UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

þ		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 000-51904

HOME BANCSHARES, INC.

(Exact Name of Registrant as Specified in Its Charter)

Arkansas		71-0682831
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
719 Harkrider, Suite 100, Conway, Arkansas		72032
(Address of principal executive offices)		(Zip Code)

(501) 328-4770

(Registrant’s telephone number, including area code)

Not Applicable

Former name, former address and former fiscal year, if changed since last report

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 þ No o

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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No o

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.

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a 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 o No þ

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

Common Stock Issued and Outstanding: 28,504,089 shares as of August 1, 2011.

 

 

HOME BANCSHARES, INC.
FORM 10-Q
June 30, 2011

INDEX

		Page No.
Part I: Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets — June 30, 2011 (Unaudited) and December 31, 2010			4
Consolidated Statements of Income (Unaudited)— Three and six months ended June 30, 2011 and 2010			5
Consolidated Statements of Stockholders’ Equity (Unaudited)— Six months ended June 30, 2011 and 2010			6-7
Consolidated Statements of Cash Flows (Unaudited) — Six months ended June 30, 2011 and 2010			8
Condensed Notes to Consolidated Financial Statements (Unaudited)			9-35
Report of Independent Registered Public Accounting Firm			36
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			37-69
Item 3. Quantitative and Qualitative Disclosures About Market Risk			69-71
Item 4. Controls and Procedures			72
Part II: Other Information
Item 1. Legal Proceedings			72
Item1A. Risk Factors			72
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			72
Item 3. Defaults Upon Senior Securities			72
Item 4. (Reserved)			72
Item 5. Other Information			73
Item 6. Exhibits			73
Signatures			74
EX-12.1
EX-15
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     Some of our statements contained in this document, including matters discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operation” are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements relate to future events or our future financial performance and include statements about the competitiveness of the banking industry, potential regulatory obligations, our entrance and expansion into other markets, our other business strategies and other statements that are not historical facts. Forward-looking statements are not guarantees of performance or results. When we use words like “may,” “plan,” “contemplate,” “anticipate,” “believe,” “intend,” “continue,” “expect,” “project,” “predict,” “estimate,” “could,” “should,” “would,” and similar expressions, you should consider them as identifying forward-looking statements, although we may use other phrasing. These forward-looking statements involve risks and uncertainties and are based on our beliefs and assumptions, and on the information available to us at the time that these disclosures were prepared. These forward-looking statements involve risks and uncertainties and may not be realized due to a variety of factors, including, but not limited to, the following:

	•		the effects of future economic conditions, including inflation or a continued decrease in commercial real estate and residential housing values;
	•		governmental monetary and fiscal policies, as well as legislative and regulatory changes;
	•		the impact of the recently enacted Dodd-Frank financial regulatory reform act and regulations to be issued thereunder;
	•		the risks of changes in interest rates or the level and composition of deposits, loan demand and the values of loan collateral, securities and interest sensitive assets and liabilities;
	•		the effects of terrorism and efforts to combat it;
	•		credit risks;
	•		the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in our market area and elsewhere, including institutions operating regionally, nationally and internationally, together with competitors offering banking products and services by mail, telephone and the Internet;
	•		the effect of any mergers, acquisitions or other transactions to which we or our subsidiaries may from time to time be a party, including our ability to successfully integrate any businesses that we acquire;
	•		the failure of assumptions underlying the establishment of our allowance for loan losses; and
	•		the failure of assumptions underlying the estimates of the fair values for our covered assets and FDIC indemnification receivable.

     All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by this Cautionary Note. Our actual results may differ significantly from those we discuss in these forward-looking statements. For other factors, risks and uncertainties that could cause our actual results to differ materially from estimates and projections contained in these forward-looking statements, see the “Risk Factors” section of our Form 10-K filed with the Securities and Exchange Commission on March 10, 2011.

PART I: FINANCIAL INFORMATION

Item 1: Financial Statements

Home BancShares, Inc.

Consolidated Balance Sheets

		June 30,				December 31,
(In thousands, except share data)		2011				2010
		(Unaudited)
Assets
Cash and due from banks		$	48,207			$	49,927
Interest-bearing deposits with other banks			231,667				237,605
Cash and cash equivalents			279,874				287,532
Federal funds sold			7,595				27,848
Investment securities — available for sale			541,534				469,864
Loans receivable not covered by loss share			1,812,718				1,892,374
Loans receivable covered by FDIC loss share			548,236				575,776
Allowance for loan losses			(56,784	)			(53,348	)
Loans receivable, net			2,304,170				2,414,802
Bank premises and equipment, net			90,128				81,939
Foreclosed assets held for sale not covered by loss share			19,855				11,626
Foreclosed assets held for sale covered by FDIC loss share			21,941				21,568
FDIC indemnification asset			211,383				227,258
Cash value of life insurance			52,101				51,970
Accrued interest receivable			12,338				16,176
Deferred tax asset, net			22,265				18,586
Goodwill			59,663				59,663
Core deposit and other intangibles			10,030				11,447
Other assets			61,592				62,367
Total assets		$	3,694,469			$	3,762,646
Liabilities and Stockholders’ Equity
Deposits:
Demand and non-interest-bearing		$	462,275			$	392,622
Savings and interest-bearing transaction accounts			1,122,034				1,108,309
Time deposits			1,315,484				1,460,867
Total deposits			2,899,793				2,961,798
Securities sold under agreements to repurchase			65,632				74,459
FHLB borrowed funds			150,124				177,270
Accrued interest payable and other liabilities			30,140				27,863
Subordinated debentures			44,331				44,331
Total liabilities			3,190,020				3,285,721
Stockholders’ equity:
Preferred stock; $0.01 par value; 5,500,000 shares authorized:
Series A fixed rate cumulative perpetual; liquidation preference of $1,000 per share; 50,000 shares issued and outstanding at June 30, 2011 and December 31, 2010			49,547				49,456
Common stock, par value $0.01; shares authorized 50,000,000; shares issued and outstanding 28,496,414 in 2011 and 28,452,411 in 2010			285				285
Capital surplus			433,306				432,962
Retained earnings (deficit)			15,766				(6,079	)
Accumulated other comprehensive income			5,545				301
Total stockholders’ equity			504,449				476,925
Total liabilities and stockholders’ equity		$	3,694,469			$	3,762,646

See Condensed Notes to Consolidated Financial Statements.

Home BancShares, Inc.

Consolidated Statements of Income

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(In thousands, except per share data)		2011					2010				2011				2010
						(Unaudited)
Interest income:
Loans		$	39,690			$	33,136			$	78,645			$	63,002
Investment securities
Taxable			2,204				1,935				4,364				3,562
Tax-exempt			1,543				1,500				3,071				2,979
Deposits — other banks			142				81				247				166
Federal funds sold			1				5				8				10
Total interest income			43,580				36,657				86,335				69,719
Interest expense:
Interest on deposits			5,986				5,872				12,246				11,167
FHLB borrowed funds			1,227				2,082				2,518				4,259
Securities sold under agreements to repurchase			125				118				264				212
Subordinated debentures			543				600				1,081				1,197
Total interest expense			7,881				8,672				16,109				16,835
Net interest income			35,699				27,985				70,226				52,884
Provision for loan losses			—				3,750				1,250				6,850
Net interest income after provision for loan losses			35,699				24,235				68,976				46,034
Non-interest income:
Service charges on deposit accounts			3,639				3,583				6,790				6,724
Other service charges and fees			2,602				1,899				4,886				3,537
Mortgage lending income			661				650				1,306				1,062
Mortgage servicing income			—				154				—				314
Insurance commissions			470				309				1,077				656
Income from title services			110				148				201				255
Increase in cash value of life insurance			287				348				526				776
Dividends from FHLB, FRB & bankers’ bank			181				142				322				268
Gain on acquisitions			—				—				—				9,334
Gain on sale of SBA loans			—				18				259				18
Gain (loss) on sale of premises and equipment, net			77				12				73				219
Gain (loss) on OREO, net			(1,007	)			(404	)			(1,101	)			(245	)
Gain (loss) on securities, net			—				—				—				—
FDIC indemnification asset			1,463				663				3,300				736
Other income			644				698				1,528				1,211
Total non-interest income			9,127				8,220				19,167				24,865
Non-interest expense:
Salaries and employee benefits			10,680				9,080				21,758				17,614
Occupancy and equipment			3,648				2,973				7,361				5,772
Data processing expense			1,137				954				2,422				1,816
Other operating expenses			8,391				5,983				16,176				12,343
Total non-interest expense			23,856				18,990				47,717				37,545
Income before income taxes			20,970				13,465				40,426				33,354
Income tax expense			7,424				4,508				14,164				11,516
Net income available to all stockholders			13,546				8,957				26,262				21,838
Preferred stock dividends and accretion of discount on preferred stock			670				670				1,340				1,340
Net income available to common stockholders		$	12,876			$	8,287			$	24,922			$	20,498
Basic earnings per common share		$	0.46			$	0.29			$	0.88			$	0.72
Diluted earnings per common share		$	0.45			$	0.29			$	0.87			$	0.72

See Condensed Notes to Consolidated Financial Statements.

Home BancShares, Inc.

Consolidated Statements of Stockholders’ Equity
Six Months Ended June 30, 2011 and 2010

																		Accumulated
														Retained				Other
		Preferred				Common				Capital				Earnings				Comprehensive
(In thousands, except share data)		Stock				Stock				Surplus				(Deficit)				Income (Loss)				Total
Balance at January 1, 2010		$	49,275			$	257			$	363,519			$	51,746			$	176			$	464,973
Comprehensive income:
Net income			—				—				—				21,838				—				21,838
Other comprehensive income:
Unrealized gain on investment securities available for sale, net of tax effect of $2,173			—				—				—				—				3,367				3,367
Comprehensive income																							25,205
Accretion of discount on preferred stock			91				—				—				(91	)			—				—
Net issuance of 66,205 shares of common stock from exercise of stock options			—				1				659				—				—				660
Disgorgement of profits			—				—				11				—				—				11
Tax benefit from stock options exercised			—				—				342				—				—				342
Share-based compensation			—				—				272				—				—				272
Cash dividends — Preferred Stock - 5%			—				—				—				(1,249	)			—				(1,249	)
Cash dividends — Common Stock, $0.1085 per share			—				—				—				(3,088	)			—				(3,088	)
Stock dividend — Common Stock - 10%			—				25				66,540				(66,576	)			—				(11	)
Balances at June 30, 2010 (unaudited)			49,366				283				431,343				2,580				3,543				487,115
Comprehensive income:
Net income			—				—				—				(4,247	)			—				(4,247	)
Other comprehensive income:
Unrealized loss on investment securities available for sale, net of tax effect of $(2,093)			—				—				—				—				(3,242	)			(3,242	)
Comprehensive income																							(7,489	)
Accretion of discount on preferred stock			90				—				—				(90	)			—				—
Net issuance of 108,693 shares of common stock from exercise of stock options			—				2				893				—				—				895
Disgorgement of profits			—				—				—				—				—				—
Tax benefit from stock options exercised			—				—				622				—				—				622
Share-based compensation			—				—				104				—				—				104
Cash dividends — Preferred stock - 5%			—				—				—				(1,251	)			—				(1,251	)
Cash dividends — Common Stock, $0.108 per share			—				—				—				(3,071	)			—				(3,071	)
Balances at December 31, 2010			49,456				285				432,962				(6,079	)			301				476,925

See Condensed Notes to Consolidated Financial Statements.

Home BancShares, Inc.
Consolidated Statements of Stockholders’ Equity — Continued
Six Months Ended June 30, 2011 and 2010

																		Accumulated
														Retained				Other
		Preferred				Common				Capital				Earnings				Comprehensive
(In thousands, except share data)		Stock				Stock				Surplus				(Deficit)				Income (Loss)				Total
Comprehensive income:
Net income			—				—				—				26,262				—				26,262
Other comprehensive income:
Unrealized gain on investment securities available for sale, net of tax effect of $3,386			—				—				—				—				5,244				5,244
Comprehensive income																							31,506
Accretion of discount on preferred stock			91				—				—				(91	)			—				—
Net issuance of 11,847 shares of common stock from exercise of stock options			—				—				97				—				—				97
Tax benefit from stock options exercised			—				—				66				—				—				66
Share-based compensation			—				—				181				—				—				181
Cash dividends — Preferred stock - 5%			—				—				—				(1,249	)			—				(1,249	)
Cash dividends — Common Stock, $0.108 per share			—				—				—				(3,077	)			—				(3,077	)
Balances at June 30, 2011 (unaudited)		$	49,547			$	285			$	433,306			$	15,766			$	5,545			$	504,449

See Condensed Notes to Consolidated Financial Statements.

Home BancShares, Inc.

Consolidated Statements of Cash Flows

		Period Ended June 30,
(In thousands)		2011				2010
		(Unaudited)
Operating Activities
Net income		$	26,262			$	21,838
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation			3,307				2,605
Amortization/(accretion)			(48	)			1,165
Share-based compensation			181				272
Tax benefits from stock options exercised			(66	)			(342	)
(Gain) loss on assets			720				(54	)
Gain on acquisitions			—				(9,334	)
Provision for loan losses			1,250				6,850
Deferred income tax effect			(7,065	)			2,952
Increase in cash value of life insurance			(526	)			(776	)
Originations of mortgage loans held for sale			(48,968	)			(54,144	)
Proceeds from sales of mortgage loans held for sale			58,966				53,403
Changes in assets and liabilities:
Accrued interest receivable			3,838				66
Other assets			19,953				7,798
Accrued interest payable and other liabilities			(7,038	)			4,293
Net cash provided by (used in) operating activities			50,766				36,592
Investing Activities
Net (increase) decrease in federal funds sold			20,253				6,174
Net (increase) decrease in loans net, excluding loans acquired			69,950				(20,653	)
Purchases of investment securities — available for sale			(144,039	)			(65,041	)
Proceeds from maturities of investment securities — available for sale			79,164				76,028
Proceeds from foreclosed assets held for sale			15,207				13,294
Proceeds from sale of SBA loans			4,524				268
Sale of mortgage servicing portfolio			—				225
Purchases of premises and equipment, net			(2,042	)			(6,846	)
Death benefits received			700				1,585
Net cash proceeds received in FDIC-assisted acquisitions			—				71,652
Net cash provided by (used in) investing activities			43,717				76,686
Financing Activities
Net increase (decrease) in deposits, net of deposits acquired			(62,005	)			(44,134	)
Net increase (decrease) in securities sold under agreements to repurchase			(8,827	)			869
Net increase (decrease) in FHLB and other borrowed funds, net of acquired			(27,146	)			(51,954	)
Proceeds from exercise of stock options			97				660
Disgorgement of profits			—				11
Tax benefits from stock options exercised			66				342
Dividends paid on preferred stock			(1,249	)			(1,249	)
Dividends paid on common stock			(3,077	)			(3,099	)
Net cash provided by (used in) financing activities			(102,141	)			(98,554	)
Net change in cash and cash equivalents			(7,658	)			14,724
Cash and cash equivalents — beginning of year			287,532				173,490
Cash and cash equivalents — end of period		$	279,874			$	188,214

See Condensed Notes to Consolidated Financial Statements.

Home BancShares, Inc.
Condensed Notes to Consolidated Financial Statements
(Unaudited)

1: Nature of Operations and Summary of Significant Accounting Policies

     Nature of Operations

     Home BancShares, Inc. (the Company or HBI) is a bank holding company headquartered in Conway, Arkansas. The Company is primarily engaged in providing a full range of banking services to individual and corporate customers through its wholly owned community bank subsidiary — Centennial Bank (the Bank). The Bank has locations in central Arkansas, north central Arkansas, southern Arkansas, the Florida Keys, central Florida, southwestern Florida and the Florida Panhandle. The Company is subject to competition from other financial institutions. The Company also is subject to the regulation of certain federal and state agencies and undergoes periodic examinations by those regulatory authorities.

     A summary of the significant accounting policies of the Company follows:

     Operating Segments

     Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Bank is the only significant subsidiary upon which management makes decisions regarding how to allocate resources and assess performance. Each of the branches of the Bank provide a group of similar community banking services, including such products and services as commercial, real estate and consumer loans, time deposits, checking and savings accounts. The individual bank branches have similar operating and economic characteristics. While the chief decision maker monitors the revenue streams of the various products, services and branch locations, operations are managed and financial performance is evaluated on a Company-wide basis. Accordingly, all of the community banking services and branch locations are considered by management to be aggregated into one reportable operating segment, community banking.

     Use of Estimates

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

     Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, the valuation of foreclosed assets, the valuations of covered loans and the related indemnification asset. In connection with the determination of the allowance for loan losses and the valuation of foreclosed assets, management obtains independent appraisals for significant properties.

     Principles of Consolidation

     The consolidated financial statements include the accounts of HBI and its subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation.

     Reclassifications

     Various items within the accompanying consolidated financial statements for previous years have been reclassified to provide more comparative information. These reclassifications had no effect on net income or stockholders’ equity.

     Loans Receivable Not Covered by Loss Share and Allowance for Loan Losses

     Loans receivable not covered by loss share that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding principal balance adjusted for any charge-offs, deferred fees or costs on originated loans. Interest income on loans is accrued over the term of the loans based on the principal balance outstanding. Loan origination fees and direct origination costs are capitalized and recognized as adjustments to yield on the related loans.

     The allowance for loan losses is established through a provision for loan losses charged against income. The allowance represents an amount that, in management’s judgment, will be adequate to absorb probable credit losses on existing loans that may become uncollectible and probable credit losses inherent in the remainder of the loan portfolio. The amounts of provisions to the allowance for loan losses are based on management’s analysis and evaluation of the loan portfolio for identification of problem credits, internal and external factors that may affect collectability, relevant credit exposure, particular risks inherent in different kinds of lending, current collateral values and other relevant factors.

     The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows, or collateral value or observable market price of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical charge-off experience and expected loss given default derived from the Bank’s internal risk rating process. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risking rating data.

     Loans considered impaired, under FASB ASC 310-10-35 (formerly SFAS No. 114, Accounting by Creditors for Impairment of a Loan, as amended by SFAS No. 118, Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosures), are loans for which, 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 of the loan agreement. The aggregate amount of impairment of loans is utilized in evaluating the adequacy of the allowance for loan losses and amount of provisions thereto. Losses on impaired loans are charged against the allowance for loan losses when in the process of collection it appears likely that such losses will be realized. The accrual of interest on impaired loans is discontinued when, in management’s opinion, the collection of interest is doubtful, or generally when loans are 90 days or more past due. When accrual of interest is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

     Groups of loans with similar risk characteristics are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans.

     Loans are placed on non-accrual status when management believes that the borrower’s financial condition, after giving consideration to economic and business conditions and collection efforts, is such that collection of interest is doubtful, or generally when loans are 90 days or more past due. Loans are charged against the allowance for loan losses when management believes that the collectability of the principal is unlikely. Accrued interest related to non-accrual loans is generally charged against the allowance for loan losses when accrued in prior years and reversed from interest income if accrued in the current year. Interest income on non-accrual loans may be recognized to the extent cash payments are received, but payments received are usually applied to principal. Non-accrual loans are generally returned to accrual status when principal and interest payments are less than 90 days past due, the customer has made required payments for at least six months, and the Company reasonably expects to collect all principal and interest.

     Trouble Debt Restructurings

     The Company accounts for troubled debt restructurings (TDRs) using ASC Topic 310-40, Troubled Debt Restructurings by Creditors. Restructuring of a debt constitutes a troubled debt restructuring if the Company, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. Common concessions granted to borrowers include interest rate and/or term modifications. As a result, the Bank will work with the borrower to prevent further difficulties, and ultimately to improve the likelihood of recovery on the loan.

     A loan modification does not result in a TDR unless the borrower is in financial difficulty and a concession has been granted. In determining whether a concession has been granted, the Company takes into account the extent to which the nature and amount of any additional collateral or guarantees received as part of the modifications do not serve as adequate compensation for other terms of the restructuring. If the additional collateral or guarantees received adequately compensate the Company for the concessions granted, the loan is not classified as a TDR.

     Interim financial information

     The accompanying unaudited consolidated financial statements as of June 30, 2011 and 2010 have been prepared in condensed format, and therefore do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

     The information furnished in these interim statements reflects all adjustments, which are, in the opinion of management, necessary for a fair statement of the results for each respective period presented. Such adjustments are of a normal recurring nature. The results of operations in the interim statements are not necessarily indicative of the results that may be expected for any other quarter or for the full year. The interim financial information should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2010 Form 10-K, filed with the Securities and Exchange Commission.

     Earnings per Share

     Basic earnings per share are computed based on the weighted average number of shares outstanding during each year. Diluted earnings per share are computed using the weighted average common shares and all potential dilutive common shares outstanding during the period. Prior year per share amounts have been adjusted for the stock dividend which occurred in June of 2010. The following table sets forth the computation of basic and diluted earnings per common share (EPS) for the three-month and six-month periods ended June 30:

		Three Months Ended June 30,								Six Months Ended June 30,
		2011				2010				2011				2010
						(In thousands)
Net income available to common stockholders		$	12,876			$	8,287			$	24,922			$	20,498
Average shares outstanding			28,491				28,320				28,480				28,299
Effect of common stock options			199				266				203				255
Diluted shares outstanding			28,690				28,586				28,683				28,554
Basic earnings per common share		$	0.46			$	0.29			$	0.88			$	0.72
Diluted earnings per common share		$	0.45			$	0.29			$	0.87			$	0.72

     A warrant to purchase 158,471.50 shares of common stock at $23.664 was outstanding at June 30, 2011 and 2010. These shares of common stock were not included in the computation of diluted EPS because the exercise prices were greater than the average market price of the common shares.

2: Business Combinations

     Acquisition Old Southern Bank

     On March 12, 2010, Centennial Bank entered into a purchase and assumption agreement (Old Southern Agreement) with the FDIC, as receiver, pursuant to which Centennial Bank acquired certain assets and assumed substantially all of the deposits and certain liabilities of Old Southern Bank (Old Southern).

     Prior to the acquisition, Old Southern operated 7 banking centers in the Orlando, Florida metropolitan area. The Company has kept open all of these locations except for one location in downtown Orlando. Including the effects of

purchase accounting adjustments, Centennial Bank acquired $342.6 million in assets and assumed approximately $328.5 million of the deposits of Old Southern. Additionally, Centennial Bank purchased covered loans with an estimated fair value of $179.1 million, $3.0 million of foreclosed assets and $30.4 million of investment securities.

     See Note 2 “Business Combinations” of Form 10-K filed with the Securities and Exchange Commission (SEC) in March 2011 for additional discussion related to the acquisition of Old Southern.

     Acquisition Key West Bank

     On March 26, 2010, Centennial Bank, entered into a purchase and assumption agreement (Key West Bank Agreement) with the FDIC, as receiver, pursuant to which Centennial Bank acquired certain assets and assumed substantially all of the deposits and certain liabilities of Key West Bank (Key West).

     Prior to the acquisition, Key West operated one banking center located in Key West, Florida. Including the effects of purchase accounting adjustments, Centennial Bank acquired $89.6 million in assets and assumed approximately $66.7 million of the deposits of Key West. Additionally, Centennial Bank purchased covered loans with an estimated fair value of $46.9 million, $5.7 million of foreclosed assets and assumed $20.0 million of FHLB advances.

     See Note 2 “Business Combinations” of Form 10-K filed with the SEC in March 2011 for additional discussion related to the acquisition of Key West.

     Acquisition Coastal Community Bank and Bayside Savings Bank

     On July 30, 2010, Centennial Bank entered into separate purchase and assumption agreements with the FDIC (collectively, the “Coastal-Bayside Agreements”), as receiver for each bank, pursuant to which Centennial Bank acquired the loans and certain assets and assumed the deposits and certain liabilities of Coastal Community Bank (Coastal) and Bayside Savings Bank (Bayside), respectively. These two institutions had been under common ownership of Coastal Community Investments, Inc.

     Prior to the acquisition, Coastal and Bayside operated 12 banking centers in the Florida Panhandle area. Including the effects of purchase accounting adjustments, Centennial Bank acquired $436.8 million in assets and assumed approximately $424.6 million of the deposits of Coastal and Bayside. Additionally, Centennial Bank purchased covered loans with an estimated fair value of $200.6 million, non-covered loans with an estimated fair value of $4.1 million, $9.6 million of foreclosed assets and $18.5 million of investment securities.

     See Note 2 “Business Combinations” of Form 10-K filed with the SEC in March 2011 for additional discussion related to the acquisition of Coastal and Bayside.

     Acquisition Wakulla Bank

     On October 1, 2010, Centennial Bank entered into a purchase and assumption agreement with the FDIC, as receiver, pursuant to which Centennial Bank acquired the performing loans and certain assets and assumed substantially all of the deposits and certain liabilities of Wakulla Bank (Wakulla).

     Prior to the acquisition, Wakulla operated 12 banking centers in the Florida Panhandle. Including the effects of purchase accounting adjustments, Centennial Bank acquired approximately $377.9 million in assets and assumed approximately $356.2 million in deposits of Wakulla. Additionally, Centennial Bank purchased performing covered loans of approximately $148.2 million, performing non-covered loans with an estimated fair value of $17.6 million, $45.9 million of marketable securities and $27.6 million of federal funds sold.

     See Note 2 “Business Combinations” of Form 10-K filed with the SEC in March 2011 for additional discussion related to the acquisition of Wakulla.

     Acquisition Gulf State Community Bank

     On November 19, 2010, Centennial Bank entered into a purchase and assumption agreement with the FDIC, as receiver, pursuant to which Centennial Bank acquired the loans and certain assets and assumed substantially all of the deposits and certain liabilities of Gulf State Community Bank (Gulf State).

     Prior to the acquisition, Gulf State operated 5 banking centers in the Florida Panhandle. Including the effects of purchase accounting adjustments, Centennial Bank acquired approximately $118.2 million in assets and assumed approximately $97.7 million in deposits of Gulf State. Additionally, Centennial Bank purchased covered loans with an estimated fair value of $41.2 million, non-covered loans with an estimated fair value of $1.7 million, $4.7 million of foreclosed assets and $10.8 million of investment securities.

     See Note 2 “Business Combinations” of Form 10-K filed with the SEC in March 2011 for additional discussion related to the acquisition of Gulf State.

     FDIC-Assisted Acquisitions — Other Matters

     The Company’s operating results for 2010, include the operating results of the acquired assets and assumed liabilities subsequent to the respective acquisition dates. Due to the significant fair value adjustments recorded, as well as the nature of the FDIC loss sharing agreements in place, historical results are not believed to be relevant to the Company’s results, and thus no pro forma information is presented.

     In an FDIC-assisted acquisition, we acquire certain assets and assume certain liabilities of the former institution under a loss share agreement with the FDIC. Any regulatory agreements or orders that existed for the former institution do not apply to the assuming institution. We, as the assuming institution, are evaluated separately by our regulators and any weaknesses of the former institution are considered in the separate evaluation. Also, the loss share agreement helps to mitigate any weaknesses that may have existed in the former institution.

3: Investment Securities

     The amortized cost and estimated market value of investment securities were as follows:

		June 30, 2011
		Available for Sale
						Gross				Gross
		Amortized				Unrealized				Unrealized				Estimated
		Cost				Gains				(Losses)				Fair Value
						(In thousands)
U.S. government-sponsored enterprises		$	243,733			$	2,303			$	(125	)		$	245,911
Mortgage-backed securities			123,528				3,401				(112	)			126,817
State and political subdivisions			157,083				4,009				(334	)			160,758
Other securities			8,065				51				(68	)			8,048
Total		$	532,409			$	9,764			$	(639	)		$	541,534

		December 31, 2010
		Available for Sale
						Gross				Gross
		Amortized				Unrealized				Unrealized				Estimated
		Cost				Gains				(Losses)				Fair Value
						(In thousands)
U.S. government-sponsored enterprises		$	198,248			$	977			$	(1,932	)		$	197,293
Mortgage-backed securities			113,557				2,820				(300	)			116,077
State and political subdivisions			154,706				1,458				(2,457	)			153,707
Other securities			2,858				—				(71	)			2,787
Total		$	469,369			$	5,255			$	(4,760	)		$	469,864

     Assets, principally investment securities, having a carrying value of approximately $336.2 million and $268.0 million at June 30, 2011 and December 31, 2010, respectively, were pledged to secure public deposits and for other purposes required or permitted by law. Also, investment securities pledged as collateral for repurchase agreements totaled approximately $65.6 million and $74.5 million at June 30, 2011 and December 31, 2010, respectively.

     During the three-month and six-month periods ended June 30, 2011 and 2010, no available for sale securities were sold.

     The amortized cost and estimated fair value of securities at June 30, 2011, by contractual maturity, are shown below. 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.

		Available-for-Sale
		Amortized				Estimated
		Cost				Fair Value
		(In thousands)
Due in one year or less		$	203,791			$	205,793
Due after one year through five years			236,343				240,515
Due after five years through ten years			62,892				64,901
Due after ten years			29,383				30,325
Total		$	532,409			$	541,534

     For purposes of the maturity tables, mortgage-backed securities, which are not due at a single maturity date, have been allocated over maturity groupings based on anticipated maturities. The mortgage-backed securities may mature earlier than their weighted-average contractual maturities because of principal prepayments.

     The Company evaluates all securities quarterly to determine if any unrealized losses are deemed to be other than temporary. In completing these evaluations the Company follows the requirements of FASB ASC 320, Investments — Debt and Equity Securities. Certain investment securities are valued less than their historical cost. These declines are primarily the result of the rate for these investments yielding less than current market rates. Based on evaluation of available evidence, management believes the declines in fair value for these securities are temporary. The Company does not intend to sell or believe it will be required to sell these investments before recovery of their amortized cost bases, which may be maturity. Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

     No securities were deemed to have other-than-temporary impairment besides securities for which impairment was taken in prior periods.

     For the period ended June 30, 2011, the Company had $210,000 in unrealized losses, which have been in continuous loss positions for more than twelve months. Excluding impairment write downs taken in prior periods, the Company’s assessments indicated that the cause of the market depreciation was primarily the change in interest rates and not the issuer’s financial condition, or downgrades by rating agencies. In addition, approximately 82.7% of the Company’s investment portfolio matures in five years or less. As a result, the Company has the ability and intent to hold such securities until maturity.

     The following shows gross unrealized losses and estimated fair value of investment securities available for sale, aggregated by investment category and length of time that individual investment securities have been in a continuous loss position as of June 30, 2011 and December 31, 2010:

		June 30, 2011
		Less Than 12 Months								12 Months or More								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		Value				Losses				Value				Losses				Value				Losses
										(In thousands)
U.S. government-sponsored enterprises		$	30,458			$	(125	)		$	—			$	—			$	30,458			$	(125	)
Mortgage-backed securities			15,101				(112	)			—				—				15,101				(112	)
State and political subdivisions			14,208				(192	)			4,578				(142	)			18,786				(334	)
Other securities			120				—				2,574				(68	)			2,694				(68	)
Total		$	59,887			$	(429	)		$	7,152			$	(210	)		$	67,039			$	(639	)

		December 31, 2010
		Less Than 12 Months								12 Months or More								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		Value				Losses				Value				Losses				Value				Losses
										(In thousands)
U.S. government-sponsored enterprises		$	126,862			$	(1,932	)		$	—			$	—			$	126,862			$	(1,932	)
Mortgage-backed securities			27,427				(300	)			—				—				27,427				(300	)
State and political subdivisions			57,272				(1,970	)			4,069				(487	)			61,341				(2,457	)
Other securities			—				—				2,667				(71	)			2,667				(71	)
Total		$	211,561			$	(4,202	)		$	6,736			$	(558	)		$	218,297			$	(4,760	)

4: Loans Receivable Not Covered by Loss Share and Allowance for Loan Losses

     The various categories of loans not covered by loss share are summarized as follows:

		June 30,				December 31,
		2011				2010
		(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential		$	754,251			$	805,635
Construction/land development			363,310				348,768
Agricultural			26,826				26,798
Residential real estate loans
Residential 1-4 family			348,402				371,381
Multifamily residential			48,803				59,319
Total real estate			1,541,592				1,611,901
Consumer			42,662				51,642
Commercial and industrial			173,285				184,014
Agricultural			25,929				16,549
Other			29,250				28,268
Loans receivable not covered by loss share		$	1,812,718			$	1,892,374

     The following tables present the balance in the allowance for loan losses for the three-month and six-month periods ended June 30, 2011, and the allowance for loan losses and recorded investment in loans based on portfolio segment by impairment method as of June 30, 2011. Allocation of a portion of the allowance to one type of loans does not preclude its availability to absorb losses in other categories.

		Three Months Ended June 30, 2011
						Other
		Construction				Commercial Real				Residential				Commercial				Consumer
		Land Development				Estate				Real Estate				& Industrial				& Other				Unallocated				Total
										(In thousands)
Allowance for loan losses:
Beginning balance		$	11,241			$	17,529			$	13,674			$	6,725			$	1,932			$	2,490			$	53,591
Loans charged off			(228	)			(4	)			(755	)			(58	)			(515	)			—				(1,560	)
Recoveries of loans previously charged off			4				73				18				4,459				199				—				4,753
Net loans recovered (charged off)			(224	)			69				(737	)			4,401				(316	)			—				3,193
Provision for loan losses			301				1,543				1,387				(4,007	)			834				(58	)			—
Balance, June 30		$	11,318			$	19,141			$	14,324			$	7,119			$	2,450			$	2,432			$	56,784

		Six Months Ended June 30, 2011
						Other
		Construction				Commercial Real				Residential				Commercial				Consumer
		Land Development				Estate				Real Estate				& Industrial				& Other				Unallocated				Total
														(In thousands)
Allowance for loan losses:
Beginning balance		$	12,002			$	17,247			$	14,297			$	6,357			$	1,022			$	2,423			$	53,348
Loans charged off			(231	)			(20	)			(784	)			(152	)			(1,995	)			—				(3,182	)
Recoveries of loans previously charged off			6				163				248				4,616				335				—				5,368
Net loans recovered (charged off)			(225	)			143				(536	)			4,464				(1,660	)			—				2,186
Provision for loan losses			(459	)			1,751				563				(3,702	)			3,088				9				1,250
Balance, June 30		$	11,318			$	19,141			$	14,324			$	7,119			$	2,450			$	2,432			$	56,784

		As of June 30, 2011
						Other
		Construction				Commercial Real				Residential				Commercial				Consumer
		Land Development				Estate				Real Estate				& Industrial				& Other				Unallocated				Total
Allowance for loan losses:
Period end amount allocated to:
Loans individually evaluated for impairment		$	7,441			$	13,160			$	10,404			$	4,011			$	1,484			$	—			$	36,500
Loans collectively evaluated for impairment			3,877				5,981				3,920				3,108				966				2,432				20,284
Balance, June 30		$	11,318			$	19,141			$	14,324			$	7,119			$	2,450			$	2,432			$	56,784
Loans receivable:
Period end amount allocated to:
Loans individually evaluated for impairment		$	21,692			$	78,291			$	28,921			$	14,303			$	2,836			$	—			$	146,043
Loans collectively evaluated for impairment			341,618				702,786				368,284				158,982				95,005				—				1,666,675
Balance, June 30		$	363,310			$	781,077			$	397,205			$	173,285			$	97,841			$	—			$	1,812,718

     The following tables present the balance in the allowance for loan losses for the year ended December 31, 2010, and the recorded investment in allowance for loan losses and loans based on portfolio segment by impairment method as of December 31, 2010. Allocation of a portion of the allowance to one type of loans does not preclude its availability to absorb losses in other categories.

		As of December 31, 2010
						Other
		Construction				Commercial Real				Residential				Commercial				Consumer
		Land Development				Estate				Real Estate				& Industrial				& Other				Unallocated				Total
														(In thousands)
Allowance for loan losses:
Beginning balance		$	9,624			$	13,568			$	11,348			$	6,067			$	1,984			$	377			$	42,968
Loans charged off			(951	)			(856	)			(2,749	)			1,636				(1,580	)			—				(7,772	)
Recoveries of loans previously charged off			54				784				383				26				321				—				1,568
Net loans recovered (charged off)			(897	)			(72	)			(2,366	)			(1,610	)			(1,259	)			—				(6,204	)
Provision for loan losses			1,479				(395	)			5,262				325				486				(307	)			6,850
Balance, June 30			10,206				13,101				14,244				4,782				1,211				70				43,614
Loans charged off			(9,323	)			(15,849	)			(7,982	)			(22,591	)			(936	)			—				(56,681	)
Recoveries of loans previously charged off			1				84				109				24				197				—				415
Net loans recovered (charged off)			(9,322	)			(15,765	)			(7,873	)			(22,567	)			(739	)			—				(56,266	)
Provision for loan losses			11,118				19,911				7,926				24,142				550				2,353				66,000
Balance, end of year		$	12,002			$	17,247			$	14,297			$	6,357			$	1,022			$	2,423			$	53,348
Period end amount allocated to:
Loans individually evaluated for impairment		$	7,602			$	9,912			$	9,843			$	2,625			$	438			$	—			$	30,420
Loans collectively evaluated for impairment			4,400				7,335				4,454				3,732				584				2,423				22,928
Balance, end of year		$	12,002			$	17,247			$	14,297			$	6,357			$	1,022			$	2,423			$	53,348
Loans receivable:
Period end amount allocated to:
Loans individually evaluated for impairment		$	25,556			$	69,010			$	35,077			$	16,939			$	1,136			$	—			$	147,718
Loans collectively evaluated for impairment			323,212				763,423				395,623				167,075				95,323				—				1,744,656
Balance, end of year		$	348,768			$	832,433			$	430,700			$	184,014			$	96,459			$	—			$	1,892,374