDIC loss share receivable, net of amortization of FDIC clawback payable		2,923			271			4,921			271
Other loss share income, net		984			0			1,955			0
Gains on FDIC-assisted acquisitions		62,756			0			65,708			10,037
Other		893			690			1,534			1,280
Total non-interest income		75,058			9,127			88,048			26,493
Non-interest expense:
Salaries and employee benefits		14,817			8,996			26,464			17,271
Net occupancy and equipment		3,775			2,416			6,881			4,837
Other operating expenses		16,608			9,698			28,047			16,473
Total non-interest expense		35,200			21,110			61,392			38,581
Income before taxes		78,584			14,346			99,215			37,234
Provision for income taxes		28,380			3,488			34,384			10,432
Net income		50,204			10,858			64,831			26,802
Net loss attributable to noncontrolling interest		13			32			16			43
Net income available to common stockholders	$	50,217		$	10,890		$	64,847		$	26,845
Basic earnings per common share	$	2.94		$	0.64		$	3.79		$	1.58
Diluted earnings per common share	$	2.91		$	0.64		$	3.77		$	1.58
Dividends declared per common share	$	0.18		$	0.15		$	0.35		$	0.29

See accompanying notes to consolidated financial statements.

2

BANK OF THE OZARKS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Unaudited

								Accumulated
			Additional					Other			Non-
	Common		Paid-In		Retained			Comprehensive			controlling
	Stock		Capital		Earnings			Income (Loss)			Interest			Total
	(Dollars in thousands)
Balances – January 1, 2010	$	169	$	41,584	$	221,243		$	6,032		$	3,442		$	272,470
Comprehensive income:
Net income		0		0		26,802			0			0			26,802
Net loss attributable to noncontrolling interest		0		0		43			0			(43	)		0
Other comprehensive income (loss):
Unrealized gains/losses on investment securities AFS, net of $1,264 tax effect		0		0		0			1,958			0			1,958
Reclassification of gains/losses included in net income, net of $1,471 tax effect		0		0		0			(2,278	)		0			(2,278	)
Total comprehensive income															26,482
Common stock dividends		0		0		(4,907	)		0			0			(4,907	)
Issuance of 51,750 shares of common stock for exercise of stock options		1		1,334		0			0			0			1,335
Tax benefit (expense) on exercise and forfeiture of stock options		0		69		0			0			0			69
Stock-based compensation expense		0		437		0			0			0			437
Noncontrolling interest cash contribution		0		0		0			0			25			25
Balances – June 30, 2010	$	170	$	43,424	$	243,181		$	5,712		$	3,424		$	295,911
Balances – January 1, 2011	$	170	$	45,278	$	275,074		$	(167	)	$	3,415		$	323,770
Comprehensive income:
Net income		0		0		64,831			0			0			64,831
Net loss attributable to noncontrolling interest		0		0		16			0			(16	)		0
Other comprehensive income (loss):
Unrealized gains/losses on investment securities AFS, net of $2,394 tax effect		0		0		0			3,710			0			3,710
Reclassification of gains/losses included in net income, net of $138 tax effect		0		0		0			(213	)		0			(213	)
Total comprehensive income															68,328
Common stock dividends		0		0		(5,978	)		0			0			(5,978	)
Issuance of 65,600 shares of common stock for exercise of stock options		1		2,048		0			0			0			2,049
Tax benefit (expense) on exercise and forfeiture of stock options		0		183		0			0			0			183
Stock-based compensation expense		0		730		0			0			0			730
Forfeiture of 800 shares of unvested common stock under restricted stock plan		0		0		0			0			0			0
Noncontrolling interest cash contribution		0		0		0			0			24			24
Balances – June 30, 2011	$	171	$	48,239	$	333,943		$	3,330		$	3,423		$	389,106

See accompanying notes to consolidated financial statements.

3

BANK OF THE OZARKS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

	Six Months Ended
	June 30,
	2011			2010
	(Dollars in thousands)
Cash flows from operating activities:
Net income	$	64,831		$	26,802
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		2,557			2,160
Amortization		664			138
Net loss attributable to noncontrolling interest		16			43
Provision for loan and lease losses		6,000			7,600
Provision for losses on foreclosed and repossessed assets		7,442			4,392
Writedown of other assets		1,250			0
Net amortization (accretion) of investment securities AFS		125			(458	)
Net gains on investment securities AFS		(351	)		(3,749	)
Originations and purchases of mortgage loans for sale		(57,173	)		(68,522	)
Proceeds from sales of mortgage loans for sale		62,718			65,808
Net accretion of covered loans		(29,030	)		(2,739	)
Accretion of FDIC loss share receivable, net of amortization of FDIC clawback payable		(4,921	)		(271	)
(Gains) losses on dispositions of premises and equipment, foreclosed and repossessed assets and other assets		(1,112	)		35
Gains on FDIC-assisted acquisitions		(65,708	)		(10,037	)
Deferred income tax expense		28,123			4,051
Increase in cash surrender value of bank owned life insurance (“BOLI”)		(1,143	)		(997	)
Current tax benefit on exercise of stock options		(340	)		(180	)
Compensation expense under stock-based compensation plans		730			437
Changes in assets and liabilities:
Accrued interest receivable		1,177			(445	)
Other assets, net		(4,903	)		59
Accrued interest payable and other liabilities		3,513			1,774
Net cash provided by operating activities		14,465			25,901
Cash flows from investing activities:
Proceeds from sales of investment securities AFS		37,813			112,712
Proceeds from maturities/calls/paydowns of investment securities AFS		11,552			38,100
Purchases of investment securities AFS		(7,573	)		(92,031	)
Net paydowns of portfolio loans and leases		57,220			1,192
Net cash flow from covered assets		139,926			13,516
Purchases of premises and equipment		(12,923	)		(3,551	)
Proceeds from disposition of premises and equipment, foreclosed and repossessed assets and other assets		3,672			10,288
Cash paid for interest in unconsolidated investments and noncontrolling interest		(1,725	)		(4,104	)
Purchase of BOLI		0			(10,200	)
Net cash proceeds received in FDIC-assisted acquisitions		365,394			62,101
Net cash provided by investing activities		593,356			128,023
Cash flows from financing activities:
Net decrease in deposits		(485,002	)		(91,228	)
Net repayments of other borrowings		(82,276	)		(84,843	)
Net (decrease) increase in repurchase agreements with customers		(4,669	)		7,408
Proceeds from exercise of stock options		2,049			1,335
Current tax benefit on exercise of stock options		340			180
Cash dividends paid on common stock		(5,978	)		(4,907	)
Net cash used by financing activities		(575,536	)		(172,055	)
Net increase (decrease) in cash and cash equivalents		32,285			(18,131	)
Cash and cash equivalents – beginning of period		49,029			78,294
Cash and cash equivalents – end of period	$	81,314		$	60,163

See accompanying notes to consolidated financial statements.

4

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 and a subsidiary that owns and operates a private aircraft. The consolidated financial statements include the accounts of the Company, the Bank, the real estate subsidiary and the aircraft subsidiary. Significant intercompany transactions and amounts have been eliminated in consolidation.

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 accounting principles generally accepted in the United States (“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, 2010.

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. In the opinion of management, all adjustments considered necessary, consisting of normal recurring items, have been included for a fair presentation of the accompanying consolidated financial statements. Operating results for the three and six months ended June 30, 2011 are not necessarily indicative of the results that may be expected for the full year or future periods.

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.

3. Acquisitions

2011 Acquisitions

On January 14, 2011 the Company, through the Bank, entered into a purchase and assumption agreement with loss share agreements with the Federal Deposit Insurance Corporation (“FDIC”) pursuant to which it acquired substantially all of the assets and assumed substantially all of the deposits and certain other liabilities of the former Oglethorpe Bank (“Oglethorpe”) with two offices in Georgia, including Brunswick and St. Simons Island.

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

On April 29, 2011, the Company, through the Bank, entered into a purchase and assumption agreement with loss share agreements with the FDIC pursuant to which it acquired substantially all of the assets and assumed substantially all of the deposits and certain other liabilities of the former The Park Avenue Bank (“Park Avenue”) with 11 offices in Georgia, including Valdosta (3), Bainbridge (2), Cairo, Lake Park, Stockbridge, McDonough, Oakwood and Athens and one office in Ocala, Florida. The Company has given notice that it plans to close the Stockbridge, Georgia office on October 21, 2011.

(The remainder of this page intentionally left blank)

5

A summary, at fair value, of the assets acquired and liabilities assumed in the Oglethorpe, First Choice and Park Avenue acquisitions, as of the acquisition dates, is as follows:

	Oglethorpe			First Choice			Park Avenue
	(Dollars in thousands)
Assets acquired:
Cash and cash equivalents	$	14,710		$	38,018		$	66,825
Investment Securities, AFS		—			4,568			131,790
Loans not covered by loss share agreements (1)		3,085			1,554			17,696
Covered assets:
Loans		80,676			149,894			262,917
Other real estate owned (“covered ORE”)		7,144			1,671			31,630
FDIC loss share receivable		52,395			59,544			113,683
Core deposit intangible		401			495			5,063
Other assets		433			70			2,977
Total assets acquired		158,844			255,814			632,581
Liabilities assumed:
Deposits		195,067			293,344			626,321
Federal Home Loan Bank of Atlanta (“FHLB – Atlanta”) advances		—			4,000			88,819
FDIC clawback payable		924			930			14,868
Other liabilities		433			578			2,088
Total liabilities assumed		196,424			298,852			732,096
Net assets acquired at fair value		(37,580	)		(43,038	)		(99,515	)
Cash received from FDIC		40,532			45,988			159,320
Pre-tax gain on FDIC-assisted acquisitions	$	2,952		$	2,950		$	59,805

(1) Certain loans acquired by the Company, consisting primarily of consumer loans, are not covered by loss share. Accordingly, these loans are reported as non-covered loans in the Company’s consolidated financial statements. The unpaid principal balance and the fair value of these loans, at acquisition date, are as follows: Oglethorpe – unpaid principal balance of $6.5 million and fair value of $3.1 million; First Choice – unpaid principal balance of $2.0 million and fair value of $1.6 million; Park Avenue – unpaid principal balance of $25.8 million and fair value of $17.7 million.

The Company’s results of operations for the quarter and the six months ended June 30, 2011 include the operating results of the acquired assets and assumed liabilities from the dates of acquisition through June 30, 2011. Due to the significant fair value adjustments and the nature of the loss share agreements with the FDIC, the Company believes pro forma information that would include historical results of these acquisitions is not relevant. Accordingly, no pro forma financial information is included in these consolidated financial statements.

2010 Acquisitions

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

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

On September 10, 2010 the Company, through the Bank, entered into a purchase and assumption agreement with loss share agreements with the FDIC pursuant to which it acquired substantially all of the assets and assumed substantially all of the deposits and certain other liabilities of the former Horizon Bank (“Horizon”) with four offices in Florida, including Bradenton (2), Palmetto and Brandon. On December 23, 2010, the Company closed the office in Brandon, Florida.

On December 17, 2010 the Company, through the Bank, entered into a purchase and assumption agreement with loss share agreements with the FDIC pursuant to which it acquired substantially all of the assets and assumed substantially all of the deposits and certain other liabilities of the former Chestatee State Bank (“Chestatee”) with four offices in Georgia, including Dawsonville (2), Cumming and Marble Hill.

6

A summary, at fair value, of the assets acquired and liabilities assumed in the Unity, Woodlands, Horizon and Chestatee acquisitions, as of the acquisition dates, is as follows:

	Unity			Woodlands			Horizon			Chestatee
	(Dollars in thousands)
Assets acquired:
Cash and cash equivalents	$	45,401		$	13,447		$	11,775		$	21,964
Investment securities AFS		5,580			84,492			5,105			7,157
Loans not covered by loss share agreements (1)		—			1,113			892			3,576
Covered assets:
Loans		134,452			186,478			93,003			116,808
Covered ORE		8,859			5,029			3,683			13,406
FDIC loss share receivable		44,147			55,866			29,089			42,072
Core deposit intangible		1,657			200			396			550
Other assets		183			1,472			1,981			1,101
Total assets acquired		240,279			348,097			145,924			206,634
Liabilities assumed:
Deposits		220,806			344,723			152,387			234,468
FHLB-Atlanta		24,078			10,142			19,251			—
FDIC clawback payable		1,566			2,941			1,461			1,091
Other liabilities		492			193			562			640
Total liabilities assumed		246,942			357,999			173,661			236,199
Net assets acquired at fair value		(6,663	)		(9,902	)		(27,737	)		(29,565	)
Cash received from FDIC		16,700			24,260			29,502			38,424
Pre-tax gains on FDIC-assisted acquisitions	$	10,037		$	14,358		$	1,765		$	8,859

(1) Certain loans acquired by the Company, consisting primarily of consumer loans, are not covered by loss share. Accordingly, these loans are reported as non-covered loans in the Company’s consolidated financial statements. The unpaid principal balance and the fair value of these loans, at acquisition date, are as follows: Woodlands – unpaid principal balance of $1.5 million and fair value of $1.1 million; Horizon – unpaid principal balance of $1.3 million and fair value of $0.9 million; Chestatee – unpaid principal balance of $5.3 million and fair value of $3.6 million.

Purchase Accounting and Purchase Accounting Adjustments

Purchased loans acquired in a business combination, including covered loans, are recorded at estimated fair value on their purchase date with no carryover of the related allowance for loan and lease losses. In determining the estimated fair value of purchased loans, management considers a number of factors including, among other things, the remaining life of the acquired loans, estimated prepayments, estimated loss ratios, estimated value of the underlying collateral, estimated holding periods, and net present value of cash flows expected to be received. Purchased loans are accounted for in accordance with guidance for certain loans or debt securities acquired in a transfer when the loans have evidence of credit deterioration since origination and it is probable at the date of acquisition that the acquirer will not collect all contractually required principal and interest payments. In determining the acquisition date fair values of purchased loans, management calculates a non-accretable difference (the credit component of the purchased loans) and an accretable difference (the yield component of the purchased loans).

The difference between contractually required payments and the cash flows expected to be collected at acquisition is referred to as the non-accretable difference. Subsequent decreases to the expected cash flows will generally result in a provision for loan and lease losses. Subsequent increases in cash flows will result in a reversal of the provision for loan and lease losses to the extent of prior charges and then an adjustment to accretable yield, which would have a positive impact on interest income.

The accretable difference on purchased loans is the difference between the expected cash flows and the net present value of expected cash flows. Such difference is accreted into earnings using the effective yield method over the term of the loans. In determining the net present value of expected cash flows, the Company used discount rates ranging from 6.0% to 9.5% depending on the risk characteristics of each individual loan or loan pool.

The acquisition date fair values of acquired assets and assumed liabilities for each of the Company’s FDIC-assisted transactions may be revised for up to 12 months following the date of acquisition.

7

Subsequent to the reporting of the assets acquired and the liabilities assumed in the Unity and Woodlands acquisitions, the Company made certain adjustments to these values. As a result of those adjustments, the Company has “recast” certain amounts previously reported in its consolidated financial statements. The following summarizes the assets acquired and liabilities assumed in the Unity and Woodlands acquisitions as originally reported and as recast.

	Unity									Woodlands
	As Originally Reported			Adjustments			As Recast			As Originally Reported			Adjustments			As Recast
	(Dollars in thousands)
Assets acquired:
Cash and cash equivalents	$	45,401		$	—		$	45,401		$	13,447		$	—		$	13,447
Investment securities AFS		5,580			—			5,580			84,492			—			84,492
Loans not covered by loss share agreements		—			—			—			1,113			—			1,113
Covered assets:
Loans		143,175			(8,723	)		134,452			187,998			(1,520	)		186,478
Covered ORE		9,414			(555	)		8,859			5,029			—			5,029
FDIC loss share receivable		35,683			8,464			44,147			54,827			1,039			55,866
Core deposit intangible		1,657			—			1,657			200			—			200
Other assets		183			—			183			1,145			327			1,472
Total assets acquired		241,093			(814	)		240,279			348,251			(154	)		348,097
Liabilities assumed:
Deposits		220,806			—			220,806			344,723			—			344,723
FHLB-Atlanta advances		24,078			—			24,078			10,142			—			10,142
FDIC clawback payable		2,265			(699	)		1,566			3,030			(89	)		2,941
Other liabilities		607			(115	)		492			258			(65	)		193
Total liabilities assumed		247,756			(814	)		246,942			358,153			(154	)		357,999
Net assets acquired at fair value	$	(6,663	)	$	—		$	(6,663	)	$	(9,902	)	$	—		$	(9,902	)

The adjustments to the acquired assets and assumed liabilities for both Unity and Woodlands affected net assets acquired and the resulting pre-tax gains on these acquisitions. However, because the net effect on net assets acquired and resulting pre-tax gains was not material, management recorded the impact of such adjustments as an increase or decrease to other non-interest income during the quarter in which the adjustments were determined. The net increase or decrease to non-interest income is included as an adjustment to “other liabilities” and/or to “other assets” in the above table.

Loss Share Agreements and Other Acquisition Matters

In conjunction with these FDIC-assisted acquisitions, the Bank entered into loss share agreements with the FDIC such that the Bank and the FDIC will share in the losses on assets covered under the loss share agreements. Pursuant to the terms of the loss share agreements for the Unity acquisition, on losses up to $65.0 million, the FDIC will reimburse the Bank for 80% of losses. On losses exceeding $65.0 million, the FDIC will reimburse the Bank for 95% of losses. Pursuant to the terms of the loss share agreements for the Woodlands acquisition, the Chestatee acquisition, the Oglethorpe acquisition and the First Choice acquisition, the FDIC will reimburse the Bank for 80% of losses. Pursuant to the terms of the loss share agreements for the Horizon acquisition, the FDIC will reimburse the Bank on single family residential loans and related foreclosed real estate 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 real estate, 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 $218.3 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 real estate 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 real estate 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.

8

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

The terms of the purchase and assumption agreements for the Unity, Woodlands, Horizon, Chestatee, Oglethorpe, First Choice and Park Avenue acquisitions provide for the FDIC to indemnify the Bank against certain claims, including claims with respect to assets, liabilities or any affiliate not acquired or otherwise assumed by the Bank and with respect to claims based on any action by Unity’s, Woodlands’, Horizon’s, Chestatee’s, Oglethorpe’s, First Choice’s or Park Avenue’s directors, officers or employees.

4. Earnings Per Common Share (“EPS”)

Basic EPS is computed by dividing reported earnings available to common stockholders by the weighted-average number of common shares outstanding. Diluted EPS is computed by dividing reported earnings 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-month and six-month periods ended June 30, 2011 and June 30, 2010 were excluded from the diluted EPS calculation as all options were dilutive for the respective periods.

Basic and diluted EPS are computed as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
	(In thousands, except per share amounts)
Common shares – weighted-average (basic)		17,109		16,948		17,092		16,938
Common share equivalents – weighted-average		123		105		111		71
Common shares – diluted		17,232		17,053		17,203		17,009
Net income available to common stockholders (in thousands)	$	50,217	$	10,890	$	64,847	$	26,845
Basic EPS	$	2.94	$	0.64	$	3.79	$	1.58
Diluted EPS		2.91		0.64		3.77		1.58

5. Investment Securities

At June 30, 2011 and 2010 and at December 31, 2010, the Company classified all of its investment securities portfolio as available for sale (“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).

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9

The following table presents the amortized cost and estimated fair value of investment securities at June 30, 2011 and 2010 and at December 31, 2010. The Company’s holdings of “other equity securities” include Federal Home Loan Bank of Dallas (“FHLB – Dallas”), FHLB – Atlanta 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  (1)
	(Dollars in thousands)
June 30, 2011:
Obligations of state and political subdivisions	$	361,434	$	6,219	$	(2,897	)	$	364,756
U.S. Government agency residential mortgage-backed securities		109,725		2,157		—			111,882
Other equity securities		22,606		—		—			22,606
Total	$	493,765	$	8,376	$	(2,897	)	$	499,244
December 31, 2010:
Obligations of state and political subdivisions	$	378,822	$	6,431	$	(6,706	)	$	378,547
U.S. Government agency residential mortgage-backed securities		1,269		—		—			1,269
Other equity securities		18,882		—		—			18,882
Total	$	398,973	$	6,431	$	(6,706	)	$	398,698
June 30, 2010:
Obligations of state and political subdivisions	$	407,872	$	12,800	$	(3,716	)	$	416,956
U.S. Government agency residential mortgage-backed securities		20,651		315		—			20,966
Other equity securities		15,541		—		—			15,541
Total	$	444,064	$	13,115	$	(3,716	)	$	453,463

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

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, at June 30, 2011 and 2010 and at December 31, 2010.

	Less than 12 Months				12 Months or More				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
	(Dollars in thousands)
June 30, 2011:
Obligations of state and political subdivisions	$	40,598	$	1,023	$	28,653	$	1,874	$	69,251	$	2,897
Total temporarily impaired securities	$	40,598	$	1,023	$	28,653	$	1,874	$	69,251	$	2,897
December 31, 2010:
Obligations of states and political subdivisions	$	174,356	$	6,153	$	5,387	$	553	$	179,743	$	6,706
Total temporarily impaired securities	$	174,356	$	6,153	$	5,387	$	553	$	179,743	$	6,706
June 30, 2010:
Obligations of state and political subdivisions	$	78,875	$	3,072	$	10,234	$	644	$	89,109	$	3,716
Total temporarily impaired securities	$	78,875	$	3,072	$	10,234	$	644	$	89,109	$	3,716

10

In evaluating the Company’s unrealized loss positions for other-than-temporary impairment for the investment securities portfolio, management considers the credit quality of the issuer, the nature and cause of the unrealized loss, the severity and duration of the impairments and other factors. At June 30, 2011 and 2010 and December 31, 2010 management determined the unrealized losses were the result of fluctuations in interest rates and did not reflect deteriorations of the credit quality of the investments. Accordingly, management 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 shows the amortized cost and estimated fair value of investment securities AFS by maturity or estimated date of repayment at June 30, 2011 and December 31, 2010.

	June 30, 2011				December 31, 2010
Maturity or Estimated Repayment	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(Dollars in thousands)
One year or less	$	2,586	$	2,592	$	4,773	$	4,808
After one year to five years		15,477		15,587		17,635		17,893
After five years to ten years		22,512		22,936		21,134		21,592
After ten years		453,190		458,129		355,431		354,405
Total	$	493,765	$	499,244	$	398,973	$	398,698

For purposes of this maturity distribution, all investment securities AFS are shown based on their contractual maturity date, except (i) FHLB – Dallas, FHLB – Atlanta and FNBB stock with no contractual maturity date are shown in the longest maturity category, (ii) U.S. Government agency residential mortgage-backed securities are allocated among various maturities based on an estimated repayment schedule utilizing Bloomberg median prepayment speeds and interest rate levels at the measurement dates and (iii) mortgage-backed securities issued by housing authorities of states and political subdivisions are allocated among various maturities based on an estimated repayment schedule projected by management at the measurement dates. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Sales activities in the Company’s investment securities AFS were as follows:

	Six Months Ended June 30,
	2011			2010
	(Dollars in thousands)
Sales proceeds	$	37,813		$	112,712
Gross realized gains	$	401		$	3,897
Gross realized losses		(50	)		(148	)
Net gains on investment securities	$	351		$	3,749

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

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

	Six Months Ended June 30,
	2011			2010
	(Dollars in thousands)
Balance – beginning of year	$	40,230		$	39,619
Loans and leases charged off		(7,286	)		(7,730	)
Recoveries of loans and leases previously charged off		180			687
Net loans and leases charged off		(7,106	)		(7,043	)
Provision charged to operating expense		6,000			7,600
Balance – end of year	$	39,124		$	40,176

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11

The following table is a summary of the Company’s ALLL and recorded investment in loans and leases, excluding loans covered by FDIC loss share agreements, as of and for the three months and six months ended June 30, 2011.

	Real Estate
	Residential 1-4 Family			Non-farm/ Non- residential			Construction/ Land Development			Agricultural			Multi- family Residential		Commercial and Industrial			Consumer			Direct Financing Leases			Other			Unallocated		Total
	(Dollars in thousands)
Allowance for loan and lease losses:
Balance at April 1, 2011	$	2,273		$	9,295		$	9,125		$	2,653		$	1,562	$	3,793		$	1,367		$	1,409		$	183		$	7,565	$	39,225
Second quarter 2011 activity:
Charge-offs		(487	)		(658	)		(1,596	)		(522	)		—		(343	)		(126	)		(135	)		(70	)		—		(3,937	)
Recoveries		10			5			5			—			—		25			21			—			20			—		86
Provisions		453			52			1,948			38			1		170			119			264			52			653		3,750
Balance at June 30, 2011	$	2,249		$	8,694		$	9,482		$	2,169		$	1,563	$	3,645		$	1,381		$	1,538		$	185		$	8,218	$	39,124
Balance at January 1, 2011	$	2,999		$	8,313		$	10,565		$	2,569		$	1,320	$	4,142		$	2,051		$	1,726		$	201		$	6,344	$	40,230
Year-to-date 2011 activity:
Charge-offs		(712	)		(903	)		(3,318	)		(613	)		—		(1,015	)		(294	)		(226	)		(205	)		—		(7,286	)
Recoveries		14			7			10			—			—		63			39			—			47			—		180
Provisions		(52	)		1,277			2,225			213			243		455			(415	)		38			142			1,874		6,000
Balance at June 30, 2011	$	2,249		$	8,694		$	9,482		$	2,169		$	1,563	$	3,645		$	1,381		$	1,538		$	185		$	8,218	$	39,124
Ending balance:
ALLL for individually evaluated impaired loans and leases	$	26		$	—		$	25		$	—		$	—	$	823		$	38		$	—		$	3		$	—	$	915
ALLL for all other loans and leases		2,223			8,694			9,457			2,169			1,563		2,822			1,343			1,538			182			8,218		38,209
Ending balance	$	2,249		$	8,694		$	9,482		$	2,169		$	1,563	$	3,645		$	1,381		$	1,538		$	185		$	8,218	$	39,124
Loans and leases:
Ending balance:
Individually evaluated impaired loans and leases	$	1,831		$	2,997		$	5,475		$	1,638		$	—	$	1,022		$	72		$	—		$	16		$	—	$	13,051
All other loans and leases		253,422			658,066			456,723			72,050			130,377		106,602			52,088			50,071			9,677			—		1,789,076
Ending balance	$	255,253		$	661,063		$	462,198		$	73,688		$	130,377	$	107,624		$	52,160		$	50,071		$	9,693		$	—	$	1,802,127

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12

The following table is a summary of the Company’s ALLL and recorded investment in loans and leases, excluding loans covered by FDIC loss share agreements, at December 31, 2010.

	Real Estate
	Residential 1-4 Family		Non-farm/ Non- residential		Construction/ Land Development		Agricultural		Multi- family Residential		Commercial and Industrial		Consumer		Direct Financing Leases		Other		Unallocated		Total
	(Dollars in thousands)
Allowance for loan and lease losses:
Ending balance:
ALLL for individually evaluated impaired loans and leases	$	33	$	71	$	508	$	403	$	—	$	928	$	33	$	—	$	44	$	—	$	2,020
ALLL for all other loans and leases		2,966		8,242		10,057		2,166		1,320		3,214		2,018		1,726		157		6,344		38,210
Ending balance	$	2,999	$	8,313	$	10,565	$	2,569	$	1,320	$	4,142	$	2,051	$	1,726	$	201	$	6,344	$	40,230
Loans and leases:
Ending balance:
Individually evaluated impaired loans and leases	$	945	$	3,096	$	4,086	$	2,456	$	—	$	947	$	182	$	—	$	115	$	—	$	11,827
All other loans and leases		265,069		675,369		492,651		79,280		103,055		119,091		54,219		42,754		12,294		—		1,844,602
Ending balance	$	266,014	$	678,465	$	496,737	$	81,736	$	103,875	$	120,038	$	54,401	$	42,754	$	12,409	$	—	$	1,856,429

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13

The following table is a summary of credit quality indicators for the Company’s loans and leases, excluding loans covered by FDIC loss share agreements, as of June 30, 2011.

	Real Estate
	Residential 1-4 Family		Non-farm/ Non- residential		Construction/ Land Development		Agricultural		Multi- family Residential		Commercial and Industrial		Consumer		Direct Financing Leases		Other		Total
	(Dollars in thousands)
Satisfactory	$	—	$	495,292	$	230,199	$	51,852	$	117,439	$	71,126	$	—	$	46,915	$	6,599	$	1,019,422
Fair		—		115,072		193,724		10,357		8,448		30,412		—		2,740		2,079		362,832
Watch		—		33,096		20,702		3,508		3,699		1,573		—		—		140		62,718
Substandard		—		17,603		17,573		7,971		791		4,513		—		416		154		49,021
Total risk-rated loans and leases		—		661,063		462,198		73,688		130,377		107,624		—		50,071		8,972		1,493,993
Loans and leases not risk rated		255,253		—		—		—		—		—		52,160		—		721		308,134
Total loans and leases	$	255,253	$	661,063	$	462,198	$	73,688	$	130,377	$	107,624	$	52,160	$	50,071	$	9,693	$	1,802,127

The following table is a summary of credit quality indicators for the Company’s loans and leases, excluding loans covered by FDIC loss share agreements, as of December 31, 2010.

	Real Estate
	Residential 1-4 Family		Non-farm/ Non- residential		Construction/ Land Development		Agricultural		Multi- family Residential		Commercial and Industrial		Consumer		Direct Financing Leases		Other		Total
	(Dollars in thousands)
Satisfactory	$	—	$	504,923	$	258,933	$	58,879	$	90,700	$	79,926	$	—	$	38,666	$	9,484	$	1,041,511
Fair		—		122,883		201,038		10,489		8,579		34,274		—		3,328		1,836		382,427
Watch		—		32,476		21,135		3,609		3,699		1,659		—		676		157		63,411
Substandard		—		18,183		15,631		8,759		897		4,179		—		84		242		47,975
Total risk-rated loans and leases		—		678,465		496,737		81,736		103,875		120,038		—		42,754		11,719		1,535,324
Loans and leases not risk rated		266,014		—		—		—		—		—		54,401		—		690		321,105
Total loans and leases	$	266,014	$	678,465	$	496,737	$	81,736	$	103,875	$	120,038	$	54,401	$	42,754	$	12,409	$	1,856,429

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.

Fair – 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.

14

The following table is a summary of impaired loans and leases, excluding loans covered by FDIC loss share agreements, as of and for the three months and six months ended June 30, 2011.

	Principal Balance		Net Charge-offs to Date		Principal Balance, Net of Charge-offs		Specific Allowance		Average Carrying Value - Three Months Ended June 30,  2011		Average Carrying Value -  Six Months Ended June 30, 2011
	(Dollars in thousands)
Real estate:
Residential 1-4 family	$	2,294	$	463	$	1,831	$	26	$	1,505	$	1,318
Non-farm/non-residential		3,852		855		2,997		—		3,157		3,137
Construction/land development		12,641		7,166		5,475		25		5,018		4,707
Agricultural		1,965		327		1,638		—		1,904		2,088
Multifamily residential		133		133		—		—		39		26
Commercial and industrial		2,294		1,272		1,022		823		965		959
Consumer		127		55		72		38		89		120
Other		39		23		16		3		17		50
Total	$	23,345	$	10,294	$	13,051	$	915	$	12,694	$	12,405

The following table is a summary of impaired loans and leases, excluding loans covered by FDIC loss share agreements, as of and for the year ended December 31, 2010.

	Principal Balance		Net Charge-offs to Date		Principal Balance, Net of Charge-offs		Specific Allowance		Average Carrying Value
	(Dollars in thousands)
Real estate:
Residential 1-4 family	$	1,156	$	211	$	945	$	33	$	1,790
Non-farm/non-residential		4,135		1,039		3,096		71		4,788
Construction/land development		7,974		3,888		4,086		508		4,457
Agricultural		2,728		272		2,456		403		2,141
Multifamily residential		133		133		—		—		—
Commercial and industrial		2,254		1,307		947		928		1,871
Consumer		268		86		182		33		248
Other		410		295		115		44		157
Total	$	19,058	$	7,231	$	11,827	$	2,020	$	15,452

The following table is an aging analysis of past due loans and leases, excluding loans covered by FDIC loss share agreements, at June 30, 2011.

	30-89 Days Past Due (1)		90 Days or More (2)		Total Past Due		Current (3)		Total Loans and Leases
	(Dollars in thousands)
Real estate:
Residential 1-4 family	$	4,083	$	1,468	$	5,551	$	249,702	$	255,253
Non-farm/non-residential		4,799		803		5,602		655,461		661,063
Construction/land development		17,898		9,187		27,085		435,113		462,198
Agricultural		836		1,638		2,474		71,214		73,688
Multifamily residential		—		—		—		130,377		130,377
Commercial and industrial		1,396		380		1,776		105,848		107,624
Consumer		989		440		1,429		50,731		52,160
Direct financing leases		43		387		430		49,641		50,071
Other		71		—		71		9,622		9,693
Total	$	30,115	$	14,303	$	44,418	$	1,757,709	$	1,802,127

(1) Includes $4.2 million of loans and leases, excluding loans covered by FDIC loss share agreements, on nonaccrual status at June 30, 2011.

(2) All loans and leases greater than 90 days past due, excluding loans covered by FDIC loss share agreements, were on nonaccrual status at June 30, 2011.

(3) Includes $1.1 million of loans and leases, excluding loans covered by FDIC loss share agreements, on nonaccrual status at June 30, 2011.

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At June 30, 2011, the Company had two related loans totaling $3.79 million which had matured and had become 90 days past due while extension negotiations were ongoing. Subsequent to quarter end, the borrower paid all accrued interest, made a principal reduction, established a reserved for future interest and taxes, and extended the loans. Accordingly, the loans became fully current and have returned to accrual status. At June 30, 2011, these two loans accounted for 22 basis points of the Company’s 247 basis points of past due loans and leases.

The following table is an aging analysis of past due loans and leases, excluding loans covered by FDIC loss share agreements, at December 31, 2010.

	30-89 Days Past Due (1)		Greater than 90 Days (2)		Total Past Due		Current (3)		Total Loans and Leases
	(Dollars in thousands)
Real estate:
Residential 1-4 family	$	3,809	$	726	$	4,535	$	261,479	$	266,014
Non-farm/non –residential		6,261		3,337		9,598		668,867		678,465
Construction/land development		11,104		4,249		15,353		481,384		496,737
Agricultural		956		2,108		3,064		78,672		81,736
Multifamily residential		881		—		881		102,994		103,875
Commercial and industrial		1,639		881		2,520		117,518		120,038
Consumer		1,187		146		1,333		53,068		54,401
Direct financing leases		—		84		84		42,670		42,754
Other		201		—		201		12,208		12,409
Total	$	26,038	$	11,531	$	37,569	$	1,818,860	$	1,856,429

(1) Includes $1.2 million of loans and leases, excluding loans covered by FDIC loss share agreements, on nonaccrual status at December 31, 2010.

(2) All loans and leases greater than 90 days past due, excluding loans covered by FDIC loss share agreements, were on nonaccrual status at December 31, 2010.

(3) Includes $1.3 million of loans and leases, excluding loans covered by FDIC loss share agreements, on nonaccrual status at December 31, 2010.

7. Foreclosed and Repossessed Assets Held For Sale

The amount and type of foreclosed and repossessed assets held for sale, excluding assets covered by loss share agreements, are as follows:

	June 30, 2011		December 31, 2010
	(Dollars in thousands)
Real estate:
Residential 1-4 family	$	4,140	$	4,018
Non-farm/non-residential		3,610		3,866
Construction/land development		28,014		33,701
Agricultural		306		459
Total real estate		36,070		42,044
Commercial and industrial		216		87
Consumer		62		85
Total foreclosed and repossessed assets held for sale	$	36,348	$	42,216

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8. FHLB Advances

FHLB advances, all of which are from FHLB – Dallas, with original maturities exceeding one year totaled $280.8 million at June 30, 2011. Interest rates on these advances ranged from 1.34% to 5.12% at June 30, 2011 with a weighted-average interest rate of 3.80%. At June 30, 2011 aggregate annual maturities and weighted-average interest rates of FHLB advances with an original maturity of over one year were as follows:

Maturity	Amount		Weighted-Average Interest Rate
	(Dollars in thousands)
2011	$	22		3.80	%
2012		33		3.40
2013		31		3.22
2014		32		3.24
2015		33		3.27
Thereafter		280,667		3.80
	$	280,818		3.80

Included in the above table are $280.0 million of FHLB advances that contain quarterly call features and are callable as follows:

	Amount		Weighted-Average Interest Rate			Maturity
	(Dollars in thousands)
Callable quarterly	$	260,000		3.90	%		2017
Callable quarterly		20,000		2.53			2018
	$	280,000		3.80

9. Subordinated Debentures

The Company had the following issues of trust preferred securities outstanding and subordinated debentures owed to the Trusts at June 30, 2011.

Description	Subordinated Debentures Owed to Trusts		Trust Preferred Securities of the Trusts		Interest Rate Spread to 90-day LIBOR			Interest Rate at June 30, 2011			Final Maturity Date
	(Dollars in thousands)
Ozark III	$	14,434	$	14,000		2.95	%		3.23	%	September 25, 2033
Ozark II		14,433		14,000		2.90			3.21		September 29, 2033
Ozark IV		15,464		15,000		2.22			2.48		September 28, 2034
Ozark V		20,619		20,000		1.60			1.85		December 15, 2036
	$	64,950	$	63,000

At June 30, 2011 the Company had $64.9 million of subordinated debentures outstanding and had an asset of $1.9 million representing its investment in the common equity issued by the Trusts. The interest rates on the subordinated debentures and related trust preferred securities are based on a spread over the 90-day London Interbank Offered Rate (“LIBOR”) and reset periodically. The sole assets of the Trusts are the adjustable rate debentures and the liabilities of the Trusts are the trust preferred securities. At June 30, 2011 the Trusts did not have any restricted net assets. The Company has, through various contractual arrangements, unconditionally guaranteed payment of all obligations of the Trusts with respect to the trust preferred securities. There are no restrictions on the ability of the Trusts to transfer funds to the Company in the form of cash dividends, loans or advances.

The trust preferred securities and the subordinated debentures mature at or near the 30^th anniversary date of their issuance. However, these securities and debentures may be prepaid at par, subject to regulatory approval, prior to maturity at any time on or after September 25 and 29, 2008, respectively, for the Ozark III and Ozark II securities and debentures; on or after September 28, 2009 for the Ozark IV securities and debentures; and on or after December 15, 2011 for the Ozark V securities or debentures, or at an earlier date upon certain changes in tax laws, investment company laws or regulatory capital requirements.

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10. Supplemental Data for Cash Flows

Supplemental cash flow information is as follows:

	Six Months Ended June 30,
	2011		2010
	(Dollars in thousands)
Cash paid during the period for:
Interest	$	17,881	$	18,286
Taxes		10,999		7,382
Supplemental schedule of non-cash investing and financing activities:
Net change in unrealized gains/losses on investment securities AFS		5,753		(527	)
Unsettled AFS investment security trades:
Purchases		—		7,516
Sales/calls		—		—
Loans transferred to foreclosed and repossessed assets held for sale		5,460		7,705
Loans advanced for sales of foreclosed and repossessed assets held for sale		312		9,324

11. 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 30, 2011 was $8.9 million. The Company holds collateral to support guarantees when deemed necessary. Collateralized commitments at June 30, 2011 totaled $8.2 million.

At June 30, 2011 the Company had outstanding commitments to extend credit, excluding commitments to extend credit on loans covered by FDIC loss share agreements, totaling $190 million. These commitments extend over varying periods of time with the majority to be disbursed or to expire within a one-year period.

12. 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 30, 2011 were issued with a vesting date of 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 1,000 shares of the Company’s common stock on the day following his or her election as a director of the Company at each annual meeting of stockholders and up to 1,000 shares upon election or appointment for the first time as a director of the Company. No option may be granted under this plan for less than the fair market value of the common stock, defined by the plan as the average of the highest reported asked price and the lowest reported bid price, on the date of the grant. These options are exercisable immediately and expire ten years after issuance.

All shares issued in connection with options exercised under both the employee and non-employee director stock option plans are in the form of newly issued shares.

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The following table summarizes stock option activity for both the employee and non-employee director stock option plans for the six months ended June 30, 2011.

	Options			Weighted-Average Exercise Price/Share		Weighted-Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (in thousands)(1)
Outstanding – January 1, 2011		526,800		$	31.05
Granted		9,900			44.66
Exercised		(65,600	)		31.24
Forfeited		(11,300	)		28.68
Outstanding – June 30, 2011		459,800		$	31.30		4.3	$	9,544
Fully vested and exercisable – June 30, 2011		223,450		$	31.80		3.2	$	4,526
Expected to vest in future periods		205,098
Fully vested and expected to vest – June 30, 2011(2)		428,548		$	31.31		4.2	$	8,894

(1) Based on closing price of $52.06 per share on June 30, 2011.

(2) At June 30, 2011 the Company estimates that outstanding options to purchase 31,252 shares of its common stock will not vest and will be forfeited prior to their vesting date.

Intrinsic value for stock options is defined as the amount by which the current market price of the underlying stock exceeds the exercise price. For those stock options where the exercise price exceeds the current market price of the underlying stock, the intrinsic value is zero. The total intrinsic value of options exercised during the six months ended June 30, 2011 and 2010 was $0.9 million and $0.5 million, respectively.

Options to purchase 9,900 shares and 9,000 shares of the Company’s common stock were issued during the six months ended June 30, 2011 and 2010, respectively. Stock-based compensation expense for stock options included in non-interest expense was $0.3 million and $0.2 million for the quarters ended June 30, 2011 and 2010, respectively, and $0.4 million for both six-month periods ended June 30, 2011 and 2010, respectively. Total unrecognized compensation cost related to nonvested stock-based compensation was $1.0 million at June 30, 2011 and is expected to be recognized over a weighted-average period of 2.1 years.

The Company has a restricted stock plan that permits issuance of up to 200,000 shares of restricted stock or restricted stock units. All officers and employees of the Company are eligible to receive awards under the restricted stock plan. The benefits or amounts that may be received by or allocated to any particular officer or employee of the Company under the restricted stock plan will be determined in the sole discretion of the Company’s board of directors or its personnel and compensation committee. Shares of common stock issued under the restricted stock plan may be shares of original issuance, shares held in treasury or shares that have been reacquired by the Company. All restricted stock awards outstanding at June 30, 2011 were issued with a vesting date of three years after issuance.

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

	Six Months Ended June 30, 2011
Outstanding – January 1, 2011		53,900
Granted		—
Forfeited		(800	)
Vested		—
Outstanding – June 30, 2011		53,100
Weighted-average grant date fair value	$	33.43

The fair value of the restricted stock awards is amortized to compensation expense over the vesting period (generally three years) and is based on the market price of the Company’s common stock at the date of grant multiplied by the number of shares granted that are expected to vest. Stock-based compensation expense for restricted stock included in non-interest expense was $0.3 million for the six months ended June 30, 2011. Unrecognized compensation expense for nonvested restricted stock awards was $1.2 million at June 30, 2011 and is expected to be recognized over 2.2 years.

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13. Comprehensive Income

Total comprehensive income consists of net income, net income or loss attributable to noncontrolling interest, unrealized gains and losses on investment securities AFS, net of income taxes, and reclassification adjustments for unrealized gains and losses on investment securities AFS sold, net of income taxes. Total comprehensive income was $52.8 million and $10.3 million for the three months ended June 30, 2011 and 2010, respectively, and $68.3 million and $26.5 million for the six months ended June 30, 2011 and 2010, respectively.

14. 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 applied 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.

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

	Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
June 30, 2011:
Assets:
Investment securities AFS(1):
Obligations of state and political subdivisions	$	—	$	344,980	$	19,776	$	364,756
U.S. Government agency residential mortgage-backed securities		—		111,882		—		111,882
Total investment securities AFS		—		456,862		19,776		476,638
Impaired loans and leases		—		—		12,136		12,136
Covered ORE		—		—		78,047		78,047
Foreclosed and repossessed assets held for sale, net		—		—		36,348		36,348
Derivative assets – interest rate lock commitments (“IRLC”) and forward sales commitments (“FSC”)		—		—		91		91
Total assets at fair value	$	—	$	456,862	$	146,398	$	603,260
Liabilities:
Derivative liabilities – IRLC and FSC	$	—	$	—	$	91	$	91
Total liabilities at fair value	$	—	$	—	$	91	$	91
December 31, 2010:
Assets:
Investment securities AFS(1):
Obligations of state and political subdivisions	$	—	$	358,511	$	20,036	$	378,547
U.S. Government agency residential mortgage-backed securities		—		1,269		—		1,269
Total investment securities AFS		—		359,780		20,036		379,816
Impaired loans and leases		—		—		10,101		10,101
Covered ORE		—		—		31,145		31,145
Foreclosed and repossessed assets held for sale, net		—		—		42,216		42,216
Derivative assets – IRLC and FSC		—		—		55		55
Total assets at fair value	$	—	$	359,780	$	103,553	$	463,333
Liabilities:
Derivative liabilities – IRLC and FSC	$	—	$	—	$	55	$	55
Total liabilities at fair value	$	—	$	—	$	55	$	55
June 30, 2010:
Assets:
Investment securities AFS(1):
Obligations of state and political subdivisions	$	—	$	397,981	$	18,975	$	416,956
U.S. Government agency residential mortgage-backed securities		—		20,966		—		20,966
Total investment securities AFS		—		418,947		18,975		437,922
Impaired loans and leases		—		—		12,501		12,501
Covered ORE		—		—		8,541		8,541
Foreclosed and repossessed assets held for sale, net		—		—		44,680		44,680
Derivative assets – IRLC and FSC		—		—		420		420
Total assets at fair value	$	—	$	418,947	$	85,117	$	504,064
Liabilities:
Derivative liabilities – IRLC and FSC	$	—	$	—	$	420	$	420
Total liabilities at fair value	$	—	$	—	$	420	$	420

(1) Does not include $22.6 million at June 30, 2011, $18.9 million at December 31, 2010 and $15.5 million at June 30, 2010 of FHLB – Dallas, FHLB – Atlanta and FNBB stock that do not have readily determinable fair values and are carried at cost.

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The following methods and assumptions are used to estimate the fair value of the Company’s financial assets and liabilities that were accounted for at fair value.

Investment securities – The Company utilizes independent third parties as its principal pricing sources for determining fair value of investment securities which are measured on a recurring basis. For investment securities traded in an active market, fair values are based on quoted market prices if available. If quoted market prices are not available, fair values are based on quoted market prices of comparable securities, broker quotes or comprehensive interest rate tables 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.

The Company has determined that certain of its investment securities had a limited to non-existent trading market at June 30, 2011. As a result, the Company considers these investments as Level 3 in the fair value hierarchy. Specifically, the fair values of certain obligations of state and political subdivisions consisting of certain unrated private placement bonds (the “private placement bonds”) in the amount of $19.8 million at June 30, 2011 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 30, 2011, the third parties pricing matrices valued the Company’s portfolio of private placement bonds at $19.9 million which exceeded the aggregate of the lower of the matrix pricing or par value of the private placement bonds by $0.1 million. Accordingly, at June 30, 2011 the Company reported the private placement bonds at the lower of the matrix pricing or par value of $19.8 million.

Impaired 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 selling costs, or the estimated discounted cash flows for such loan or lease. At June 30, 2011 the Company has reduced the carrying value of its impaired loans and leases (all of which are included in nonaccrual loans and leases) by $11.2 million to the estimated fair value of $12.1 million for such loans and leases. The $11.2 million adjustment to reduce the carrying value of impaired loans and leases to estimated fair value consisted of $10.3 million of partial charge-offs and $0.9 million of specific loan and lease loss allocations.

Covered ORE – Foreclosed assets covered by FDIC loss share agreements, or covered ORE, are recorded at estimated fair value on the date of acquisition. In estimating the fair value of ORE, management considers a number of factors including, among others, appraised value, estimating holding periods, net present value of cash flows expected to be received, and estimated selling costs. A discount rate ranging from 8.0% to 9.5% was used to determine the net present value of covered ORE. 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.

Foreclosed and repossessed assets held for sale, net – Repossessed personal properties and real estate acquired through or in lieu of foreclosure are measured on a non-recurring basis and are initially recorded at the lesser of current principal investment or fair value less estimated cost to sell at the date of repossession or foreclosure. Valuations of these assets are periodically reviewed by management with the carrying value of such assets adjusted to the then estimated fair value net of estimated selling costs, if lower, until disposition. Fair values of foreclosed and repossessed assets held for sale are generally based on third party appraisals, broker price opinions or other valuations of the property, resulting in a Level 3 classification.

Derivative assets and liabilities – The fair values of IRLC and FSC derivative assets and liabilities are measured on a recurring basis and are based primarily on the fluctuation of interest rates between the date on which the IRLC and FSC were entered and the measurement date.

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

	Investment Securities AFS			Derivative Assets – IRLC and FSC		Derivative Liabilities – IRLC and FSC
	(Dollars in thousands)
Balances – January 1, 2011	$	20,036		$	55	$	(55	)
Total realized gains (losses) included in earnings		—			36		(36	)
Total unrealized gains (losses) included in comprehensive income		(260	)		—		—
Sales		—			—		—
Transfers in and/or out of Level 3		—			—