10-12G

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES

PURSUANT TO SECTION 12(b) OR (g) OF

THE SECURITIES EXCHANGE ACT OF 1934

BBVA Compass Bancshares, Inc.

(Exact Name of Registrant as Specified in its Charter)

Texas			20-8948381
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification Number)
2200 Post Oak Blvd. Houston, Texas			77056
(Address of Principal Executive Offices)			(Zip Code)
	(205) 297-3000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Title of Each Class		Name of Each Exchange on Which Registered
None		None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
(Title of Class)

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer þ Smaller reporting company o

TABLE OF CONTENTS

		Page
Item 1.	Business	7
Item 1A.	Risk Factors	26
Item 2.	Financial Information	38
Item 3.	Properties	101
Item 4.	Security Ownership of Certain Beneficial Owners and Management	101
Item 5.	Directors and Executive Officers	101
Item 6.	Executive Compensation	101
Item 7.	Certain Relationships and Related Transactions, and Director Independence	101
Item 8.	Legal Proceedings	101
Item 9.	Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters	101
Item 10.	Recent Sales of Unregistered Securities	102
Item 11.	Description of Registrant’s Securities to be Registered	102
Item 12.	Indemnification of Directors and Officers	103
Item 13.	Financial Statements and Supplementary Data	104
Item 14.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	229
Item 15.	Financial Statements and Exhibits	230
Signatures		232

Explanatory Note

The registrant meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and General Instruction H(1)(a) and (b) of Form 10-Q. Accordingly, the registrant is filing this Registration Statement on Form 10 with certain reduced disclosures that correspond to the disclosure items the registrant is permitted to omit from a Form 10-K filing pursuant to General Instruction I(2) of Form 10-K and a Form 10-Q filing pursuant to General Instruction H(2) of Form 10-Q.

Glossary of Acronyms and Terms

The following listing provides a comprehensive reference of common acronyms and terms used throughout the document:

ADSs	BBVA American Depository Shares
AFS	Available For Sale
AICPA	American Institute of Certified Public Accountants
ARMs	Adjustable rate mortgages
ASC	Accounting Standards Codification
ASU	Accounting Standards Update
Basel III	Global regulatory framework developed by the Basel Committee on Banking Supervision
Basel Committee	Basel Committee on Banking Supervision
Bank	Compass Bank
BBVA	Banco Bilbao Vizcaya Argentaria, S.A.
BBVA Compass	Registered trade name of Compass Bank
BOLI	Bank Owned Life Insurance
BSI	BBVA Securities Inc.
CAMELS	Capital, Assets, Management, Earnings, Liquidity and Sensitivity to market risk
Capital Securities	Debentures issued by the Parent
CapPR	Federal Reserve Board's Capital Plan Review
CAPM	Capital Asset Pricing Model
Cash Flow Hedge	A hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability
CCAR	Comprehensive Capital Analysis and Review
CD	Certificate of Deposit
CFPB	Consumer Financial Protection Bureau
Company	BBVA Compass Bancshares, Inc. and its subsidiaries
Covered Assets	Loans and other real estate owned acquired from the FDIC subject to loss sharing agreements
Covered Loans	Loans acquired from the FDIC subject to loss sharing agreements
CQR	Credit Quality Review
Credit Loss Proposal	Proposed Accounting Standards Update, Financial Instruments-Credit Losses (Subtopic 825-15)
DRR	Designated Reserve Ratio
DIF	Depository Insurance Fund
Dodd-Frank Act	Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
ERM	Enterprise Risk Management
EVE	Economic Value of Equity
Exchange Act	Securities and Exchange Act of 1934, as amended
Fair Value Hedge	A hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment
FASB	Financial Accounting Standards Board
FBO	Foreign banking organizations
FDIC	Federal Deposit Insurance Corporation
FDICIA	Federal Deposit Insurance Corporation Improvement Act
Federal Reserve Board	Board of Governors of the Federal Reserve System
FHLB	Federal Home Loan Bank
FHLMC	Federal Home Loan Mortgage Corporation
FICO	Fair Isaac Corporation

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FINRA	Financial Industry Regulatory Authority
FNMA	Federal National Mortgage Association
GNMA	Government National Mortgage Association
Guaranty Bank	Collectively, certain assets and liabilities of Guaranty Bank, acquired by the Company in 2009
HTM	Held To Maturity
IFRS	International Financial Reporting Standards
IHC	Top-tier U.S. intermediate holding company
IRS	Internal Revenue Service
Large FBOs	Foreign Banking Organizations with $50 billion or more in global assets
LCR	Liquidity Coverage Ratio
Leverage Ratio	Ratio of Tier 1 capital to quarterly average on-balance sheet assets
LIBOR	London Interbank Offered Rate
LTV	Loan to Value
MBOs	Mortgage Banking Officers
MBS	Mortgage Backed Security
MSR	Mortgage Servicing Rights
NSFR	Net Stable Funding Ratio
NYSE	NYSE Euronext, Inc.
OCC	Office of the Comptroller of the Currency
OFAC	Office of Foreign Assets Control
OREO	Other Real Estate Owned
OTTI	Other-Than-Temporary Impairment
Parent	BBVA Compass Bancshares, Inc.
Potential Problem Loans	Noncovered, commercial loans rated substandard or below, which do not meet the definition of nonaccrual, TDR, or 90 days past due and still accruing.
Preferred Stock	Class B Preferred Stock
Purchased Impaired Loans	Loans with evidence of credit deterioration since acquisition for which it is probable all contractual payments will not be received that are accounted for under ASC Subtopic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality.
Purchased Nonimpaired Loans	Acquired loans with a fair value that is lower than the contractual amounts due that are not required to be accounted for in accordance with ASC Subtopic 310-30
REIT	Real Estate Investment Trust
SBA	Small Business Administration
SEC	Securities and Exchange Commission
Securities Act	Securities Act of 1933, as amended
TDR	Troubled Debt Restructuring
Tier 1 Risk-Based Capital Ratio	Ratio of Tier 1 capital to risk-weighted assets
Total Risk-Based Capital Ratio	Ratio of Total capital (the sum of Tier 1 capital and Tier 2 capital) to risk-weighted assets
Trust Preferred Securities	Mandatorily redeemable preferred capital securities
U.S.	United States of America
U.S. Treasury	United States Department of the Treasury
U.S. Basel III final rule	Final rule to implement the Basel III capital framework in the United States
U.S. GAAP	Accounting principles generally accepted in the United States
USA PATRIOT Act	Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001

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Forward-Looking Statements

This Registration Statement contains forward-looking statements about the Company and its industry that involve substantial risks and uncertainties. Statements other than statements of current or historical fact, including statements regarding the Company's future financial condition, results of operations, business plans, liquidity, cash flows, projected costs, and the impact of any laws or regulations applicable to the Company, are forward-looking statements. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “projects,” “may,” “will,” “should,” and other similar expressions are intended to identify these forward-looking statements. Such statements are subject to factors that could cause actual results to differ materially from anticipated results. Such factors include, but are not limited to, the following:

• national, regional and local economic conditions may be less favorable than expected, resulting in, among other things, increased charge offs of loans, higher provisions for credit losses and/or reduced demand for the Company's services;

• disruptions to the credit and financial markets, either nationally or globally, including further downgrades of the U.S. government's credit rating and the failure of the European Union to stabilize the fiscal condition of member countries;

• weakness in the real estate market, including the secondary residential mortgage market, which can affect, among other things, the value of collateral securing mortgage loans, mortgage loan originations and delinquencies, and profits on sales of mortgage loans;

• legislative, regulatory or accounting changes, including changes resulting from the adoption and implementation of the Dodd-Frank Act, which may adversely affect our business and/or competitive position, impose additional costs on the Company or cause us to change our business practices;

• the Dodd-Frank Act's consumer protection regulations which could adversely affect the Company's business, financial condition or results of operations;

• the CFPB's residential mortgage regulations which could adversely affect the Company's business, financial condition or results of operations;

• disruptions in the Company's ability to access capital markets which may adversely affect its capital resources and liquidity;

• the Company's heavy reliance on communications and information systems to conduct its business and reliance on third parties and affiliates to provide key components of its business infrastructure, any disruptions of which could interrupt the Company's operations or increase the costs of doing business;

• that the Company's financial reporting controls and procedures may not prevent or detect all errors or fraud;

• the Company is subject to certain risk related to originating and selling mortgages. It may be required to repurchase mortgage loans or indemnify mortgage loan purchases as a result of breaches of representations and warranties, borrower fraud or certain breaches of its servicing agreements, and this could harm the Company's liquidity, results of operations and financial condition;

• the Company's dependence on the accuracy and completeness of information about clients and counterparties;

• the fiscal and monetary policies of the federal government and its agencies;

• the failure to satisfy capital adequacy and liquidity guidelines applicable to the Company;

• downgrades in the Company's credit rating;

• changes in interest rates which could affect interest rate spreads and net interest income;

• costs and effects of litigation, regulatory investigations or similar matters;

• a failure by the Company to effectively manage the risks the Company faces, including credit, operational and cyber security risks;

• increased pressures from competitors (both banks and non-banks) and/or an inability by the Company to remain competitive in the financial services industry, particularly in the markets which the Company serves, and keep pace with technological changes;

• unpredictable natural or other disasters, which could impact the Company's customers or operations;

• a loss of customer deposits, which could increase the Company's funding costs;

• the disparate impact that can result from having loans concentrated by loan type, industry segment, borrower type or location of the borrower or collateral;

• changes in the creditworthiness of customers;

• increased loan losses or impairment of goodwill and other intangibles;

• potential changes in interchange fees;

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• negative public opinion which could damage the Company's reputation and adversely impact business and revenues;

• the Company has in the past and may in the future pursue acquisitions, which could affect costs and from which the Company may not be able to realize anticipated benefits;

• the Company depends on the expertise of key personnel, and if these individuals leave or change their roles without effective replacements, operations may suffer;

• the Company may not be able to hire or retain additional qualified personnel and recruiting and compensation costs may increase as a result of turnover, both of which may increase costs and reduce profitability and may adversely impact the Company's ability to implement the Company's business strategies; and

• changes in the Company's accounting policies or in accounting standards which could materially affect how the Company reports financial results and condition.

Further Information about the Company

The public may read and copy this Registration Statement, including the exhibits and schedules thereto, as well as any other materials the Company files with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Additionally, the SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers, like the Company, that file electronically with the SEC. The address of the SEC's website is www.sec.gov.

Upon the effectiveness of this Registration Statement, the Company will become subject to the reporting and information requirements of the Exchange Act, and as a result will file periodic reports and other information with the SEC. These periodic reports and other information will be available for inspection and copying at the SEC's public reference room and the website of the SEC referred to above, as well as on the Company's website at no cost, www.bbvacompass.com. This reference to the Company's website is an inactive textual reference only, and is not a hyperlink. The contents of the Company's website shall not be deemed to be incorporated by reference into this Registration Statement.

Purpose for Filing this Registration Statement

The Company is filing this Registration Statement in order to be able to file periodic and other reports with the SEC. The Company has no current plans to offer for sale any of the common stock registered hereunder.

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Item 1.    Business

Overview

The Parent is a bank holding company that conducts its business operations primarily through its commercial banking subsidiary, Compass Bank, which is an Alabama banking corporation headquartered in Birmingham, Alabama. The Parent was organized in 2007 as a Texas corporation.

The Parent is a wholly-owned subsidiary of BBVA (NYSE: BBVA). BBVA is a global financial services group founded in 1857. It has a significant position in Spain, is the largest financial institution in Mexico, has franchises in South America and has banking positions in Turkey and China. The Bank operates under the brand “BBVA Compass,” which is a trademark of the Company. BBVA acquired the Company in 2007.

The Bank performs banking services customary for full service banks of similar size and character. Such services include receiving demand and time deposits, making personal and commercial loans and furnishing personal and commercial checking accounts. Compass Bank offers, either directly or through its subsidiaries or affiliates, a variety of fiduciary services, including: portfolio management and administration and investment services to estates, trusts and employee benefit plans; term life insurance, variable annuities, property and casualty insurance and other insurance products; investment advisory services; a variety of investment services and products to institutional and individual investors; discount brokerage services, investment company securities and fixed-rate annuities; and lease financing services.

As part of its operations, the Company regularly evaluates acquisition and investment opportunities of a type permissible for a bank holding company, including FDIC-assisted transactions. The Company may also from time to time consider the potential disposition of certain of its assets, branches, subsidiaries, or lines of businesses. On August 21, 2009, the Bank entered into a purchase and assumption agreement with the FDIC to acquire certain assets and assume certain liabilities of Guaranty Bank, headquartered in Austin, Texas. Guaranty Bank conducted consumer and banking activities through a network of 150 banking centers located in Texas and California.

On September 11, 2009, BBVA Bancomer USA, a California state bank and a wholly-owned subsidiary of BBVA, was merged into the Bank. BBVA Bancomer USA provided a full range of banking, money service business products and services to its commercial and consumer customers through branches located throughout southern and northern California.

On April 13, 2012, the Company sold its insurance business unit which specialized in commercial lines property and casualty insurance sales.

On April 8, 2013, BBVA contributed all of the outstanding stock of its wholly-owned subsidiary, BSI, to the Company.  BSI is a registered broker-dealer and engages in investment banking and institutional sales of fixed income securities.

On May 14, 2013, BBVA Compass Bancshares, Inc., the Company's former mid-tier holding company, was merged into BBVA USA Bancshares, Inc., the Company's top-tier U.S. holding company. Subsequent to the merger, the surviving entity's name was changed to BBVA Compass Bancshares, Inc.

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Banking Operations

At September 30, 2013, the Company, through the Bank, operated approximately 687 banking offices in Alabama, Arizona, California, Colorado, Florida, New Mexico, and Texas. The following chart reflects the distribution of branch locations in each of the states in which the Company conducts its banking operations:

Alabama	90
Arizona	78
California	64
Colorado	38
Florida	45
New Mexico	21
Texas	351
Total	687

The banking centers in Alabama are located throughout the state. In Arizona, the banking centers are concentrated in the Tucson and Phoenix metropolitan markets. The banking centers in California are concentrated in the Inland Empire and Central Valley regions. The Colorado banking centers are concentrated in the Denver metropolitan area and the New Mexico banking centers are concentrated in the Albuquerque metropolitan area. In Florida, the banking centers are concentrated in Jacksonville, Gainesville, and in the Florida panhandle. The Texas banking centers are primarily located in the state’s four largest metropolitan areas of Houston, Dallas/Ft. Worth, San Antonio, and Austin, as well as cities in south Texas, such as McAllen and Laredo.

The Company also operates commercial loan production offices in Miami, Orlando, and Tampa, Florida; Chicago, Illinois, New York, New York; Washington D.C.; Tuscaloosa and Montgomery, Alabama; La Jolla and Ontario, California; Atlanta, Georgia; and Cleveland, Ohio; and has received approval to open offices in Charlotte, North Carolina; Nashville, Tennessee; and San Francisco, California.

Segment Information

The Company is currently organized along lines of business. Each line of business is a strategic unit that serves a particular group of customers with certain common characteristics by offering various products and services. The line of business results include certain overhead allocations and intercompany transactions. The Company’s operating segments are Retail Banking, Commercial Banking, Corporate and Investment Banking, Wealth Management and Treasury.

The Retail Banking segment serves the Company's consumer customers through its full-service banking centers and through the use of alternative delivery channels such as the internet, mobile devices and telephone banking. The Retail Banking segment provides individuals with comprehensive products and services including home mortgages, credit and debit cards, deposit accounts, insurance products, mutual funds and brokerage services. In addition, the Retail Banking segment serves the Company's small business customers.

The Commercial Banking segment is responsible for providing a full array of banking and investment services to businesses in the Company's markets. In addition to traditional credit and deposit products, the Commercial Banking segment also supports its customers with capabilities in treasury management, leasing, accounts receivable purchasing, asset-based lending, international services, and insurance and interest rate protection and investment products.

The Corporate and Investment Banking segment is responsible for providing a full array of banking and investment services to corporate and institutional clients. In addition to traditional credit and deposit products, the Corporate and Investment Banking segment also supports its customers with capabilities in treasury management, leasing, accounts receivable purchasing, asset-based lending, international services, and interest rate protection and investment products.

The Wealth Management segment provides private banking to high net worth individuals and wealth management services, including specialized investment portfolio management, traditional credit products, traditional trust and estate services, investment advisory services, financial counseling and customized services to companies and their employees.

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The Treasury segment's primary function is to manage the investment securities portfolio and the interest rate sensitivity of the Company's Consolidated Balance Sheets and the liquidity and funding positions of the Company.

For financial information regarding the Company’s segments, which are presented by line of business, as of and for the years ended December 31, 2012, 2011 and 2010, see Note 23, Segment Information, in the Notes to the December 31, 2012, Consolidated Financial Statements and as of and for the nine months ended September 30, 2013 and 2012, see Note 12,Segment Information, in the Notes to the September 30, 2013, Unaudited Condensed Consolidated Financial Statements.

Competition

In most of the markets served by the Company, it encounters intense competition from national, regional and local financial service providers, including banks, thrifts, securities dealers, mortgage bankers and finance companies. Competition is based on a number of factors, including customer service and convenience, the quality and range of products and services offered, innovation, price, reputation and interest rates on loans and deposits. The Company’s ability to compete effectively also depends on its ability to attract, retain and motivate employees while managing employee-related costs.

Many of the Company’s nonfinancial institution competitors have fewer regulatory constraints, broader geographic service areas, greater capital and, in some cases, lower cost structures. In addition, competition for quality customers has intensified as a result of changes in regulation, advances in technology and product delivery systems, consolidation among financial service providers, bank failures and the conversion of certain former investment banks to bank holding companies. For a discussion of risks related to the competition the Company faces, see Item 1A. - Risk Factors.

The table below shows the Company’s deposit market share ranking by state in which the Company operates based on deposits of FDIC-insured institutions as of June 30, 2013:

Table 1 Deposit Market Share Ranking
	Deposit Market
State	Share Rank*
Alabama	2nd
Arizona	5th
California	24th
Colorado	8th
Florida	21st
New Mexico	11th
Texas	4th

*Source SNL Financial

Employees

At September 30, 2013, the Company had approximately 11,054 full-time equivalent employees.

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Supervision, Regulation and Other Factors

Like all bank holding companies, the Company is regulated extensively under federal and state law. In addition, certain of the Company's non-bank subsidiaries are subject to regulation under federal and state law. The following discussion sets forth some of the elements of the bank regulatory framework applicable to the Company and certain of its subsidiaries. The bank regulatory framework is intended primarily for the protection of depositors and the DIF and not for the protection of security holders and creditors. To the extent that the following information describes statutory and regulatory provisions, it is qualified in its entirety by reference to the particular statutory and regulatory provisions.

General

Bank holding companies are subject to supervision and regulation by the Board of Governors of the Federal Reserve System under the Bank Holding Company Act. In addition, the Alabama Banking Department regulates holding companies, like the Company, that own Alabama-chartered banks, like the Bank, under the bank holding company laws of the State of Alabama. The Company is subject to primary regulation and examination by the Federal Reserve Board, through the Federal Reserve Bank of Atlanta, and by the Alabama Banking Department. Numerous other federal and state laws, as well as regulations promulgated by the Federal Reserve Board and the state banking regulator, govern almost all aspects of the operations of the Company. Various federal and state bodies regulate and supervise the Company's non-bank subsidiaries including its brokerage, investment advisory, insurance agency and processing operations. These include, but are not limited to, the SEC, FINRA, federal and state banking regulators and various state regulators of insurance and brokerage activities.

In addition, the Dodd-Frank Act, which is discussed in greater detail below, established the CFPB, a new federal agency with broad authority to regulate the offering and provision of consumer financial products. Rulemaking authority for a range of consumer financial protection laws (such as the Truth in Lending Act, the Electronic Funds Transfer Act and the Real Estate Settlement Procedures Act) transferred from the prudential regulators to the CFPB on July 21, 2011. With the appointment of a director for the CFPB in January 2012, the CFPB began to exercise its full authority under the Dodd-Frank Act, including the authority to supervise and examine depository institutions with more than $10 billion in assets for compliance with these federal consumer laws.

The Dodd-Frank Act also established the Financial Stability Oversight Council, which has oversight authority for monitoring and regulating systemic risk and alters the authority and duties of the federal banking and securities regulatory agencies, and restricts certain proprietary trading and hedge fund and private equity activities of banks and their affiliates. In addition, the Dodd-Frank Act requires the issuance of many implementing regulations which will take effect over several years, making it difficult to anticipate the overall impact to the Company, its customers or the financial industry more generally. While the overall impact cannot be predicted with any degree of certainty, the Company is affected by the Dodd-Frank Act in a wide range of areas.

Permitted Activities

Under the Bank Holding Company Act, a bank holding company is generally permitted to engage in, or acquire direct or indirect control of more than five percent of the voting shares of, any company engaged in the following activities:

• banking or managing or controlling banks;

• furnishing services to or performing services for its subsidiaries; and

• engaging in activities that the Federal Reserve Board determines to be so closely related to banking as to be a proper incident to the business of banking, including:

• factoring accounts receivable;

• making, acquiring, brokering or servicing loans and usual related activities;

• leasing personal or real property;

• operating a non-bank depository institution, such as a savings association;

• performing trust company functions;

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• providing financial and investment advisory activities;

• conducting discount securities brokerage activities;

• underwriting and dealing in government obligations and money market instruments;

• providing specified management consulting and counseling activities;

• performing selected data processing services and support services;

• acting as agent or broker in selling credit life insurance and other types of insurance in connection with credit transactions;

• performing selected insurance underwriting activities;

• providing certain community development activities (such as making investments in projects designed primarily to promote community welfare); and

• issuing and selling money orders and similar consumer-type payment instruments.

The Federal Reserve Board has the authority to order a bank holding company or its subsidiaries to terminate any of these activities or to terminate its ownership or control of any subsidiary when it has reasonable cause to believe that the bank holding company's continued ownership, activity or control constitutes a serious risk to the financial safety, soundness or stability of it or any of its bank subsidiaries.

Actions by Federal and State Regulators

Like all bank holding companies, the Company is regulated extensively under federal and state law. Under federal and state laws and regulations pertaining to the safety and soundness of insured depository institutions, state banking regulators, the Federal Reserve Board, and separately the FDIC as the insurer of bank deposits, have the authority to compel or restrict certain actions on the Company's part if they determine that it has insufficient capital or other resources, or are otherwise operating in a manner that may be deemed to be inconsistent with safe and sound banking practices. Under this authority, the Company's bank regulators can require it to enter into informal or formal supervisory agreements, including board resolutions, memoranda of understanding, written agreements and consent or cease and desist orders, pursuant to which the Company would be required to take identified corrective actions to address cited concerns and to refrain from taking certain actions.

Standards for Safety and Soundness

The Federal Deposit Insurance Act requires the federal bank regulatory agencies to prescribe, by regulation or guideline, operational and managerial standards for all insured depository institutions relating to: internal controls; information systems and audit systems; loan documentation; credit underwriting; interest rate risk exposure; and asset quality. The agencies also must prescribe standards for asset quality, earnings, and stock valuation, as well as standards for compensation, fees and benefits. The federal banking regulators have adopted regulations and interagency guidelines prescribing standards for safety and soundness to implement these required standards. These guidelines set forth the safety and soundness standards used to identify and address problems at insured depository institutions before capital becomes impaired. Under the regulations, if a regulator determines that a bank fails to meet any standards prescribed by the guidelines, the regulator may require the bank to submit an acceptable plan to achieve compliance, consistent with deadlines for the submission and review of such safety and soundness compliance plans.

Dividends

The Federal Reserve Board has issued policy statements that provide that insured banks and bank holding companies should generally only pay dividends out of current operating earnings.

The primary sources of funds for the Company's interest and principal payments on its debt are cash on hand and dividends from its bank and non-bank subsidiaries. Various federal and state statutory provisions and regulations limit the amount of dividends that the Bank and its non-banking subsidiaries may pay. Under Alabama law, the Bank may not pay a dividend in excess of 90 percent of its net earnings until its surplus is equal to at least 20 percent of capital.

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The Bank is also required by Alabama law to seek the approval of the Alabama Superintendent of Banking prior to the payment of dividends if the total of all dividends declared by the Bank in any calendar year will exceed the total of (a) the Bank's net earnings for that year, plus (b) its retained net earnings for the preceding two years, less any required transfers to surplus. The statute defines net earnings as the remainder of all earnings from current operations plus actual recoveries on loans and investments and other assets, after deducting from the total thereof all current operating expenses, actual losses, accrued dividends on preferred stock, if any, and all federal, state and local taxes. The Bank cannot, without approval from the Federal Reserve Board and the Alabama Superintendent of Banking, declare or pay a dividend to the Company unless the Bank is able to satisfy the criteria discussed above.

The Federal Deposit Insurance Corporation Improvement Act generally prohibits a depository institution from making any capital distribution, including payment of a dividend, or paying any management fee to its holding company if the institution would thereafter be undercapitalized. In addition, federal banking regulations applicable to the Company and its bank subsidiary require minimum levels of capital that limit the amounts available for payment of dividends. In addition, many regulators have a policy, but not a requirement, that a dividend payment should not exceed net income to date in the current year. The ability of banks and bank holding companies to pay dividends and make other forms of capital distribution will also depend on their ability to maintain a sufficient capital conservation buffer under the U.S. Basel III capital framework. The capital conservation buffer will be phased in for the Company and the Bank beginning on January 1, 2016. The supervisory stress tests of the Company conducted by the Federal Reserve Board as part of its annual CCAR process will also affect the ability of the Company to pay dividends and make other forms of capital distribution. Finally, the ability of banks and bank holding companies to pay dividends, and the contents of their respective dividend policies, could be impacted by a range of regulatory changes made pursuant to the Dodd-Frank Act, many of which will require final implementing rules to become effective. The Parent's ability to pay dividends is also subject to the Federal Reserve Board's review of the Parent's annual capital plan, as discussed below under "Large bank holding companies are required to submit annual capital plans to the Federal Reserve Board and are subject to stress testing requirements."

Capital

The Company is required to comply with the capital adequacy standards established by the Federal Reserve Board and the Bank must comply with similar capital adequacy standards established by the FDIC.

Capital Requirements

The Federal Reserve Board adopted guidelines pursuant to which it assesses the adequacy of capital in examining and supervising a bank holding company and in reviewing applications submitted to it under the Bank Holding Company Act. These guidelines include quantitative measures that assign risk weights to a bank holding company's assets, exposures and off-balance sheet items to determine its risk-weighted assets and that define and set minimum regulatory capital requirements. Under capital adequacy guidelines that are currently in effect, bank holding companies are required to maintain a Tier 1 risk-based capital ratio of at least 4 percent, a total risk-based capital ratio of at least 8 percent and a leverage ratio of at least 4 percent.

Under bank holding company capital adequacy guidelines that are currently in effect, Tier 1 capital consists principally of shareholders' equity less any amounts of goodwill, other intangible assets, non-financial equity investments, and other items that are required to be deducted. Tier 2 capital consists principally of perpetual and trust preferred stock that is not eligible to be included as Tier 1 capital, term subordinated debt, intermediate-term preferred stock and, subject to limitations, general allowances for loan and lease losses. Assets are adjusted under the risk-based guidelines to take into account different risk characteristics. Quarterly average on-balance sheet assets for purpose of the leverage ratio do not include goodwill, other intangible assets or items that the Federal Reserve Board has determined should be deducted from Tier 1 capital.

The existing regulatory capital framework has been significantly revised as a result of the Dodd-Frank Act and a set of internationally agreed-upon bank capital standards known as “Basel III,” which is published by the Basel Committee, a committee of central bank and regulatory officials from 27 countries. Among other things, the Dodd-Frank Act requires trust preferred securities to be phased out of a bank holding company's Tier 1 capital by January 1, 2016.

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The current risk-based capital guidelines that apply to the Company and the Bank are based on the 1988 Basel I capital accord. In 2007, the federal banking regulators established capital standards based on the advanced internal ratings-based approach for credit risk and the advanced measurement approaches for operational risk contained in the Basel Committee's second capital accord, referred to as “Basel II,” for the largest and most internationally active U.S. banking organizations, which do not include the Company or the Bank. Basel II emphasizes internal assessment of credit, market and operational risk in determining minimum capital requirements, as well as supervisory assessment and market discipline with respect to capital adequacy.

In December 2010, the Basel Committee reached agreement on a revised set of regulatory capital standards: Basel III. These new standards, which are aimed at increasing the quality and quantity of regulatory capital, seek to further strengthen financial institutions' capital positions by mandating a higher minimum level of common equity to be held, along with a capital conservation buffer to withstand future periods of stress. The Basel III framework builds upon, and does not supplant, Basel II. Basel II largely focuses on the methods for calculating risk-weighted assets, the denominator of the risk-based capital ratio. Basel III, among other things, introduces a new tier of capital (Common Equity Tier 1 capital), new eligibility criteria for regulatory capital instruments for each tier of capital and new regulatory adjustments to and deductions from capital. Basel III also increases the minimum risk-based capital ratios and introduces capital buffers above the minimum requirements.

As discussed below, the federal banking regulators have issued a final rule to implement the Basel III capital framework in the United States. For the Company and the Bank, the U.S. Basel III final rule will become effective on January 1, 2015.

Capital Requirements Applicable to the Company, As Currently in Effect

Under bank holding company capital adequacy guidelines that are currently in effect, to be well-capitalized the Company must generally maintain a total risk-based capital ratio of 10 percent or greater, a Tier 1 risk-based capital ratio of 6 percent or greater, and a leverage ratio of 5 percent or greater. For the purposes of these measures, Tier 1 capital consists of common equity, retained earnings and a limited amount of qualifying preferred stock, less goodwill and certain core deposit intangibles. Tier 2 capital consists of non-qualifying preferred stock, certain types of debt and the eligible portion of the allowance for loan losses.

To calculate risk-weighted assets, the capital adequacy guidelines applicable to the Company assign standardized risk weights to the Company's assets, exposures and off-balance sheet items that generally range from zero percent to 100 percent. Certain types of assets, such as most cash instruments and U.S. Treasury securities, are assigned a zero percent risk weight. Other types of assets, such as certain commercial and consumer loans, are assigned a 100 percent risk weight. Risk weights are also assigned to off-balance sheet items, such as unfunded loan commitments, after applying a credit conversion factor. A bank holding company's assets, exposures and off-balance sheet items are generally multiplied by the applicable risk weight to determine its risk-weighted assets. For purposes of calculating the leverage ratio, assets are not risk weighted.

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Capital Ratios

Certain regulatory capital ratios for the Company and the Bank as of December 31, 2012, are shown in the table below.

Table 2 Capital Ratios
	Regulatory Minimum		Well-Capitalized Minimum		The Company		The Bank
Tier 1 capital ratio	4.0	%	6.0	%	11.68	%	11.34	%
Total risk-based capital ratio	8.0	%	10.0	%	14.28	%	13.94	%
Leverage ratio	4.0	%	5.0	%	9.43	%	9.16	%

See Note 16, Regulatory Matters and Dividends from Subsidiaries, in the Notes to the December 31, 2012, Consolidated Financial Statements in this Registration Statement, and Item 2. Financial Information-Management's Discussion and Analysis of Financial Condition and Results of Operations - Capital of this Registration Statement for additional information on the calculation of capital ratios for the Company and the Bank.

Prompt Corrective Action for Undercapitalization

The FDICIA established a system of prompt corrective action to resolve the problems of undercapitalized insured depository institutions. Under this system, the federal banking regulators are required to rate insured depository institutions on the basis of five capital categories as described below. The federal banking regulators are also required to take mandatory supervisory actions and are authorized to take other discretionary actions, with respect to insured depository institutions in the three undercapitalized categories, the severity of which will depend upon the capital category in which the insured depository institution is assigned. Generally, subject to a narrow exception, the FDICIA requires the banking regulator to appoint a receiver or conservator for an insured depository institution that is critically undercapitalized. The federal banking regulators have specified by regulation the relevant capital level for each category. Under the prompt corrective action regulations that are currently in effect, all insured depository institutions are assigned to one of the following capital categories:

Well-capitalized - The insured depository institution exceeds the required minimum level for each relevant capital measure. A well-capitalized insured depository institution is one (1) having a total risk-based capital ratio of 10 percent or greater, (2) having a Tier 1 risk-based capital ratio of 6 percent or greater, (3) having a leverage ratio of 5 percent or greater, and (4) that is not subject to any order or written directive to meet and maintain a specific capital level for any capital measure.

Adequately Capitalized - The insured depository institution meets the required minimum level for each relevant capital measure. An adequately capitalized insured depository institution is one (1) having a total risk-based capital ratio of 8 percent or greater, (2) having a Tier 1 risk-based capital ratio of 4 percent or greater, and (3) having a leverage ratio of 4 percent or greater, or a leverage ratio of 3 percent or greater if the institution is rated composite 1 under the CAMELS rating system; and (4) failing to meet the definition of a well-capitalized bank.

Undercapitalized - The insured depository institution fails to meet the required minimum level for any relevant capital measure. An undercapitalized insured depository institution is one (1) having a total risk-based capital ratio of less than 8 percent, (2) having a Tier 1 risk-based capital ratio of less than 4 percent, or (3) a leverage ratio of less than 4 percent, or if the institution is rated a composite 1 under the CAMELS rating system, a leverage ratio of less than 3 percent.

Significantly Undercapitalized - The insured depository institution is significantly below the required minimum level for any relevant capital measure. A significantly undercapitalized insured depository institution is one (1) having a total risk-based capital ratio of less than 6 percent, (2) a Tier 1 risk-based capital ratio of less than 3 percent, or (3) a leverage ratio of less than 3 percent.

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Critically Undercapitalized - The insured depository institution fails to meet a critical capital level set by the appropriate federal banking agency. A critically undercapitalized institution is one having a ratio of tangible equity to total assets that is equal to or less than 2 percent.

The regulations permit the appropriate federal banking regulator to downgrade an institution to the next lower category if the regulator determines after notice and opportunity for hearing or response that the institution (1) is in an unsafe or unsound condition or (2) has received and not corrected a less-than-satisfactory rating for any of the categories of asset quality, management, earnings or liquidity in its most recent examination. Supervisory actions by the appropriate federal banking regulator depend upon an institution's classification within the five categories. The Company's management believes that the Company and the Bank have the requisite capital levels to qualify as well-capitalized institutions under the FDICIA. See Note 16, Regulatory Matters and Dividends from Subsidiaries, in the Notes to the December 31, 2012, Consolidated Financial Statements in Item 13 of this Registration Statement.

If an institution fails to remain well-capitalized, it will be subject to a variety of enforcement remedies that increase as the capital condition worsens. For instance, the FDICIA generally prohibits a depository institution from making any capital distribution, including payment of a dividend, or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized as a result. Undercapitalized depository institutions are subject to restrictions on borrowing from the Federal Reserve System. In addition, undercapitalized depository institutions may not accept brokered deposits absent a waiver from the FDIC, are subject to growth limitations and are required to submit capital restoration plans for regulatory approval. A depository institution's holding company must guarantee any required capital restoration plan, up to an amount equal to the lesser of 5 percent of the depository institution's assets at the time it becomes undercapitalized or the amount of the capital deficiency when the institution fails to comply with the plan. Federal banking regulators may not accept a capital plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution's capital. If a depository institution fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized.

Significantly undercapitalized depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets and cessation of receipt of deposits from correspondent banks. Critically undercapitalized depository institutions are subject to appointment of a receiver or conservator.

The U.S. Basel III final rule revises the capital ratio thresholds in the prompt corrective action framework to reflect the new Basel III capital ratios. This aspect of the U.S. Basel III will become effective on January 1, 2015.

The Company and the Bank will be subject to the higher capital adequacy standards contained in the U.S. Basel III final rule.

In July 2013, the federal banking regulators issued the U.S. Basel III final rule. The final rule implements the Basel III capital framework and certain provisions of the Dodd-Frank Act, including the Collins Amendment. Certain aspects of the final rule, such as the new minimum capital ratios and the revised methodology for calculating risk-weighted assets, will become effective on January 1, 2015 for the Bank and the Company. Other aspects of the final rule, such as the capital conservation buffer and the new regulatory deductions from and adjustments to capital, will be phased in over several years beginning on January 1, 2015.

Consistent with the Basel Committee's Basel III capital framework, the U.S. Basel III final rule includes a new minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of 4.5 percent and a Common Equity Tier 1 capital conservation buffer of greater than 2.5 percent of risk-weighted assets that will apply to all U.S. banking organizations, including the Bank and the Company. Failure to maintain the capital conservation buffer will result in increasingly stringent restrictions on a banking organization's ability to make dividend payments and other capital distributions and pay discretionary bonuses to executive officers. The final rule also increases the minimum ratio of Tier 1 capital to risk-weighted assets from 4 percent to 6 percent, while maintaining the current minimum total risk-based capital ratio of 8 percent. In addition, for the largest and most internationally active U.S. banking organizations, which do not include the Bank and the Company, the final rule includes a new minimum supplementary leverage ratio that takes into account certain off-balance sheet exposures.

The U.S. Basel III final rule focuses regulatory capital on Common Equity Tier 1 capital, and introduces new regulatory adjustments and deductions from capital as well as narrower eligibility criteria for regulatory capital

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instruments. The new eligibility criteria for regulatory capital instruments results in, among other things, trust preferred securities no longer qualifying as Tier 1 capital for bank holding companies such as the Company, an outcome that is also required by the Collins Amendment provision of the Dodd-Frank Act. Under the U.S. Basel III final rule, existing trust preferred securities issued by the Company before May 19, 2010 will be phased out of Tier 1 capital and into Tier 2 capital by January 1, 2016. The final rule also revises the methodology for calculating risk-weighted assets for certain types of assets and exposures.

Large bank holding companies are required to submit annual capital plans to the Federal Reserve Board and are subject to stress testing requirements.

In November 2011, the Federal Reserve Board issued a final rule to require large bank holding companies to submit annual capital plans to the Federal Reserve Board and to generally obtain approval from the Federal Reserve Board before making a dividend payment or other capital distribution. The capital plan rule applies to the Company and all other bank holding companies with $50 billion or more of total consolidated assets. The Company participated in the CapPR program in 2012 and 2013, submitting its first annual capital plan on January 9, 2012. Beginning in 2014, the Company will participate in the CCAR program. A large bank holding company's capital plan must include an assessment of the expected uses and sources of capital over a forward-looking planning horizon of at least nine quarters, a detailed description of the company's process for assessing capital adequacy, the company's capital policy, and a discussion of any expected changes to the company's business plan that are likely to have a material impact on its capital adequacy or liquidity. Based on a qualitative and quantitative assessment, including a supervisory stress test conducted as part of the CCAR process, the Federal Reserve Board will either object to a large bank holding company's capital plan, in whole or in part, or provide a notice of non-objection to the company by March 31 of a calendar year for plans submitted by the January submission date. If the Federal Reserve Board objects to a capital plan, the bank holding company may not make any capital distribution other than those with respect to which the Federal Reserve Board has indicated its non-objection. While the Company can give no assurances as to the outcome of the CCAR process or specific interactions with the regulators, it believes it has a strong capital position.

In addition, the Dodd-Frank Act and implementing rules issued by the Federal Reserve Board impose stress test requirements on both the Company and the Bank. Beginning in October 2013, the Company must conduct semi-annual company-run stress tests and is subject to an annual supervisory stress test conducted by the Federal Reserve Board. The Bank must submit its first annual company-run stress test to the Federal Reserve Board by January 2014.

The Federal Reserve Board has issued an interim final rule specifying how large bank holding companies, including the Company, should incorporate the U.S. Basel III capital standards into their 2014 capital plan and 2014 Dodd-Frank Act stress test capital projections. Among other things, the interim final rule requires large bank holding companies to project both their Tier 1 Common risk-based capital ratio using the methodology under existing capital guidelines and their Common Equity Tier 1 risk-based capital ratio under the U.S. Basel III capital standards, as such standards phase in over the nine-quarter planning horizon.

Under a Federal Reserve Board proposal issued pursuant to the Dodd-Frank Act, BBVA's U.S. operations, including the Company and the Bank, would be subject to enhanced prudential standards.

The Dodd-Frank Act requires the Federal Reserve Board to impose greater risk-based and leverage capital, liquidity, single counterparty credit limits, stress testing, risk management and other enhanced prudential standards for bank holding companies with $50 billion or more in total consolidated assets, including the Company. The Federal Reserve Board has proposed two different sets of rules pursuant to its enhanced prudential standards authority under the Dodd-Frank Act. The first set of rules is applicable to top-tier U.S.-based bank holding companies with total consolidated assets of $50 billion or more. Proposed in December 2012, the second set of rules would apply to Large FBOs, such as BBVA, and their U.S. branch and subsidiaries, such the Company and the Bank.

Under the December 2012 enhanced prudential standards proposal, Large FBOs with $10 billion or more in U.S. assets held outside of their U.S. branches and agencies, such as BBVA, would be required to create a separately-capitalized IHC that would hold all of the Large FBO's U.S. bank and nonbank subsidiaries, such as the Bank and the Company. Under the proposal, a Large FBO that is subject to the IHC requirement may request permission from the Federal Reserve Board to establish multiple IHCs or use an alternative organizational structure. The proposal would also permit the Federal Reserve Board to apply the IHC requirement in a manner that takes into account the separate operations of multiple foreign banks that are owned by a single Large FBO.

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Under the Federal Reserve Board's proposal, an IHC would be subject to U.S. capital, liquidity, single counterparty credit limits, risk management, stress testing and other enhanced prudential standards on a consolidated basis, and the Federal Reserve Board would have the authority to examine any IHC and any subsidiary of an IHC. Although U.S. branches and agencies of Large FBOs would not be required to be held beneath an IHC, such branches and agencies would be subject to liquidity, single counterparty credit limits, and, in certain circumstances, asset maintenance requirements. The proposal has a proposed effective date of July 1, 2015.

Deposit Insurance and Assessments

Deposits at the Bank are insured by the DIF as administered by the FDIC, up to the applicable limits established by law. The Dodd-Frank Act amended the statutory regime governing the DIF. Among other things, the Dodd-Frank Act established a minimum DRR of 1.35 percent of estimated insured deposits, required that the fund reserve ratio reach 1.35 percent by September 30, 2020 and directed the FDIC to amend its regulations to redefine the assessment base used for calculating deposit insurance assessments. Specifically, the Dodd-Frank Act requires the assessment base to be an amount equal to the average consolidated total assets of the insured depository institution during the assessment period, minus the sum of the average tangible equity of the insured depository institution during the assessment period and an amount the FDIC determines is necessary to establish assessments consistent with the risk-based assessment system found in the Federal Deposit Insurance Act.

In December of 2010, the FDIC adopted a final rule setting the DRR at 2.0 percent. Furthermore, on February 7, 2011 the FDIC issued a final rule changing its assessment system from one based on domestic deposits to one based on the average consolidated total assets of a bank minus its average tangible equity during each quarter. The February 7, 2011, final rule modifies two adjustments added to the risk-based pricing system in 2009 (an unsecured debt adjustment and a brokered deposit adjustment), discontinues a third adjustment added in 2009 (the secured liability adjustment) and adds an adjustment for long-term debt held by an insured depository institution where the debt is issued by another insured depository institution. Under the February 7, 2011, final rule, the total base assessment rates will vary depending on the DIF reserve ratio. For example, for banks in the best risk category, the total base assessment rates will be between 2.5 and 9 basis points when the DIF reserve ratio is below 1.15 percent, between 1.5 and 7 basis points when the DIF reserve ratio is between 1.15 percent and 2 percent, between 1 and 6 basis points when the DIF reserve ratio is between 2 percent and 2.5 percent and between 0.5 and 5 basis points when the DIF reserve ratio is 2.5 percent or higher.

In addition, the FDIC collects FICO deposit assessments, which is calculated off of the new assessment base established by the Dodd-Frank Act. FICO assessments are set quarterly, and in 2011 ranged from 1.020 (annual) basis points in the first quarter to .680 (annual) basis points in the second, third and fourth quarters. The Company pays the deposit insurance assessment, less offset available by means of prepaid assessment credits, and pays the quarterly FICO assessments.

On November 12, 2009, the FDIC imposed a requirement on all financial institutions to prepay three years of FDIC insurance premiums.

On February 7, 2011, the FDIC adopted regulations that were effective for the 2011 second quarter assessment and payable in September 2011, which outlined significant changes in the risk-based premiums approach for banks with over $10 billion of assets and created a scorecard system. The scorecard system uses a performance score and loss severity score, which aggregate to an initial base assessment rate. The assessment base also changed from deposits to an institution's average total assets minus its average tangible equity. The 2011 FDIC assessment impact on the Company's Consolidated Financial Statements from these assessment changes was not materially different than the prior period.

With respect to brokered deposits, an insured depository institution must be well-capitalized in order to accept, renew or roll over such deposits without FDIC clearance. An adequately capitalized insured depository institution must obtain a waiver from the FDIC in order to accept, renew or roll over brokered deposits. Undercapitalized insured depository institutions generally may not accept, renew or roll over brokered deposits. See the Deposits section in Item 2. Financial Information - Management's Discussion and Analysis of Financial Condition and Results of Operations of this Registration Statement.

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Dodd-Frank Act; Future Changes to Legal Framework

On July 21, 2010, President Obama signed into law the Dodd-Frank Act, which substantially changed the regulatory framework under which the Company operates. The Dodd-Frank Act represents a significant overhaul of many aspects of the regulation of the financial-services industry, addressing, among other things, systemic risk, capital adequacy, deposit insurance assessments, consumer financial protection, interchange fees, derivatives, lending limits, mortgage lending practices, registration of investment advisors and changes among the bank regulatory agencies. Among the provisions that may affect the operations of the Company or the Bank are the following:

• Creation of the CFPB with centralized authority, including examination and enforcement authority, for consumer protection in the banking industry;

• New limitations on federal preemption;

• New prohibitions and restrictions on the ability of a banking entity and non-bank financial company to engage in proprietary trading and have certain interests in, or relationships with, a hedge fund or private equity fund;

• Application of heightened capital, liquidity, single counterparty credit limits, stress testing, risk management and other enhanced prudential standards to the U.S. operations of BBVA, including the Company and the Bank;

• Requirement that the Company and the Bank be well-capitalized;

• Changes to the assessment base for deposit insurance premiums;

• Permanently raises the FDIC's standard maximum insurance amount to $250,000;

• Imposes limits on interchange fees;

• Repeals the prohibition on the payment of interest on demand deposits, effective July 21, 2011, thereby permitting depository institutions to pay interest on business transaction and other accounts;

• Places restrictions on compensation, including a prohibition on incentive-based compensation arrangements that encourage inappropriate risk taking by covered financial institutions and are deemed to be excessive, or that may lead to material losses;

• Requires that sponsors of asset-backed securities retain a percentage of the credit risk underlying the securities; and

• Requires that banking regulators remove references to and requirements of reliance upon credit ratings from their regulations and replace them with appropriate alternatives for evaluating creditworthiness.

Some of these and other major changes could materially impact the profitability of the Company's business, the value of its assets or the collateral available for its loans, require changes to business practices or force the Company to discontinue businesses and expose it to additional costs, taxes, liabilities, enforcement actions and reputational risk. Many of these provisions became effective upon enactment of the Dodd-Frank Act, while others are subject to further study, rule-making, and the discretion of regulatory bodies. In light of these significant changes and the discretion afforded to federal regulators, the Company cannot fully predict the effect that compliance with the Dodd-Frank Act or any implementing regulations will have on the Company's businesses or its ability to pursue future business opportunities. Additional regulations resulting from the Dodd-Frank Act may materially adversely affect the Company's business, financial condition or results of operations. See Item 1A. Risk Factors - The Company is subject to legislation and regulation, including the Dodd-Frank Act, and future legislation or regulation could require it to change certain business practices, reduce its revenue, impose additional costs on the Company or otherwise adversely affect its business operations and competitive position of this Registration Statement.

Additional changes to the laws and regulations applicable to the Company are frequently proposed at both the federal and state levels. The likelihood, timing and scope of any such change and the impact any such change may have on the Company are impossible to determine with any certainty.

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Rules have been proposed to implement the Volcker Rule

In October 2011, the Federal Reserve Board issued proposed rules to implement the Volcker Rule required by the Dodd-Frank Act. The Volcker Rule prohibits an insured depository institution and its affiliates from (1) engaging in “proprietary trading” and (2) investing in or sponsoring certain types of funds (covered funds) subject to certain limited exceptions. These prohibitions are expected to impact the ability of U.S. banking organizations to provide investment management products and services that are competitive with non-banking firms generally and with non-U.S. banking organizations in overseas markets. The proposed rules would also effectively prohibit short-term trading strategies by any U.S. banking organization if those strategies involve instruments other than those specifically permitted for trading. The Company does not anticipate that impacts of the proposed rules will be material to its results of operations or financial position.

The Durbin Amendment's rules affecting debit card interchange fees impact the Company's electronic banking income

The Durbin Amendment required the Federal Reserve Board to establish a cap on the rate merchants pay banks for electronic clearing of debit transactions (i.e., the interchange rate). The Federal Reserve Board issued final rules, effective October 1, 2011, for establishing standards, including a cap, for debit card interchange fees and prohibiting network exclusivity arrangements and routing restrictions. The final rule established standards for assessing whether debit card interchange fees received by debit card issuers were reasonable and proportional to the costs incurred by issuers for electronic debit transactions. Under the final rule, the maximum permissible interchange fee that an issuer may receive for an electronic debit transaction is the sum of 21 cents per transaction, a 1 cent fraud prevention adjustment, and 5 basis points multiplied by the value of the transaction.

The lowering of interchange fees adversely impacted the Company's noninterest income, as described in Item 2. Financial Information - Management's Discussion and Analysis of Financial Condition and Results of Operations. In July 2013, a decision by a Washington D.C. District Court judge invalidated the Federal Reserve Board's interchange rule ruling in favor of a group of retailers who argued that the new lower interchange fees had been inappropriately set too high by the Federal Reserve Board. The Federal Reserve Board has appealed the decision and a stay is in effect. If the rule were to be revised so that interchange fees were even lower, it would further adversely impact the Company's noninterest income. It is not possible to predict what the appellate court might do and how the Federal Reserve Board, if required to do so, would revise the interchange rule.

Consumer Protection Regulations

Retail activities of banks are subject to a variety of statutes and regulations designed to protect consumers. Interest and other charges collected or contracted for by banks are subject to state usury laws and federal laws concerning interest rates. Loan operations are also subject to federal laws applicable to credit transactions, such as:

• the federal Truth-In-Lending Act and Regulation Z issued by the Federal Reserve Board, governing disclosures of credit terms to consumer borrowers;

• the Home Mortgage Disclosure Act and Regulation C issued by the Federal Reserve Board, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

• the Equal Credit Opportunity Act and Regulation B issued by the Federal Reserve Board, prohibiting discrimination on the basis of various prohibited factors in extending credit;

• the Fair Credit Reporting Act and Regulation V issued by the Federal Reserve Board, governing the use and provision of information to consumer reporting agencies;

• the Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;

• the Servicemembers Civil Relief Act, applying to all debts incurred prior to commencement of active military service (including credit card and other open-end debt) and limiting the amount of interest,

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including service and renewal charges and any other fees or charges (other than bona fide insurance) that is related to the obligation or liability; and

• the guidance of the various federal agencies charged with the responsibility of implementing such federal laws.

Deposit operations also are subject to, among others:

• the Truth in Savings Act and Regulation DD issued by the Federal Reserve Board, which require disclosure of deposit terms to consumers;

• Regulation CC issued by the Federal Reserve Board, which relates to the availability of deposit funds to consumers;

• the Right to Financial Privacy Act, which imposes a duty to maintain the confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; and

• the Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve Board, which governs automatic deposits to and withdrawals from deposit accounts and customers' rights and liabilities arising from the use of automated teller machines and other electronic banking services.

In addition, there are a number of significant consumer protection standards that apply to functional areas of operation (rather than applying only to loan or deposit products). The Federal Reserve Board and the FDIC also enacted consumer protection regulations related to automated overdraft payment programs offered by financial institutions. The FDIC has issued rules aimed at protecting consumers in connection with retail foreign exchange transactions. In addition, the Federal Reserve Board has been actively revising Regulation E, which governs electronic transactions, including a recent proposal governing remittance transfer transactions. Among the finalized changes made to Regulation E is the November 2009 amendment, which prohibits financial institutions, including the Company, from charging consumers fees for paying overdrafts on automated teller machine and one-time debit card transactions, unless a consumer consents, or opts in, to the overdraft service for those types of transactions. Regulation E amendments also require financial institutions to provide consumers with a notice that explains the financial institution's overdraft services, including the fees associated with the service and the consumer's choices. The amendments to Regulation E became effective on August 1, 2010.

The CFPB recently finalized a number of significant rules which will impact nearly every aspect of the lifecycle of a residential mortgage. These rules implement the Dodd-Frank Act amendments to the Equal Credit Opportunity Act, the Truth in Lending Act and the Real Estate Settlement Procedures Act. The final rules require banks to, among other things: (i) develop and implement procedures to ensure compliance with a new “reasonable ability to repay” test and identify whether a loan meets a new definition for a “qualified mortgage,” (ii) implement new or revised disclosures, policies and procedures for servicing mortgages including, but not limited to, early intervention with delinquent borrowers and specific loss mitigation procedures for loans secured by a borrower's principal residence, (iii) comply with additional restrictions on mortgage loan originator compensation, and (iv) comply with new disclosure requirements and standards for appraisals and escrow accounts maintained for “higher priced mortgage loans.” These new rules create operational and strategic challenges for the Company, as it is both a mortgage originator and a servicer. For example, business models for cost, pricing, delivery, compensation, and risk management will need to be reevaluated and potentially revised, perhaps substantially. Additionally, programming changes and enhancements to systems will be necessary to comply with the new rules. Some of these new rules went effective in June 2013, while others will be effective in January 2014. Forthcoming additional rulemaking affecting the residential mortgage business is also expected. These rules and any other new regulatory requirements promulgated by the CFPB could require changes to the Company's business, result in increased compliance costs and affect the streams of revenue of such business.

Many of the foregoing laws and regulations are subject to change resulting from the provisions in the Dodd-Frank Act, which in many cases calls for revisions to implementing regulations. In addition, oversight responsibilities of these and other consumer protection laws and regulations transferred from the bank's primary federal regulator to the CFPB. The CFPB is in the process of republishing the transferred regulations in a new section of the Code of Federal Regulations but has not yet made substantive changes to these rules. It is anticipated that the CFPB will be making substantive

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changes to a number of consumer protection regulations and associated disclosures in the near term. The Company cannot predict the effect that being regulated by a new, additional regulatory authority focused on consumer financial protection, or any new implementing regulations or revisions to existing regulations that may result from the establishment of this new authority, will have on its businesses. Additional regulations resulting from the Dodd-Frank Act may materially adversely affect the Company' business, financial condition or results of operations. See Item 1A. Risk Factors - The Company is subject to legislation and regulation, including the Dodd-Frank Act, and future legislation or regulation could require it to change certain business practices, reduce its revenue, impose additional costs on the Company or otherwise adversely affect its business operations and competitive position of this Registration Statement.

In addition, the Company is also subject to certain state laws and regulations designed to protect consumers.

The Company is required to submit a resolution plan to the Federal Reserve Board and the FDIC.

The Federal Reserve Board and the FDIC have issued final regulations as required by Section 165 of the Dodd-Frank Act regarding resolution plans, also referred to as living wills. The Federal Reserve Board and the FDIC issued final rules applicable to bank holding companies with assets of $50 billion or more, which became effective November 30, 2011. The FDIC issued final rules applicable to insured depository institutions with assets of $50 billion or more, which became effective April 1, 2012. Insured depository institutions with $50 billion or more in total assets, like the Bank, must submit to the FDIC a plan whereby the institution can be resolved by the FDIC, in the event of failure, in a manner that ensures depositors will receive access to insured funds within the required timeframes and generally ensures an orderly liquidation of the institution. Additionally, bank holding companies, like the Company, with assets of $50 billion or more are required to submit to the Federal Reserve Board and the FDIC a plan that, in the event of material financial distress or failure, establishes the rapid and orderly liquidation of the company under the bankruptcy code and in a way that would not pose systemic risk to the financial system of the United States. The regulations allow for a tiered approach for complying with the requirements based on materiality of the institution. The Company is required to submit resolution plans by December 31, 2013. If the Federal Reserve Board and the FDIC determine that a company’s plan is not credible and the company fails to cure the deficiencies in a timely manner, then the Federal Reserve Board and the FDIC may jointly impose on the company, or on any of its subsidiaries, more stringent capital, leverage or liquidity requirements or restrictions on growth, activities, or operations.

U.S. Liquidity Standards

The Federal Reserve Board evaluates the Company’s liquidity as part of the supervisory process. In addition, the Basel Committee has developed a set of internationally-agreed upon quantitative liquidity metrics: the LCR and the NSFR. The LCR was developed to ensure banks have sufficient high-quality liquid assets to cover expected net cash outflows over a 30-day liquidity stress period. The NSFR has a time horizon of one year and has been developed to provide a sustainable maturity structure of assets and liabilities. The Basel Committee contemplates that major jurisdictions will begin to phase in the LCR requirement on January 1, 2015. It contemplates that the NSFR, including any revisions, will be implemented as a minimum standard by January 1, 2018.

In October 2013, the federal banking regulators proposed a rule to implement the LCR in the United States. The proposed rule would apply a modified version of the LCR to large bank holding companies such as the Company. The modified version of the LCR differs in certain respects from the Basel Committee’s version of the LCR, including a narrower definition of high-quality liquid assets, different prescribed cash inflow and outflow assumptions for certain types of instruments and transactions and a shorter phase-in schedule that ends on December 31, 2016. The federal banking regulators have not yet proposed rules to implement the NSFR in the United States. However, the Federal Reserve Board has proposed liquidity risk management, stress testing and liquidity buffer requirements for the U.S. operations of Large FBOs such as BBVA. The Company and the Bank are part of BBVA’s U.S. operations.

Anti-Money Laundering; USA PATRIOT Act; Office of Foreign Assets Control

Financial institutions must maintain anti-money laundering programs that include established internal policies, procedures, and controls; a designated compliance officer; an ongoing employee training program; and testing of the program by an independent audit function. The Company is prohibited from entering into specified financial transactions and account relationships and must meet enhanced standards for due diligence in dealings with foreign financial institutions and foreign customers. The Company also must take reasonable steps to conduct enhanced scrutiny of account relationships to guard against money laundering and to report any suspicious transactions. Recent laws provide

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law enforcement authorities with increased access to financial information maintained by banks. Anti-money laundering obligations have been substantially strengthened as a result of the USA PATRIOT Act, enacted in 2001 and renewed in 2006. Bank regulators routinely examine institutions for compliance with these obligations and are required to consider compliance in connection with the regulatory review of applications.

The USA PATRIOT Act amended, in part, the Bank Secrecy Act and provides for the facilitation of information sharing among governmental entities and financial institutions for the purpose of combating terrorism and money laundering. The statute also creates enhanced information collection tools and enforcement mechanics for the U.S. government, including: (1) requiring standards for verifying customer identification at account opening; (2) promulgating rules to promote cooperation among financial institutions, regulators and law enforcement entities in identifying parties that may be involved in terrorism or money laundering; (3) requiring reports by nonfinancial trades and businesses filed with the Treasury's Financial Crimes Enforcement Network for transactions exceeding $10,000; and (4) mandating the filing of suspicious activities reports if a bank believes a customer may be violating U.S. laws and regulations. The statute also requires enhanced due diligence requirements for financial institutions that administer, maintain or manage private bank accounts or correspondent accounts for non-U.S. persons.

The Federal Bureau of Investigation may send bank regulatory agencies lists of the names of persons suspected of involvement in terrorist activities. The Bank can be requested to search their records for any relationships or transactions with persons on those lists and may be required to report any identified relationships or transactions. Furthermore, OFAC is responsible for helping to ensure that U.S. entities do not engage in transactions with certain prohibited parties, as defined by various Executive Orders and Acts of Congress. OFAC publishes, and routinely updates, lists of names of persons and organizations suspected of aiding, harboring or engaging in terrorist acts, including the Specially Designated Nationals and Blocked Persons. OFAC also administers sanctions programs against certain countries. If the Company finds a name on any transaction, account or wire transfer that is on an OFAC list or that would violate a sanctions program administered by OFAC, it must freeze such account, file a suspicious activity report and notify the appropriate authorities.

Commitments to the Company

Under the Dodd-Frank Act, both BBVA and the Company are required to serve as a source of financial strength to the Bank and to commit resources to support the Bank in circumstances when BBVA and the Company might not do so absent the statutory requirement. Under the Bank Holding Company Act, the Federal Reserve Board may require a bank holding company to terminate any activity or relinquish control of a non-bank subsidiary, other than a non-bank subsidiary of a bank, upon the Federal Reserve Board's determination that such activity or control constitutes a serious risk to the financial soundness or stability of any depository institution subsidiary. Further, the Federal Reserve Board has discretion to require a bank holding company to divest itself of any bank or non-bank subsidiaries if the agency determines that any such divestiture may aid the depository institution's financial condition. In addition, any loans by the Company to the Bank would be subordinate in right of payment to depositors and to certain other indebtedness of the Bank.

Transactions with Affiliates and Insiders

A variety of legal limitations restrict the Bank from lending or otherwise supplying funds or in some cases transacting business with the Company or the Company's non-bank subsidiaries. The Company is subject to Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Regulation W. Section 23A places limits on the amount of “covered transactions,” which include loans or extensions of credit to, investments in or certain other transactions with, affiliates as well as the amount of advances to third parties collateralized by the securities or obligations of affiliates. The aggregate of all covered transactions is limited to 10 percent of a bank's capital and surplus for any one affiliate and 20 percent for all affiliates. Furthermore, within the foregoing limitations as to amount, certain covered transactions must meet specified collateral requirements ranging from 100 to 130 percent. Also, a bank is prohibited from purchasing low quality assets from any of its affiliates. Section 608 of the Dodd-Frank Act broadens the definition of “covered transactions” to include derivative transactions and the borrowing or lending of securities if the transaction will cause a bank to have credit exposure to an affiliate. The revised definition also includes the acceptance of debt obligations of an affiliate as collateral for a loan or extension of credit to a third party. Furthermore, reverse repurchase transactions are viewed as extensions of credit (instead of asset purchases) and thus become subject to collateral requirements.

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Section 23B prohibits an institution from engaging in certain transactions with affiliates unless the transactions are on terms substantially the same, or at least as favorable to the bank, as those prevailing at the time for comparable transactions with nonaffiliated companies. Except for limitations on low quality asset purchases and transactions that are deemed to be unsafe or unsound, Regulation W generally excludes affiliated depository institutions from treatment as affiliates. Transactions between a bank and any of its subsidiaries that are engaged in certain financial activities may be subject to the affiliated transaction limits. The Federal Reserve Board also may designate bank subsidiaries as affiliates.

Banks are also subject to quantitative restrictions on extensions of credit to executive officers, directors, principal shareholders and their related interests. In general, such extensions of credit (1) may not exceed certain dollar limitations, (2) must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties, and (3) must not involve more than the normal risk of repayment or present other unfavorable features. Certain extensions of credit also require the approval of a bank's board of directors.

Regulatory Examinations

Federal and state banking agencies require the Company and the Bank to prepare annual reports on financial condition and to conduct an annual audit of financial affairs in compliance with minimum standards and procedures. The Bank, and in some cases the Company and the Company's non-bank affiliates, must undergo regular on-site examinations by the appropriate regulatory agency, which will examine for adherence to a range of legal and regulatory compliance responsibilities. A bank regulator conducting an examination has complete access to the books and records of the examined institution. The results of the examination are confidential. The cost of examinations may be assessed against the examined institution as the agency deems necessary or appropriate.

Community Reinvestment Act

The Community Reinvestment Act requires the Federal Reserve Board to evaluate the record of the Company in meeting the credit needs of its local community, including low and moderate income neighborhoods. These evaluations are considered in evaluating mergers, acquisitions and applications to open a branch or facility. Failure to adequately meet these criteria could result in additional requirements and limitations on the Bank.

Commercial Real Estate Lending

Lending operations that involve concentrations of commercial real estate loans are subject to enhanced scrutiny by federal banking regulators. The regulators have advised financial institutions of the risks posed by commercial real estate lending concentrations. Such loans generally include land development, construction loans and loans secured by multifamily property, and nonfarm, nonresidential real property where the primary source of repayment is derived from rental income associated with the property. The guidance prescribes the following guidelines for examiners to help identify institutions that are potentially exposed to concentration risk and may warrant greater supervisory scrutiny:

• total reported loans for construction, land development and other land represent 100 percent or more of the institution's total capital, or

• total commercial real estate loans represent 300 percent or more of the institution's total capital, and the outstanding balance of the institution's commercial real estate loan portfolio has increased by 50 percent or more during the prior 36 months.

In October 2009, the federal banking regulators issued additional guidance on commercial real estate lending that emphasizes these considerations.

In addition, the Dodd-Frank Act contains provisions that may impact the Company's business by reducing the amount of its commercial real estate lending and increasing the cost of borrowing, including rules relating to risk retention of securitized assets. Section 941 of the Dodd-Frank Act requires, among other things, a loan originator or a securitizer of asset-backed securities to retain a percentage of the credit risk of securitized assets. The banking agencies have jointly issued a proposed rule to implement these requirements but have yet to issue final rules.

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Branching

The Dodd-Frank Act substantially amended the legal framework that had previously governed interstate branching activities. Formerly, under the Reigle-Neal Interstate Banking and Branching Efficiency Act of 1994, a bank's ability to branch into a particular state was largely dependent upon whether the state “opted in” to de novo interstate branching. Many states did not “opt-in,” which resulted in branching restrictions in those states. The Dodd-Frank Act removed the “opt-in” concept and permits banks to engage in de novo branching outside of their home states, provided that the laws of the target state permit banks chartered in that state to branch within that state. Accordingly, de novo interstate branching by the Company is subject to these new standards. All branching in which the Company may engage remains subject to regulatory approval and adherence to applicable legal and regulatory requirements.

Anti-Tying Restrictions

In general, a bank may not extend credit, lease, sell property, or furnish any services or fix or vary the consideration for them on the condition that (1) the customer obtain or provide some additional credit, property or services from or to said bank or bank holding company or their subsidiaries, or (2) the customer not obtain some other credit, property or services from a competitor, except to the extent reasonable conditions are imposed to assure the soundness of the credit extended. A bank may, however, offer combined-balance products and may otherwise offer more favorable terms if a customer obtains two or more traditional bank products. Also, certain foreign transactions are exempt from the general rule.

Privacy and Credit Reporting

Financial institutions are required to disclose their policies for collecting and protecting confidential customer information. Customers generally may prevent financial institutions from sharing nonpublic personal financial information with nonaffiliated third parties, with some exceptions, such as the processing of transactions requested by the consumer. Financial institutions generally may not disclose certain consumer or account information to any nonaffiliated third-party for use in telemarketing, direct mail marketing or other marketing. Federal and state banking agencies have prescribed standards for maintaining the security and confidentiality of consumer information, and the Company is subject to such standards, as well as certain federal and state laws or standards for notifying consumers in the event of a security breach.

The Bank utilizes credit bureau data in underwriting activities. Use of such data is regulated under the Fair Credit Reporting Act and Regulation V on a uniform, nationwide basis, including credit reporting, prescreening and sharing of information between affiliates and the use of credit data. The Fair and Accurate Credit Transactions Act, which amended the Fair Credit Reporting Act, permits states to enact identity theft laws that are not inconsistent with the conduct required by the provisions of that Act.

Enforcement Powers

The Bank and its “institution-affiliated parties,” including management, employees, agents, independent contractors and consultants, such as attorneys and accountants and others who participate in the conduct of the institution's affairs, are subject to potential civil and criminal penalties for violations of law, regulations or written orders of a government agency. Violations can include failure to timely file required reports, filing false or misleading information or submitting inaccurate reports. Civil penalties may be as high as $1,000,000 a day for such violations and criminal penalties for some financial institution crimes may include imprisonment for 20 years. Regulators have flexibility to commence enforcement actions against institutions and institution-affiliated parties, and the FDIC has the authority to terminate deposit insurance. When issued by a banking agency, cease-and-desist and similar orders may, among other things, require affirmative action to correct any harm resulting from a violation or practice, including restitution, reimbursement, indemnifications or guarantees against loss. A financial institution may also be ordered to restrict its growth, dispose of certain assets, rescind agreements or contracts or take other actions determined to be appropriate by the ordering agency. The federal banking regulators also may remove a director or officer from an insured depository institution (and bar them from the industry) if a violation is willful or reckless.

Monetary Policy and Economic Controls

The Bank's earnings, and therefore the Company's earnings, are affected by the policies of regulatory authorities, including the monetary policy of the Federal Reserve Board. An important function of the Federal Reserve Board is to

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promote orderly economic growth by influencing interest rates and the supply of money and credit. Among the methods that have been used to achieve this objective are open market operations in U.S. government securities, changes in the discount rate for bank borrowings, expanded access to funds for non-banks and changes in reserve requirements against bank deposits. These methods are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits, interest rates on loans and securities, and rates paid for deposits. Recently, in response to the financial crisis, the Federal Reserve Board has created several innovative programs to stabilize certain financial institutions and to ensure the availability of credit.

The effects of the various Federal Reserve Board policies on the Company's future business and earnings cannot be predicted. The Company cannot predict the nature or extent of any effects that possible future governmental controls or legislation might have on its business and earnings.

Depositor Preference Statute

Federal law provides that deposits and certain claims for administrative expenses and employee compensation against an insured depository institution are afforded priority over other general unsecured claims against such institution, including federal funds and letters of credit, in the liquidation or other resolution of the institution by any receiver.

Other Regulatory Matters

The Company and its subsidiaries and affiliates are subject to numerous examinations by federal and state banking regulators, as well as the SEC, FINRA and various state insurance and securities regulators. The Company and its subsidiaries have from time to time received requests for information from regulatory authorities at the federal level or in various states, including state insurance commissions, state attorneys general, federal agencies or law enforcement authorities, securities regulators and other regulatory authorities, concerning their business practices. Such requests are considered incidental to the normal conduct of business.

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Item 1A. Risk Factors

This section highlights the material risks that the Company currently faces. These risks may change over time and other risks may prove to be important in the future. New risks may emerge at any time, and the Company cannot predict such risks or estimate the extent to which they may affect its business, financial condition or the results of operations.

Any deterioration in national, regional and local economic conditions, particularly unemployment levels and home prices, could materially affect the Company's business, financial condition or results of operations.

The Company's business is subject to periodic fluctuations based on national, regional and local economic conditions. These fluctuations are not predictable, cannot be controlled, and may have a material adverse impact on its financial condition and operations even if other favorable events occur. The Company's banking operations are locally-oriented and community-based. Accordingly, the Company expects to continue to be dependent upon local business conditions as well as conditions in the local residential and commercial real estate markets it serves, including Alabama, Arizona, California, Colorado, Florida, New Mexico and Texas. These economic conditions could require the Company to charge off a higher percentage of loans or increase provisions for credit losses, which would reduce its net income.

Significant declines in the housing market from 2007 through 2010, with falling home prices and increasing foreclosures and unemployment, resulted in significant write-downs of asset values by many financial institutions, including government-sponsored entities and major commercial and investment banks. These write-downs, initially of mortgage-backed securities, but spreading to credit default swaps and other derivative securities, caused many financial institutions to seek additional capital, to merge with larger and stronger institutions and, in some cases, to fail. Although the U.S. economy has shown modest improvement recently, economic conditions continue to pose a risk to the financial system. The Company is part of the financial system and a systemic lack of available credit, a lack of confidence in the financial sector, continued volatility in the financial markets and/or reduced business activity could materially adversely affect its business, financial condition or results of operations.

The failure of the European Union to stabilize the fiscal condition of member countries, especially in Spain, could have an adverse impact on the Company as well as the financial markets, and the current U.S. economic recovery.

Certain European Union member countries have fiscal obligations greater than their fiscal revenue, which has caused investor concern over such countries' ability to continue to service their debt and foster economic growth. Fiscal austerity measures such as raising taxes and reducing entitlements have improved the ability of some member countries to service their debt, but have challenged economic growth and efforts to lower unemployment rates in the region.

The Company is a wholly-owned subsidiary of BBVA, which is based in Spain and serves as a source of strength and capital to the Company. Accordingly, European Union weakness, particularly in Spain, could directly impact BBVA and could have an adverse impact on the Company's business or financial condition.

A weaker European economy may transcend Europe, cause investors to lose confidence in the safety and soundness of European financial institutions and the stability of European member economies, and likewise affect U.S.-based financial institutions, the stability of the global financial markets and the economic recovery underway in the U.S. Should the U.S. economic recovery be adversely impacted by these factors, loan and asset growth at U.S. financial institutions, like the Company, could be affected.

The Company takes steps to strengthen its liquidity position. Nevertheless, a return of the volatile economic conditions experienced in the U.S. during 2008-2009, including the adverse conditions in the fixed income debt markets, for an extended period of time, particularly if left unmitigated by policy measures, may materially and adversely affect the Company.

Weakness in the real estate market, including the secondary residential mortgage loan market, has adversely affected the Company and may continue to adversely affect it.

Weakness in the non-agency secondary market for residential mortgage loans has limited the market for and liquidity of many nonconforming mortgage loans. The effects of ongoing mortgage market challenges, combined with the recent corrections in residential real estate market prices and reduced levels of home sales, could result in further price reductions in single family home values, adversely affecting the value of collateral securing mortgage loans that the

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Company holds, and mortgage loan originations and profits on sales of mortgage loans. Declining real estate prices have caused cyclically higher delinquencies and losses on mortgage loans, particularly Alt-A mortgages, and home equity lines of credit. These conditions have resulted in losses, write downs and impairment charges in the Company's mortgage and other lines of business.

Continued declines in real estate values, low home sales volumes, financial stress on borrowers as a result of unemployment, interest rate resets on ARMs or other factors could have further adverse effects on borrowers that could result in higher delinquencies and greater charge-offs in future periods, which would adversely affect the Company's financial condition or results of operations. Additionally, counterparties to insurance arrangements used to mitigate risk associated with increased defaults in the real estate market are stressed by weaknesses in the real estate market and a commensurate increase in the number of claims. Further, decreases in real estate values might adversely affect the creditworthiness of state and local governments, and this might result in decreased profitability or credit losses from loans made to such governments. A decline in home values or overall economic weakness could also have an adverse impact upon the value of real estate or other assets which the Company owns as a result of foreclosing a loan and its ability to realize value on such assets.

The Company is subject to legislation and regulation, including the Dodd-Frank Act, and future legislation or regulation could require it to change certain business practices, reduce its revenue, impose additional costs on the Company or otherwise adversely affect its business operations and competitive position.

On July 21, 2010, President Obama signed into law the Dodd-Frank Act, which has and will continue to substantially change the legal and regulatory framework under which the Company operates. The Dodd-Frank Act represents a significant overhaul of many aspects of the regulation of the financial-services industry, addressing, among other things, systemic risk, capital adequacy, deposit insurance assessments, consumer financial protection, interchange fees, derivatives, lending limits, mortgage lending practices, registration of investment advisors and changes among the bank regulatory agencies. The following are among the provisions that may affect the Company's operations:

• Creation of the CFPB with centralized authority, including examination and enforcement authority, for consumer protection in the banking industry.

• New limitations on federal preemption.

• Application of heightened capital, liquidity, single counterparty credit limits, stress testing, risk management and other enhanced prudential standards to the U.S. operations of BBVA, including the Company and the Bank.

• Requirement that a parent company and its subsidiary bank(s) be well-capitalized and well-managed in order to engage in activities permitted for financial holding companies.

• Changes to the assessment base for deposit insurance premiums.

• Permanently raising the FDIC's standard maximum deposit insurance limit to $250,000 for federal deposit insurance.

• Imposing further limits on interchange fees.

• Repeal of the prohibition on the payment of interest on demand deposits, effective July 21, 2011, thereby permitting depository institutions to pay interest on business transaction and other accounts.

• Restrictions on compensation, including a prohibition on incentive-based compensation arrangements that encourage inappropriate risk taking by covered financial institutions and are deemed to be excessive, or that may lead to material losses.

• Requirement that banking regulators remove references to and requirements of reliance upon credit ratings from their regulations and replace them with appropriate alternatives for evaluating credit worthiness.

• New prohibitions and restrictions on the ability of a banking entity and nonbank financial company to engage in proprietary trading and have certain interests in, or relationships with, a hedge fund or private equity fund.

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• Creation of a new framework for the regulation of over-the-counter derivatives and new regulations for the securitization market and the strengthening of the regulatory oversight of securities and capital markets by the SEC.

Some of these and other major changes could materially impact the profitability of the Company's business, the value of assets it holds or the collateral available for its loans, require changes to business practices or force the Company to discontinue businesses and expose it to additional costs, taxes, liabilities, enforcement actions and reputational risk.

Many of these provisions became effective upon enactment of the Dodd-Frank Act, while others are subject to further study, rulemaking and the discretion of regulatory bodies. In light of these significant changes and the discretion afforded to federal regulators, the Company cannot fully predict the effect that compliance with the Dodd-Frank Act or any implementing regulations will have on the Company's businesses or its ability to pursue future business opportunities. Additional regulations resulting from the Dodd-Frank Act may materially adversely affect the Company's business, financial condition or results of operations.

The Dodd-Frank Act's provisions restricting bank interchange fees, and the rules promulgated thereunder, may negatively impact the Company's revenues and earnings.

Pursuant to the Dodd-Frank Act, the Federal Reserve Board adopted rules effective October 1, 2011, limiting the interchange fees that may be charged with respect to electronic debit transactions. Interchange fees are charges that merchants pay to the Company and other credit card companies and card-issuing banks for processing electronic payment transactions. Since taking effect, these limitations have reduced the Company's debit card interchange revenues and have created meaningful compliance costs. Additional limits may further reduce the Company's debit card interchange revenues and create additional compliance costs.

The lowering of interchange fees adversely impacted the Company's noninterest income, as described in Item 2. Financial Information - Management's Discussion and Analysis of Financial Condition and Results of Operations. In July 2013, a decision by a Washington D.C. District Court judge invalidated the Federal Reserve Board's interchange rule ruling in favor of a group of retailers who argued that the new lower interchange fees had been inappropriately set too high by the Federal Reserve Board. The Federal Reserve Board has appealed the decision and a stay is in effect. If the rule were to be revised so that interchange fees were even lower, it would further adversely impact the Company's noninterest income. It is not possible to predict what the appellate court might do and how the Federal Reserve Board, if required to do so, would revise the interchange rule.

The Dodd-Frank Act's consumer protection regulations could adversely affect the Company's business, financial condition or results of operations.

The Federal Reserve Board recently enacted consumer protection regulations related to automated overdraft payment programs offered by financial institutions. The Company has implemented changes to its business practices relating to overdraft payment programs in order to comply with these regulations.

For the years ended December 31, 2010 and 2009, the Company's overdraft and insufficient funds fees represented a significant amount of noninterest fees. Since taking effect on July 1, 2011, the fees received by the Company for automated overdraft payment services have decreased, thereby adversely impacting its noninterest income. Complying with these regulations has resulted in increased operational costs for the Company, which may continue to rise. The actual impact of these regulations in future periods could vary due to a variety of factors, including changes in customer behavior, economic conditions and other factors, which could adversely affect the Company's business, financial condition or results of operations.

The CFPB's residential mortgage regulations could adversely affect the Company's business, financial condition or results of operations.

The CFPB recently finalized a number of significant rules which will impact nearly every aspect of the lifecycle of a residential mortgage. These rules implement the Dodd-Frank Act amendments to the Equal Credit Opportunity Act, the Truth in Lending Act and the Real Estate Settlement Procedures Act. The final rules require banks to, among other things: (i) develop and implement procedures to ensure compliance with a new “reasonable ability to repay” test and identify whether a loan meets a new definition for a “qualified mortgage,” (ii) implement new or revised disclosures, policies and procedures for servicing mortgages including, but not limited to, early intervention with delinquent

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borrowers and specific loss mitigation procedures for loans secured by a borrower's principal residence, (iii) comply with additional restrictions on mortgage loan originator compensation, and (iv) comply with new disclosure requirements and standards for appraisals and escrow accounts maintained for “higher priced mortgage loans.” These new rules create operational and strategic challenges for the Company, as it is both a mortgage originator and a servicer. For example, business models for cost, pricing, delivery, compensation and risk management will need to be reevaluated and potentially revised, perhaps substantially. Additionally, programming changes and enhancements to systems will be necessary to comply with the new rules. Some of these new rules went effective in June 2013, while others will be effective in January 2014. Forthcoming additional rulemaking affecting the residential mortgage business is also expected. These rules and any other new regulatory requirements promulgated by the CFPB could require changes to the Company's business, result in increased compliance costs and affect the streams of revenue of such business.

The Company is subject to capital adequacy and liquidity standards, and if it fails to meet these standards its financial condition and operations would be adversely affected.

The U.S. Basel III final rule and provisions in the Dodd-Frank Act, including the Collins Amendment, will increase capital requirements for banking organizations such as the Company and the Bank. Consistent with the Basel Committee's Basel III capital framework, the U.S. Basel III final rule includes a new minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of 4.5 percent and a Common Equity Tier 1 capital conservation buffer of greater than 2.5 percent of risk-weighted assets that will apply to all U.S. banking organizations, including the Bank and the Company. Failure to maintain the capital conservation buffer would result in increasingly stringent restrictions on a banking organization's ability to make dividend payments and other capital distributions and pay discretionary bonuses to executive officers. Under the U.S. Basel III final rule, trust preferred securities no longer qualify as Tier 1 capital for bank holding companies such as the Company, an outcome that is also required by the Collins Amendment.

The Company is also required to submit an annual capital plan to the Federal Reserve Board. The capital plan must include an assessment of the Company's expected uses and sources of capital over a forward-looking planning horizon of at least nine quarters, a detailed description of the Company's process for assessing capital adequacy, the Company's capital policy, and a discussion of any expected changes to the Company's business plan that are likely to have a material impact on its capital adequacy or liquidity. Based on a qualitative and quantitative assessment, including a supervisory stress test conducted as part of the CCAR process, the Federal Reserve Board will either object to the Company's capital plan, in whole or in part, or provide a notice of non-objection to the Company by March 31 of a calendar year. If the Federal Reserve Board objects to a capital plan, the Company may not make any capital distribution other than those with respect to which the Federal Reserve Board has indicated its non-objection. In addition to capital planning, the Company and the Bank are subject to capital stress testing requirements imposed by the Dodd-Frank Act. The Company's capital plan to be submitted in January 2014 will be the first capital plan evaluated under the CCAR process, as the Company's prior capital plans were evaluated under the CapPR process.

While the Company can give no assurances as to the outcome or specific interactions with the regulators, it believes it has a strong capital position.

The Federal Reserve Board evaluates the Company's liquidity as part of the supervisory process. In addition, the Basel Committee has developed a set of internationally-agreed upon quantitative liquidity metrics: the LCR and the NSFR. The LCR was developed to ensure banks have sufficient high-quality liquid assets to cover expected net cash outflows over a 30-day liquidity stress period.  The NSFR has a time horizon of one year and has been developed to provide a sustainable maturity structure of assets and liabilities. The Basel Committee contemplates that major jurisdictions will begin to phase in the LCR requirement on January 1, 2015. It contemplates that the NSFR, including any revisions, will be implemented as a minimum standard by January 1, 2018.

In October 2013, the federal banking regulators proposed a rule to implement the LCR in the United States. The proposed rule would apply a modified version of the LCR to large bank holding companies such as the Company. The modified version of the LCR differs in certain respects from the Basel Committee’s version of the LCR, including a narrower definition of high-quality liquid assets, different prescribed cash inflow and outflow assumptions for certain types of instruments and transactions and a shorter phase-in schedule that ends on January 1, 2017. The federal banking regulators have not yet proposed rules to implement the NSFR in the United States. However, the Federal Reserve Board has proposed liquidity risk management, stress testing and liquidity buffer requirements for the U.S. operations of Large FBOs such as BBVA. The Company and the Bank are part of BBVA’s U.S. operations.

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The Federal Reserve Board has proposed to enhance its supervision and regulation of the U.S. operations of Large FBOs such as BBVA. BBVA's U.S. operations include the Company and the Bank. Under the Federal Reserve Board's proposal, Large FBOs with $10 billion or more in U.S. assets held outside of their U.S. branches and agencies, such as BBVA, would be required to create a separately-capitalized top-tier U.S. IHC that would hold all of the Large FBO's U.S. bank and nonbank subsidiaries, such as the Bank and the Company. An IHC would be subject to U.S. risk-based and leverage capital, liquidity, single counterparty credit limits, risk management, stress testing, early remediation framework and other enhanced prudential standards on a consolidated basis. The Federal Reserve Board's proposal has a proposed effective date of July 1, 2015. The Federal Reserve Board's proposal, if adopted, could affect the Company's operations.

The Parent is a holding company and depends on its subsidiaries for liquidity in the form of dividends, distributions and other payments.

The Parent is a legal entity separate and distinct from its subsidiaries, including the Bank. The principal source of cash flow for the Parent is dividends from the Bank. There are statutory and regulatory limitations on the payment of dividends by the Bank. Regulations of both the Federal Reserve and the State of Alabama affect the ability of the Bank to pay dividends and other distributions to the Company and to make loans to the Company. Also, the Company’s right to participate in a distribution of assets upon a subsidiary's liquidation or reorganization is subject to the prior claims of the subsidiary's creditors. Limitations on the Parent’s ability to receive dividends and distributions from its subsidiaries could have a material adverse effect on the Company’s liquidity and on its ability to pay dividends on common stock. For additional information regarding these limitations see Item 1. Business - Supervision, Regulation and Other Factors - Dividends.

The Company is subject to credit risk.

When the Company loans money, commits to loan money or enters into a letter of credit or other contract with a counterparty, it incurs credit risk, which is the risk of losses if its borrowers do not repay their loans or its counterparties fail to perform according to the terms of their contracts. A number of the Company's products expose it to credit risk, including loans, leases and lending commitments.

Further downgrades to the U.S. government's credit rating, or the credit rating of its securities, by one or more of the credit ratings agencies could have a material adverse effect on general economic conditions, as well as the Company's operations, earnings and financial condition.

On August 5, 2011, Standard & Poor's cut the U.S. government's sovereign credit rating of long-term U.S. federal debt from AAA to AA+ while also keeping its outlook negative. Moody's also lowered its outlook to “Negative” on June 2, 2011, and Fitch lowered its outlook to “Negative” on November 28, 2011. During 2013, both Moody's and Standard & Poor's revised their outlook from "Negative" to "Stable" while Fitch continued to maintain a "Negative" outlook. There continues to be the perceived risk of a downgrade to the U.S. government's sovereign credit rating, including the rating of U.S. Treasury securities. It is foreseeable that the ratings and perceived creditworthiness of instruments issued, insured or guaranteed by institutions, agencies or instrumentalities directly linked to the U.S. government could also be correspondingly affected by any such downgrade. Instruments of this nature are key assets on the balance sheets of financial institutions, including the Company, and are widely used as collateral by financial institutions to meet their day-to-day cash flows in the short-term debt market.

Further downgrades of the U.S. government's sovereign credit rating, and the perceived creditworthiness of U.S. government-related obligations, could impact the Company's ability to obtain funding that is collateralized by affected instruments, as well as affecting the pricing of that funding when it is available. A downgrade may also adversely affect the market value of such instruments. The Company cannot predict if, when or how any changes to the credit ratings or perceived creditworthiness of these organizations will affect economic conditions. Such ratings actions could result in a significant adverse impact on the Company. A downgrade of the sovereign credit ratings of the U.S. government or the credit ratings of related institutions, agencies or instrumentalities would significantly exacerbate the other risks to which the Company is subject and any related adverse effects on its business, financial condition and results of operations.

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A reduction in the Company's own credit rating could have a material adverse effect on the Company's liquidity and increase the cost of its capital markets funding.

Adequate liquidity is essential to the Company's businesses. A reduction to the Company's credit rating could have a material adverse effect on the Company's business, financial condition and results of operations.

The rating agencies regularly evaluate the Company and their ratings are based on a number of factors, including the Company's financial strength as well as factors not entirely within its control, such as conditions affecting the financial services industry generally. Adverse changes in the credit ratings of the Kingdom of Spain, which subsequently could impact BBVA and its subsidiaries, as well as those of BBVA itself could also adversely impact the Company's credit rating. In light of the difficulties in the financial services industry and the housing and financial markets, there can be no assurance that the Company will maintain its current ratings. The Company's failure to maintain those ratings could increase its borrowing costs, require the Company to replace funding lost due to the downgrade, which may include the loss of customer deposits, and may also limit the Company's access to capital and money markets and trigger additional collateral requirements in derivatives contracts and other secured funding arrangements.

The Company's ability to access the capital markets is important to its overall funding profile. This access is affected by its credit rating. The interest rates that the Company pays on its securities are also influenced by, among other things, the credit ratings that it receives from recognized rating agencies. A downgrade to the Company's credit rating could affect its ability to access the capital markets, increase its borrowing costs and negatively impact its profitability. A ratings downgrade to the Company's credit rating could also create obligations or liabilities for it under the terms of its outstanding securities that could increase its costs or otherwise have a negative effect on the Company's results of operations or financial condition. Additionally, a downgrade of the credit rating of any particular security issued by the Company could negatively affect the ability of the holders of that security to sell the securities and the prices at which any such securities may be sold.

Changes in interest rates could affect the Company's income and cash flows.

The Company's earnings and financial condition are largely dependent on net interest income, which is the difference between interest earned from loans and investments and interest paid on deposits and borrowings. The narrowing of interest rate spreads, meaning the difference between interest rates earned on loans and investments and the interest rates paid on deposits and borrowings, could adversely affect the Company's earnings and financial condition. The Company cannot control or predict with certainty changes in interest rates.

Regional and local economic conditions, competitive pressures and the policies of regulatory authorities, including monetary policies of the Federal Reserve Board, affect interest income and interest expense. The Company has policies and procedures designed to manage the risks associated with changes in market interest rates. Changes in interest rates, however, may still have an adverse effect on the Company's profitability. While the Company actively manages against these risks, if its assumptions regarding borrower behavior are wrong or overall economic conditions are significantly different than planned for, then its risk mitigation techniques may be insufficient to protect against the risk.

The costs and effects of litigation, regulatory investigations or similar matters, or adverse facts and developments relating thereto, could materially affect the Company's business, operating results and financial condition.

The Company faces legal risks in its business, and the volume of claims and amount of damages and penalties claimed in litigation and regulatory proceedings against financial institutions remain high. Substantial legal liability or significant regulatory action against the Company may have material adverse financial effects or cause significant reputational harm, which in turn could seriously harm its business prospects.

The Company's insurance may not cover all claims that may be asserted against it and indemnification rights to which it is entitled may not be honored. Any claims asserted against the Company, regardless of merit or eventual outcome, may harm its reputation. Should the ultimate judgments or settlements in any litigation or investigation significantly exceed the Company's insurance coverage, they could have a material adverse effect on its business, financial condition and results of operations. In addition, premiums for insurance covering the financial and banking sectors are rising. The Company may not be able to obtain appropriate types or levels of insurance in the future, nor may it be able to obtain adequate replacement policies with acceptable terms or at historic rates, if at all.

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Disruptions in the Company's ability to access capital markets may adversely affect its capital resources and liquidity.

The Company may access capital markets to provide it with sufficient capital resources and liquidity to meet its commitments and business needs, and to accommodate the transaction and cash management needs of its clients. Other sources of contingent funding available to the Company include inter-bank borrowings, brokered deposits, repurchase agreements, FHLB capacity and borrowings from the Federal Reserve discount window. Any occurrence that may limit the Company's access to the capital markets, such as a decline in the confidence of debt investors, its depositors or counterparties participating in the capital markets, or a downgrade of its debt rating, may adversely affect the Company's capital costs and its ability to raise capital and, in turn, its liquidity.

Starting in mid-2007, significant turmoil and volatility in worldwide financial markets increased, though current volatility has declined. Such disruptions in the liquidity of financial markets directly impact the Company to the extent it needs to access capital markets to raise funds to support its business and overall liquidity position. This situation could adversely affect the cost of such funds or the Company's ability to raise such funds. If the Company were unable to access any of these funding sources when needed, it might be unable to meet customers' needs, which could adversely impact its financial condition, results of operations, cash flows and level of regulatory-qualifying capital.

The Company may suffer increased losses in its loan portfolio despite enhancement of its underwriting policies and practices, and the Company's allowances for credit losses may not be adequate to cover such eventual losses.

The Company seeks to mitigate risks inherent in its loan portfolio by adhering to specific underwriting policies and practices, which often include analysis of (1) a borrower's credit history, financial statements, tax returns and cash flow projections; (2) valuation of collateral based on reports of independent appraisers; and (3) verification of liquid assets. The Company's underwriting policies, practices and standards are periodically reviewed and, if appropriate, enhanced in response to changing market conditions and/or corporate strategies.

Like other financial institutions, the Company maintains allowances for credit losses to provide for loan defaults and nonperformance. The Company's allowances for credit losses may not be adequate to cover eventual loan losses, and future provisions for credit losses could materially and adversely affect the Company's financial condition and results of operations. In addition, on December 20, 2012, the FASB issued for public comment a Proposed Accounting Standards Update, Financial Instruments-Credit Losses (Subtopic 825-15), that would substantially change the accounting for credit losses under current U.S. GAAP standards. Under current U.S. GAAP standards, credit losses are not reflected in financial statements until it is probable that the credit loss has been incurred. Under the Credit Loss Proposal, an entity would reflect in its financial statements its current estimate of credit losses on financial assets over the expected life of each financial asset. The comment period on the Credit Loss Proposal closed on April 30, 2013. The Credit Loss Proposal, if adopted as proposed, may have a negative impact on the Company's reported earnings, capital, regulatory capital ratios, as well as on regulatory limits which are based on capital (e.g., loans to affiliates) since it would accelerate the recognition of estimated credit losses.

The value of the Company’s goodwill may decline in the future.

A significant decline in the Company’s expected future cash flows, a significant adverse change in the business climate, or slower growth rates, any or all of which could be materially impacted by many of the risk factors discussed herein, may require that the Company take charges in the future related to the impairment of goodwill. Future regulatory actions could also have a material impact on assessments of goodwill for impairment. If the Company were to conclude that a future write-down of its goodwill and other intangible assets is necessary, the Company would record the appropriate charge which could have a material adverse effect on its results of operations.

The financial services market is undergoing rapid technological changes, and the Company may be unable to effectively compete or may experience heightened cyber-security risks as a result of these changes.

The financial services market, including banking services, is undergoing rapid changes with frequent introductions of new technology-driven products and services. In addition to better serving customers, the effective use of technology increases efficiency and may enable us to reduce costs. The Company's future success may depend, in part, on its ability to use technology to provide products and services that provide convenience to customers and to create additional efficiencies in its operations. Some of the Company's competitors have substantially greater resources to invest in technological improvements. The Company may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to its customers. As a result, the Company's

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ability to effectively compete to retain or acquire new business may be impaired, and its business, financial condition or results of operations may be adversely affected.

The Company is under continuous threat of loss due to cyber-attacks, especially as it continues to expand customer capabilities to utilize internet and other remote channels to transact business. Two of the most significant cyber-attack risks that it faces are e-fraud and loss of sensitive customer data. Loss from e-fraud occurs when cybercriminals breach and extract funds directly from customers' or the Company's accounts. The attempts to breach sensitive customer data, such as account numbers and social security numbers, are less frequent, but could present significant reputational, legal and/or regulatory costs to the Company if successful.

Recently, there has been a series of distributed denial of service attacks on financial services companies. Distributed denial of service attacks are designed to saturate the targeted online network with excessive amounts of network traffic, resulting in slow response times, or in some cases, causing the site to be temporarily unavailable. Generally, these attacks have not been conducted to steal financial data, but meant to interrupt or suspend a company's internet service. While these events may not result in a breach of client data and account information, the attacks can adversely affect the performance of a company’s website and in some instances prevented customers from accessing a company’s website. Distributed denial of service attacks, hacking and identity theft risks could cause serious reputational harm. Cyber threats are rapidly evolving and the Company may not be able to anticipate or prevent all such attacks. The Company's risk and exposure to these matters remains heightened because of the evolving nature and complexity of these threats from cybercriminals and hackers, its plans to continue to provide internet banking and mobile banking channels, and its plans to develop additional remote connectivity solutions to serve its customers. The Company may incur increasing costs in an effort to minimize these risks and could be held liable for any security breach or loss.

The Company relies heavily on communications and information systems to conduct its business and relies on third parties and affiliates to provide key components of its business infrastructure.

The Company relies heavily on communications and information systems to conduct its business. This includes the utilization of a data center in Mexico. Any failure, interruption or breach in security of these systems could result in failures or disruptions in the Company's customer relationship management, general ledger, deposit, loan and other systems. While the Company has policies and procedures designed to prevent or limit the effect of the possible failure, interruption or security breach of its information systems, there can be no assurance that any such failure, interruption or security breach will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failure, interruption or security breach of the Company's information systems could damage its reputation, result in a loss of customer business, subject it to additional regulatory scrutiny, or expose it to civil litigation and possible financial liability.

Third parties and affiliates provide key components of the Company's business infrastructure such as banking services, processing, and internet connections and network access. Any disruption in such services provided by these third parties or affiliates or any failure of these third parties or affiliates to handle current or higher volumes of use could adversely affect the Company's ability to deliver products and services to clients and otherwise to conduct business. Beginning in 2011, the Bank began converting to a new core banking system. Implementation and continuing improvement of this new core banking system relies heavily on third parties to develop software.

Technological or financial difficulties of a third party or affiliate service provider could adversely affect the Company's business to the extent those difficulties result in the interruption or discontinuation of services provided by that party. Further, in some instances the Company may be responsible for failures of such third parties or affiliates to comply with government regulations. The Company may not be insured against all types of losses as a result of third party or affiliate failures and the Company's insurance coverage may be inadequate to cover all losses resulting from system failures or other disruptions. Failures in the Company business infrastructure could interrupt the operations or increase the costs of doing business.

The Company is subject to a variety of operational risks, including reputational risk, legal risk and regulatory and compliance risk, and the risk of fraud or theft by employees or outsiders, which may adversely affect its business and results of operations.

The Company is exposed to many types of operational risks, including reputational risk, legal, regulatory and compliance risk, the risk of fraud or theft by employees or outsiders, including unauthorized transactions by employees,

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or operational errors, such as clerical or record-keeping errors or those resulting from faulty or disabled computer or telecommunications systems. Negative public opinion can result from the Company's actual or alleged conduct in any number of activities, including lending practices, corporate governance and acquisitions, and from actions taken by government regulators and community organizations in response to those activities. In addition, negative public opinion can adversely affect the Company's ability to attract and keep customers and can expose it to litigation and regulatory action. Actual or alleged conduct by the Company can result in negative public opinion about its other business. Negative public opinion could also affect the Company's credit ratings, which are important to its access to unsecured wholesale borrowings.

The Company's business involves storing and processing sensitive consumer and business customer data. If personal, non-public, confidential or proprietary information of customers in its possession were to be mishandled or misused, the Company could suffer significant regulatory consequences, reputational damage and financial loss. Such mishandling or misuse could include, for example, if such information were erroneously provided to parties who are not permitted to have the information, either by fault of the Company's systems, employees or counterparties, or where such information is intercepted or otherwise inappropriately taken by third parties.

Because the financial services business involves a high volume of transactions, certain errors may be repeated or compounded before they are discovered and successfully rectified. The Company's necessary dependence upon automated systems to record and process transactions and its large transaction volume may further increase the risk that technical flaws or employee tampering or manipulation of those systems will result in losses that are difficult to detect. The Company also may be subject to disruptions of its operating systems arising from events that are wholly or partially beyond its control, such as computer viruses, electrical or telecommunications outages, natural disasters, or other damage to property or physical assets which may give rise to disruption of service to customers and to financial loss or liability. The Company is further exposed to the risk that its external vendors may be unable to fulfill their contractual obligations, or will be subject to the same risk of fraud or operational errors by their respective employees as it is, and to the risk that the Company's, or its vendors', business continuity and data security systems prove to be inadequate. The occurrence of any of these risks could result in a diminished ability of the Company to operate its business, as well as potential liability to clients, reputational damage and regulatory intervention, which could adversely affect the Company's business, financial condition or results of operations.

The Company depends on the expertise of key personnel, and its operations may suffer if it fails to attract and retain skilled personnel.

The Company's success depends, in large part, on its ability to attract and retain key individuals. Competition for qualified candidates in the activities and markets that the Company serves is great and it may not be able to hire these candidates and retain them. If the Company is not able to hire or retain these key individuals, it may be unable to execute its business strategies and may suffer adverse consequences to its business, operations and financial condition.

In June 2010, the federal banking regulators issued joint guidance on executive compensation designed to help ensure that a banking organization's incentive compensation policies do not encourage imprudent risk taking and are consistent with the safety and soundness of the organization. In addition, the Dodd-Frank Act requires those agencies, along with the SEC, to adopt rules to require reporting of incentive compensation and to prohibit certain compensation arrangements. The federal banking regulators and SEC proposed such rules in April 2011. If the Company is unable to attract and retain qualified employees, or do so at rates necessary to maintain its competitive position, or if compensation costs required to attract and retain employees become more expensive, the Company's performance, including its competitive position, could be materially adversely affected.

The Company's framework for managing risks may not be effective in mitigating risk and loss to the company.

The Company's risk management framework is made up of various processes and strategies to manage its risk exposure. The framework to manage risk, including the framework's underlying assumptions, may not be effective under all conditions and circumstances. If the risk management framework proves ineffective, the Company could suffer unexpected losses and could be materially adversely affected.

The Company's financial reporting controls and procedures may not prevent or detect all errors or fraud.

Financial reporting disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is accumulated and communicated

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to management, and recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Any disclosure controls and procedures over financial reporting or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by any unauthorized override of the controls. Accordingly, because of the inherent limitations in the control system, misstatements due to error or fraud may occur and not be detected.

The Company is subject to certain risks related to originating and selling mortgages. It may be required to repurchase mortgage loans or indemnify mortgage loan purchasers as a result of breaches of representations and warranties, borrower fraud or certain breaches of its servicing agreements, and this could harm the Company's liquidity, results of operations and financial condition.

The Company originates and often sells mortgage loans. When it sells mortgage loans, whether as whole loans or pursuant to a securitization, the Company is required to make customary representations and warranties to the purchaser about the mortgage loans and the manner in which they were originated. The Company's whole loan sale agreements require it to repurchase or substitute mortgage loans in the event that it breaches certain of these representations or warranties. In addition, the Company may be required to repurchase mortgage loans as a result of borrower fraud or in the event of early payment default of the borrower on a mortgage loan. Likewise, the Company is required to repurchase or substitute mortgage loans if it breaches a representation or warranty in connection with its securitizations, whether or not it was the originator of the loan. While in many cases it may have a remedy available against certain parties, often these may not be as broad as the remedies available to a purchaser of mortgage loans against it, and the Company faces the further risk that such parties may not have the financial capacity to satisfy remedies that may be available to it. Therefore, if a purchaser enforces its remedies against it, the Company may not be able to recover its losses from third parties. The Company has received repurchase and indemnity demands from purchasers. These have resulted in an increase in the amount of losses for repurchases. While the Company has taken steps to enhance its underwriting policies and procedures, these steps will not reduce risk associated with loans sold in the past. If repurchase and indemnity demands increase materially, the Company's results of operations may be adversely affected.

The Company is subject to intense competition in the financial services industry, particularly in its market area, which could result in losing business or margin declines.

The Company operates in a highly competitive industry that could become even more competitive as a result of reform of the financial services industry resulting from the Dodd-Frank Act and other legislative, regulatory and technological changes, as well as continued consolidation. The Company faces aggressive competition from other domestic and foreign lending institutions and from numerous other providers of financial services. The ability of non-banking financial institutions to provide services previously limited to commercial banks has intensified competition. Because non-banking financial institutions are not subject to the same regulatory restrictions as banks and bank holding companies, they can often operate with greater flexibility and lower cost structures. Securities firms and insurance companies that elect to become financial holding companies can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking, and may acquire banks and other financial institutions. This may significantly change the competitive environment in which the Company conducts business. Some of the Company's competitors have greater financial resources and/or face fewer regulatory constraints. As a result of these various sources of competition, the Company could lose business to competitors or be forced to price products and services on less advantageous terms to retain or attract clients, either of which would adversely affect its profitability.

Some of the Company's larger competitors, including certain national banks that have a significant presence in its market area, may have greater capital and resources than the Company, may have higher lending limits and may offer products and services not offered by the Company. Although the Company remains strong, stable and well capitalized, management cannot predict the reaction of customers and other third parties with which it conducts business with respect to the strength of the Company relative to its competitors, including its larger competitors. Any potential adverse reactions to the Company's financial condition or status in the marketplace, as compared to its competitors, could limit its ability to attract and retain customers and to compete for new business opportunities. The inability to attract and

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retain customers or to effectively compete for new business may have a material and adverse effect on the Company's financial condition and results of operations.

The Company also experiences competition from a variety of institutions outside of its market area. Some of these institutions conduct business primarily over the Internet and may thus be able to realize certain cost savings and offer products and services at more favorable rates and with greater convenience to the customer who can pay bills and transfer funds directly without going through a bank. This “disintermediation” could result in the loss of fee income, as well as the loss of customer deposits and income generated from those deposits. In addition, changes in consumer spending and saving habits could adversely affect the Company's operations, and the Company may be unable to timely develop competitive new products and services in response to these changes.

Unpredictable catastrophic events could have a material adverse effect on the Company.

The occurrence of catastrophic events such as hurricanes, tropical storms, tornados and other large scale catastrophes could adversely affect the Company's consolidated financial condition or results of operations. The Company has operations and customers in the southern and southeastern United States, which could be adversely impacted by hurricanes and other severe weather in those regions. Unpredictable natural and other disasters could have an adverse effect on the Company in that such events could materially disrupt its operations or the ability or willingness of its customers to access the financial services it offers. The incidence and severity of catastrophes are inherently unpredictable. Although the Company carries insurance to mitigate its exposure to certain catastrophic events, these events could nevertheless reduce its earnings and cause volatility in its financial results for any fiscal quarter or year and have a material adverse effect on its financial condition and/or results of operations.

Clients could pursue alternatives to bank deposits, causing the Company to lose a relatively inexpensive source of funding.

Checking and savings account balances and other forms of client deposits could decrease if clients perceive alternative investments, such as the stock market, provide superior expected returns. When clients move money out of bank deposits in favor of alternative investments, the Company can lose a relatively inexpensive source of funds, increasing its funding costs.

Negative public opinion could damage the Company's reputation and adversely impact business and revenues.

As a financial institution, the Company's earnings and capital are subject to risks associated with negative public opinion. The reputation of the financial services industry in general has been damaged as a result of the financial crisis and other matters affecting the financial services industry, including mortgage foreclosure issues. Negative public opinion regarding the Company could result from its actual or alleged conduct in any number of activities, including lending practices, the failure of any product or service sold by it to meet its clients' expectations or applicable regulatory requirements, corporate governance and acquisitions, or from actions taken by government regulators and community organizations in response to those activities. The Company could also be adversely affected by negative public opinion involving BBVA. Negative public opinion can adversely affect the Company's ability to keep, attract and/or retain clients and personnel, and can expose it to litigation and regulatory action. Actual or alleged conduct by one of the Company's businesses can result in negative public opinion about its other businesses. Negative public opinion could also affect the Company's credit ratings, which are important to accessing unsecured wholesale borrowings. Significant changes in these ratings could change the cost and availability of these sources of funding.

The Company depends on the accuracy and completeness of information about clients and counterparties.

In deciding whether to extend credit or enter into other transactions with clients and counterparties, the Company may rely on information furnished by or on behalf of clients and counterparties, including financial statements and other financial information. The Company also may rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors.

Compliance with anti-money laundering and anti-terrorism financing rules involve significant cost and effort.

The Company is subject to rules and regulations regarding money laundering and the financing of terrorism. Monitoring compliance with anti-money laundering and anti-terrorism financing rules can put a significant financial

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burden on banks and other financial institutions and poses significant technical problems. Although we believe that our current policies and procedures are sufficient to comply with applicable rules and regulations, we cannot guarantee that our anti-money laundering and anti-terrorism financing policies and procedures completely prevent situations of money laundering or terrorism financing. Any of such events may have severe consequences, including sanctions, fines and reputational consequences, which could have a material adverse effect on the Company's business, financial condition or results of operations.

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Item 2. Financial Information

Selected Financial Data

The following table sets forth summarized historical consolidated financial information for each of the periods indicated. This information should be read together with Management's Discussion and Analysis of Financial Condition and Results of Operations below and with the accompanying consolidated financial statements included in this Registration Statement. The historical information indicated as of and for the nine months ended September 30, 2013 and 2012, has been derived from the unaudited condensed consolidated financial statements for the nine months ended September 30, 2013 and 2012. The historical information indicated as of and for the years ended December 31, 2012 through 2008, has been derived from the Company's audited consolidated financial statements for the years ended December 31, 2012 through 2008. Historical results set forth below and elsewhere in this Registration Statement are not necessarily indicative of future performance.

	Nine Months Ended September 30,						Year Ended December 31,
	2013			2012			2012			2011			2010			2009 (1)			2008 (1)
	(Dollars in Thousands)
Summary of Operations:
Interest income	$	1,746,127		$	1,831,470		$	2,491,536		$	2,609,774		$	2,733,517		$	2,492,701		$	2,866,246
Interest expense	210,955			189,917			261,554			280,725			394,333			567,295			1,078,487
Net interest income	1,535,172			1,641,553			2,229,982			2,329,049			2,339,184			1,925,406			1,787,759
Provision for loan losses	81,386			26,710			29,471			428,633			825,049			1,686,493			477,981
Net interest income after provision for loan losses	1,453,786			1,614,843			2,200,511			1,900,416			1,514,135			238,913			1,309,778
Noninterest income	665,375			646,557			850,048			853,213			886,197			1,009,908			936,462
Noninterest expense, including goodwill impairment (2)	1,622,504			1,706,533			2,351,847			4,392,818			2,676,948			3,419,053			2,521,145
Net income (loss) before income tax expense (benefit)	496,657			554,867			698,712			(1,639,189		)	(276,616		)	(2,170,232		)	(274,905		)
Income tax expense (benefit)	146,033			172,425			219,701			98,175			59,845			(241,665		)	121,079
Net income (loss)	350,624			382,442			479,011			(1,737,364		)	(336,461		)	(1,928,567		)	(395,984		)
Noncontrolling interest	1,608			1,550			2,138			2,011			2,010			1,863			1,876
Net income (loss) available to shareholder	$	349,016		$	380,892		$	476,873		$	(1,739,375	)	$	(338,471	)	$	(1,930,430	)	$	(397,860	)
Summary of Balance Sheet:
Period-End Balances:
Loans (3)	$	49,458,966		$	44,949,036		$	45,333,608		$	42,112,678		$	40,441,825		$	42,777,077		$	38,735,204
Allowance for loan losses	(717,937		)	(903,833		)	(802,853		)	(1,051,796		)	(1,109,017		)	(1,268,046		)	(732,869		)
Assets	70,087,078			68,094,403			69,236,695			63,319,367			63,421,556			64,647,358			62,464,511
Deposits	52,242,409			50,038,499			51,642,778			46,057,193			45,401,163			46,544,138			38,898,331
FHLB and other borrowings	4,307,546			4,780,366			4,273,279			4,168,434			3,023,225			3,285,947			5,260,552
Shareholder's equity	11,421,396			11,023,917			11,083,573			10,617,064			12,213,101			11,832,062			12,650,908
Average Balances:
Loans(3)	$	47,101,663		$	43,759,395		$	44,118,556		$	40,998,782		$	41,525,768		$	40,336,643		$	36,547,099
Assets	69,706,435			65,669,826			66,468,815			63,734,477			64,627,460			63,448,673			60,619,233
Deposits	52,148,609			47,824,886			48,549,780			45,516,065			45,665,092			40,840,116			36,672,321
FHLB and Other Borrowings	4,188,876			4,437,355			4,478,136			3,249,709			3,362,144			4,226,130			5,174,676
Shareholder's Equity	11,285,368			10,847,037			10,906,123			12,265,322			12,363,848			13,011,587			13,481,072
Selected Ratios:
Return on average total assets	0.67		%	0.78		%	0.72		%	(2.73		)%	(0.52		)%	(3.04		)%	(0.65		)%
Return on average total equity	4.15			4.71			4.39			(14.16		)	(2.72		)	(14.82		)	(2.94		)
Average equity to average assets	16.19			16.52			16.41			19.24			19.13			20.51			22.24

(1) 2009 and 2008 financial information has not been retrospectively adjusted to include the historical activity of BSI due to the immateriality of BSI's 2009 and 2008 financial information.

(2) Noninterest expense for the years ended December 31, 2011, 2010, 2009 and 2008 includes goodwill impairment of $2.0 billion, $523.3 million, $1.6 billion and $655.3 million, respectively.

(3) Includes loans held for sale.

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

The purpose of this discussion is to focus on significant changes in the financial condition and results of operations of the Company during the nine months ended September 30, 2013 and 2012 and the years ended December 31, 2012, 2011 and 2010. The Executive Overview summarizes information management believes is important for an understanding of the financial condition and results of operations of the Company. Topics presented in the Executive Overview are discussed in more detail within, and should be read in conjunction with, this Management’s Discussion and Analysis of Financial Condition and Results of Operations and the accompanying Consolidated Financial Statements included in this Registration Statement. The discussion of the critical accounting policies and analysis set forth below is intended to supplement and highlight information contained in the accompanying Consolidated Financial Statements and the selected financial data presented elsewhere in this Registration Statement.

Executive Overview

General

Notable accomplishments for the Company during the first nine months of 2013 included the following:

• Total end of period loans increased 13% on an annualized basis. This growth reflects management's strategy to grow the Company's commercial and consumer portfolios while further diversifying the risk profile of the overall loan portfolio.

• Credit quality - nonperforming assets declined $253.9 million or 27%, while the Company's allowance for loan losses to period end loans decreased from 1.78% at December 31, 2012 to 1.46% at September 30, 2013.

• The Company made investments in personnel and technology while reducing overall expenses.

• The Company's risk-based and leverage capital ratios remained significantly above the “well-capitalized” standard that is currently in effect in the prompt corrective action framework.

In addition to the accomplishments listed above, the recent implementation of a new core banking platform has enabled the Company to provide its customers with real-time information. It has also significantly reduced the time necessary during the new account opening process and simplified the process for the Company's customers. The new core banking platform has also facilitated the Company’s ability to introduce new products and services, and provide its customers access to various mobile platforms to conduct their banking transactions. Notable products and services introduced during the first nine months of 2013 included:

• NBA Banking - as official bank of the NBA, the Company launched its first all-digital account during the 2013 NBA All-Star Weekend. The product combines a checking and savings account with exclusive NBA content and uses the Company’s digital platforms.

• Business Mobility Bundle - product designed to provide micro-businesses the tools needed to manage their financial needs including e-Business Checking account, online and mobile banking, and a merchant services mobility pack with a secured card reader for processing debit and credit card payments.

• Mobile Deposit - app that allows mobile device users the ability to deposit a check by taking a picture and transmitting to the bank.

• Picture Bill Pay - expanding on the capabilities of its mobile device app, this feature allows customers to pay bills and add payees by taking pictures of their paper bills with their mobile device.

The Company has utilized its new core banking platform to provide a comprehensive mobile banking offering to its clients.

The Company is also currently testing the next generation of drive-thru banking technology that allows customers to operate an ATM-like machine for self service or opt for live assistance from a teller. Shortly after September 30,

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2013, the Company also introduced four new checking account products as part of a comprehensive deposit account redesign aimed at creating straightforward and transparent banking options for customers.

Economic and regulatory

The first nine months of 2013 saw moderate economic growth driven by improvements in labor market conditions, increased household spending and further strengthening of housing markets. Household spending continued to moderately increase and borrowing costs remained at relatively low levels. Compared to December 31, 2012, the housing market continued to strengthen as demonstrated by price increases, favorable shifts in supply and demand and some encouraging signs from certain homebuilding activities. However, continued elevated unemployment contributes uncertainty about the strength of economic growth. The global economy continued to recover unevenly amid concerns over the economic health of the European Union and reports of slowing growth in emerging markets. While actions were taken during 2012 to ease the European sovereign debt crisis, uncertainty about the sustained financial health of certain European countries continues to exist.

During the second quarter of 2013, the Federal Reserve reaffirmed that a highly accommodative monetary policy will remain in effect for a considerable time after its asset purchase program ends and the economic recovery strengthens. Accordingly, the Federal Reserve conveyed that it anticipates maintaining key interest rates at exceptionally low levels, as long as the unemployment rate remains above 6.5% and its long-term inflation goals are not met. As a result of executing its monetary policy, the Federal Reserve continues to maintain large portfolios of U.S. Treasury notes and bonds and agency MBSs with plans to continue adding Treasuries and agency MBSs to its portfolio. However, the Federal Reserve indicated it is prepared to increase or reduce the pace of its purchases as the outlook for the labor market or inflation changes.

Capital

Under Federal Reserve Board capital adequacy guidelines that are currently in effect, to be well-capitalized the Company must generally maintain a Tier 1 risk-based capital ratio of 6% or greater and a leverage ratio of 5% or greater.

The Company's Tier 1 risk-based capital ratio was 11.83% and 11.68% at September 30, 2013 and December 31, 2012, respectively. The Company leverage capital ratio was 10.16% and 9.43% at September 30, 2013 and December 31, 2012, respectively. The Company's risk-based and leverage capital ratios remain significantly above the “well-capitalized” standard that is currently in effect in the prompt corrective action framework. The U.S. Basel III final rule revises the capital ratio thresholds in the prompt corrective action framework to reflect the new Basel III capital ratios. This aspect of the U.S. Basel III final rule will become effective on January 1, 2015. For more information see “Capital” in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 1. Business - Supervision, Regulation and Other Factors - Capital, and Note 16, Regulatory Matters and Dividends from Subsidiaries, in the Notes to the December 31, 2012, Consolidated Financial Statements in this Registration Statement.

Liquidity

The Company’s sources of liquidity include customers’ interest-bearing and noninterest-bearing deposit accounts, loan principal and interest payments, investment securities held to maturity and available for sale, short-term investments and short-term borrowings. As a bank holding company, the Parent’s primary source of liquidity is the Bank. The Bank did not have the ability to pay any dividends at September 30, 2013 or December 31, 2012 without regulatory approval. Management believes that the current sources of liquidity are adequate to meet the Company’s requirements and plans for continued growth. For more information see below under “Liquidity Management” in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Note 11, FHLB and Other Borrowings, Note 12, Capital Securities and Preferred Stock, and Note 15, Commitments, Contingencies and Guarantees, in the Notes to the December 31, 2012, Consolidated Financial Statements.

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Financial Performance

The economy and interest rates were the biggest factors impacting the Company’s financial results in the first nine months of 2013. Despite this challenging environment, the Company was able to deliver solid financial performance. Consolidated net income attributable to shareholder for the nine months ended September 30, 2013 was $349.0 million compared to $380.9 million earned during the nine months ended September 30, 2012. The decrease in net income attributable to shareholder was primarily due to a decrease in net interest income and an increase in the provision for loan losses, offset in part by decreases in noninterest expense and income tax expense.

The $106.4 million decrease in net interest income for the nine months ended September 30, 2013 was driven by lower yields on earning assets, particularly loans and investment securities available for sale, as well as higher funding costs primarily associated with interest bearing deposits and FHLB and other borrowings. The net interest margin for the nine months ended September 30, 2013 was 3.68%, a decline of 50 basis points compared to 4.18% for the nine months ended September 30, 2012.

The provision for loan losses was $81.4 million for the nine months ended September 30, 2013, which represented an increase of $54.7 million compared to the nine months ended September 30, 2012. Net charge-offs for the nine months ended September 30, 2013 totaled $166.3 million compared to $174.7 million for the nine months ended September 30, 2012. Excluding covered loans, the provision for loan losses for the nine months ended September 30, 2013 was $91.5 million compared to $46.1 million for the nine months ended September 30, 2012. The increase in provision for loan losses for the nine months ended September 30, 2013 as compared to the same period in 2012 was primarily attributable to loan growth during the nine months ended September 30, 2013 in the commercial, financial and agricultural, residential real estate, and consumer portfolios. Offsetting the increase attributable to loan growth was improving credit quality in the real estate-construction and commercial real estate-mortgage portfolios. Net charge-offs excluding covered loans for the nine months ended September 30, 2013 were $162.5 million, which represented a $26.1 million decrease from the nine months ended September 30, 2012.

Noninterest income was $665.4 million, an increase of $18.8 million from the $646.6 million reported for the nine months ended September 30, 2012. The increase in noninterest income was largely attributable to an increase of $25.1 million in investment securities gains and a $43.4 million increase in other noninterest income. The increase in other noninterest income principally resulted from an increase in OREO income due to stabilizing real estate values and an increase in revenues from the Company's broker dealer. These increases were offset by a $28.6 million decrease in service charges on deposit accounts and a $16.7 million decrease in gains on prepayment of FHLB and other borrowings.

Noninterest expense was $1.6 billion for the nine months ended September 30, 2013, a decrease of $84.0 million compared to the nine months ended September 30, 2012. The lower level of noninterest expense was primarily attributable to a $12.1 million decrease in salaries, benefits and commissions, a $19.3 million decrease in FDIC indemnification expense, a $21.6 million decrease in amortization of intangibles, and a $74.9 million decrease in other noninterest expense principally resulting from a reduction in FDIC insurance premiums and credit related costs. The decline in these noninterest expense categories was partially offset by a $27.1 million increase in equipment expense and an $11.9 million increase in professional services.

Income tax expense was $146.0 million for the nine months ended September 30, 2013 compared to $172.4 million for the nine months ended September 30, 2012. This resulted in an effective tax rate of 29.4% for the nine months ended September 30, 2013 and a 31.1% effective tax rate for the nine months ended September 30, 2012.

Certain key credit quality metrics continued to show improvement during the nine months ended September 30, 2013. Specifically, nonperforming assets excluding covered assets were $598 million at September 30, 2013, a decrease of $206 million compared to December 31, 2012. At the same time, accruing loans 30-59 days past due and accruing loans 60-89 days past due declined during the nine months ended September 30, 2013.

The Company's total assets at September 30, 2013 were $70.1 billion, up slightly from December 31, 2012 levels. Total loans excluding loans held for sale were $49.3 billion at September 30, 2013, an increase of $4.3 billion or 12.7% annualized from year-end 2012 levels. The growth in loans was due to increases in commercial loans, residential mortgages and indirect auto lending offset, in part, by a decline in the commercial real estate loan portfolio resulting from paydowns, maturing loans and the disposal of underperforming loans. Deposits increased $600 million or 1.5% on an annualized basis compared to December 31, 2012, driven by transaction accounts which increased 4.4% fueled

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by savings and money market growth. Noninterest bearing demand deposits increased 5.8% annualized despite the expiration at December 31, 2012, of a provision from the Dodd-Frank Act which provided temporary unlimited deposit insurance coverage on noninterest bearing deposits. Certificates and other time deposits decreased 7.4% on an annualized basis at September 30, 2013 compared to December 31, 2012 primarily as a result of a decrease in certificates of deposits over $100,000.

Total shareholders' equity at September 30, 2013 was $11.4 billion, an increase of $337.8 million compared to December 31, 2012.

Critical Accounting Policies

The accounting principles followed by the Company and the methods of applying these principles conform with accounting principles generally accepted in the United States of America and with general practices within the banking industry. The Company’s critical accounting policies relate to (1) the allowance for loan losses, (2) fair value of financial instruments, (3) income taxes and (4) goodwill impairment. These critical accounting policies require the use of estimates, assumptions and judgments which are based on information available as of the date of the financial statements. Accordingly, as this information changes, future financial statements could reflect the use of different estimates, assumptions and judgments. Certain determinations inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported.

Allowance for Loan Losses: Management’s policy is to maintain the allowance for loan losses at a level sufficient to absorb estimated probable incurred losses in the loan portfolio. Management performs periodic and systematic detailed reviews of its loan portfolio to identify trends and to assess the overall collectability of the loan portfolio. Accounting standards require that loan losses be recorded when management determines it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated.

Estimates for the allowance for loan losses are determined by analyzing historical losses, historical migration to charge-off experience, current trends in delinquencies and charge-offs, the results of regulatory examinations and changes in the size, composition and risk assessment of the loan portfolio. Also included in management’s estimate for the allowance for loan losses are considerations with respect to the impact of current economic events. These events may include, but are not limited to, fluctuations in overall interest rates, political conditions, legislation that may directly or indirectly affect the banking industry and economic conditions affecting specific geographical areas and industries in which the Company conducts business.

While management uses the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses and methodology may be necessary if economic or other conditions differ substantially from the assumptions used in making the estimates. Such adjustments to original estimates, as necessary, are made in the period in which these factors and other relevant considerations indicate that loss levels vary from previous estimates.

A detailed discussion of the methodology used in determining the allowance for loan losses is included in Note 1, Summary of Significant Accounting Policies, in the Notes to the December 31, 2012, Consolidated Financial Statements.

Fair Value of Financial Instruments: A portion of the Company’s assets and liabilities is carried at fair value, with changes in fair value recorded either in earnings or accumulated other comprehensive income (loss). These include investment securities available for sale, trading account assets and liabilities, loans held for sale, mortgage servicing assets, and derivative assets and liabilities. Periodically, the estimation of fair value also affects investment securities held to maturity when it is determined that an impairment write-down is other than temporary. Fair value determination is also relevant for certain other assets such as other real estate owned, which is recorded at the lower of the recorded balance or fair value, less estimated costs to sell. The determination of fair value also impacts certain other assets that are periodically evaluated for impairment using fair value estimates, including goodwill and impaired loans.

Fair value is generally based upon quoted market prices, when available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use observable market based parameters as inputs. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the Company’s creditworthiness, among other things, as well as other unobservable parameters. Any such valuation adjustments are applied consistently over time. While management believes the Company’s valuation methodologies are appropriate and consistent with other

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market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

See Note 20, Fair Value of Financial Instruments, in the Notes to the December 31, 2012, Consolidated Financial Statements for a detailed discussion of determining fair value, including pricing validation processes.

Income Taxes: The Company’s income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s best assessment of estimated taxes due. The calculation of each component of the Company’s income tax provision is complex and requires the use of estimates and judgments in its determination. As part of the Company’s evaluation and implementation of business strategies, consideration is given to the regulations and tax laws that apply to the specific facts and circumstances for any tax positions under evaluation. Management closely monitors tax developments on both the federal and state level in order to evaluate the effect they may have on the Company’s overall tax position and the estimates and judgments used in determining the income tax provision and records adjustments as necessary.

Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expenses. In evaluating the Company’s ability to recover its deferred tax assets within the jurisdiction from which they arise, the Company must consider all available evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and the results of recent operations. A valuation allowance is recognized for a deferred tax asset if, based on the available evidence, it is more likely than not that some portion or all of a deferred tax asset will not be realized. See Note 19, Income Taxes, in the Notes to the December 31, 2012, Consolidated Financial Statements for additional information.

Goodwill Impairment: It is the Company’s policy to assess goodwill for impairment at the reporting unit level on an annual basis or between annual assessments if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value.

Accounting standards require management to estimate the fair value of each reporting unit in assessing impairment at least annually. As such, the Company engages an independent valuation expert to assist in the computation of the fair value estimates of each reporting unit as part of its annual assessment. This assessment utilizes a blend of income and market based valuation methodologies.

The impairment testing process conducted by the Company begins by assigning net assets and goodwill to each reporting unit. The Company then completes step one of the impairment test by comparing the fair value of each reporting unit with the recorded book value of its net assets, with goodwill included in the computation of the carrying amount. If the fair value of a reporting unit exceeds its carrying amount, goodwill of that reporting unit is not considered impaired, and step two of the impairment test is not necessary. If the carrying amount of a reporting unit exceeds its fair value, step two of the impairment test is performed to determine the amount of impairment. Step two of the impairment test compares the implied fair value of goodwill attributable to each reporting unit to the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination; an entity allocates the fair value determined in step one for the reporting unit to all of the assets and liabilities of that unit as if the reporting unit had been acquired in a business combination. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

The computation of the fair value estimate is based upon management’s estimates and assumptions. Although management has used the estimates and assumptions it believes to be most appropriate in the circumstances, it should be noted that even relatively minor changes in certain valuation assumptions used in management’s calculation would result in significant differences in the results of the impairment test. See Note 8, Goodwill and Other Acquired Intangible Assets, in the Notes to the December 31, 2012, Consolidated Financial Statements for a detailed discussion of the impairment testing process.

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NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

Analysis of Results of Operations

Consolidated net income attributable to shareholder for the nine months ended September 30, 2013, was $349.0 million compared to $380.9 million earned during the nine months ended September 30, 2012. The decrease in net income was due to $106.4 million of lower net interest income, primarily driven by lower yields on earning assets and higher funding costs. The net interest margin was 3.68%, 50 basis points lower than the 4.18% net interest margin for the nine months ended September 30, 2012.

Net Interest Income and Net Interest Margin

Net interest income is the principal component of the Company’s income stream and represents the difference, or spread, between interest and fee income generated from earning assets and the interest expense paid on deposits and borrowed funds. Net interest margin, stated as a percentage, is the annualized yield obtained by dividing the difference between interest income generated on earning assets and the interest expense paid on all funding sources by average earning assets. Fluctuations in interest rates as well as changes in the volume and mix of earning assets and interest bearing liabilities can impact net interest income and net interest margin. The following discussion of net interest income and net interest margin is presented on a fully taxable equivalent basis, unless otherwise noted, to facilitate performance comparisons among various taxable and tax-exempt assets.

Net interest income on a fully taxable equivalent basis totaled $1.6 billion for the nine months ended September 30, 2013, a decrease of $97.4 million as compared to the nine months ended September 30, 2012. The decrease in net interest income was driven by lower yields on interest earning assets, particularly investment securities available for sale, as well as higher funding costs associated with interest bearing deposits and FHLB and other borrowings.

The net interest margin was 3.68% for the nine months ended September 30, 2013, compared to 4.18% for the nine months ended September 30, 2012. The decline in net interest margin primarily reflects the maturity of higher yielding covered loans and lower yields on new loans and investment securities as well as an increase in rates paid on interest bearing deposits and FHLB and other borrowings.

The annualized yield for the nine months ended September 30, 2013 for the loan portfolio was 4.58% compared to 5.06% for the nine months ended September 30, 2012. The decrease was primarily due to the maturity of higher yielding covered loans and a higher volume of new loans originated at lower rates.

For the nine months ended September 30, 2013, the fully taxable equivalent annualized yield on the total investment securities portfolio was 2.29% compared to 2.87% for the nine months ended September 30, 2012. The decrease of 58 basis points was primarily due to lower yields on investment securities purchased during the period.

The annualized rate paid on interest bearing deposits increased to 0.57% during the nine months ended September 30, 2013, from 0.54% during the nine months ended September 30, 2012. This increase was a result of higher rates paid on certificates and other time deposits.

The annualized rate paid on FHLB and other borrowings for the nine months ended September 30, 2013 was 1.57% compared to 1.49% for the corresponding period in 2012. This increase was primarily due to higher rates paid on FHLB advances that were modified to extend the maturity of the advances in the second quarter of 2012.

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The following table sets forth the major components of net interest income and the related annualized yields and rates for the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012, as well as the variances between the periods caused by changes in interest rates versus changes in volumes. Changes attributable to the mix of assets and liabilities have been allocated proportionally between the changes due to rate and the changes due to volume.

Table 3 Consolidated Average Balance and Yield/Rate Analysis
	Nine Months Ended September 30, 2013							Nine Months Ended September 30, 2012							Change Due To
	Average Balance			Income/Expense		Yield/ Rate		Average Balance			Income/ Expense		Yield/Rate		Volume			Yield/Rate			Total
	(Dollars in Thousands)
Assets:
Interest earning assets:
Loans (1) (2) (3)	$	47,101,663		$	1,614,343	4.58	%	$	43,759,395		$	1,656,475	5.06	%	$	185,187		$	(227,319	)	$	(42,132	)
Investment securities – AFS (tax exempt) (3)	446,849			15,270		4.57		264,164			11,890		6.01		5,177			(1,797		)	3,380
Investment securities – AFS (taxable)	8,052,308			123,614		2.05		7,973,899			164,204		2.75		1,636			(42,226		)	(40,590		)
Total investment securities – AFS	8,499,157			138,884		2.18		8,238,063			176,094		2.86		6,813			(44,023		)	(37,210		)
Investment securities – HTM (tax exempt) (3)	1,189,603			27,545		3.10		968,039			23,782		3.28		5,000			(1,237		)	3,763
Investment securities – HTM (taxable)	351,972			5,202		1.98		417,948			6,614		2.11		(999		)	(413		)	(1,412		)
Total investment securities - HTM	1,541,575			32,747		2.84		1,385,987			30,396		2.93		4,001			(1,650		)	2,351
Trading account securities (3)	118,086			2,392		2.71		72,977			1,781		3.26		1,112			(501		)	611
Other (4)	30,507			164		0.72		19,716			174		1.18		100			(110		)	(10		)
Total earning assets	57,290,988			1,788,530		4.17		53,476,138			1,864,920		4.66		197,213			(273,603		)	(76,390		)
Noninterest earning assets:
Cash and due from banks	4,305,498							3,334,694
Allowance for loan losses	(764,558		)					(992,996		)
Net unrealized gain (loss) on investment securities available for sale	120,058							240,668
Other noninterest earning assets	8,754,449							9,611,322
Total assets	$	69,706,435						$	65,669,826
Liabilities:
Interest bearing liabilities:
Interest bearing demand deposits	$	6,684,384		8,437		0.17		$	6,329,918		7,365		0.16		423			649			1,072
Savings and money market accounts	19,164,257			56,081		0.39		16,670,618			47,484		0.38		7,228			1,368			8,596
Certificates and other time deposits	11,899,480			95,501		1.07		11,124,806			83,217		1.00		5,939			6,345			12,284
Foreign office deposits	119,007			202		0.23		107,877			204		0.25		(1		)	(1		)	(2		)
Total interest bearing deposits	37,867,128			160,221		0.57		34,233,219			138,270		0.54		13,589			8,361			21,950
FHLB and other borrowings	4,188,876			49,070		1.57		4,437,355			49,428		1.49		(5,935		)	5,577			(358		)
Federal funds purchased and securities sold under agreements to repurchase	984,940			1,577		0.21		1,260,102			2,145		0.23		(448		)	(119		)	(567		)
Other short-term borrowings	12,679			87		0.92		18,057			74		0.55		(10		)	23			13
Total interest bearing liabilities	43,053,623			210,955		0.66		39,948,733			189,917		0.64		7,196			13,842			21,038
Noninterest bearing deposits	14,281,481							13,591,667
Other noninterest bearing liabilities	1,085,963							1,282,389
Total liabilities	58,421,067							54,822,789
Shareholder’s equity	11,285,368							10,847,037
Total liabilities and shareholder’s equity	$	69,706,435						$	65,669,826
Net interest income/net interest spread				$	1,577,575	3.51	%				$	1,675,003	4.02	%	$	190,017		$	(287,445	)	$	(97,428	)
Net interest margin						3.68	%						4.18	%
Taxable equivalent adjustment				42,403							33,450
Net interest income				$	1,535,172						$	1,641,553

(1) Loans include loans held for sale and nonaccrual loans.

(2) Interest income includes loan fees for rate calculation purposes.

(3) Yields are stated on a fully taxable equivalent basis assuming the tax rate in effect for each period presented.

(4) Includes federal funds sold, securities purchased under agreements to resell, interest bearing deposits, and other earning assets.

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Provision for Loan Losses

Provision for loan losses was $81.4 million for the nine months ended September 30, 2013, compared to $26.7 million for the nine months ended September 30, 2012. Excluding covered loans, provision for loan losses was $91.5 million for the nine months ended September 30, 2013, compared to $46.1 million for the nine months ended September 30, 2012. The increase in provision for loan losses for the nine months ended September 30, 2013 as compared to the same period in 2012 was primarily attributable to loan growth during 2013 in the commercial, financial and agricultural, residential real estate, and consumer portfolios. Offsetting the increase attributable to loan growth was improving credit quality in the real estate-construction and commercial real estate-mortgage portfolios. See Note 4, Loans and Allowance for Loan Losses, in the Notes to the September 30, 2013, Unaudited Condensed Consolidated Financial Statements.

The Company recorded net charge-offs of $166.3 million for the nine months ended September 30, 2013, compared to net charge-offs of $174.7 million for the nine months ended September 30, 2012. Net charge-offs were 0.47% of average loans outstanding for the nine months ended September 30, 2013, compared to 0.53% for the nine months ended September 30, 2012.

Noninterest Income

For the nine months ended September 30, 2013, noninterest income increased $18.8 million from the corresponding period in 2012.

The following table presents the components of noninterest income for the nine months ended September 30, 2013 and 2012:

Table 4 Noninterest Income
	Nine Months Ended September 30,
	2013		2012
	(In Thousands)
Service charges on deposit accounts	$	164,601	$	193,168
Card and merchant processing fees	76,869		76,229
Retail investment sales	71,724		73,957
Mortgage banking income	32,221		37,570
Asset management fees	31,143		28,464
Corporate and correspondent investment sales	26,954		24,527
Bank owned life insurance	12,901		15,458
Investment securities gains, net	33,030		7,917
Gain on prepayment of FHLB and other borrowings	21,775		38,500
Other	194,157		150,767
Total noninterest income	$	665,375	$	646,557

For the nine months ended September 30, 2013, service charges on deposit accounts decreased $28.6 million from the corresponding period in 2012. The decrease was due to decreases in non-sufficient funds charges and decreases in service charges on consumer demand deposit accounts and savings accounts. The decrease in service charge income is due to a declining number of deposit demand accounts, higher quality customers maintaining higher balances resulting in fewer fees, and modified customer behavior to avoid fees.

For the nine months ended September 30, 2013, mortgage banking income decreased $5.3 million as compared to the nine months ended September 30, 2012. The decrease was due to a net valuation decrease in the fair value of loans held for sale, interest rate lock commitments and forward sale contracts, in addition to a decrease in the gain on sale of loans, net.

Asset management fees for the nine months ended September 30, 2013, increased by $2.7 million from the corresponding period in 2012. The increase was due in part to a new Wealth Management product which launched in 2012 and grew during 2013, coupled with organic growth from new accounts and an increase in the equity markets during 2013.

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Corporate and correspondent investment sales represent income generated through the sales of interest rate protection contracts to corporate customers and the sale of bonds and other services to the Company's correspondent banking clients. Income from corporate and correspondent investment sales increased by $2.4 million for the nine months ended September 30, 2013, compared to the same period in 2012. This increase was attributable to increases in swap and bond sales due to increased activity during 2013 compared to the same period in 2012.

BOLI represents income generated by the underlying investments maintained within each of the Company’s life insurance policies on certain key executives and employees. For the nine months ended September 30, 2013, BOLI income also decreased by $2.6 million from the corresponding period in 2012. The decrease was attributable to a decline in crediting rates on certain policies held by the Company.

For the nine months ended September 30, 2013, investment securities gains, net, increased $25.1 million from the corresponding period in 2012. Higher securities gains during the year-to-date 2013 periods were due to higher volumes of securities sales resulting from the Company's asset/liability management process.

Based on market conditions and the Company's interest position, approximately $126 million of subordinated debt debentures were repurchased during the nine months ended September 30, 2013 and a $21.8 million gain on prepayment of FHLB and other borrowings was recorded during the nine months ended September 30, 2013. During the nine months ended September 30, 2012, the Company repurchased $150 million of subordinated debentures and recorded a gain of $38.5 million.

Other income is comprised of income recognized that does not typically fit into one of the other noninterest income categories and includes primarily various fees associated with letters of credit, syndication, ATMs, investment services and foreign exchange fees. The gain (loss) associated with the sale of fixed assets and OREO income is also included in other income. Other income increased $43.4 million for the nine months ended September 30, 2013, compared to the same period in 2012. The increase is attributable an increase in OREO income due to stabilizing real estate values and an increase in revenue from the Company's broker dealer.

Noninterest Expense

For the nine months ended September 30, 2013, noninterest expense was $1.6 billion, a decrease of $84.0 million compared to the corresponding 2012 period.

The following table presents the components of noninterest expense for the nine months ended September 30, 2013 and 2012:

Table 5 Noninterest Expense
		Nine Months Ended September 30,
		2013		2012
	(In Thousands)
Salaries, benefits and commissions		$	743,601	$	755,692
FDIC indemnification expense		211,706		230,997
Professional services		133,198		121,269
Equipment		148,989		121,923
Net occupancy		117,622		113,158
Amortization of intangibles		46,386		68,006
Total securities impairment		1,430		987
Other		219,572		294,501
Total noninterest expense		$	1,622,504	$	1,706,533

For the nine months ended September 30, 2013, salaries, benefits and commissions expense decreased $12.1 million compared to the corresponding 2012 period. The decrease in the year-to-date period reflects lower compensation costs due to a decrease in full-time equivalent employees. At September 30, 2013, full-time equivalent employees totaled 11,054 compared to 11,422 at September 30, 2012.

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FDIC indemnification expense represents the amortization of changes in the FDIC indemnification asset stemming from changes in credit expectations of covered loans. For the nine months ended September 30, 2013, FDIC indemnification expense decreased $19.3 million compared to the corresponding 2012 period. The changes in FDIC indemnification expense between periods is driven by changes in credit quality of the covered loan portfolio as well as changes in the expected cash flows of the covered loans.

For the nine months ended September 30, 2013, professional services expense increased $11.9 million compared to the corresponding period in 2012. This increase was due in part to an increase in expenses related to outsourcing and contractor services.

For the nine months ended September 30, 2013, equipment expense increased $27.1 million compared to the corresponding 2012 period. The increase was attributable to an increase in software amortization and hardware depreciation related to the Company's implementation of a new core banking platform as well as several other IT projects implemented during 2013.

Amortization expense for the nine months ended September 30, 2013 decreased $21.6 million compared to the corresponding 2012 period. The decrease in amortization expense is due to a lower level of intangible assets between the periods.

Other noninterest expense represents FDIC insurance, marketing, communications, postage, supplies, subscriptions, credit related costs, other real estate owned expenses and other miscellaneous expenses. For the nine months ended September 30, 2013, other noninterest expense decreased $74.9 million compared to the corresponding 2012 period. The decrease is primarily attributable to a reduction in FDIC insurance expense as a result of improvements in the variables used to calculate the assessment. In addition, due to improvements in credit quality, other real estate owned expenses and provisions for unfunded commitments and letters of credit decreased during 2013 compared to 2012.

Income Tax Expense

Income tax expense for the nine months ended September 30, 2013 was $146.0 million compared to $172.4 million for the same period in 2012. The effective tax rate was 29.4% for the nine months ended September 30, 2013 and 31.1% for the same period in 2012. The decrease in the effective tax rate for the nine months ended September 30, 2013 was primarily due to the decrease in net income before income tax expense in 2013.

Analysis of Financial Condition

Total assets were $70.1 billion at September 30, 2013 as compared to $69.2 billion at December 31, 2012.

Investment Securities

The total investment securities portfolio, including both investment securities available for sale and investment securities held to maturity, was $9.8 billion at September 30, 2013, an increase of $317 million compared with December 31, 2012. At September 30, 2013, the investment securities portfolio includes $8.3 billion of investment securities available for sale and $1.6 billion of investment securities held to maturity compared to $8.0 billion of investment securities available for sale and $1.5 billion of investment securities held to maturity at December 31, 2012.

During the nine months ended September 30, 2013, the Company sold collateralized mortgage obligations and mortgage-backed securities with principal balances totaling $535 million and $119 million, respectively. These sales resulted in a gain on sale of investment securities of $33.0 million.

The Company recognized $1.4 million and $987 thousand of other than temporary impairment charges for the nine months ended September 30, 2013 and 2012, respectively. While all securities are reviewed by the Company for OTTI, the securities primarily impacted by credit impairment are non-agency collateralized mortgage obligations and asset-backed securities. Refer to Note 3,Investment Securities Available for Sale and Investment Securities Held to Maturity, in the Notes to the September 30, 2013, Unaudited Condensed Consolidated Financial Statements for further details.

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Lending Activities

Average loans and loans held for sale, net of unearned income, represented 82.2% of average interest-earning assets at September 30, 2013, compared to 82.0% at December 31, 2012. The following table presents the Company’s loan portfolio by portfolio segment and class at September 30, 2013 and December 31, 2012.

Table 6 Loan Portfolio
	September 30, 2013		December 31, 2012
	(In Thousands)
Commercial loans:
Commercial, financial and agricultural	$	19,504,300	$	16,980,957
Real estate – construction	1,663,819		1,895,931
Commercial real estate – mortgage	8,769,810		7,707,548
Total commercial loans	29,937,929		26,584,436
Consumer loans:
Residential real estate – mortgage	12,419,845		11,443,973
Equity lines of credit	2,244,754		2,393,271
Equity loans	658,058		671,616
Credit card	643,530		625,395
Consumer – direct	519,361		522,995
Consumer – indirect	2,026,714		1,593,175
Total consumer loans	18,512,262		17,250,425
Total loans, excluding covered loans	48,450,191		43,834,861
Covered loans	832,884		1,176,682
Total loans	49,283,075		45,011,543
Loans held for sale	175,891		322,065
Total loans and loans held for sale	$	49,458,966	$	45,333,608

Loans and loans held for sale, net of unearned income, totaled $49.5 billion at September 30, 2013, an increase of $4.1 billion from December 31, 2012. The increase in total loans was primarily driven by growth in commercial, financial and agricultural loans as well as increases in the commercial real estate - mortgage, residential real estate – mortgage and consumer – indirect loan portfolios. Growth in the loan portfolio was partially offset by continued run-off in the real estate construction portfolio as well as expected runoff in the covered loan portfolio.

Asset Quality

The Company’s asset quality continued to improve during the nine months ended September 30, 2013. Nonperforming assets, which includes nonaccrual loans, nonaccrual loans held for sale, accruing loans 90 days past due, accruing TDRs 90 days past due, other real estate owned, and other repossessed assets totaled $688 million at September 30, 2013 compared to $942 million at December 31, 2012. Excluding covered assets, nonperforming assets decreased from $804 million at December 31, 2012 to $598 million at September 30, 2013. The decrease in nonperforming assets, excluding covered assets, was primarily due to a $188 million decrease in nonaccrual loans partially attributable to the Company's decision to sell certain nonperforming loans. As a percentage of total loans and loans held for sale and other real estate, nonperforming assets were 1.39% (or 1.21% excluding covered assets) at September 30, 2013 compared with 2.07% (or 1.82% excluding covered assets) at December 31, 2012.

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The Company defines potential problem loans as noncovered, commercial loans rated substandard or below, which do not meet the definition of nonaccrual, TDR, or 90 days past due and still accruing. See Note 4, Loans and Allowance for Loan Losses, in the Notes to the September 30, 2013, Unaudited Condensed Consolidated Financial Statements for further information on the Company’s credit grade categories, which are derived from standard regulatory rating definitions. The following table provides a summary of potential problem loans as of September 30, 2013 and December 31, 2012:

Table 7 Potential Problem Loans
	September 30, 2013		December 31, 2012
	(In Thousands)
Commercial, financial and agricultural	$	173,930	$	58,949
Real estate – construction	4,637		10,804
Commercial real estate – mortgage	192,667		207,911
Total recorded investment	$	371,234	$	277,664

In connection with the 2009 acquisition of Guaranty Bank, the Bank has entered into loss sharing agreements with the FDIC whereby the FDIC reimburses the Bank for a substantial portion of the losses incurred. In addition, covered loans acquired were recorded at fair value as of the acquisition date without regard to the loss sharing agreements. These covered loans were evaluated and assigned to loan pools based on common risk characteristics. The fair value of the covered loans was estimated to be significantly below the unpaid principal balance. In accordance with the acquisition method of accounting, there was no allowance brought forward on any of the acquired loans as the credit losses were included in the determination of the fair value of the covered loans at the acquisition date. Charge-offs are recognized for these loans when the actual losses exceed the estimated losses used in determining the fair value of the loans. Substantially all of the covered loans were considered to be accruing loans at the date of acquisition. In accordance with regulatory reporting standards, covered loans that are contractually past due will continue to be reported as past due and still accruing based on the number of days past due.

Given the significant amount of acquired loans that are past due but still accruing, the Company believes the inclusion of these loans in certain asset quality ratios including “Loans 90 days or more past due and still accruing as a percentage of total loans,” “Nonperforming loans as a percentage of total loans,” and certain other asset quality ratios that reflect nonperforming assets in the numerator or denominator (or both) results in significant distortion to these ratios. In addition, because loan level charge-offs related to the acquired loans are not recognized in the financial statements until the cumulative amounts exceed the original loss projections on a pool basis, the net charge-off ratio for the acquired loans is not consistent with the net charge-off ratio for other loan portfolios. The inclusion of these loans in the asset quality ratios described above could result in a lack of comparability across quarters or years and could negatively impact comparability with other portfolios that were not impacted by acquisition accounting. The Company believes that the presentation of asset quality measures excluding covered loans and related amounts from both the numerator and the denominator provides better perspective into underlying trends related to the quality of its loan portfolio. Accordingly, the asset quality measures in Table 8 present asset quality information both on a consolidated basis as well as excluding the covered loans and the related amounts.

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The following table summarizes asset quality information at September 30, 2013 and December 31, 2012 and includes loans held for sale and purchased impaired loans.

Table 8 Asset Quality
	September 30, 2013		December 31, 2012
	(Dollars in Thousands)
Nonaccrual loans:
Commercial, financial and agricultural	$	160,372	$	112,135
Real estate – construction	19,786		104,683
Commercial real estate – mortgage	166,916		270,734
Residential real estate – mortgage	118,546		193,983
Equity lines of credit	39,301		20,143
Equity loans	23,197		16,943
Credit card	—		—
Consumer – direct	272		337
Consumer – indirect	2,237		—
Total nonaccrual loans, excluding covered loans	530,627		718,958
Covered nonaccrual loans	5,810		1,235
Total nonaccrual loans	536,437		720,193
Nonaccrual loans held for sale	7,465		7,583
Total nonaccrual loans and loans held for sale	$	543,902	$	727,776
Accruing TDRs: (1)
Commercial, financial and agricultural	$	25,994	$	17,832
Real estate – construction	5,192		49,215
Commercial real estate – mortgage	78,773		56,520
Residential real estate – mortgage	75,421		91,384
Equity lines of credit	—		—
Equity loans	39,127		21,929
Credit card	—		—
Consumer – direct	103		138
Consumer – indirect	—		—
Total accruing TDRs, excluding covered loans	224,610		237,018
Covered TDRs	2,090		7,079
Total TDRs	226,700		244,097
TDRs classified as loans held for sale	—		—
Total TDRs (loans and loans held for sale)	$	226,700	$	244,097

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Table 8 (continued) Asset Quality
	September 30, 2013			December 31, 2012
	(Dollars in Thousands)
Other real estate:
Other real estate, excluding covered assets	$	28,174		$	45,007
Covered other real estate	13,319			23,561
Total other real estate	$	41,493		$	68,568
Other repossessed assets:
Other repossessed assets, excluding covered assets	$	3,896		$	3,890
Covered other repossessed assets	—			—
Total other repossessed assets	$	3,896		$	3,890
Loans 90 days past due and accruing:
Commercial, financial and agricultural	$	2,452		$	1,853
Real estate – construction	824			1,907
Commercial real estate – mortgage	1,494			2,771
Residential real estate – mortgage	5,137			3,645
Equity lines of credit	2,342			4,661
Equity loans	2,129			2,335
Credit card	8,026			7,729
Consumer – direct	3,216			2,065
Consumer – indirect	1,924			1,138
Total loans 90 days past due and accruing, excluding covered loans	27,544			28,104
Covered loans 90 days past due and accruing	70,491			112,748
Total loans 90 days past due and accruing	98,035			140,852
Loans held for sale 90 days past due and accruing	—			—
Total loans and loans held for sale 90 days past due and accruing	$	98,035		$	140,852
Nonperforming loans and loans held for sale as a percentage of total loans and loans held for sale, excluding covered loans (2)	1.16		%	1.71		%
Nonperforming assets as a percentage of total loans and loans held for sale, other real estate, and other repossessed assets, excluding covered assets (3)	1.23		%	1.82		%
Allowance for loan losses as a percentage of loans, excluding covered loans and related allowance	1.47		%	1.79		%
Allowance for loan losses as a percentage of nonperforming loans, excluding covered loans (4)	127.75		%	104.96		%

(1) TDR totals include accruing loans 90 days past due classified as TDR.

(2) Nonperforming loans include nonaccrual loans and loans held for sale, accruing loans 90 days past due and accruing TDRs 90 days past due.

(3) Nonperforming assets include nonperforming loans, other real estate and other repossessed assets.

(4) Nonperforming loans include nonaccrual loans, accruing loans 90 days past due and accruing TDRs 90 days past due.

The current inventory of foreclosed real estate, excluding amounts covered under FDIC loss sharing agreements, totaled $28 million at September 30, 2013 compared to $45 million at December 31, 2012. This includes land and lots, which totaled $17 million at September 30, 2013. The remaining foreclosed real estate at September 30, 2013 is primarily single family residential and commercial real estate.

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The following table provides a rollforward of nonaccrual loans and loans held for sale, excluding covered loans, for the nine months ended September 30, 2013.

Table 9 Rollforward of Nonaccrual Loans
	(In Thousands)
Balance at December 31, 2012	$	726,541
Additions	446,890
Returns to accrual	(54,480		)
Loan sales	(102,310		)
Payments and paydowns	(241,009		)
Transfers to other real estate	(23,195		)
Charge-offs	(214,345		)
Balance at September 30, 2013	$	538,092

When borrowers are experiencing financial difficulties, the Company may, in order to assist the borrowers in repaying the principal and interest owed to the Company, make certain modifications to the loan agreement. To facilitate this process, a concessionary modification that would not otherwise be considered may be granted resulting in a classification of the loan as a TDR. Within each of the Company’s loan classes, TDRs typically involve modification of the loan interest rate to a below market rate or an extension or deferment of the loan. The financial effects of TDRs are reflected in the components that comprise the allowance for loan losses in either the amount of charge-offs or loan loss provision and period-end allowance levels. All TDRs are considered to be impaired loans. Refer to Note 4, Loans and Allowance for Loan Losses, in the Notes to the September 30, 2013, Unaudited Condensed Consolidated Financial Statements for additional information.

The Company’s aggregate recorded investment in impaired loans modified through TDRs excluding covered loans decreased to $345 million at September 30, 2013 from $389 million at December 31, 2012. Included in these amounts are $225 million at September 30, 2013 and $237 million at December 31, 2012 of accruing TDRs. Accruing restructured loans are not considered nonperforming because they are performing in accordance with the restructured terms.

The Company’s allowance for loan losses is largely driven by risk ratings assigned to commercial loans, updated borrower credit scores on consumer loans, and borrower delinquency history in both commercial and consumer portfolios.  As such, the provision for credit losses is impacted primarily by changes in borrower payment performance rather than TDR classification.  In addition, all commercial and consumer loans modified in a TDR are considered to be impaired, even if they maintain their accrual status.

Allowance for Loan Losses

Management’s policy is to maintain the allowance for loan losses at a level sufficient to absorb estimated probable incurred losses in the loan portfolio. The total allowance for loan losses, excluding covered loans, decreased $71 million to $714 million at September 30, 2013, from $785 million at December 31, 2012. During the first nine months of 2013, the overall risk profile of the loan portfolio continued to improve as a result of the decrease in the balance of real estate construction loans and growth in lower risk portfolios such as commercial, financial and agricultural and residential real estate-mortgage. As loans with higher levels of probable incurred losses have been removed from the portfolio, this has influenced the allowance estimate resulting in lower required reserves. In addition, nonperforming loans, excluding covered loans and loans held for sale, decreased $189 million to $559 million at September 30, 2013 from $748 million at December 31, 2012 resulting in an improvement in the allowance to nonperforming loan ratio of 127.8% at September 30, 2013 compared to 105.0% at December 31, 2012. The ratio of the allowance for loan losses to total loans, excluding covered loans and the related allowance, decreased to 1.47% at September 30, 2013 from 1.79% at December 31, 2012. The allowance attributable to individually impaired loans was $108.1 million at September 30, 2013 compared to $72.8 million at December 31, 2012. The increase in the allowance attributable to individually impaired loans was primarily related to the reserve for the collateral shortfall on nonreaffirmed loans discharged in bankruptcy recorded during the nine months ended September 30, 2013. See Note 4, Loans and Allowance for Loan Losses, in the Notes to the September 30, 2013, Unaudited Condensed Consolidated Financial Statements for additional discussion.

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The provision for loan losses is the charge to earnings that management determines to be necessary to maintain the allowance for loan losses at a sufficient level reflecting management's estimate of probably incurred losses in the loan portfolio. Provision for loan losses was $81.4 million for the nine months ended September 30, 2013, compared to $26.7 million for the nine months ended September 30, 2012. Excluding covered loans, provision for loan losses was $91.5 million for the nine months ended September 30, 2013, compared to $46.1 million for the nine months ended September 30, 2012. The increase in provision for loan losses for the nine months ended September 30, 2013 as compared to the same period in 2012 was primarily attributable to loan growth during 2013 in the commercial, financial and agricultural, residential real estate, and consumer portfolios. Offsetting the increase attributable to loan growth is improving credit quality in the real estate-construction and commercial real estate-mortgage portfolios. See Note 4, Loans and Allowance for Loan Losses, in the Notes to the September 30, 2013, Unaudited Condensed Consolidated Financial Statements.

Net charge-offs were 0.47% of average loans outstanding for the nine months ended September 30, 2013, compared to 0.53% for the nine months ended September 30, 2012. Excluding covered loans, net charge-offs were 0.47% of average loans outstanding for the nine months ended September 30, 2013, compared to 0.60% for the nine months ended September 30, 2012.

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The following table sets forth information with respect to the Company’s loans and the allowance for loan losses.

Table 10 Summary of Loan Loss Experience
	Nine Months Ended
	September 30,
	2013			2012
	(Dollars in Thousands)
Average loans outstanding during the period	$	46,949,111		$	43,670,319
Average loans outstanding during the period, excluding covered loans	$	45,930,501		$	41,913,577
Allowance for loan losses, beginning of period	$	802,853		$	1,051,796
Charge-offs:
Commercial, financial and agricultural	31,044			42,036
Real estate – construction	6,898			41,239
Commercial real estate – mortgage	27,370			50,631
Residential real estate – mortgage	62,564			45,044
Equity lines of credit	23,513			39,638
Equity loans	10,212			12,848
Credit card	24,308			23,791
Consumer – direct	16,334			17,704
Consumer – indirect	12,102			11,391
Total, excluding covered loans	214,345			284,322
Covered loans	6,444			2,916
Total, including covered loans	220,789			287,238
Recoveries:
Commercial, financial and agricultural	13,548			26,911
Real estate – construction	9,894			18,808
Commercial real estate – mortgage	5,672			9,980
Residential real estate – mortgage	4,371			3,059
Equity lines of credit	3,052			20,766
Equity loans	1,478			1,405
Credit card	2,002			1,980
Consumer – direct	4,359			4,383
Consumer – indirect	7,443			8,442
Total, excluding covered loans	51,819			95,734
Covered loans	2,668			16,831
Total, including covered loans	54,487			112,565
Net charge-offs	166,302			174,673
Provision for covered loans	(10,111		)	(19,406		)
Provision charged to income, excluding covered loans	91,497			46,116
Total	81,386			26,710
Allowance for loan losses, end of period	$	717,937		$	903,833
Allowance for loan losses, excluding allowance attributable to covered loans, end of year	$	714,021		$	882,440
Allowance for covered loans	3,916			21,393
Total allowance for loan losses	$	717,937		$	903,833
Net charge-offs to average loans outstanding	0.47		%	0.53		%
Net charge-offs to average loans outstanding, excluding covered loans	0.47		%	0.60		%

Loan Concentrations

The following tables provide further details regarding the Company’s commercial, financial and agricultural, commercial real estate, residential real estate, and consumer segments as of September 30, 2013 and December 31, 2012.

In accordance with the Company’s lending policy, each commercial loan undergoes a detailed underwriting process, which incorporates the Company’s risk tolerance, credit policy and procedures. In addition, the Company has in place

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a graduated approval process which accounts for the quality, loan type and total exposure of the borrower. The Company has also adopted an internal exposure based limit which is based on a variety of risk factors, including but not limited to the borrower industry.

Commercial, Financial and Agricultural

The commercial, financial and agricultural portfolio segment totaled $19.5 billion at September 30, 2013 compared to $17.0 billion at December 31, 2012. This segment ranges from large national and international companies to small and mid-sized companies with business operations in the Company’s geographic footprint. This segment also contains owner occupied commercial real estate loans. Loans in this portfolio are generally underwritten individually and are secured with the assets of the company, and/or the personal guarantees of the business owners. The Company minimizes the risk associated with this segment by maintaining prudent advance rates, financial covenants, and obtaining personal guarantees from the principals of the company, where necessary.

The following table provides details related to the commercial, financial, and agricultural segment as of September 30, 2013 and December 31, 2012.

Table 11 Commercial, Financial and Agricultural
	September 30, 2013								December 31, 2012
Industry	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Autos, Components and Durable Goods	$	416,022	$	426	$	—	$	—	$	317,984	$	944	$	—	$	19
Capital Goods & Industrial Services	1,844,181		8,768		50		91		1,505,005		8,916		79		—
Construction & Infrastructure	650,206		40,914		24,453		121		608,417		32,588		6,495		—
Energy	2,847,803		849		—		—		2,790,610		—		—		—
Financials	1,033,915		23		—		—		1,003,885		1,524		967		—
Food, Beverage, Textile, Personal Healthcare	2,362,268		16,125		971		1		1,910,536		12,888		369		275
General Corporates	916,021		1,984		35		2,004		864,085		10,035		1,806		1,522
Institutions	2,195,645		54,510		—		—		1,689,647		8,751		6,211		—
Leisure	1,089,819		1,748		439		12		1,133,755		3,314		—		—
Mining & Metals, Pulp & Paper Chemicals	658,499		2,746		—		—		593,437		4,329		1,657		—
Real Estate	1,456,451		2,907		—		54		1,214,560		9,272		—		1
Retail	1,867,761		21,484		29		37		1,566,566		12,329		218		36
Telecoms, Technology & Media	734,903		6,108		17		19		671,942		6,885		13		—
Transportation	637,422		287		—		113		533,091		360		17		—
Utilities & Alternative Power	793,384		1,493		—		—		577,437		—		—		—
Total Commercial, Financial and Agricultural	$	19,504,300	$	160,372	$	25,994	$	2,452	$	16,980,957	$	112,135	$	17,832	$	1,853

Commercial Real Estate

The commercial real estate portfolio segment includes the commercial real estate and real estate – construction loan portfolios. Commercial real estate loans totaled $8.8 billion at September 30, 2013, compared to $7.7 billion at December 31, 2012, and real estate – construction loans totaled $1.7 billion at September 30, 2013, compared to $1.9 billion at December 31, 2012.

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This segment consists primarily of extensions of credits to real estate developers and investors for the financing of land and buildings, whereby the repayment is generated from the sale of the real estate or the income generated by the real estate property. The Company attempts to minimize risk on commercial real estate properties by requiring collateral values that exceed the loan amount, adequate cash flow to service the debt, and the personal guarantees of principals of the borrowers. In order to minimize risk on the construction portfolio, the Company has established an operations group outside of the lending staff responsible for loan disbursements during the construction process.

The following tables present the geographic distribution for the commercial real estate and real estate – construction portfolios as of September 30, 2013 and December 31, 2012.

Table 12 Commercial Real Estate
	September 30, 2013								December 31, 2012
State	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Alabama	$	740,545	$	13,108	$	6,824	$	—	$	859,936	$	24,684	$	2,409	$	909
Arizona	833,288		15,157		24,943		189		708,146		27,995		21,357		1,194
California	671,448		2,749		—		—		419,488		2,226		654		—
Colorado	549,402		4,225		14,443		—		585,062		6,928		15,122		—
Florida	871,884		9,378		5,390		440		767,971		14,687		7,973		—
New Mexico	265,729		3,982		—		—		270,226		11,054		—		—
Texas	3,111,423		95,823		6,523		744		3,046,862		161,071		7,957		668
Other	1,726,091		22,494		20,650		121		1,049,857		22,089		1,048		—
	$	8,769,810	$	166,916	$	78,773	$	1,494	$	7,707,548	$	270,734	$	56,520	$	2,771

Table 13 Real Estate – Construction
	September 30, 2013								December 31, 2012
State	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Alabama	$	46,954	$	1,644	$	1,977	$	—	$	94,948	$	5,981	$	3,484	$	189
Arizona	120,288		4,053		—		—		158,211		6,667		18,428		384
California	222,329		26		83		91		212,580		42		—		—
Colorado	70,757		836		2,242		540		70,767		3,504		4,468		—
Florida	102,608		2,976		—		—		77,704		7,346		1,009		—
New Mexico	19,440		72		73		—		46,806		6,142		38		—
Texas	779,273		9,378		817		193		866,544		50,944		2,169		1,334
Other	302,170		801		—		—		368,371		24,057		19,619		—
	$	1,663,819	$	19,786	$	5,192	$	824	$	1,895,931	$	104,683	$	49,215	$	1,907

Residential Real Estate

The residential real estate portfolio includes residential real estate – mortgage loans, equity lines of credit and equity loans. The residential real estate portfolio primarily contains loans to individuals, which are secured by single-family residences. Loans of this type are generally smaller in size than commercial real estate loans and are geographically

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dispersed throughout the Company’s market areas, with some guaranteed by government agencies or private mortgage insurers. Losses on residential real estate loans depend, to a large degree, on general economic conditions, including the level of interest rates, the unemployment rate, economic conditions and collateral values.

Residential real estate - mortgage loans totaled $12.4 billion at September 30, 2013 compared to $11.4 billion at December 31, 2012. Risks associated with residential real estate – mortgage loans are mitigated through rigorous underwriting procedures and mortgage insurance. In addition, the collateral for this segment is concentrated in the Company’s footprint as indicated by Table 14 below.

Table 14 Residential Real Estate - Mortgage
	September 30, 2013								December 31, 2012
State	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Alabama	$	1,407,074	$	21,711	$	16,058	$	646	$	1,401,209	$	26,943	$	22,411	$	—
Arizona	1,356,655		11,867		10,894		462		1,317,875		19,254		15,120		—
California	1,817,916		7,632		3,506		216		1,325,754		11,573		3,173		161
Colorado	996,617		2,052		2,491		744		1,006,798		12,365		2,032		—
Florida	940,515		12,647		10,727		544		1,115,414		25,309		16,821		109
New Mexico	222,955		1,408		1,329		33		220,693		2,322		1,752		—
Texas	4,810,959		40,767		21,760		2,239		4,577,159		64,268		24,728		3,375
Other	867,154		20,462		8,656		253		479,071		31,949		5,347		—
	$	12,419,845	$	118,546	$	75,421	$	5,137	$	11,443,973	$	193,983	$	91,384	$	3,645

The following tables provide information related to refreshed FICO scores and LTVs for the Company’s residential real estate portfolio as of September 30, 2013 and December 31, 2012.

Table 15 Residential Real Estate - Mortgage
	September 30, 2013								December 31, 2012
FICO Score	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Below 621	$	584,942	$	76,557	$	26,721	$	4,122	$	703,422	$	122,192	$	40,027	$	938
621-680	1,192,982		16,192		20,073		47		1,163,895		19,718		20,394		105
681 – 720	2,103,785		5,270		9,896		—		1,893,879		3,439		9,510		—
Above 720	7,644,119		2,405		17,629		614		6,772,932		4,439		18,905		283
Unknown	894,017		18,122		1,102		354		909,845		44,195		2,548		2,319
	$	12,419,845	$	118,546	$	75,421	$	5,137	$	11,443,973	$	193,983	$	91,384	$	3,645

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Table 16 Residential Real Estate - Mortgage
	September 30, 2013								December 31, 2012
LTV Range	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Below 80%	$	6,584,937	$	90,277	$	38,617	$	3,032	$	6,519,321	$	142,139	$	44,985	$	3,464
80-89%	2,199,625		15,636		20,782		942		2,124,333		26,633		21,484		181
90-94%	1,838,517		4,195		6,207		846		1,844,229		7,809		8,325		—
Above 94%	1,679,305		3,675		9,728		220		940,771		16,810		16,499		—
Unknown	117,461		4,763		87		97		15,319		592		91		—
	$	12,419,845	$	118,546	$	75,421	$	5,137	$	11,443,973	$	193,983	$	91,384	$	3,645

Equity lines of credit and equity loans totaled $2.9 billion and $3.1 billion at September 30, 2013 and December 31, 2012, respectively. Losses in these portfolios generally track overall economic conditions. These loans are underwritten in accordance with the underwriting standards set forth in the Company’s policies and procedures. The collateral for this segment is also concentrated within the Company’s footprint as indicated by Table 17.

Table 17 Equity Loans and Lines
	September 30, 2013								December 31, 2012
State	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Alabama	$	681,705	$	10,967	$	11,484	$	1,259	$	737,750	$	8,563	$	4,894	$	1,411
Arizona	431,177		13,381		5,349		813		465,817		4,618		3,456		1,196
California	59,162		206		168		—		37,910		23		—		—
Colorado	234,093		7,927		917		84		271,959		1,090		864		410
Florida	433,384		10,813		8,097		597		469,498		8,599		4,264		1,283
New Mexico	59,155		1,387		980		175		62,567		1,091		163		514
Texas	947,275		16,429		11,308		1,308		971,963		12,303		8,059		2,135
Other	56,861		1,388		824		235		47,423		799		229		47
	$	2,902,812	$	62,498	$	39,127	$	4,471	$	3,064,887	$	37,086	$	21,929	$	6,996

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The following tables provide information related to refreshed FICO scores and LTVs for the Company’s equity loans and lines as of September 30, 2013 and December 31, 2012.

Table 18 Equity Loans and Lines
	September 30, 2013								December 31, 2012
FICO Score	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Below 621	$	308,826	$	31,553	$	17,762	$	2,955	$	325,536	$	27,637	$	11,090	$	4,716
621-680	445,505		20,366		10,653		615		464,520		5,266		5,661		1,794
681 – 720	529,308		6,808		4,771		230		562,713		636		2,625		238
Above 720	1,571,315		1,828		5,353		49		1,664,235		763		2,347		32
Unknown	47,858		1,943		588		622		47,883		2,784		206		216
	$	2,902,812	$	62,498	$	39,127	$	4,471	$	3,064,887	$	37,086	$	21,929	$	6,996

Table 19 Equity Loans and Lines
	September 30, 2013								December 31, 2012
LTV Range	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Below 80%	$	2,677,684	$	50,377	$	24,874	$	4,320	$	2,844,327	$	30,074	$	19,102	$	6,314
80-89%	36,177		989		3,412		—		33,404		2,654		1,157		177
90-94%	10,450		152		2,243		—		8,727		389		428		—
Above 94%	25,563		1,260		8,417		117		7,160		704		1,021		—
Unknown	152,938		9,720		181		34		171,269		3,265		221		505
	$	2,902,812	$	62,498	$	39,127	$	4,471	$	3,064,887	$	37,086	$	21,929	$	6,996

Other Consumer

The Company also operates a consumer finance unit which purchases loan contracts for indirect automobile consumer financing. These loans are centrally underwritten using industry accepted tools and underwriting guidelines. The Company also originates credit card loans and consumer-direct loans that are centrally underwritten and sourced from the Company’s branches. Total credit card, consumer-direct and consumer-indirect loans at September 30, 2013, were $3.2 billion, or 6.5% of the total loan portfolio, compared to $2.7 billion, or 6.1% of the total loan portfolio at December 31, 2012.

Foreign Exposure

As of September 30, 2013, foreign exposure risk did not represent a significant concentration of the Bank’s total portfolio of loans and was substantially represented by borrowers domiciled in Mexico and foreign borrowers currently residing in the United States.  At this time, less than 1% of the Bank’s foreign exposure is outside of Mexico and is not comprised of any European nations or sovereign indebtedness.

Goodwill

Goodwill totaled $5.0 billion at both September 30, 2013 and December 31, 2012 and is allocated to each of the Company’s reporting units, at which level goodwill is tested for impairment on an annual basis or more often if events and circumstances indicate impairment may exist. At September 30, 2013 and December 31, 2012, goodwill, net of

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accumulated impairment losses, attributable to each of the Company’s four identified reporting units is as follows: Retail Banking - $1.7 billion, Commercial Banking - $2.4 billion, Wealth Management - $390 million and Corporate and Investment Banking - $568 million.

A test of goodwill for impairment consists of two steps. In step one of the impairment test, the Company compares the fair value of each reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, step two of the impairment test is required to be performed to measure the amount of impairment loss, if any. Step two compares the implied fair value of goodwill attributable to each reporting unit to the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination; an entity allocates the fair value determined in step one for the reporting unit to all of the assets and liabilities of that unit as if the reporting unit had been acquired in a business combination. The carrying value of equity for each reporting unit is determined from an allocation based upon risk weighted assets. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. Adverse changes in the economic environment, declining operations of the reporting unit, or other factors could result in a decline in the estimated implied fair value of goodwill.

The estimated fair value of the reporting unit is determined using a blend of both income and market approaches. For the income approach, estimated future cash flows and terminal values are discounted. The Company utilizes a CAPM in order to derive the base discount rate. The inputs to the CAPM include the 20-year risk free rate, 5-year beta for a select peer set, and a market risk premium based on published data. Once the output of the CAPM is determined, a size premium is added (also based on a published source), as well as a company-specific risk premium for each reporting unit.

In estimating future cash flows, a balance sheet as of the test date and a statement of income for the last 12 months of activity for each reporting unit is compiled. From that point, future balance sheets and statements of income are projected based on the inputs. Cash flows are based on future capitalization requirements due to balance sheet growth and anticipated changes in regulatory capital requirements.

The Company uses the guideline public company method and the guideline transaction method as the market approaches. The public company method applies valuation multiples derived from each reporting units peer group to tangible book value or earnings and an implied control premium to the respective reporting unit. The control premium is evaluated and compared to similar financial services transactions considering the absolute and relative potential revenue synergies and cost savings. The guideline transaction method applies valuation multiples to a financial metric of the reporting unit based on comparable observed purchase transactions in the financial services industry for the reporting unit, where available.

The Company tested its four identified reporting units with goodwill for impairment as of October 31, 2012. The results of this test indicated no goodwill impairment was required; however, the estimated fair value of the Company’s reporting units was less than their carrying amounts. The following table includes the carrying value and fair value of each reporting unit’s goodwill as of December 31, 2012.

Table 20 Fair Value of Reporting Units
	Fair Value		Carrying Value
	(In Thousands)
Reporting Unit:
Retail	$	3,680,000	$	3,999,000
Commercial	5,010,000		5,073,000
Wealth Management	800,000		869,000
Corporate and Investment Banking	830,000		865,000

Based on the above data, step two of the goodwill impairment test was performed for all of the Company’s reporting units. In step two, the fair value of the reporting units’ assets, both tangible and intangible, and liabilities were determined using estimates of the amounts at which the assets or liabilities could be bought, incurred, sold or settled in a taxable transaction between willing participants. The effects of the step two adjustments, exceeded any reductions in the value

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of equity determined in step one; accordingly, the implied goodwill exceeded the carrying amount of goodwill for all of the reporting units by 10.5% for Retail, 11.8% for Commercial, 6.3% for Wealth Management and 3.8% for Corporate and Investment Banking, resulting in no impairment for the Company’s reporting units as of the October 31, 2012, test date.

During the nine months ended September 30, 2013, the Company assessed the indicators of goodwill impairment for all four reporting units as of April 30, 2013. The indicators assessed included:

• Recent operating performance,

• Changes in market capitalization,

• Regulatory actions and assessments,

• Changes in the business climate (including legislation, legal factors, and competition),

• Company-specific factors (including changes in key personnel, asset impairments, and business dispositions) and

• Trends in the banking industry.

While the assessment of these indicators did not indicate impairment, the Company determined that quantitative testing of goodwill was required for all of the Company’s reporting units prior to its annual impairment test, due to it being more likely than not that the fair value of all reporting units is less than their carrying amounts. As such, the Company tested its four identified reporting units with goodwill for impairment as of April 30, 2013. The results of this test indicated no goodwill impairment was required; however, the estimated fair value of the Company’s Wealth Management and Corporate and Investment Banking reporting units was less than their carrying amounts. The following table includes the carrying value and fair value of each reporting unit’s goodwill as of April 30, 2013:

Table 21 Fair Value of Reporting Units
	Fair Value		Carrying Value
	(In Thousands)
Reporting Unit:
Retail	$	4,440,000	$	4,331,000
Commercial	5,100,000		4,974,000
Wealth Management	910,000		944,000
Corporate and Investment Banking	800,000		859,000

Based on the above data, step two of the goodwill impairment test was performed for the Wealth Management and Corporate and Investment Banking reporting units. In step two, the fair value of the Wealth Management and Corporate and Investment Banking reporting unit’s assets, both tangible and intangible, and liabilities were determined using estimates of the amounts at which the assets or liabilities could be bought, incurred, sold, or settled in a taxable transaction between willing participants. The effects of the step two adjustments, exceeded any reductions in the value of equity determined in step one; accordingly the calculation of implied goodwill exceeded the carrying amount of goodwill by approximately 7.2% for Wealth Management and 3.2% for Corporate and Investment Banking resulting in no impairment for the Wealth Management and Corporate and Investment Banking reporting units as of the April 30, 2013 test date. In addition, management monitored events and circumstances through September 30, 2013, and determined that there were no events and circumstances that would change the conclusions reached as of the April 30, 2013 test date.

Both the step one fair values of the reporting units and the step two allocations of the fair values of the reporting units’ assets and liabilities are based upon management’s estimates and assumptions. Although management has used the estimates and assumptions it believes to be most appropriate in the circumstances, it should be noted that even relatively minor changes in certain valuation assumptions used in management’s calculations would result in significant differences in the results of the impairment tests. As an example, the discount rates used in the step one valuations are a key valuation assumption. In the Company’s step one test at April 30, 2013, the combined fair value of the reporting units with goodwill exceeded the combined carrying value by approximately $142 million. If the discount rates used in the step one test were increased by 50 basis points and 100 basis points, this excess fair value would decrease to a deficit to fair value of $678 million and $1.4 billion, respectively.

The sensitivity calculation above is hypothetical and should not be considered to be predictive of future performance. Changes in implied fair value based on adverse changes in assumptions generally cannot be extrapolated because of

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the relationship of the change in assumption to the change in fair value may not be linear. Also, the effect of an adverse variation in a particular assumption on the implied fair value of goodwill is calculated without changing any other assumption, while in reality changes in one factor may result in changes in another which may magnify or counteract the effect of the change.

Specific factors as of the date of filing of the financial statements that could negatively impact the assumptions used in assessing goodwill for impairment: include: disparities in the level of fair value changes in net assets (especially loans); increases in book values of equity of a reporting unit in excess of the increase in fair value of equity; adverse business trends resulting from litigation and/or regulatory actions; higher loan losses; lengthened forecasts of high unemployment levels; future increased minimum regulatory capital requirements above current thresholds; future federal rules and regulators; and/or a protraction in the current low level of interest rates significantly beyond 2014.

Funding Activities

Deposits are the primary source of funds for lending and investing activities and their cost is the largest category of interest expense. The Company also utilizes brokered deposits as a funding source in addition to customer deposits. Scheduled payments, as well as prepayments, and maturities from portfolios of loans and investment securities also provide a stable source of funds. FHLB advances, other secured borrowings, federal funds purchased, securities sold under agreements to repurchase and other short-term borrowed funds, as well as longer-term debt issued through the capital markets, all provide supplemental liquidity sources. The Company’s funding activities are monitored and governed through the Company’s asset/liability management process.

Deposits

Total deposits increased by $600 million from December 31, 2012 to September 30, 2013. Brokered deposits, which are included in the table below, totaled $2.4 billion and $2.9 billion at September 30, 2013 and December 31, 2012, respectively. The following table presents the Company’s deposits segregated by major category:

Table 22 Composition of Deposits
	September 30, 2013				December 31, 2012
	Balance		% of Total		Balance		% of Total
	(Dollars in Thousands)
Noninterest-bearing demand deposits	$	15,068,999	28.85	%	$	14,436,539	27.95	%
Interest-bearing demand deposits	6,844,407		13.10		6,739,778		13.05
Savings and money market	18,813,452		36.01		18,250,326		35.34
Certificates and other time deposits	11,399,442		21.82		12,073,215		23.38
Foreign office deposits	116,109		0.22		142,920		0.28
Total deposits	$	52,242,409	100.00	%	$	51,642,778	100.00	%

The overall increase in total deposits was driven by an increase in noninterest-bearing demand deposits and savings and money market account balances. The increase was partially offset by decreases in certificates and other time deposits. Noninterest bearing demand deposits increased despite the expiration at December 31, 2012, of a provision from the Dodd-Frank Act which provided temporary unlimited deposit insurance coverage on noninterest bearing deposits. Certificates and other time deposits decreased from September 30, 2013 compared to December 31, 2012 primarily as a result of a decrease in time deposits over $100,000.

Borrowed Funds

In addition to internal deposit generation, the Company also relies on borrowed funds as a supplemental source of funding. Borrowed funds consist of short-term borrowings, FHLB advances, subordinated debentures and other long-term borrowings.

At both September 30, 2013 and December 31, 2012, short-term borrowings were comprised of federal funds purchased and securities sold under agreements to repurchase that were a result of customer activity. At September 30, 2013, short-term borrowings totaled $1.1 billion, an increase of $42 million, or 4% compared to December 31, 2012.

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Long-term debt totaled $4.3 billion at September 30, 2013, a slight increase of $34 million, or 1%, from the balance at December 31, 2012. For the nine months ended September 30, 2013, the Company redeemed approximately $200 million of FHLB advances and repurchased subordinated debt debentures totaling $126 million. Proceeds from FHLB and other borrowings totaled $425 million for the nine months ended September 30, 2013.

Shareholder’s Equity

Total shareholder's equity at September 30, 2013 was $11.4 billion, an increase of $338 million compared to December 31, 2012.  Shareholder’s equity increased $349 million due to earnings attributable to shareholder during the period.  In addition, accumulated other comprehensive income (loss) decreased $106 million, primarily as a result of a decrease in the fair value of investment securities available for sale.

YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010

Analysis of Results of Operations

Consolidated net income attributable to shareholder totaled $476.9 million for 2012. Consolidated net loss for 2011 and 2010 was $(1.7) billion and $(338.5) million, respectively. Goodwill impairment charges of $2.0 billion and $523.3 million, respectively, were included in the consolidated net loss for 2011 and 2010. The Company’s 2012 results reflected a significant decline in provision for loan losses resulting from continued improving credit metrics and lower non-interest expense due to a $2.0 billion goodwill impairment charge in 2011. The Company also experienced lower net interest income as a result of lower earning asset yields brought about from an extended period of historically low interest rates and subsequently lower yielding reinvestment opportunities.

Net Interest Income and Net Interest Margin

Net interest income is the principal component of the Company’s income stream and represents the difference, or spread, between interest and fee income generated from earning assets and the interest expense paid on deposits and borrowed funds. Fluctuations in interest rates as well as changes in the volume and mix of earning assets and interest bearing liabilities can impact net interest income. The following discussion of net interest income is presented on a fully taxable equivalent basis, unless otherwise noted, to facilitate performance comparisons among various taxable and tax-exempt assets.

2012 compared to 2011

Net interest income on a fully taxable equivalent basis totaled $2.3 billion in 2012 compared with $2.4 billion in 2011. Net interest income on a fully taxable equivalent basis decreased 4% in 2012 compared to 2011. The decrease in net interest income was primarily driven by lower interest earning asset yields, which decreased 57 basis points compared to 2011.

Net interest margin was 4.23% in 2012 compared to 4.73% in 2011. The decline in net interest margin primarily reflects the runoff of higher yielding covered loans and lower yields on new loans, partially offset by a decrease in rates paid on interest bearing liabilities.

The fully taxable equivalent yield for 2012 for the loan portfolio was 5.14% compared to 5.75% for the prior year. The decrease was primarily due to maturity and payoff of higher yielding covered loans and a higher volume of new loans originated at lower rates.

The fully taxable equivalent yield on the total investment securities portfolio was 2.79% for the year ended December 31, 2012, compared to 3.23% for the prior year. The decrease is primarily due to a higher volume of lower yielding investment securities available for sale.

The average rate paid on interest bearing deposits decreased to 0.56% during 2012 from 0.66% during 2011. This improvement was a result of lower rates on certificates and other time deposits.

The average rate on FHLB and other borrowings during 2012 was 1.47%, a decrease of 31 basis points compared to the prior year. This reduction was primarily due to the replacement of higher cost FHLB advances with lower cost FHLB advances during 2012.

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2011 compared to 2010

Net interest income on a fully taxable equivalent basis totaled $2.4 billion in both 2011 and 2010. Net interest margin was 4.73% in both 2011 and 2010.

The fully taxable equivalent yield for 2011 for the loan portfolio was 5.75% compared to 5.86% for the prior year. The decrease was due to the maturity and payoff of higher yielding covered loans.

The fully taxable equivalent yield on the total investment securities portfolio was 3.23% for the year ended December 31, 2011, compared to 3.88% for the prior year. The decrease is primarily due to a higher volume of lower yielding investment securities available for sale.

The average rate paid on interest bearing deposits decreased to 0.66% during 2011 from 0.85% during 2010. This improvement was a result of a decrease in higher rate certificates and other time deposits and management’s ability to lower rates on other deposit products.

The average rate on FHLB and other borrowings during 2011 was 1.78%, a decrease of 94 basis points compared to the prior year. This reduction was primarily due to new issuances at lower rates.

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The following tables set forth the major components of net interest income and the related annualized yields and rates for 2012, 2011, and 2010, as well as the variances between the periods caused by changes in interest rates versus changes in volumes.

Table 23 Consolidated Average Balance and Yield/ Rate Analysis
	December 31, 2012							December 31, 2011							December 31, 2010
	Average Balance			Income/Expense		Yield/ Rate		Average Balance			Income/ Expense		Yield/Rate		Average Balance			Income/ Expense		Yield/Rate
	(Dollars in Thousands)
Assets:
Interest earning assets:
Loans (1) (2) (3)	$	44,118,556		$	2,268,077	5.14	%	$	40,998,782		$	2,355,446	5.75	%	$	41,525,768		$	2,431,779	5.86	%
Investment securities – AFS (tax exempt) (3)	266,046			15,755		5.92		303,522			18,172		5.99		349,896			21,101		6.03
Investment securities – AFS (taxable)	7,868,648			210,084		2.67		7,305,578			231,023		3.16		7,005,032			271,922		3.88
Total investment securities – AFS	8,134,694			225,839		2.78		7,609,100			249,195		3.27		7,354,928			293,023		3.98
Investment securities – HTM (tax exempt) (3)	1,006,818			32,712		3.25		791,741			24,956		3.15		589,420			19,116		3.24
Investment securities – HTM (taxable)	409,384			8,116		1.98		472,393			12,807		2.71		535,859			16,564		3.09
Total investment securities - HTM	1,416,202			40,828		2.88		1,264,134			37,763		2.99		1,125,279			35,680		3.17
Trading account securities (3)	77,962			2,399		3.08		37,941			1,460		3.85		23,763			961		4.04
Other (4)	19,518			230		1.18		28,761			149		0.52		29,113			96		0.33
Total earning assets	53,766,932			2,537,373		4.72		49,938,718			2,644,013		5.29		50,058,851			2,761,539		5.52
Noninterest earning assets:
Cash and due from banks	3,919,156							2,919,956							2,503,428
Allowance for loan losses	(964,101		)					(1,112,845		)					(1,207,200		)
Net unrealized gain (loss) on investment securities available for sale	241,651							187,514							244,031
Other noninterest earning assets	9,505,177							11,801,134							13,028,350
Total assets	$	66,468,815						$	63,734,477						$	64,627,460
Liabilities:
Interest bearing liabilities:
Interest bearing demand deposits	$	6,324,500		10,192		0.16		$	6,333,278		9,489		0.15		$	6,068,082		10,893		0.18
Savings and money market accounts	16,918,633			67,991		0.40		15,322,550			59,424		0.39		14,426,645			70,007		0.49
Certificates and other time deposits	11,340,316			114,176		1.01		11,519,132			149,795		1.30		14,303,855			216,327		1.51
Foreign office deposits	112,176			285		0.25		98,743			249		0.25		120,631			343		0.28
Total interest bearing deposits	34,695,625			192,644		0.56		33,273,703			218,957		0.66		34,919,213			297,570		0.85
FHLB and other borrowings	4,478,136			66,014		1.47		3,249,709			57,892		1.78		3,362,144			91,445		2.72
Federal funds purchased and securities sold under agreements to repurchase	1,226,301			2,783		0.23		1,657,849			3,828		0.23		2,170,632			5,195		0.24
Other short-term borrowings	15,618			113		0.72		51,226			48		0.09		70,638			123		0.17
Total interest bearing liabilities	40,415,680			261,554		0.65		38,232,487			280,725		0.73		40,522,627			394,333		0.97
Noninterest bearing deposits	13,854,155							12,242,362							10,745,879
Other noninterest bearing liabilities	1,292,857							994,306							995,106
Total liabilities	55,562,692							51,469,155							52,263,612
Shareholder’s equity	10,906,123							12,265,322							12,363,848
Total liabilities and shareholder’s equity	$	66,468,815						$	63,734,477						$	64,627,460
Net interest income/net interest spread				$	2,275,819	4.07	%				$	2,363,288	4.56	%				$	2,367,206	4.54	%
Net interest margin						4.23	%						4.73	%						4.73	%
Taxable equivalent adjustment				$	45,837						$	34,239						$	28,022
Net interest income				$	2,229,982						$	2,329,049						$	2,339,184

(1) Loans include loans held for sale and nonaccrual loans.

(2) Interest income includes loan fees for rate calculation purposes.

(3) Yields are stated on a fully taxable equivalent basis assuming the tax rate in effect for each period presented.

(4) Includes federal funds sold, securities purchased under agreements to resell, interest bearing deposits, and other earning assets.

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Table 24 Volume and Yield/ Rate Variances (1)
	2012 compared to 2011									2011 compared to 2010
	Change due to									Change due to
	Volume			Yield/Rate			Total			Volume			Yield/Rate			Total
	(Dollars in Thousands, yields on a fully taxable equivalent basis)
Interest income on:
Loans	$	228,555		$	(315,924	)	$	(87,369	)	$	(30,626	)	$	(45,707	)	$	(76,333	)
Total investment securities available for sale	18,303			(41,659		)	(23,356		)	9,833			(53,661		)	(43,828		)
Total investment securities held to maturity	5,411			(2,346		)	3,065			4,229			(2,146		)	2,083
Trading account securities	1,281			(342		)	939			548			(49		)	499
Other (2)	(60		)	141			81			(1		)	54			53
Total earning assets	$	253,490		$	(360,130	)	$	(106,640	)	$	(16,017	)	$	(101,509	)	$	(117,526	)
Interest expense on:
Interest bearing demand deposits	$	(13	)	$	716		$	703		$	459		$	(1,863	)	$	(1,404	)
Savings and money market accounts	6,356			2,211			8,567			4,141			(14,724		)	(10,583		)
Certificates and other time deposits	(2,750		)	(32,869		)	(35,619		)	(38,742		)	(27,790		)	(66,532		)
Foreign office deposits	34			2			36			(58		)	(36		)	(94		)
Total interest bearing deposits	3,627			(29,940		)	(26,313		)	(34,200		)	(44,413		)	(78,613		)
FHLB and other borrowings	14,940			(6,818		)	8,122			(2,965		)	(30,588		)	(33,553		)
Federal funds purchased and securities sold under agreements to repurchase	(980		)	(65		)	(1,045		)	(1,190		)	(177		)	(1,367		)
Other short-term borrowings	(7		)	72			65			(28		)	(47		)	(75		)
Total interest bearing liabilities	17,580			(36,751		)	(19,171		)	(38,383		)	(75,225		)	(113,608		)
Increase (decrease) in net interest income	$	235,910		$	(323,379	)	$	(87,469	)	$	22,366		$	(26,284	)	$	(3,918	)

(1) The change in interest not solely due to volume or yield/rate is allocated to the volume column and yield/rate column in proportion to their relationship of the absolute dollar amounts of the change in each.

(2) Includes federal funds sold, securities purchased under agreement to resell, interest bearing deposits, and other earning assets.

Provision for Loan Losses

The provision for loan losses is the charge to earnings that management determines to be necessary to maintain the allowance for loan losses at a sufficient level reflecting management's estimate of probable incurred losses in the loan portfolio.

2012 compared to 2011

In 2012, the Company recorded $29.5 million of provision for loan losses compared to $428.6 million of provision for loan losses expense for 2011. Excluding covered loans, provision for loan losses for 2012 was $60.1 million compared to $416.6 million for 2011. The decrease in the provision for loan losses during 2012 was primarily due to improving credit trends, particularly in the real estate - construction and commercial real estate - mortgage portfolios. The Company recorded net charge-offs of $278.4 million during 2012 compared to $485.9 million during 2011. Net charge-offs were 0.63% of average loans for 2012 compared to 1.19% of average loans for 2011.

2011 compared to 2010

Provision for loan losses was $428.6 million for 2011 compared to $825.0 million for 2010. Excluding covered loans, provision for loan losses was $416.6 million for 2011 compared to $769.5 million for 2010. The decrease in provision for loan losses during 2011 was primarily due to improving credit trends. The Company recorded net charge-offs of $485.9 million during 2011 compared to $984.1 million during 2010. Net charge-offs were 1.19% of average loans for 2011 compared to 2.37% of average loans for 2010.

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For further discussion and analysis of the allowance for loan losses, refer to the discussion of lending activities found later in this section. Also, refer to Note 4, Loans and Allowance for Loan Losses, in the Notes to the December 31, 2012, Consolidated Financial Statements for additional disclosures.

Noninterest Income

Noninterest income consists of revenues generated from a broad range offinancial services and activities, including fee-based services, profits andcommissions earned through securities and insurance sales and corporate and correspondent investment sales. In addition, gains and losses realized from the sale of investmentportfolio securities and gains on prepayment of FHLB and other borrowings are included in noninterest income.

The following table provides a breakdown of noninterest income.

Table 25 Noninterest Income
	Years Ended December 31,
	2012		2011		2010
	(In Thousands)
Service charges on deposit accounts	$	254,675	$	250,332	$	282,163
Card and merchant processing fees	101,540		153,804		159,450
Retail investment sales	97,504		108,767		73,464
Mortgage banking income	50,759		13,958		2,734
Asset management fees	37,848		39,160		39,845
Corporate and correspondent investment sales	38,014		3,126		35,267
Bank owned life insurance	20,335		21,115		15,469
Insurance commissions	9,469		27,367		36,107
Investment securities gains, net	12,832		50,078		69,127
Gain on prepayment of FHLB and other borrowings	38,359		5,351		—
Other	188,713		180,155		172,571
Total noninterest income	$	850,048	$	853,213	$	886,197

2012 compared to 2011

Noninterest income was $850.0 million for the year ended December 31, 2012, which remained relatively unchanged from the $853.2 million reported for the year ended December 31, 2011. The slight decline in total noninterest income is due primarily to a decrease in card and merchant processing fees, insurance commissions, and investment securities gains which were partially offset by increases in corporate and correspondent investment sales, mortgage banking income, and gain on prepayment of FHLB and other borrowings.

Service charges on deposit accounts were $254.7 million in 2012, compared to $250.3 million in 2011. Service charges on deposit accounts represent the Company's largest category of noninterest revenue.

Card and merchant processing fees represent income related to customers’ utilization of their debit cards, as well as interchange income and merchants’ discounts. Card and merchant processing fees were $101.5 million in 2012, a decline of $52.3 million, compared to 2011. The decline in card and merchant processing fees was primarily due to the impact of the Durbin Amendment to the Dodd-Frank Act which was implemented on October 1, 2011 and limited the fees banks could charge on debit cards.

Retail investment sales income is primarily comprised of mutual fund and annuity sales income.  Income from retail investment sales decreased to $97.5 million in 2012 from $108.8 million in 2011.  The decrease was driven by a decrease in annuity sales fees during 2012 which was partially offset by an increase in mutual fund fees.

Mortgage banking income represents mortgage origination fees, gains and losses from the sale of mortgage loans, revenues from servicing mortgage loans and changes in fair value of mortgage servicing rights.  Mortgage banking income increased to $50.8 million in 2012 from $14.0 million in 2011.  This increase is due in part to the Company’s retained servicing initiative and due to an increase in residential mortgage loan production during 2012.

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Corporate and correspondent investment sales represents income generated through the sales of interest rate protection contracts to corporate customers and the sale of bonds and other services to the Company's correspondent banking clients. Income from corporate and correspondent investment sales increased to $38.0 million in 2012 from $3.1 million in 2011.  This increase was attributable to increases in swap and bond sales due to increased activity during the year 2012 compared to 2011.

Insurance commissions decreased to $9.5 million in 2012 compared to $27.4 million in 2011 due to the sale of the commercial property and casualty insurance agency business unit during April 2012. Refer to Note 2, Disposition Activity, in the Notes to the December 31, 2012, Consolidated Financial Statements for additional disclosures.

Investment securities gains, net decreased to $12.8 million in 2012 compared to $50.1 million in 2011. During 2012, the Company sold $541 million of available for sale securities compared to $968 million during 2011.

The Company recognized a gain of $38.4 million in 2012 related to the partial extinguishment of the Company’s outstanding subordinated debentures. Refer to Note 11, FHLB and Other Borrowings, in the Notes to the December 31, 2012, Consolidated Financial Statements for additional disclosures related to the partial extinguishment.

Other income is comprised of income recognized that does not typically fit into one of the other noninterest income categories and includes primarily various fees associated with letters of credit, syndication, ATMs, investment services and foreign exchange fees. The gain (loss) associated with the sale of fixed assets and OREO income is also included in other income. For the year ended December 31, 2012, other income increased principally from an increase in OREO income due to stabilizing real estate values compared to the same period in 2011.

2011 compared to 2010

Noninterest income was $853.2 million for the year ended December 31, 2011, a decline from the $886.2 million reported for the year ended December 31, 2010. The decrease in total noninterest income was due primarily to decreases in corporate and correspondent investment sales, investment securities gains and insurance commissions which were partially offset by increases in retail investment sales and mortgage banking income.

Service charges on deposit accounts were $250.3 million in 2011, compared to $282.2 million in 2010. The decrease was largely due to a decline in non-sufficient funds charges that were a result of the Company’s policy changes in mid-2010 in response to amendments to Regulation E, issued by the Federal Reserve Board pursuant to the Electronic Fund Transfer Act.

Card and merchant processing fess declined by $5.6 million in 2011 due in part to the impact of the Durbin Amendment to the Dodd-Frank Act which was implemented on October 1, 2011 and limited the fees banks could charge on debit cards.

Income from retail investment sales increased to $108.8 million in 2011 from $73.5 million in 2010.  The increase was due in part to increased activity in the fixed income market. Included in this balance are annuity sales fees of $68.1 million in 2011 which increased from $50.8 million in 2010.

Mortgage banking income increased to $14.0 million in 2011 from $2.7 million in 2010.  The increase relates to the Company’s new retained servicing initiative.

Income from corporate and correspondent investment sales decreased to $3.1 million in 2011 from $35.3 million in 2010.  The decrease was due to a decline in trading volume specifically related to bond sales.

BOLI represents income generated by the underlying investments maintained within each of the Company’s life insurance policies on certain key executives and employees. BOLI income increased to $21.1 million in 2011 from $15.5 million in 2010. The increase was attributable to increases in credit rates on certain policies held by the Company and proceeds received in excess death benefits.

Insurance commissions are generated through commissions on the sale of insurance, primarily property and casualty, and other related insurance products.  Insurance commissions decreased to $27.4 million in 2011 compared to $36.1 million in 2010.  The decrease was a result of weaker pricing for premiums in the market.

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Investment securities gains, net decreased to $50.1 million, in 2011 compared to $69.1 million in 2010. During 2011, the Company sold $968 million of available for sale securities compared to $1.5 billion during 2010.

The Company recognized a gain of $5.4 million on its prepayment of $775 million in FHLB advances during 2011. This prepayment was made as part of the Company’s asset/liability management process.

Noninterest Expense

The following table provides a breakdown of noninterest expense.

Table 26 Noninterest Expense
	Years Ended December 31,
	2012		2011		2010
	(In Thousands)
Salaries, benefits and commissions	$	1,003,010	$	1,005,276	$	873,184
FDIC indemnification expense	372,496		358,486		219,110
Professional services	176,266		163,768		148,234
Equipment	173,459		151,225		146,369
Net occupancy	153,429		153,703		154,618
Amortization of intangibles	91,746		108,336		140,400
FDIC insurance	86,925		121,145		106,333
Marketing	28,233		30,253		41,393
Communications	30,349		31,876		30,006
Merger and integration	—		—		16,709
Goodwill impairment	—		2,003,800		523,310
Total securities impairment	987		3,546		4,317
Other	234,947		261,404		272,965
Total noninterest expense	$	2,351,847	$	4,392,818	$	2,676,948

2012 compared to 2011

Noninterest expense was $2.4 billion for the year ended December 31, 2012, a decrease of $2.0 billion compared to the year ended December 31, 2011. The decline in total noninterest expense for 2012 is attributable to a goodwill impairment charge recorded in 2011.

Salaries, benefits and commissions expense is comprised of salaries and wages in addition to pension and other employee benefit costs and represents the largest components of noninterest expense. Salaries, benefits and commissions expense was $1.0 billion in 2012, relatively unchanged from 2011.

FDIC indemnification expense, which represents the amortization of changes in the FDIC indemnification asset stemming from changes in credit expectations of covered loans, was $372.5 million in 2012 compared to $358.5 million in 2011. The increase in 2012 was due to continued improvements in the credit quality or cash flows of the loans acquired. Refer to Note 1, Summary of Significant Accounting Policies, in the Notes to the December 31, 2012, Consolidated Financial Statements for further details.

Professional services expense represents fees incurred for the various support functions, which includes legal, consulting, outsourcing and other professional related fees. The professional service expense increased by $12.5 million in 2012 to $176.3 million compared to 2011. The increase in professional service expenses were driven by increases of approximately $27.2 million related to consulting, outsourcing and contractor services during 2012 and was partially offset by decreases of approximately $9.2 million related to temporary help and recruiting.

Equipment expense increased by $22.2 million in 2012 which was driven by an increase in software amortization related to several IT projects implemented during 2012.

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FDIC insurance decreased by $34.2 million in 2012 as a result of improvements in the earnings, credit quality and liquidity factors used to calculate the assessment.

Other expenses represent postage, supplies, subscriptions, credit related costs and other real estate owned expenses. Other expenses decreased in 2012 to $234.9 million compared to $261.4 million in 2011 due in part to an overall decrease in expenses related to OREO which decreased by $15.9 million in 2012 compared to 2011.

2011 compared to 2010

Noninterest expense was $4.4 billion for the year ended December 31, 2011, an increase of $1.7 billion compared to the year ended December 31, 2010. The increase in total noninterest expense for 2011 was due primarily to the $2.0 billion goodwill impairment charge recognized in 2011.

Salaries, benefits and commissions expense increased $132.1 million to $1.0 billion in 2011 compared to $873.2 million in 2010. The increase was due in part to additional incentive expenses in 2011 related to customary salary increases and performance based incentive plans due to the increase in net income, excluding goodwill impairment, from 2010 to 2011.

FDIC indemnification expense increased by $139.4 million in 2011 due to improvements in the credit quality of the covered loan portfolio as well as changes in the expected cash flows of the covered loan portfolio. Refer to Note 1, Summary of Significant Accounting Policies, in the Notes to the December 31, 2012, Consolidated Financial Statements for further details.

Professional services expense increased by $15.5 million in 2011 due in part to an increase of $6.8 million in expenses related to temporary help, recruitment activities and contractor services and an increase of $3.6 million in credit-related expenses.

Equipment expense increased by $4.9 million, in 2011 which was driven by an increase in software amortization and maintenance expense related to software assets purchased during 2011 as part of the Company's IT platform upgrade on its core banking services.

FDIC insurance increased by $14.8 million in 2011 due to a change in methodology used to calculate deposit insurance that was implemented during the year by the FDIC as required by the Dodd-Frank Act. In addition, the Company’s asset base grew in 2011 which resulted in higher FDIC insurance.

Marketing expense represents the cost of advertising and promoting the various product lines the Company offers along with advertising the Company itself. Marketing expense decreased by $11.1 million in 2011 compared to 2010 as part of the Company's overall efforts to reduce expenses and more strategically market the Company's products and services.

Merger and integration expense represents costs associated with business combinations completed by the Company and integration costs of acquired companies. These costs include compensation expense, data processing systems conversion costs, costs to close facilities, marketing fees, professional fees and broker fees. The Company recorded $16.7 million in merger and integration charges during 2010 related to the Guaranty Bank and the BBVA Bancomer USA acquisitions. The Company did not record any merger and integration expenses for the year ended December 31, 2011. Refer to Note 2, Disposition Activity, in the Notes to the December 31, 2012, Consolidated Financial Statements for further details.

The Company evaluates on an annual basis potential impairment of goodwill. The 2011 annual test indicated a goodwill impairment of $810.5 million within the Retail Banking reporting unit, $640.1 million within the Commercial Banking reporting unit, $285.8 million within the Wealth Management reporting unit, $249.4 million within the Corporate and Investment Banking reporting unit and $18.0 million within the Insurance reporting unit. Accordingly, the Company recorded a goodwill impairment charge of $2 billion in 2011. During the year ended December 31, 2010, the Company recognized a goodwill impairment charge totaling $523.3 million within its Commercial Banking reporting unit. The goodwill impairment charge is a non-cash item which does not have an adverse impact on regulatory capital or liquidity. Refer to Note 8, Goodwill and Other Acquired Intangible Assets, in the Notes to the December 31, 2012, Consolidated Financial Statements for further details.

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Other expenses decreased in 2011 to $261.4 million compared to $273.0 million in 2010 due in part to an overall decrease of expenses related to OREO which decreased by $8.7 million in 2011.

Income Tax Expense

The Company’s income tax expense totaled $219.7 million, $98.2 million and $59.8 million for 2012, 2011, and 2010, respectively. The effective tax rate was 31.4%, (6.0)%, and (21.6)% for 2012, 2011 and 2010, respectively.Income tax expense in 2012 increased from 2011 due to the increase in income (loss) before income tax expense as compared to 2011. Income tax expense in 2011 increased from 2010 due to the significantly higher unfavorable impact of the goodwill impairment charge in 2011 as compared to 2010. Refer to Note 19, Income Taxes, in the Notes to the December 31, 2012, Consolidated Financial Statements for a reconciliation of the effective tax rate to the statutory tax rate and a discussion of uncertain tax positions and other tax matters.

Analysis of Financial Condition

A review of the Company’s major balance sheet categories is presented below.

Investment Securities

The composition of the Company’s investment securities portfolio reflects the Company’s investment strategy of maximizing portfolio yields commensurate with risk and liquidity considerations. The primary objectives of the Company’s investment strategy are to maintain an appropriate level of liquidity and provide a tool to assist in controlling the Company’s interest rate sensitivity position while at the same time producing adequate levels of interest income. The Company’s investment securities are classified into one of three categories based upon management’s intent to hold the investment securities: (i) investment securities available for sale, (ii) investment securities held to maturity or (iii) trading account assets and liabilities.

For additional financial information regarding the Company’s investment securities, see Note 3, Investment Securities Available for Sale and Investment Securities Held to Maturity, in the Notes to the December 31, 2012, Consolidated Financial Statements.

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The following table reflects the carrying amount of the investment securities portfolio at the end of each of the last three years.

Table 27 Composition of Investment Securities Portfolio
	December 31,
	2012		2011		2010
	(In Thousands)
Investment securities available for sale (at fair value):
Debt securities:
U.S. Treasury and other U.S. government agencies	$	96,125	$	122,296	$	168,601
Agency mortgage-backed securities	5,199,513		4,752,943		4,186,047
Agency collateralized mortgage obligations	1,722,825		2,164,532		2,021,952
States and political subdivisions	341,897		303,827		336,231
Other	130,222		122,275		113,113
Equity securities (1)	497,848		557,808		513,386
Total securities available for sale	$	7,988,430	$	8,023,681	$	7,339,330
Investment securities held to maturity (at amortized cost):
Collateralized mortgage obligations	$	185,684	$	231,256	$	288,968
Asset-backed securities	87,503		106,783		123,664
States and political subdivisions (2)	1,151,742		886,807		740,131
Other	83,000		80,327		76,332
Total securities held to maturity	$	1,507,929	$	1,305,173	$	1,229,095
Total investment securities	$	9,496,359	$	9,328,854	$	8,568,425

(1) Includes $498 million, $558 million and $513 million at December 31, 2012, 2011 and 2010, respectively, of FHLB and Federal Reserve stock carried at par.

(2) Includes private placement transactions underwritten as loans but meet the definition of a security within ASC Topic 320, Investments – Debt and Equity Securities at origination.

As of December 31, 2012, the securities portfolio includes $8.0 billion in available for sale securities and $1.5 billion in held to maturity securities. Approximately 77% of the total securities portfolio was backed by government agencies or government-sponsored entities.

During 2012, the Company sold $528 million of mortgage-backed securities and collateralized mortgage obligations classified as available for sale which resulted in net gains of $12.8 million. Mortgage-backed securities issued by government-sponsored entities represented 73% of the total securities portfolio at December 31, 2012. All of the mortgage-backed securities issued by government-sponsored entities were “AAA” rated, the highest rating possible by nationally recognized rating agencies.

The Company recognized $987 thousand in other than temporary impairment charges in 2012 compared to $3.5 million and $4.3 million in 2011 and 2010, respectively. While all securities are reviewed by the Company for other than temporary impairment (OTTI), the securities primarily impacted by credit impairment are non-agency collateralized mortgage obligations and asset-backed securities. Refer to Note 3, Investment Securities Available for Sale and Investment Securities Held to Maturity, in the Notes to the December 31, 2012, Consolidated Financial Statements for further details.

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The maturities and weighted average yields of the investment securities available for sale and the investment securities held to maturity portfolios at December 31, 2012 are presented in the following table. Maturity data is calculated based on the next re-pricing date for securities with variable rates and remaining contractual maturity for securities with fixed rates. For other mortgage-backed securities excluding pass-through securities, the maturity was calculated using weighted average life. Taxable equivalent adjustments, using a 35 percent tax rate, have been made in calculating yields on tax-exempt obligations.

Table 28 Investment Securities Maturity Schedule
	Maturing
	Within One Year				After One But Within Five Years				After Five But Within Ten Years				After Ten Years
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
	(Dollars in Thousands)
Investment securities available for sale (at fair value):
U.S. Treasury and other U.S. government agencies	$	93	1.24	%	$	7,273	2.09	%	$	49,456	2.91	%	$	39,303	2.22	%
Mortgage-backed securities	3,745		3.30		269,049		2.85		158,623		2.68		4,768,096		1.44
Collateralized mortgage obligations	—		—		6,687		3.63		107,503		2.25		1,608,635		1.95
States and political subdivisions	17,287		5.82		144,317		6.17		80,972		6.43		99,321		4.57
Other (1)	4,950		5.02		50		0.01		—		—		125,222		0.00
Equity securities	—		—		—		—		—		—		497,848		0.03
Total	$	26,075	5.30	%	$	427,376	3.99	%	$	396,554	3.37	%	$	7,138,425	1.40	%
Investment securities held to maturity (at amortized cost):
Collateralized mortgage obligations	$	—	—	%	$	—	—	%	$	16,039	3.73	%	$	169,645	1.65	%
Asset-backed securities	—		—		2,589		0.39		—		—		84,914		0.39
States and political subdivisions	1,376		4.81		184,330		1.77		294,904		1.93		671,132		2.23
Other	—		—		—		—		—		—		83,000		—
Total	$	1,376	4.81	%	$	186,919	1.75	%	$	310,943	2.02	%	$	1,008,691	1.69	%
Total securities	$	27,451			$	614,295			$	707,497			$	8,147,116

(1) Equity securities are included in the maturing after ten years category.

Trading Account Assets and Liabilities

Securities carried in the Company’s trading account portfolio are primarily held for sale to institutional customers for their investment portfolios and generally are sold within 30 days of purchase. Interest rate floors, caps and swaps are sold to customers as protection against interest rate fluctuation and used as economic hedges for the Company. To mitigate the interest rate risk associated with the customer derivative contracts, the Company enters into offsetting derivative contract positions. The Company manages its credit risk of default by its corporate customers through credit limit approval and monitoring procedures. Both the derivative contracts entered into with the Company’s customers and the offsetting derivative positions are recorded at their estimated fair value. Market value changes on these derivative instruments are recognized in noninterest income in the period of change. The volume of activity is directly related to general market conditions and reactions to the changes in the interest rate environment.

The balance in the trading account assets portfolio decreased 11% from $612 million for the year ended December 31, 2011 to $546 million for the year ended December 31, 2012. The balance in the trading account assets portfolio increased 35% from $452 million for the year ended December 31, 2010 to $612 million for the year ended December 31, 2011.

The balance in the trading account liabilities portfolio decreased 19% to $461 million for the year ended December 31, 2012, following an increase of 52% to $567 million for the year ended December 31, 2011.

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The following table details the composition of the Company’s trading account assets and liabilities at December 31, 2012, 2011 and 2010.

Table 29 Trading Account Assets and Liabilities
	December 31,
	2012		2011		2010
	(In Thousands)
Trading account assets:
U.S. Treasury and other U.S. government agencies	$	17,114	$	501	$	14,496
Mortgage-backed securities	4,029		2,632		12,719
State and political subdivisions	3,744		2,411		1,958
Interest rate contracts	431,765		439,474		317,284
Commodity contracts	80,004		162,403		102,240
Foreign exchange contracts	3,519		789		231
Other trading assets	5,605		3,308		2,856
Total trading account assets	$	545,780	$	611,518	$	451,784
Trading account liabilities:
U.S. Treasury and other U.S. government agencies	$	—	$	—	$	996
Mortgage-backed securities	3,763		2,603		11,967
Interest rate contracts	377,655		397,122		260,301
Commodity contracts	75,842		166,024		100,316
Foreign exchange contracts	3,414		786		223
Total trading account liabilities	$	460,674	$	566,535	$	373,803

Lending Activities

Average loans and loans held for sale, net of unearned income, represented 82.1% of average interest-earning assets for both the year ended December 31, 2012 and the year-ended December 31, 2011. The Company groups its loans into portfolio segments based on internal classifications reflecting the manner in which the allowance for loan losses is established and how credit risk is measured, monitored and reported. Commercial loans are comprised of commercial, financial and agricultural, real estate-construction, and commercial real estate–mortgage loans. Consumer loans are comprised of residential real-estate mortgage, equity lines of credit, equity loans, credit cards, consumer-direct and consumer-indirect loans. The Company also has a portfolio of covered loans that were acquired in the FDIC-assisted acquisition of certain assets and liabilities of Guaranty Bank.

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The Loan Portfolio table presents the classifications of loans by major category at December 31, 2012, and for each of the preceding four years. The second table presents maturities of certain loan classifications at December 31, 2012, and an analysis of the rate structure for such loans with maturities greater than one year, excluding covered loans.

Table 30 Loan Portfolio
	2012		2011		2010		2009		2008
	(In Thousands)
Commercial loans:
Commercial, financial and agricultural	$	16,980,957	$	13,700,779	$	10,637,446	$	8,672,237	$	9,079,258
Real estate – construction	1,895,931		3,367,413		4,537,392		7,793,693		8,454,561
Commercial real estate – mortgage	7,707,548		7,235,458		7,103,237		7,132,983		7,148,421
Total commercial loans	$	26,584,436	$	24,303,650	$	22,278,075	$	23,598,913	$	24,682,240
Consumer loans:
Residential real estate – mortgage	$	11,443,973	$	9,669,114	$	7,781,881	$	5,385,976	$	4,731,067
Equity lines of credit	2,393,271		2,563,706		2,672,193		2,708,041		2,706,092
Equity loans	671,616		849,369		1,070,879		1,317,245		1,522,865
Credit card	625,395		582,244		534,375		487,301		472,312
Consumer – direct	522,995		528,818		544,678		580,592		779,920
Consumer – indirect	1,593,175		1,366,060		1,473,893		2,420,794		3,736,214
Total consumer loans	$	17,250,425	$	15,559,311	$	14,077,899	$	12,899,949	$	13,948,470
Total loans, excluding covered loans	43,834,861		39,862,961		36,355,974		36,498,862		38,630,710
Covered loans (1)	1,176,682		2,079,366		4,016,788		6,213,270		—
Total loans	$	45,011,543	$	41,942,327	$	40,372,762	$	42,712,132	$	38,630,710
Loans held for sale	322,065		170,351		69,063		64,945		104,494
Total loans and loans held for sale	$	45,333,608	$	42,112,678	$	40,441,825	$	42,777,077	$	38,735,204

(1) Represents loans acquired from the FDIC subject to loss sharing agreements. The loans covered by loss sharing agreements are primarily commercial real estate loans and residential mortgage loans.

Table 31 Selected Loan Maturity and Interest Rate Sensitivity
	Maturity								Rate Structure For Loans Maturing Over One Year
	One Year or Less		Over One Year Through Five Years		Over Five Years		Total		Fixed Interest Rate		Floating or Adjustable Rate
	(In Thousands)
Commercial, financial and agricultural	$	3,235,688	$	12,177,569	$	1,567,700	$	16,980,957	$	1,241,116	$	12,504,153
Real estate - construction	696,561		967,835		231,535		1,895,931		175,711		1,023,659
	$	3,932,249	$	13,145,404	$	1,799,235	$	18,876,888	$	1,416,827	$	13,527,812

Scheduled repayments are reported in the maturity category in which the payment is due. Determinations of maturities are based upon contract terms.

Loans and loans held for sale, net of unearned income, totaled $45.3 billion at December 31, 2012, an increase of $3.2 billion from December 31, 2011. The increase in total loans was primarily driven by growth in commercial, financial and agricultural loans as well as increases in the residential real estate - mortgage and consumer - indirect loan portfolios. Growth in the loan portfolio was partially offset by continued run-off in the real estate construction portfolio as well as expected runoff in the covered loan portfolio.

See Note 4, Loans and Allowance for Loan Losses, in the Notes to the December 31, 2012, Consolidated Financial Statements for additional discussion.

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Asset Quality

The Company's asset quality continued to improve during 2012. Nonperforming assets, which includes nonaccrual loans, nonaccrual loans held for sale, accruing loans 90 days past due, accruing TDRs 90 days past due, other real estate owned and other repossessed assets totaled $942 million at December 31, 2012 compared to $1.8 billion at December 31, 2011. Excluding covered assets, nonperforming assets decreased from $1.5 billion at December 31, 2011 to $804 million at December 31, 2012. The decrease in nonperforming assets, excluding covered assets, was primarily due to a $615 million decrease in nonaccrual loans partially attributable to the Company's decision to sell certain nonperforming loans. As a percentage of total loans and loans held for sale and other real estate, nonperforming assets were 2.07% (or 1.82% excluding covered assets) at December 31, 2012 compared with 4.18% (or 3.84% excluding covered assets) at December 31, 2011.

The Company defines potential problem loans as noncovered, commercial loans rated substandard or below, which do not meet the definition of nonaccrual, Troubled Debt Restructuring (TDR) or 90 days past due and still accruing. See Note 4, Loans and Allowance for Loan Losses, in the Notes to the December 31, 2012, Consolidated Financial Statements for further information on the Company’s credit grade categories, which are derived from standard regulatory rating definitions. The following table provides a summary of potential problem loans as of December 31, 2012:

Table 32 Potential Problem Loans
	Recorded Investment
	(In Thousands)
Commercial, financial and agricultural	$	58,949
Real estate – construction	10,804
Commercial real estate – mortgage	207,911
	$	277,664

In connection with the 2009 acquisition of Guaranty Bank, the Bank has entered into loss sharing agreements with the FDIC whereby the FDIC reimburses the Bank for a substantial portion of the losses incurred. In addition, covered loans acquired were recorded at fair value as of the acquisition date without regard to the loss sharing agreements. These covered loans were evaluated and assigned to loan pools based on common risk characteristics. The fair value of the covered loans was estimated to be significantly below the unpaid principal balance. In accordance with the acquisition method of accounting, there was no allowance brought forward on any of the acquired loans as the credit losses were included in the determination of the fair value of the covered loans at the acquisition date. Charge-offs are recognized for these loans when the actual losses exceed the estimated losses used in determining the fair value of the loans. Substantially all of the covered loans were considered to be accruing loans at the date of acquisition. In accordance with regulatory reporting standards, covered loans that are contractually past due will continue to be reported as past due and still accruing based on the number of days past due.

Given the significant amount of acquired loans that are past due but still accruing, the Company believes the inclusion of these loans in certain asset quality ratios including “Loans 90 days or more past due and still accruing as a percentage of total loans,” “Nonperforming loans as a percentage of total loans,” and certain other asset quality ratios that reflect nonperforming assets in the numerator or denominator (or both) results in significant distortion to these ratios. In addition, because loan level charge-offs related to the acquired loans are not recognized in the financial statements until the cumulative amounts exceed the original loss projections on a pool basis, the net charge-off ratio for the acquired loans is not consistent with the net charge-off ratio for other loan portfolios. The inclusion of these loans in the asset quality ratios described above could result in a lack of comparability across quarters or years and could negatively impact comparability with other portfolios that were not impacted by acquisition accounting. The Company believes that the presentation of asset quality measures excluding covered loans and related amounts from both the numerator and the denominator provides better perspective into underlying trends related to the quality of its loan portfolio. Accordingly, the asset quality measures in Table 33 present asset quality information both on a consolidated basis as well as excluding the covered loans and the related amounts.

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The following table summarizes asset quality information for the past five years and includes loans held for sale and purchased impaired loans.

Table 33 Asset Quality
	December 31,
	2012		2011		2010		2009		2008
	(In Thousands)
Nonaccrual loans:
Commercial, financial and agricultural	$	112,135	$	185,629	$	206,704	$	193,525	$	83,618
Real estate – construction	104,683		415,629		629,909		1,268,526		716,178
Commercial real estate – mortgage	270,734		446,926		424,891		320,168		130,489
Residential real estate – mortgage	193,983		220,844		222,156		157,518		76,751
Equity lines of credit	20,143		23,570		20,860		15,646		16,202
Equity loans	16,943		30,309		24,698		20,764		11,026
Credit card	—		—		—		—		—
Consumer – direct	337		1,217		5,799		4,399		2,392
Consumer – indirect	—		—		—		—		—
Total nonaccrual loans, excluding covered loans	718,958		1,324,124		1,535,017		1,980,546		1,036,656
Covered nonaccrual loans	1,235		16,555		30,367		95,965		—
Total nonaccrual loans	720,193		1,340,679		1,565,384		2,076,511		1,036,656
Nonaccrual loans held for sale	7,583		16,970		40,664		17,550		34,550
Total nonaccrual loans and loans held for sale	$	727,776	$	1,357,649	$	1,606,048	$	2,094,061	$	1,071,206
Accruing TDRs: (1)
Commercial, financial and agricultural	$	17,832	$	22,658	$	29,716	$	5,019	$	9,779
Real estate – construction	49,215		97,126		44,733		16,930		4,474
Commercial real estate – mortgage	56,520		59,690		30,010		2,929		4,209
Residential real estate – mortgage	91,384		75,170		50,285		26,201		178
Equity lines of credit	—		203		851		—		—
Equity loans	21,929		13,597		9,255		3,999		—
Credit card	—		—		—		—		—
Consumer – direct	138		8		12		16		5
Consumer – indirect	—		—		—		—		—
Total accruing TDRs, excluding covered loans	237,018		268,452		164,862		55,094		18,645
Covered TDRs	7,079		9,545		51,116		—		—
Total TDRs	244,097		277,997		215,978		55,094		18,645
TDRs classified as loans held for sale	—		—		—		—		—
Total TDRs (loans and loans held for sale)	$	244,097	$	277,997	$	215,978	$	55,094	$	18,645
Other real estate:
Other real estate, excluding covered assets	45,007		172,725		300,761		260,566		132,294
Covered other real estate	23,561		45,115		43,838		47,397		—
Total other real estate	$	68,568	$	217,840	$	344,599	$	307,963	$	132,294
Other repossessed assets:
Other repossessed assets, excluding covered assets	3,890		4,249		6,900		7,108		6,028
Covered other repossessed assets	—		36		—		—		—
Total other repossessed assets	$	3,890	$	4,285	$	6,900	$	7,108	$	6,028

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Table 33 (continued) Asset Quality
	December 31,
	2012			2011			2010			2009			2008
	(In Thousands)
Loans 90 days past due and accruing:
Commercial, financial and agricultural	1,853			2,501			5,467			20,744			26,863
Real estate – construction	1,907			502			7,156			79,163			54,132
Commercial real estate – mortgage	2,771			496			2,581			11,483			7,150
Residential real estate – mortgage	3,645			1,885			7,993			9,720			6,025
Equity lines of credit	4,661			6,917			5,767			4,739			5,634
Equity loans	2,335			2,276			2,334			2,167			2,810
Credit card	7,729			8,384			10,887			13,490			12,139
Consumer – direct	2,065			1,798			1,181			1,663			2,457
Consumer – indirect	1,138			1,496			1,308			3,356			4,520
Total loans 90 days past due and accruing, excluding covered loans	28,104			26,255			44,674			146,525			121,730
Covered loans 90 days past due and accruing	112,748			157,022			399,607			295,154			—
Total loans 90 days past due and accruing	140,852			183,277			444,281			441,679			121,730
Loans held for sale 90 days past due and accruing	—			—			—			—			—
Total loans and loans held for sale 90 days past due and accruing	$	140,852		$	183,277		$	444,281		$	441,679		$	121,730
Nonperforming loans and loans held for sale as a percentage of total loans and loans held for sale, excluding covered loans (2)	1.71		%	3.42		%	4.45		%	5.91		%	3.08		%
Nonperforming assets as a percentage of total loans and loans held for sale, other real estate, and other repossessed assets, excluding covered assets (3)	1.82		%	3.84		%	5.25		%	6.59		%	3.42		%
Allowance for loan losses as a percentage of loans, excluding covered loans and related allowance	1.79		%	2.57		%	3.00		%	3.47		%	1.90		%
Allowance for loan losses as a percentage of nonperforming loans, excluding covered loans (4)	104.96		%	75.89		%	68.99		%	59.15		%	63.27		%

(1) TDR totals include accruing loans 90 days past due classified as TDR.

(2) Nonperforming loans include nonaccrual loans and loans held for sale, accruing loans 90 days past due and accruing TDRs 90 days past due.

(3) Nonperforming assets include nonperforming loans, other real estate and other repossessed assets.

(4) Nonperforming loans include nonaccrual loans, accruing loans 90 days past due and accruing TDRs 90 days past due.

The current inventory of foreclosed real estate, excluding amounts covered under FDIC loss sharing agreements, totaled $45 million at December 31, 2012 compared to $173 million at December 31, 2011. This includes lands and lots, which totaled $33 million at December 31, 2012. The remaining foreclosed real estate at December 31, 2012 is primarily single family residential and commercial real estate.

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The following table provides a rollforward of nonaccrual loans and loans held for sale, excluding covered loans, for the year ended December 31, 2012

Table 34 Rollforward of Nonaccrual Loans
	(In Thousands)
Balance at December 31, 2011	$	1,341,094
Additions	629,639
Returns to accrual	(102,386		)
Loan sales	(384,249		)
Payments and paydowns	(291,439		)
Transfers to other real estate	(52,849		)
Charge-offs	(413,269		)
Balance at December 31, 2012	$	726,541

Generally when a loan is placed on nonaccrual status, the Company applies the entire amount of any subsequent payments (including interest) to the outstanding principal balance. Consequently, a substantial portion of the interest received related to nonaccrual loans has been applied to principal. At December 31, 2012, nonaccrual loans and loans for sale, excluding covered loans, totaled $727 million. During the year ended December 31, 2012, $8.7 million of interest income was recognized loans and loans held for sale classified as nonaccrual as of December 31, 2012. Under the original terms of the loans, interest income would have been approximately $42 million for loans and loans held for sale classified as nonaccrual as of December 31, 2012.

When borrowers are experiencing financial difficulties, the Company may, in order to assist the borrowers in repaying the principal and interest owed to the Company, make certain modifications to the loan agreement. To facilitate this process, a concessionary modification that would not otherwise be considered may be granted resulting in a classification of the loan as a TDR. Within each of the Company’s loan classes, TDRs typically involve modification of the loan interest rate to a below market rate or an extension or deferment of the loan. The financial effects of TDRs are reflected in the components that comprise the allowance for loan losses in either the amount of charge-offs or loan loss provision and period-end allowance levels. All TDRs are considered to be impaired loans. Refer to Note 1, Summary of Significant Accounting Policies, and Note 4, Loans and Allowance for Loan Losses, in the Notes to the December 31, 2012, Consolidated Financial Statements for additional information.

The Company’s aggregate recorded investment in impaired loans modified through TDRs excluding covered loans decreased to $389 million at December 31, 2012 from $668 million at December 31, 2011. Included in these amounts are $237 million at December 31, 2012 and $268 million at December 31, 2011 of accruing TDRs, excluding covered loans. Accruing restructured loans are not considered nonperforming because they are performing in accordance with the restructured terms.

The Company's allowance for loan losses is largely driven by risk ratings assigned to commercial loans, updated borrower credit scores on consumer loans and borrower delinquency history in both commercial and consumer portfolios.  As such, the provision for credit losses is impacted primarily by changes in borrower payment performance rather than TDR classification.  In addition, all commercial and consumer loans modified in a TDR are considered to be impaired, even if they maintain their accrual status.

Allowance for Loan Losses

Management’s policy is to maintain the allowance for loan losses at a level sufficient to absorb estimated probable incurred losses in the loan portfolio. Refer to Note 1, Summary of Significant Accounting Policies, and Note 4, Loans and Allowance for Loan Losses, in the Notes to the December 31, 2012, Consolidated Financial Statements for additional disclosures regarding the allowance for loan losses. The total allowance for loan losses, excluding covered loans, decreased to $785 million at December 31, 2012, from $1.0 billion at December 31, 2011. During 2012, the overall risk profile of the loan portfolio continued to improve as a result of the decrease in the balance of the real estate construction portfolio and growth in lower risk portfolios such as commercial, financial and agricultural portfolio and residential real estate-mortgage portfolio. As loans with higher levels of probable incurred losses have been removed from the portfolio, this has influenced the allowance estimate resulting in lower required reserves. In addition,

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nonperforming loans, excluding covered loans and loans held for sale, decreased to $748 million at December 31, 2012 from $1.4 billion at December 31, 2011. The ratio of the allowance for loan losses to total loans, excluding covered loans and the related allowance, decreased to 1.79% at December 31, 2012 from 2.57% at December 31, 2011. The allowance attributable to individually impaired loans was $73 million at December 31, 2012 compared to $116 million at December 31, 2011.

Net charge-offs were 0.63% of average loans for 2012 compared to 1.19% of average loans for 2011. Excluding covered loans, net charge-offs were 0.71% of average loans for 2012 compared to 1.28% for 2011. Net charge-offs decreased in most lending portfolios, including an $82.2 million decrease in the commercial, financial and agricultural portfolio and a $50.0 million decrease in the real estate-construction portfolio.

When determining the adequacy of the allowance for loan losses, management considers changes in the size and character of the loan portfolio, changes in nonperforming and past due loans, historical loan loss experience, the existing risk of individual loans, concentrations of loans to specific borrowers or industries and current economic conditions. The portion of the allowance that has not been identified by the Company as related to specific loan categories has been allocated to the individual loan categories on a pro rata basis for purposes of the table below.

The following table presents an estimated allocation of the allowance for loan losses at the end of each of the last five years. This allocation of the allowance for loan losses is calculated on an approximate basis and is not necessarily indicative of future losses or allocations. The entire amount of the allowance is available to absorb losses occurring in any category of loans.

Table 35 Allocation of Allowance for Loan Losses
	December 31,
	2012				2011				2010				2009				2008
	Amount		Percent of Loans to Total Loans		Amount		Percent of Loans to Total Loans		Amount		Percent of Loans to Total Loans		Amount		Percent of Loans to Total Loans		Amount		Percent of Loans to Total Loans
	(Dollars in Thousands)
Commercial, financial and agricultural	$	283,058	37.7	%	$	252,399	32.6	%	$	207,992	26.4	%	$	149,151	20.3	%	$	142,018	23.5	%
Real estate – construction	69,761		4.2		237,203		8.0		410,745		11.2		830,155		18.3		268,441		21.9
Commercial real estate – mortgage	184,563		17.1		252,081		17.3		213,612		17.6		75,592		16.7		26,463		18.5
Residential real estate – mortgage	115,600		25.4		148,430		23.1		88,158		19.3		29,233		12.6		11,347		12.3
Equity lines of credit	41,528		5.3		39,867		6.1		54,546		6.6		38,476		6.3		25,405		7.0
Equity loans	15,137		1.5		18,466		2.0		20,567		2.7		12,151		3.1		8,810		3.9
Credit card	37,039		1.4		43,272		1.4		48,154		1.3		39,152		1.1		60,227		1.2
Consumer - direct	16,122		1.2		12,266		1.3		14,822		1.3		30,277		1.4		72,135		2.0
Consumer – indirect	22,242		3.6		20,929		3.2		31,672		3.7		63,859		5.7		118,023		9.7
Total, excluding covered loans	785,050		97.4		1,024,913		95.0		1,090,268		90.1		1,268,046		85.5		732,869		100.0
Covered loans	17,803		2.6		26,883		5.0		18,749		9.9		—		14.5		—		—
Total	$	802,853	100.0	%	$	1,051,796	100.0	%	$	1,109,017	100.0	%	$	1,268,046	100.0	%	$	732,869	100.0	%

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The following table sets forth information with respect to the Company’s loans and the allowance for loan losses for the last five years.

Table 36 Summary of Loan Loss Experience
	2012			2011			2010			2009			2008
	(Dollars in Thousands)
Average loans outstanding during the year	$	44,002,221		$	40,909,860		$	41,474,531		$	40,157,637		$	36,440,877
Average loans outstanding during the year, excluding covered loans	$	42,339,949		$	37,723,721		$	36,291,728		$	37,713,585		$	36,440,877
Allowance for loan losses, beginning of year	$	1,051,796		$	1,109,017		$	1,268,046		$	732,869		$	553,437
Charge-offs:
Commercial, financial and agricultural	63,678			154,721			116,880			184,866			75,419
Real estate – construction	57,758			111,419			559,662			662,169			90,433
Commercial real estate – mortgage	94,160			103,822			138,757			91,775			13,985
Residential real estate – mortgage	56,834			68,885			59,464			35,491			5,975
Equity lines of credit	52,899			60,765			52,474			46,713			13,379
Equity loans	16,354			17,410			17,765			14,752			4,639
Credit card	31,891			34,457			44,511			43,747			29,485
Consumer – direct	24,208			23,045			32,298			38,344			37,695
Consumer – indirect	15,488			21,718			46,076			77,529			62,331
Total, excluding covered loans	413,270			596,242			1,067,887			1,195,386			333,341
Covered loans	3,807			12,198			42,764			7,920			—
Total, including covered loans	417,077			608,440			1,110,651			1,203,306			333,341
Recoveries:
Commercial, financial and agricultural	31,074			39,873			20,127			11,813			5,507
Real estate – construction	22,462			26,138			50,573			5,593			244
Commercial real estate – mortgage	13,419			15,678			11,620			394			729
Residential real estate – mortgage	3,848			3,391			2,884			938			129
Equity lines of credit	21,736			3,085			3,819			1,684			1,837
Equity loans	1,847			1,329			1,470			875			497
Credit card	2,559			3,104			2,520			2,414			2,583
Consumer – direct	5,432			6,956			9,242			9,580			8,793
Consumer – indirect	10,886			14,756			18,357			18,430			14,473
Total, excluding covered loans	113,263			114,310			120,612			51,721			34,792
Covered loans	25,400			8,276			5,961			269			—
Total, including covered loans	138,663			122,586			126,573			51,990			34,792
Net charge-offs	278,414			485,854			984,078			1,151,316			298,549
Provision for covered loans	(30,673		)	12,056			55,552			7,651			—
Provision charged to income, excluding covered loans	60,144			416,577			769,497			1,678,842			477,981
Total provision for loan losses	29,471			428,633			825,049			1,686,493			477,981
Allowance for loan losses, end of year	$	802,853		$	1,051,796		$	1,109,017		$	1,268,046		$	732,869
Allowance for loan losses, excluding allowance attributable to covered loans, end of year	$	785,050		$	1,024,913		$	1,090,268		$	1,268,046		$	732,869
Allowance for covered loans	17,803			26,883			18,749			—			—
Total allowance for loan losses	$	802,853		$	1,051,796		$	1,109,017		$	1,268,046		$	732,869
Net charge-offs to average loans	0.63		%	1.19		%	2.37		%	2.87		%	0.82		%
Net charge-offs to average loans, excluding covered loans	0.71		%	1.28		%	2.61		%	3.03		%	0.82		%

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Concentrations

The following tables provide further details regarding the Company’s commercial, financial and agricultural, commercial real estate, residential real estate and consumer segments as of December 31, 2012 and 2011.

Commercial, Financial and Agricultural

In accordance with the Company's lending policy, each commercial loan undergoes a detailed underwriting process, which incorporates the Company's risk tolerance, credit policy and procedures. In addition, the Company has in place a graduated approval process which accounts for the quality, loan type and total exposure of the borrower. The Company has also adopted an internal exposure based limit which is based on a variety of risk factors, including but not limited to the borrower industry.

The commercial, financial and agricultural portfolio segment totaled $17.0 billion at December 31, 2012, compared to $13.7 billion at December 31, 2011. The increase in this portfolio segment reflects the Company's objective to strategically grow this segment. This segment consists primarily of large national and international companies and small to mid-sized companies with business operations in the Company's geographic footprint. This segment also contains owner occupied commercial real estate loans. Loans in this portfolio are generally underwritten individually and are secured with the assets of the company, and/or the personal guarantees of the business owners. The Company minimizes the risk associated with this segment by various means, including maintaining prudent advance rates, financial covenants, and obtaining personal guarantees from the principals of the company.

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The following table provides details related to the commercial, financial, and agricultural segment as of December 31, 2012 and December 31, 2011.

Table 37 Commercial, Financial and Agricultural
	2012								2011
Industry	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Autos, Components and Durable Goods	$	317,984	$	944	$	—	$	19	$	201,718	$	1,254	$	—	$	46
Capital Goods & Industrial Services	1,505,005		8,916		79		—		1,215,801		24,819		—		68
Construction & Infrastructure	608,417		32,588		6,495		—		515,472		79,559		8,820		43
Energy	2,790,610		—		—		—		2,161,112		2		16		—
Financials	1,003,885		1,524		967		—		1,221,986		8,429		1,584		380
Food, Beverage, Textile, Personal Healthcare	1,910,536		12,888		369		275		1,831,328		11,592		5,998		182
General Corporates	864,084		10,035		1,806		1,522		945,436		14,671		1,827		1,657
Institutions	1,689,647		8,751		6,211		—		1,147,108		4,910		—		—
Leisure	1,133,755		3,314		—		—		757,301		4,124		—		69
Mining & Metals, Pulp & Paper Chemicals	593,437		4,329		1,657		—		600,419		4,546		3,901		—
Real Estate	1,214,560		9,272		—		1		343,494		4,432		—		—
Retail	1,566,566		12,329		218		36		1,203,966		13,153		512		56
Telecoms, Technology & Media	671,942		6,885		13		—		579,197		11,737		—		—
Transportation	533,091		360		17		—		503,639		1,798		—		—
Utilities & Alternative Power	577,437		—		—		—		472,802		603		—		—
Total Commercial, Financial and Agricultural	$	16,980,956	$	112,135	$	17,832	$	1,853	$	13,700,779	$	185,629	$	22,658	$	2,501

Commercial Real Estate

The commercial real estate portfolio segment includes the commercial real estate and real estate - construction loan portfolios. Commercial real estate loans totaled $7.7 billion at December 31, 2012, compared to $7.2 billion at December 31, 2011, and real estate - construction loans totaled $1.9 billion at December 31, 2012, compared to $3.4 billion at December 31, 2011.

This segment consists primarily of extensions of credits to real estate developers and investors for the financing of land and buildings, whereby the repayment is generated from the sale of the real estate or the income generated by the real estate property. The Company attempts to minimize risk on commercial real estate properties by various means including requiring collateral values that exceed the loan amount, adequate cash flow to service the debt, and the personal guarantees of principals of the borrowers. In order to minimize risk on the construction portfolio, the Company has established an operations group outside of the lending staff which is responsible for loan disbursements during the construction process.

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The following tables present the geographic distribution for the commercial real estate and real estate - construction portfolios as of December 31, 2012 and December 31, 2011.

Table 38 Commercial Real Estate
	2012								2011
State	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Alabama	$	859,936	$	24,684	$	2,409	$	909	$	933,377	$	52,718	$	—	$	315
Arizona	708,146		27,995		21,357		1,194		744,093		47,460		24,040		—
California	419,488		2,226		654		—		292,750		6,944		–		—
Colorado	585,062		6,928		15,122		—		408,652		9,735		463		—
Florida	767,971		14,687		7,973		—		745,224		55,397		19,644		—
New Mexico	270,226		11,054		—		—		248,686		20,143		1,502		—
Texas	3,046,862		161,071		7,957		668		3,005,158		225,822		9,952		181
Other	1,049,857		22,089		1,048		—		857,518		28,707		4,089		—
	$	7,707,548	$	270,734	$	56,520	$	2,771	$	7,235,458	$	446,926	$	59,690	$	496

Table 39 Real Estate – Construction
	2012								2011
State	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Alabama	$	94,948	$	5,981	$	3,484	$	189	$	262,886	$	32,333	$	6,593	$	157
Arizona	158,211		6,667		18,428		384		231,250		31,985		45,174		—
California	212,580		42		—		—		157,837		3,319		55		—
Colorado	70,767		3,504		4,468		—		234,719		14,685		22,803		—
Florida	77,704		7,346		1,009		—		256,728		22,780		8,456		—
New Mexico	46,806		6,142		38		—		84,232		33,538		39		—
Texas	866,544		50,944		2,169		1,334		1,594,175		205,325		13,955		345
Other	368,371		24,057		19,619		—		545,586		71,664		51		—
	$	1,895,931	$	104,683	$	49,215	$	1,907	$	3,367,413	$	415,629	$	97,126	$	502

Residential Real Estate

The residential real estate portfolio includes residential real estate - mortgage loans, equity lines of credit and equity loans. The residential real estate portfolio primarily contains loans to individuals, which are secured by single-family residences. Loans of this type are generally smaller in size than commercial real estate loans and are geographically dispersed throughout the Company's market areas, with some guaranteed by government agencies or private mortgage insurers. Losses on residential real estate loans depend, to a large degree, on the level of interest rates, the unemployment rate, economic conditions and collateral values.

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Residential real estate - mortgage loans totaled $11.4 billion at December 31, 2012 compared to $9.7 billion at December 31, 2011. Risks associated with residential real estate - mortgage loans are mitigated through rigorous underwriting procedures, collateral values established by independent appraisers and mortgage insurance. In addition, the collateral for this segment is concentrated in the Company's footprint as indicated by Table 40 below.

Table 40 Residential Real Estate - Mortgage
	2012								2011
State	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Alabama	$	1,401,209	$	26,943	$	22,411	$	—	$	1,414,133	$	33,919	$	18,101	$	30
Arizona	1,317,875		19,254		15,120		—		1,090,818		23,107		10,064		—
California	1,325,754		11,573		3,173		161		670,064		12,384		4,140		548
Colorado	1,006,798		12,365		2,032		—		717,911		8,336		3,724		—
Florida	1,115,414		25,309		16,821		109		713,401		32,850		12,764		—
New Mexico	220,693		2,322		1,752		—		192,582		3,277		898		197
Texas	4,577,159		64,268		24,728		3,375		4,052,198		77,663		20,729		671
Other	479,071		31,949		5,347		—		818,007		29,308		4,750		439
	$	11,443,973	$	193,983	$	91,384	$	3,645	$	9,669,114	$	220,844	$	75,170	$	1,885

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The following tables provide information related to refreshed FICO scores and LTVs for the Company's residential real estate portfolio as of December 31, 2012 and December 31, 2011.

Table 41 Residential Real Estate - Mortgage
	2012								2011
FICO Score	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Below 621	$	703,422	$	122,192	$	40,027	$	938	$	659,908	$	114,196	$	35,023	$	1,500
621-680	1,163,895		19,718		20,394		105		982,266		35,461		12,083		—
681 – 720	1,893,879		3,439		9,510		—		1,563,240		2,680		10,660		—
Above 720	6,772,932		4,439		18,905		283		5,582,692		1,691		15,357		49
Unknown	909,845		44,195		2,548		2,319		881,008		66,816		2,047		336
	$	11,443,973	$	193,983	$	91,384	$	3,645	$	9,669,114	$	220,844	$	75,170	$	1,885

Table 42 Residential Real Estate - Mortgage
	2012								2011
LTV Range	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Below 80%	$	6,519,321	$	142,139	$	44,985	$	3,464	$	5,386,429	$	146,163	$	40,454	$	1,545
80-89%	2,124,333		26,633		21,484		181		1,567,156		41,752		17,723		179
90-94%	1,844,229		7,809		8,325		—		1,362,589		11,077		6,299		—
Above 94%	940,771		16,810		16,499		—		1,334,311		21,250		10,604		126
Unknown	15,319		592		91		—		18,629		602		90		35
	$	11,443,973	$	193,983	$	91,384	$	3,645	$	9,669,114	$	220,844	$	75,170	$	1,885

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Equity lines of credit and equity loans totaled $3.1 billion and $3.4 billion at December 31, 2012 and December 31, 2011, respectively. Losses in these portfolios generally track overall economic conditions. These loans are underwritten in accordance with the underwriting standards set forth in the Company's policy and procedures. The collateral for this segment is also concentrated within the Company's footprint as indicated by Table 43.

Table 43 Equity Loans and Lines
	2012								2011
State	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Alabama	$	737,750	$	8,563	$	4,894	$	1,411	$	828,109	$	10,940	$	2,492	$	1,901
Arizona	465,817		4,618		3,456		1,196		514,301		7,538		1,794		2,397
California	37,910		23		—		—		26,738		169		134		—
Colorado	271,959		1,090		864		410		305,507		5,443		642		877
Florida	469,498		8,599		4,264		1,283		529,708		11,887		2,880		2,702
New Mexico	62,567		1,091		163		514		67,043		898		49		166
Texas	971,963		12,303		8,059		2,135		1,073,143		15,293		5,769		831
Other	47,423		799		229		47		68,526		1,711		40		319
	$	3,064,887	$	37,086	$	21,929	$	6,996	$	3,413,075	$	53,879	$	13,800	$	9,193

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The following tables provide information related to refreshed FICO scores and LTVs for the Company's equity loans and lines as of December 31, 2012 and December 31, 2011.

Table 44 Equity Loans and Lines
	2012								2011
FICO Score	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Below 621	$	325,536	$	27,637	$	11,090	$	4,716	$	384,202	$	33,220	$	7,118	$	7,261
621-680	464,520		5,266		5,661		1,794		477,292		5,003		3,880		1,438
681 – 720	562,713		636		2,625		238		609,672		1,129		1,215		239
Above 720	1,664,235		763		2,347		32		1,874,014		1,352		1,377		229
Unknown	47,883		2,784		206		216		67,895		13,175		210		26
	$	3,064,887	$	37,086	$	21,929	$	6,996	$	3,413,075	$	53,879	$	13,800	$	9,193

Table 45 Equity Loans and Lines
	2012								2011
LTV Range	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Below 80%	$	2,844,327	$	30,074	$	19,102	$	6,314	$	1,750,626	$	32,960	$	12,385	$	2,937
80-89%	33,404		2,654		1,157		177		21,971		2,269		469		86
90-94%	8,727		389		428		—		7,163		—		340		—
Above 94%	7,160		704		1,021		—		7,914		825		403		—
Unknown	171,269		3,265		221		505		1,625,401		17,825		203		6,170
	$	3,064,887	$	37,086	$	21,929	$	6,996	$	3,413,075	$	53,879	$	13,800	$	9,193

Other Consumer

The Company also operates a consumer finance unit which purchases loan contracts for indirect automobile consumer financing. These loans are centrally underwritten using industry accepted tools and underwriting guidelines. The Company also originates credit card loans and other consumer-direct loans that are centrally underwritten and sourced from the Company's branches. Total credit card, consumer-direct and consumer-indirect loans at December 31, 2012 were $2.7 billion, or 6% of the total loan portfolio, excluding covered loans, compared to $2.5 billion, or 6% of the total loan portfolio, excluding covered loans at December 31, 2011.

Foreign Exposure

As of December 31, 2012, foreign exposure risk did not represent a significant concentration of the Bank's total portfolio of loans and was substantially represented by borrowers domiciled in Mexico and foreign borrowers currently residing in the United States.  At this time, less than 1% of the Bank's foreign exposure is outside of Mexico and is not comprised of any European nations or sovereign indebtedness.

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Funding Activities

Deposits are the primary source of funds for lending and investing activities and their cost is the largest category of interest expense. The Company also utilizes brokered deposits as a funding source in addition to customer deposits. Scheduled payments, as well as prepayments, and maturities from portfolios of loans and investment securities also provide a stable source of funds. FHLB advances, other secured borrowings, federal funds purchased, securities sold under agreements to repurchase and other short-term borrowed funds, as well as longer-term debt issued through the capital markets, all provide supplemental liquidity sources. The Company’s funding activities are monitored and governed through the Company’s asset/liability management process, which is further discussed in the Market Risk Management section in Management’s Discussion and Analysis of Financial Condition and Results of Operations herein. Following is a brief description of the various sources of funds used by the Company.

Deposits

At December 31, 2012 and 2011, total deposits included $2.9 billion and $2.4 billion, respectively, of brokered deposits. Total average deposits increased by $3.0 billion from December 31, 2011 to December 31, 2012. The following table presents the Company’s average deposits segregated by major category:

Table 46 Composition of Average Deposits
	December 31,
	2012				2011				2010
	Balance		% of Total		Balance		% of Total		Balance		% of Total
	(Dollars in Thousands)
Noninterest-bearing demand deposits	$	13,854,155	28.5	%	$	12,242,362	26.9	%	$	10,745,879	23.5	%
Interest-bearing demand deposits	6,324,500		13.0		6,333,278		13.9		6,068,082		13.3
Savings and money market	16,918,633		34.9		15,322,550		33.7		14,426,645		31.6
Certificates and other time deposits	11,340,316		23.4		11,519,132		25.3		14,303,855		31.3
Foreign office deposits- interest-bearing	112,176		0.2		98,743		0.2		120,631		0.3
Total average deposits	$	48,549,780	100.0	%	$	45,516,065	100.0	%	$	45,665,092	100.0	%

The overall mix of deposits improved during 2012 with noninterest-bearing demand deposits representing 28.5% of average total deposits in 2012 compared to 26.9% in 2011. The average total savings and money market deposits increased by $1.6 billion during 2012 due in part to the Company's marketing efforts related to money market products throughout the year. The increase in total average deposits was partially offset by decreases in certificates and other time deposits and interest-bearing demand deposit accounts. The total average certificates and other time deposits decreased from December 31, 2012 compared to December 31, 2011 primarily as a result of a decrease in the total average certificates of deposits under $100,000. For additional information about deposits, see Note 9, Deposits, in the Notes to the December 31, 2012, Consolidated Financial Statements.

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The following table summarizes the remaining maturities of time deposits of $100,000 or more outstanding at December 31, 2012.

Table 47 Maturities of Time Deposits of $100,000 or More
	Time Deposits of $100,000 or More
	(In Thousands)
Three months or less	$	1,091,646
Over three through six months	1,316,874
Over six through twelve months	2,387,514
Over twelve months	3,343,076
	$	8,139,110

Borrowed Funds

In addition to internal deposit generation, the Company also relies on borrowed funds as a supplemental source of funding. Borrowed funds consist of short-term borrowings, FHLB advances, subordinated debentures and other long-term borrowings.

Short-term borrowings are primarily in the form of federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings. At December 31, 2012, 2011 and 2010, short-term borrowings were related to customer activity. The short-term borrowings table presents the distribution of the Company’s short-term borrowed funds and the corresponding weighted average interest rates for each of the last three years. Also provided are the maximum outstanding amounts of borrowings, the average amounts of borrowings and the average interest rates at year-end for the last three years. For additional information regarding the Company’s short-term borrowings, see Note 10, Short-Term Borrowings, in the Notes to the December 31, 2012, Consolidated Financial Statements.

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Table 48 Short-Term Borrowings
	Years Ended December 31,
	Maximum Outstanding at Any Month End		Average Balance		Average Interest Rate		Ending Balance		Average Interest Rate at Year-End
	(Dollars in Thousands)
2012
Federal funds purchased	$	1,347,795	$	1,048,741	0.25	%	$	901,980	0.26	%
Securities sold under agreements to repurchase	211,055		177,560		0.06		199,611		0.04
Other short-term borrowings	29,295		15,617		0.03		3,763		—
	$	1,588,145	$	1,241,918			$	1,105,354
2011
Federal funds purchased	$	1,967,670	$	1,466,149	0.25	%	$	1,163,670	0.25	%
Securities sold under agreements to repurchase	219,040		191,700		0.09		173,172		0.06
Other short-term borrowings	76,218		51,227		0.09		2,603		0.12
	$	2,262,928	$	1,709,076			$	1,339,445
2010
Federal funds purchased	$	2,331,980	$	1,860,954	0.25	%	$	1,540,530	0.25	%
Securities sold under agreements to repurchase	378,557		309,678		0.15		286,518		0.16
Other short-term borrowings	167,243		70,638		0.17		74,962		—
	$	2,877,780	$	2,241,270			$	1,902,010

At December 31, 2012, total short-term borrowings decreased by $234 million, or 17% compared to the ending balance at December 31, 2011. Average short-term borrowings decreased by $467 million, or 27% during 2012.

At December 31, 2012, FHLB and other borrowings were $4.3 billion compared to $4.2 billion at December 31, 2011. During 2012, proceeds from FHLB and other borrowings were $2.2 billion and repayments were $2.1 billion.

For a discussion of interest rates and maturities of FHLB and other borrowings, refer to Note 11, FHLB and Other Borrowings, and Note 12, Capital Securities and Preferred Stock, in the Notes to the December 31, 2012, Consolidated Financial Statements.

Shareholder’s Equity

Total shareholders' equity at December 31, 2012 was $11.1 billion, an increase of $467 million compared to December 31, 2011.  Shareholder's equity increased $479 million due to earnings attributable to shareholder during the period.  In addition, accumulated other comprehensive income (loss) decreased $4 million, primarily as a result of a decrease in the fair value of investment securities available for sale.  

Risk Management

In the normal course of business, the Company encounters inherent risk in its business activities. The Company’s risk management approach includes processes for identifying, assessing, managing, monitoring and reporting risks. Management has grouped the risks facing its operations into the following categories: credit risk, structural interest rate, market and liquidity risk, operational risk, strategic and business risk, and reputational risk. Each of these risks is managed through the Company’s ERM program. The ERM program provides the structure and framework necessary to identify, measure, control and manage risk across the organization. ERM is the cornerstone for defining risk tolerance, identifying key risk indicators, managing capital and integrating the Company’s capital planning process with on-going risk assessments and related stress testing for major risks.

The ERM program follows fundamental principles in establishing, executing and maintaining a program to manage overall risks. The Board of Directors is responsible for overseeing the strategic and business plans, the ERM program and framework and the risk tolerance of the Company, approving key risk management policies, overseeing their

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implementation, and holding executive management accountable for the execution of the ERM program. Under the oversight of the Board of Directors, management is charged with ensuring there is an effective, integrated risk management structure. This incorporates a clearly defined organizational structure, with defined roles and responsibilities for all aspects of risk management and appropriate tools that support the identification, assessment, control and reporting of key risks. Management is also responsible for defining categories of risk pertaining to the operations of the Company and is responsible for ensuring that the risk management framework adequately covers both measurable as well as non-measurable risk. Management prepares risk policies and procedures that clearly delineate the approach to all aspects of risk management through proper documentation and communication through appropriate channels. These risk management policies and procedures are aligned with the Company’s overall business strategies and support the continuous improvement of its risk management. Management and employees within each line of business and support units are the first line of defense in the identification, assessment, mitigation, monitoring and reporting of risks taken by the lines of business, consistent with the Company’s risk tolerance, the current regulatory model for these risks and any material failures that may occur. The lines of business and support units also will have additional infrastructure for certain types of risk embedded in the lines. The risk management organization and other control units serve as the second line of defense and the credit quality review and internal audit functions provide the third line of defense.

Some of the more significant processes used to manage and control these and other risks are described in the remainder of this Registration Statement.

Credit Risk

Credit risk is the most significant risk affecting the organization. Credit risk refers to the potential that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. It can arise from items carried on the balance sheet or in off-balance sheet instruments, customers in the Company’s normal lending activities, and other counterparties. The general definition of credit risk also includes transfer risk. That is, the risk that a particular counterparty cannot honor an obligation because it cannot obtain the currency in which the debt is denominated.

The Company has established the following general practices to manage credit risk:

• limiting the amount of credit that may be extended to individual borrowers, or on an aggregate basis to certain industries, products or collateral types;

• providing tools and policies to promote prudent lending practices;

• developing credit risk underwriting standards, metrics and the continuous monitoring of portfolio performance;

• assessing, monitoring, and reporting credit risks; and

• periodically reevaluating the Company’s strategy and overall exposure as economic, market and other relevant conditions change.

The following discussion presents the principal types of lending conducted by the Company and describes the underwriting procedures and overall risk management of the Company’s lending function.

Management Process

The Company assesses and manages credit risk through a series of policies, processes, measurement systems and controls. The lines of business are responsible for credit risk at the operational day-to-day level. Oversight of the lines of business is provided by the Credit Risk Management department and the appropriate credit committees established within the Company.

Credit Risk Management evaluates all loan requests and approves those that meet the Company’s risk tolerance and are in compliance with Company policies and regulatory guidance. Credit Risk Management also provides policy, portfolio, and approval data to management to help ensure that there is a common understanding of loan portfolio risk. This is accomplished by developing credit risk underwriting standards, metrics and the continuous monitoring of portfolio performance and assessing whether risk management practices have been carried out in accordance with the

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Company’s credit risk strategy and policies. Key metrics, trends and issues related to credit risk are presented to the Risk Committee of the Board of Directors.

The CQR function provides an independent review of the Company’s credit quality. The CQR function reports to the Audit and Compliance Committee of the Board of Directors and the Director of Internal Audit. The CQR function is charged with providing the Board of Directors and executive management with independent, objective, and timely assessments of the Company’s portfolio quality, credit policies, and credit risk management process.

Underwriting Approach

The Company’s underwriting approach is designed to define acceptable combinations of specific risk-mitigating features so that the credit relationships are expected to conform to the Company’s risk tolerances. Provided below is a summary of the most significant underwriting criteria used to evaluate new loans and loan renewals.

• Cashflow and debt service coverage – cash flow adequacy is a necessary condition of creditworthiness, meaning that loans not clearly supported by a borrower’s cash flow should be justified by secondary repayment sources.

• Secondary sources of repayment – alternative repayment sources are a significant risk-mitigating factor as long as they are liquid, can be easily accessed, and provide adequate resources to supplement the primary cash flow source.

• Value of any underlying collateral – loans are often secured by the asset being financed. Because an analysis of the primary and secondary sources of repayment is the most important factor, collateral, unless it is liquid, generally does not justify loans that cannot be serviced by the borrower’s normal cash flows.

• Overall creditworthiness of the customer, taking into account the customer’s relationships, both past and current, with other lenders – the Company’s success depends on building lasting and mutually beneficial relationships with clients, which involves assessing their financial position and background.

• Level of equity invested in the transactions – in general, borrowers are required to contribute or invest a portion of their own funds prior to any loan advances.

Structural Interest Rate, Market, and Liquidity Risks

Structural interest rate risk arises from the impact on the Company’s banking assets and liabilities due to changes in the interest rate curves in the market, impacting both economic value and net interest income generation. Market risk arises from the movement of market variables that impact the trading book. These variables can include interest rates, foreign exchange rates, and commodity prices, among others. Liquidity risk refers to the possibility that a counterparty or borrower cannot meet its payment commitments without having to resort to borrowing funds under onerous conditions or damaging its image or reputation. See the Market Risk Management and Liquidity sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations herein.

Operational Risk

Operational risk refers to the potential loss resulting from inadequate or failed internal processes, people or systems, or from external events. It includes the current and prospective risk to earnings and capital arising from fraud, error, and the inability to deliver products or services, maintain a competitive position or manage information. Included in operational risk is compliance and legal risk. This refers to the possibility of legal or regulatory sanctions and liabilities, financial loss or damage to reputation the Company may suffer as a result of its failure to comply with all applicable laws, regulations, codes of conduct and good practice standards.

Operational risk is managed by the lines of business and supporting units with oversight by the Operational Risk Committees at the line of business and supporting unit level. The Operational Risk Committees are the key element to monitor operational risk events and the implementation of action plans and controls. Summary reports of these committees’ activities and decisions are provided to executive management.

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Strategic and Business Risk

Strategic and business risk refers to the potential of lower earnings generation due to reduced operating income that cannot be offset quickly through expense management. The origin can be either company specific or systemic. Management of these risks is a shared responsibility throughout the organization using the following management processes. An annual business planning process occurs where market, competitive and economic factors that could have a negative impact on earnings are addressed with action plans developed to deal with these factors. Additionally, monthly reporting and analysis at a line of business and support unit level is performed and reviewed.

Reputational Risk

Reputational risk normally results as a consequence of events related to other risks previously discussed. Therefore, an adequate management of all the different financial and non-financial risk is critical to mitigate and control reputational risk. Management of this risk also involves brand management, community involvement and internal and external communication.

Market Risk Management

The effective management of market risk is essential to achieving the Company’s strategic financial objectives. As a financial institution, the Company’s most significant market risk exposure is interest rate risk in its balance sheet; however, market risk also includes product liquidity risk, price risk and volatility risk in the Company’s lines of business. The primary objectives of market risk management are to minimize any adverse effect that changes in market risk factors may have on net interest income, and to offset the risk of price changes for certain assets recorded at fair value.

Interest Rate Market Risk

The Company’s net interest income and the fair value of its financial instruments are influenced by changes in the level of interest rates. The Company manages its exposure to fluctuations in interest rates through policies established by its Asset/Liability Committee. The Asset/Liability Committee meets regularly and has responsibility for approving asset/liability management policies, formulating strategies to improve balance sheet positioning and/or earnings and reviewing the interest rate sensitivity of the Company.

Management utilizes an interest rate simulation model to estimate the sensitivity of the Company’s net interest income to changes in interest rates. Such estimates are based upon a number of assumptions for each scenario, including the level of balance sheet growth, deposit repricing characteristics and the rate of prepayments.

The estimated impact on the Company’s net interest income sensitivity over a one-year time horizon at September 30, 2013, is shown in the table below along with comparable prior-year information. Such analysis assumes a gradual and sustained parallel shift in interest rates, a static balance sheet and the Company’s estimate of how interest-bearing transaction accounts would reprice in each scenario using current yield curves at September 30, 2013 and 2012, respectively.

Table 49 Net Interest Income Sensitivity
	Estimated % Change in Net Interest Income
	September 30, 2013		September 30, 2012
Rate Change
+ 200 basis points	6.49	%	7.93	%
+ 100 basis points	3.47		3.70
No Change	—		—
- 25 basis points	(1.53	)	(1.32	)

Management modeled only a 25 basis point decline because larger declines would have resulted in a federal funds rate of less than zero.

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The following table shows the effect that the indicated changes in interest rates would have on the EVE. Key assumptions in the preparation of the table include prepayment speeds on mortgage related assets, cash flows and maturities of derivative financial instruments, loan volumes and pricing, and deposit sensitivity. The resulting change in the EVE reflects the level of sensitivity in relation to changing interest rates.

Table 50 Economic Value of Equity
	Estimated % Change in Economic Value of Equity
	September 30, 2013		September 30, 2012
Rate Change
+ 200 basis points	(0.49)	%	5.94	%
+ 100 basis points	0.16		3.97
No Change	—		—
- 25 basis points	(0.56	)	(1.55	)

The Company is also subject to trading risk. The Company utilizes various tools to measure and manage price risk in its trading portfolios. In addition, the Board of Directors has established certain limits relative to positions and activities. The level of price risk exposure at any given point in time depends on the market environment and expectation of future price and market movements, and will vary from period to period.

Derivatives

The Company uses derivatives primarily to manage economic risks related to commercial loans, mortgage banking operations, long-term debt and other funding sources. The Company also uses derivatives to facilitate transactions on behalf of its clients. As of September 30, 2013, the Company had derivative financial instruments outstanding with notional amounts of $17.9 billion. The estimated net fair value of open contracts was $123 million at September 30, 2013.

Liquidity Management

Liquidity is the ability of the Company to convert assets into cash or cash equivalents without significant loss and to raise additional funds by increasing liabilities. Liquidity management involves maintaining the Company’s ability to meet the day-to-day cash flow requirements of its customers, whether they are depositors wishing to withdraw funds or borrowers requiring funds to meet their credit needs. Without proper liquidity management, the Company would not be able to perform the primary function of a financial intermediary and would, therefore, not be able to meet the needs of the communities it serves.

The Company regularly assesses liquidity needs under various scenarios of market conditions, asset growth and changes in credit ratings. The assessment includes liquidity stress testing which measures various sources and uses of funds under the different scenarios. The assessment provides regular monitoring of unused borrowing capacity and available sources of contingent liquidity to prepare for unexpected liquidity needs and to cover unanticipated events that could affect liquidity.

The asset portion of the balance sheet provides liquidity primarily through unencumbered securities available for sale, loan principal and interest payments, maturities and prepayments of investment securities held to maturity and, to a lesser extent, sales of investment securities available for sale and trading account assets. Other short-term investments such as federal funds sold, securities purchased under agreements to resell and maturing interest bearing deposits with other banks, are additional sources of liquidity.

The liability portion of the balance sheet provides liquidity through various customers’ interest-bearing and noninterest-bearing deposit accounts and through FHLB and other borrowings. Brokered deposits, federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings are additional sources of liquidity and, basically, represent the Company’s incremental borrowing capacity. These sources of liquidity are used as necessary to fund asset growth and meet short-term liquidity needs.

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In addition to the Company’s financial performance and condition, liquidity may be impacted by the Company’s structure as a bank holding company that is a separate legal entity from the Bank. The Parent requires cash for various operating needs including payment of dividends to its shareholder, the servicing of debt, and the payment of general corporate expenses. The primary source of liquidity for the Parent is dividends paid by the Bank. Applicable federal and state statutes and regulations impose restrictions on the amount of dividends that may be paid by the Bank. In addition to the formal statutes and regulations, regulatory authorities also consider the adequacy of the Bank’s total capital in relation to its assets, deposits and other such items. Due to the net earnings restrictions on dividend distributions, the Bank did not have the ability to pay dividends at September 30, 2013 or December 31, 2012 without regulatory approval. Any future dividends must be set forth as capital actions in the Company's capital plans and not objected to by the Federal Reserve before any dividends can be paid.

The Company’s ability to raise funding at competitive prices is affected by the rating agencies’ views of the Company’s credit quality, liquidity, capital and earnings. Management meets with the rating agencies on a routine basis to discuss the current outlook for the Company.

Management believes that the current sources of liquidity are adequate to meet the Company’s requirements and plans for continued growth. See Note11, FHLB and Other Borrowings, Note 12, Capital Securities and Preferred Stock, and Note 15, Commitments, Contingencies and Guarantees, in the Notes to the December 31, 2012, Consolidated Financial Statements for additional information regarding outstanding balances of sources of liquidity and contractual commitments and obligations.

The following tables present information about the Company’s contractual obligations at December 31, 2012.

Table 51 Contractual Obligations (1)
	Payments Due by Period
	Total		Less than 1 year		1-3 Years		3-5 Years		More than 5 Years		Indeterminable Maturity
	(In Thousands)
FHLB and other borrowings	$	4,273,279	$	2,455	$	1,798,539	$	1,716,067	$	756,218	$	—
Short-term borrowings(2)	1,105,354		1,105,354		—		—		—		—
Capital lease obligations	33,750		3,317		5,054		4,460		20,919		—
Operating leases	459,478		51,802		104,716		85,861		217,099		—
Deposits(3)	51,642,778		7,109,391		3,619,672		1,078,999		265,153		39,569,563
Unrecognized income tax benefits	28,639		—		—		—		—		28,639
Total	$	57,543,278	$	8,272,319	$	5,527,981	$	2,885,387	$	1,259,389	$	39,598,202

(1) Amounts do not include associated interest payments.

(2) Includes federal funds purchased and borrowings with an original maturity of less than one year. For more information, see Note 10 of the Notes to the December 31, 2012, Consolidated Financial Statements.

(3) Deposits with indeterminable maturity include noninterest bearing demand, savings, interest-bearing transaction accounts and money market accounts.

Off Balance Sheet Arrangements

The following table presents information about the Company's commitments at December 31, 2012.

Table 52 Commitments
	2012
	(In Thousands)
Commitments to extend credit	$	20,965,717
Standby and commercial letters of credit	2,306,556
	$	23,272,273

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Capital

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking regulators. Failure to meet minimum risk-based and leverage capital requirements can subject the Company and the Bank to a series of increasingly restrictive regulatory actions. Currently, there are two basic measures of capital adequacy: the risk-based capital ratio and the leverage ratio.

The risk-based capital framework is designed to make regulatory capital requirements more sensitive to differences in credit, market and operational risk profiles among banks and bank holding companies, to account for off-balance sheet exposures and certain types of interest rate risk, and to minimize the disincentives for holding liquid and low-risk assets. Assets and off-balance sheet items are assigned to broad risk categories, each associated with specified risk weights. The resulting risk-based capital ratios represent the ratio of a banking organization's regulatory capital to its total risk weighted assets. Banking organizations that are considered to have excessive interest rate risk exposure are required to maintain higher levels of capital as a supervisory matter.

In the U.S. regulatory capital context, the leverage ratio is the ratio of a banking organization's Tier 1 capital to its quarterly average on-balance sheet assets. The leverage ratio is a non-risk based measure of capital adequacy because a bank's on-balance sheet assets are not adjusted for risk for purposes of calculating the leverage ratio.

The Company’s Tier 1 risk-based capital ratio was 11.83% at September 30, 2013 compared to 11.68% at December 31, 2012. The Company's leverage ratio was 10.16% at September 30, 2013 compared to 9.43% at December 31, 2012. The Company regularly performs stress testing on its capital levels and is required to periodically submit the Company’s capital plan to the banking regulators.

Please refer to Item 1. Business - Supervision and Regulation - Capital Requirements and Item 1A. - Risk Factors for more information regarding regulatory capital requirements. Also, see Note 16, Regulatory Matters and Dividends from Subsidiaries, in the Notes to the December 31, 2012, Consolidated Financial Statements for further details.

The following table shows the calculation of capital ratios for the Company.

Table 53  Capital Ratios
	September 30,			December 31,
	2013			2012			2011
	(Dollars in Thousands)
Risk-based capital:
Tier 1 Capital	$	6,529,407		$	5,969,976		$	5,418,207
Total Qualifying Capital	7,786,640			7,296,721			6,909,516
Assets:
Total risk-adjusted assets (regulatory)	$	55,209,656		$	51,111,442		$	47,239,836
Ratios:
Tier 1 risk-based capital ratio	11.83		%	11.68		%	11.47		%
Total risk-based capital ratio	14.10		%	14.28		%	14.63		%
Leverage ratio	10.16		%	9.43		%	9.14		%

At September 30, 2013, the regulatory capital ratios of the Bank exceed the “well-capitalized” standard for banks as defined in the existing prompt corrective action framework. The Company continually monitors these ratios to ensure that the Bank exceeds this standard.

The U.S. Basel III final rule revises the capital ratio thresholds in the prompt corrective action framework to reflect the new Basel III capital ratios. This aspect of the U.S. Basel III will become effective on January 1, 2015.

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Effects of Inflation

The majority of assets and liabilities of a financial institution are monetary in nature; therefore, a financial institution differs greatly from most commercial and industrial companies, which have significant investments in fixed assets or inventories that are greatly impacted by inflation. However, inflation does have an important impact on the growth of total assets in the banking industry and the resulting need to increase equity capital at higher than normal rates in order to maintain an appropriate equity-to-assets ratio. Inflation also affects other expenses that tend to rise during periods of general inflation.

Management believes the most significant potential impact of inflation on financial results is a direct result of the Company’s ability to manage the impact of changes in interest rates. Management attempts to maintain a balanced position between rate-sensitive assets and liabilities in order to minimize the impact of interest rate fluctuations on net interest income. However, this goal can be difficult to completely achieve in times of rapidly changing interest rates and is one of many factors considered in determining the Company’s interest rate positioning. The Company is asset sensitive as of September 30, 2013. Refer to Table 49, Net Interest Income Sensitivity, for additional details on the Company’s interest rate sensitivity.

Effects of Deflation

A period of deflation would affect all industries, including financial institutions. Potentially, deflation could lead to lower profits, higher unemployment, lower production and deterioration in overall economic conditions. In addition, deflation could depress economic activity and impair bank earnings through increasing the value of debt while decreasing the value of collateral for loans. If the economy experienced a severe period of deflation, then it could depress loan demand, impair the ability of borrowers to repay loans and sharply reduce bank earnings.

Management believes the most significant potential impact of deflation on financial results relates to the Company’s ability to maintain a high amount of capital to cushion against future losses. In addition, the Company can utilize certain risk management tools to help it maintain its balance sheet strength even if a deflationary scenario were to develop.

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Quarterly Financial Results

The accompanying table presents condensed information relating to quarterly periods for the nine months ended September 30, 2013 and for the years ended December 31, 2012 and 2011.

Table 54 Quarterly Financial Summary (Unaudited)
	2013						2012								2011
	Third Quarter		Second Quarter		First Quarter		Fourth Quarter		Third Quarter		Second Quarter		First Quarter		Fourth Quarter (1)			Third Quarter		Second Quarter		First Quarter
	(In Thousands)
Summary of Operations:
Interest income	$	569,556	$	580,770	$	595,801	$	660,066	$	616,012	$	614,367	$	601,091	$	617,203		$	664,281	$	671,531	$	656,759
Interest expense	67,645		70,455		72,855		71,637		67,984		59,284		62,649		61,566			61,135		76,221		81,803
Net interest income	501,911		510,315		522,946		588,429		548,028		555,083		538,442		555,637			603,146		595,310		574,956
Provision for loan losses	37,534		24,237		19,615		2,761		2,073		8,498		16,139		53,463			96,993		134,737		143,440
Net interest income (loss) after provision for loan losses	464,377		486,078		503,331		585,668		545,955		546,585		522,303		502,174			506,153		460,573		431,516
Noninterest income	210,985		249,013		205,377		203,491		199,281		250,925		196,351		179,081			202,834		214,022		257,276
Noninterest expense	522,139		554,700		545,665		645,314		566,452		595,238		544,843		2,614,491			624,944		584,442		568,941
Income (loss) before income tax expense (benefit)	153,223		180,391		163,043		143,845		178,784		202,272		173,811		(1,933,236		)	84,043		90,153		119,851
Provision for income taxes	41,930		51,596		52,507		47,276		52,723		64,416		55,286		17,768			24,434		22,818		33,155
Net income (loss)	$	111,293	$	128,795	$	110,536	$	96,569	$	126,061	$	137,856	$	118,525	$	(1,951,004	)	$	59,609	$	67,335	$	86,696
Noncontrolling interest	647		568		393		588		554		540		456		507			485		649		370
Net income (loss) attributable to shareholder	$	110,646	$	128,227	$	110,143	$	95,981	$	125,507	$	137,316	$	118,069	$	(1,951,511	)	$	59,124	$	66,686	$	86,326
Selected Average Balances:
Average Balances:
Loans (2)	$	48,822,516	$	46,791,135	$	45,656,547	$	45,188,234	$	44,987,636	$	43,834,026	$	42,443,025	$	42,031,068		$	40,940,957	$	40,485,276	$	40,521,877
Assets	69,325,343		69,944,558		69,855,226		68,848,414		67,172,340		65,127,489		64,693,138		64,847,781			63,670,086		63,243,136		63,159,055
Deposits	51,916,791		52,473,024		52,057,560		50,708,703		49,060,360		47,410,609		46,990,112		45,732,379			45,041,053		45,847,088		45,445,810
FHLB and other borrowings	4,304,941		4,039,732		4,221,034		4,599,596		4,780,936		4,366,674		4,160,677		4,612,127			3,637,999		2,248,391		2,472,539
Shareholder’s equity	11,361,991		11,342,874		11,148,896		11,082,098		10,978,493		10,860,652		10,700,522		11,954,166			12,490,151		12,349,732		12,268,220

(1) Includes goodwill impairment of $2.0 billion in noninterest expense.

(2) Loans include loans held for sale.

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Item 3. Properties

The Company occupies various facilities principally located in Alabama, Arizona, California, Colorado, Florida, New Mexico and Texas and in states where it operates loan production offices that are used in the normal course of the financial services business. The properties consist of both owned and leased properties and include land for future banking center sites. The leased properties include both land and buildings that are generally under long-term leases. The Company leases office space used as the Company's principal executive offices in Houston, Texas. The Bank has significant operations in Birmingham, Alabama. The Company owns the building where the Bank is headquartered, and the land is subject to a long-term ground lease. See Note 6, Premises and Equipment, in the Notes to the December 31, 2012, Consolidated Financial Statements, for additional disclosures related to the Company’s properties.

Item 4. Security Ownership of Certain Beneficial Owners and Management

Information for this item is not required as the Company is filing this Registration Statement on Form 10 with a reduced disclosure format. See "Explanatory Note."

Item 5. Directors and Executive Officers

Information for this item is not required as the Company is filing this Registration Statement on Form 10 with a reduced disclosure format. See "Explanatory Note."

Item 6. Executive Compensation

Information for this item is not required as the Company is filing this Registration Statement on Form 10 with a reduced disclosure format. See "Explanatory Note."

Item 7. Certain Relationships and Related Transactions, and Director Independence

Information for this item is not required as the Company is filing this Registration Statement on Form 10 with a reduced disclosure format. See "Explanatory Note."

Item 8. Legal Proceedings

See under “Legal and Regulatory Proceedings” in Note 8, Commitments, Contingencies and Guarantees, of the Notes to the September 30, 2013, Unaudited Condensed Consolidated Financial Statements and Note 15, Commitments, Contingencies and Guarantees, of the Notes to the December 31, 2012, Consolidated Financial Statements.

Item 9. Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters

Market Information

The Company's common stock is not traded on any exchange or other interdealer electronic trading facility and there is no established public trading market for the Company's common stock. As of the date of this Registration Statement on Form 10, there are no shares of the Company's common stock that are subject to outstanding options or warrants to purchase, or securities convertible into, the Company's common stock. No shares of the Company's common stock can be sold pursuant to Rule 144 under the Securities Act and the Company has not agreed to register any such shares under the Securities Act for sale by security holders.

Holders

As of the date of this filing, BBVA was the sole holder of the Company's common stock.

Dividends

The payment of dividends on the Company's common stock is subject to determination and declaration by the Board of Directors of the Company and regulatory limitations on the payment of dividends. There is no assurance that dividends will be declared or, if declared, what the amount of dividends will be, or whether such dividends will continue. The Company has not declared or paid any dividends during 2011, 2012 or 2013. A discussion of dividend restrictions

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is provided in Item 1. Business - Overview - Supervision, Regulation, and Other Factors - Dividends and in Note 16, Regulatory Matters and Dividends from Subsidiaries in the Notes to the December 31, 2012, Consolidated Financial Statements.

Item 10. Recent Sales of Unregistered Securities

On April 8, 2013, BBVA contributed all of the outstanding shares of BSI to the Company, and the Company issued 1,482,239 shares of common stock to BBVA. The shares were issued in reliance upon the exemption from registration for transactions not involving a public offering under Section 4(a)(2) of the Securities Act.

On April 9, 2013, BBVA contributed $100 million to the Company, and the Company issued an additional 1,961,554 shares of common stock to BBVA. The shares were issued in reliance upon the exemption from registration for transactions not involving a public offering under Section 4(a)(2) of the Securities Act.

Item 11. Description of Registrant’s Securities to be Registered

General

The Company is incorporated in the State of Texas. The rights of the Company's shareholders are generally covered by Texas law and the Company's certificate of formation and bylaws. The terms of the Company's capital stock are therefore subject to Texas law, including the Texas Business Organizations Code, and the common and constitutional law of Texas. The Company's certificate of formation and bylaws will be filed with the SEC as Exhibit 3.1 and Exhibit 3.2 to this Registration Statement.

The Company's authorized capital stock consists of 300,000,000 shares of common stock, par value $0.01 per share. As of November 22, 2013, the Company had 220,723,876 outstanding shares of common stock and no shares of the Company's preferred stock were outstanding. All of the shares outstanding at that date were fully paid and nonassessable. As of the date of this filing, BBVA was the sole holder of the Company's common stock.

The Company's Common Stock

Voting Rights. Holders of the Company's common stock are entitled to one vote per share in the election of directors and on all other matters submitted to a vote at a meeting of shareholders. No shareholder has the right of cumulative voting with respect to the election of directors.

With respect to any matter other than the election of directors or a matter for which the affirmative vote of the holders of a specified portion of the shares entitled to vote is required by Texas law or the Company's certificate of formation, the act of the shareholders will be the affirmative vote of the holders of a majority of the shares entitled to vote on, and voted for or against, the matter at a meeting of shareholders at which a quorum is present. For purposes of such a vote, however, all abstentions and broker nonvotes are not counted as voted either for or against such matter.

In elections of directors, the directors will be elected by a plurality of the votes cast by the holders of shares entitled to vote in the election of directors at a meeting of shareholders at which a quorum is present.

Under Texas law, no action required or permitted to be taken at an annual or special meeting of shareholders may be taken by written consent in lieu of a meeting of shareholders without the unanimous written consent of all shareholders entitled to vote on the action unless the certificate of formation specifically allows action to be taken by a written consent of the shareholders holding the minimum number of shares necessary to take the action that is subject to that consent at a meeting of shareholders, even though such consent is not signed by all of the corporation's shareholders. The Company's bylaws permit action by written consent by the Company's shareholders.

Dividend Rights. Holders of the Company's common stock are entitled to dividends when, as and if declared by the Company's Board of Directors out of funds legally available therefor.

Liquidation Rights. In the event of any liquidation, dissolution or winding up of the Bank, the Company, as holder of the Bank's capital stock, would be entitled to receive, after payment or provision for payment of all debts and liabilities of the Bank, including all deposit accounts and accrued interest thereon, all assets of the Bank available for distribution. In the event of liquidation, dissolution or winding up of the Company, the holders of its common stock would be entitled

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to receive, after payment or provision for payment of all its debts and liabilities, all the assets of the Company available for distribution.

Other. The Company's common stock has no preemptive or conversion rights and is not entitled to the benefits of any redemption or sinking fund provision.

Indemnification of Officers and Directors

The Company's bylaws also provide that the Company will indemnify its directors, officers, employees and agents, to the fullest extent permitted by applicable Texas law, from any expenses, liabilities or other matters.

Item 12. Indemnification of Directors and Officers

Section 17 of Article V of the Company's bylaws provides that the Company shall indemnify any person made a party to or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise.

In Section 17 of Article V of the Company's bylaws, the Company makes mandatory for directors and officers the indemnification provided for in Section 8.101 of the Texas Business Organizations Code, which provides that, subject to certain limitations, a corporation may indemnify a governing person, former governing person, or delegate who was, is, or is threatened to be made a respondent in a proceeding to the extent permitted by Section 8.102 of the Texas Business Organizations Code if it is determined in accordance with Section 8.103 of the Texas Business Organizations Code that:

(1) the person:

(A) acted in good faith;

(B) reasonably believed:

(i) in the case of conduct in the person's official capacity, that the person's conduct was in the corporation's best interests; and

(ii) in any other case, that the person's conduct was not opposed to the corporation's best interests; and

(C) in the case of a criminal proceeding, did not have a reasonable cause to believe the person's conduct was unlawful.

(2) with respect to expenses, the amount of expenses other than a judgment is reasonable; and

(3) indemnification should be paid.     

The Company also maintains directors' and officers' liability insurance.

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Item 13. Financial Statements and Supplementary Data

BBVA Compass Bancshares, Inc. and Subsidiaries Financial Statements
Unaudited Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012	105
Condensed Consolidated Statements of Income for the nine months ended September 30, 2013 and 2012	106
Condensed Consolidated Statements of Comprehensive Income (Loss) for the nine months ended September 30, 2013 and 2012	107
Condensed Consolidated Statements of Shareholder's Equity for the nine months ended September 30, 2013 and 2012	108
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012	109
Notes to the September 30, 2013 Unaudited Condensed Consolidated Financial Statements	110
Audited Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm	154
Consolidated Balance Sheets as of December 31, 2012 and 2011	155
Consolidated Statements of Income for the years ended December 31, 2012, 2011 and 2010	156
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2012, 2011 and 2010	157
Consolidated Statements of Shareholder’s Equity for the years ended December 31, 2012, 2011 and 2010	158
Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010	159
Notes to the December 31, 2012 Consolidated Financial Statements	160

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BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
	September 30, 2013			December 31, 2012
	(In Thousands)
Assets:
Cash and due from banks	$	2,826,571		$	6,139,018
Federal funds sold, securities purchased under agreements to resell and interest bearing deposits	17,101			19,424
Cash and cash equivalents	2,843,672			6,158,442
Trading account assets	375,988			545,780
Investment securities available for sale	8,258,755			7,988,430
Investment securities held to maturity (fair value of $1,422,856 and $1,416,723, respectively)	1,554,681			1,507,929
Loans held for sale (includes $168,426 and $312,171 measured at fair value, respectively)	175,891			322,065
Loans	49,283,075			45,011,543
Allowance for loan losses	(717,937		)	(802,853		)
Net loans	48,565,138			44,208,690
Premises and equipment, net	1,406,680			1,433,961
Bank owned life insurance	681,470			671,888
Goodwill	4,971,645			4,971,645
Other intangible assets	123,345			169,731
FDIC indemnification asset	80,545			271,928
Other real estate owned	41,493			68,568
Other assets	1,007,775			917,638
Total assets	$	70,087,078		$	69,236,695
Liabilities:
Deposits:
Noninterest bearing	$	15,068,999		$	14,436,539
Interest bearing	37,173,410			37,206,239
Total deposits	52,242,409			51,642,778
FHLB and other borrowings	4,307,546			4,273,279
Federal funds purchased and securities sold under agreements to repurchase	1,118,028			1,101,591
Other short-term borrowings	28,876			3,763
Accrued expenses and other liabilities	968,823			1,131,711
Total liabilities	58,665,682			58,153,122
Shareholder’s Equity:
Common stock — $0.01 par value:
Authorized — 300,000,000 shares
Issued — 220,723,876 and 217,280,083 shares for 2013 and 2012, respectively	2,207			2,173
Surplus	15,267,249			15,172,910
Retained deficit	(3,797,557		)	(4,146,573		)
Accumulated other comprehensive income (loss)	(80,080		)	26,058
Total BBVA Compass Bancshares, Inc. shareholder’s equity	11,391,819			11,054,568
Noncontrolling interests	29,577			29,005
Total shareholder’s equity	11,421,396			11,083,573
Total liabilities and shareholder’s equity	$	70,087,078		$	69,236,695

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

105

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
	Nine Months Ended September 30,
	2013		2012
	(In Thousands)
Interest income:
Interest and fees on loans	$	1,586,886	$	1,635,479
Interest on investment securities available for sale	133,559		171,954
Interest on investment securities held to maturity	23,132		22,091
Interest on federal funds sold, securities purchased under agreements to resell and interest bearing deposits	164		174
Interest on trading account assets	2,386		1,772
Total interest income	1,746,127		1,831,470
Interest expense:
Interest on deposits	160,221		138,270
Interest on FHLB and other borrowings	49,070		49,428
Interest on federal funds purchased and securities sold under agreements to repurchase	1,577		2,145
Interest on other short-term borrowings	87		74
Total interest expense	210,955		189,917
Net interest income	1,535,172		1,641,553
Provision for loan losses	81,386		26,710
Net interest income after provision for loan losses	1,453,786		1,614,843
Noninterest income:
Service charges on deposit accounts	164,601		193,168
Card and merchant processing fees	76,869		76,229
Retail investment sales	71,724		73,957
Mortgage banking income	32,221		37,570
Asset management fees	31,143		28,464
Corporate and correspondent investment sales	26,954		24,527
Bank owned life insurance	12,901		15,458
Investment securities gains, net	33,030		7,917
Gain on prepayment of FHLB and other borrowings	21,775		38,500
Other	194,157		150,767
Total noninterest income	665,375		646,557
Noninterest expense:
Salaries, benefits and commissions	743,601		755,692
FDIC indemnification expense	211,706		230,997
Professional services	133,198		121,269
Equipment	148,989		121,923
Net occupancy	117,622		113,158
Amortization of intangibles	46,386		68,006
Securities impairment:
Other-than-temporary impairment	3,718		5,715
Less: non-credit portion recognized in other comprehensive income	2,288		4,728
Total securities impairment	1,430		987
Other	219,572		294,501
Total noninterest expense	1,622,504		1,706,533
Net income before income tax expense	496,657		554,867
Income tax expense	146,033		172,425
Net income	350,624		382,442
Less: net income attributable to noncontrolling interests	1,608		1,550
Net income attributable to shareholder	$	349,016	$	380,892

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
	Nine Months Ended September 30,
	2013			2012
	(In Thousands)
Net income	$	350,624		$	382,442
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) arising during period from securities available for sale	(100,261		)	22,474
Less: reclassification adjustment for net gains (losses) on sale of securities available for sale in net income	20,941			5,041
Net change in unrealized holding gains (losses) on securities available for sale	(121,202		)	17,433
Change in unamortized net holding losses on investment securities held to maturity	8,085			18,399
Less: non-credit related impairment on investment securities held to maturity	1,450			3,011
Change in unamortized non-credit related impairment on investment securities held to maturity	1,257			401
Net change in unamortized holding losses on securities held to maturity	7,892			15,789
Unrealized holding gains (losses) arising during period from cash flow hedge instruments	6,491			(3,734		)
Net change in accumulated gain (loss) on cash flow hedging instruments	6,491			(3,734		)
Change in defined benefit pension plans	681			98
Net change in defined benefit pension plans	681			98
Other comprehensive income (loss), net of tax	(106,138		)	29,586
Comprehensive income	244,486			412,028
Less: comprehensive income attributable to noncontrolling interests	1,608			1,550
Comprehensive income attributable to shareholder	$	242,878		$	410,478

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (Unaudited)
	Common Stock		Surplus			Retained Deficit			Accumulated Other Comprehensive Income (Loss)			Non-controlling Interests			Total Shareholder’s Equity
	(In Thousands)
Balance, January 1, 2012	$	2,173	$	15,179,420		$	(4,623,446	)	$	29,955		$	28,962		$	10,617,064
Net income	—		—			380,892			—			1,550			382,442
Other comprehensive income, net of tax	—		—			—			29,586			—			29,586
Dividends	—		—			—			—			(1,039		)	(1,039		)
Vesting of restricted stock	—		(11,547		)	—			—			—			(11,547		)
Restricted stock retained to cover taxes	—		(1,458		)	—			—			—			(1,458		)
Amortization of stock-based deferred compensation	—		8,869			—			—			—			8,869
Balance, September 30, 2012	$	2,173	$	15,175,284		$	(4,242,554	)	$	59,541		$	29,473		$	11,023,917
Balance, January 1, 2013	$	2,173	$	15,172,910		$	(4,146,573	)	$	26,058		$	29,005		$	11,083,573
Net income	—		—			349,016			—			1,608			350,624
Other comprehensive loss, net of tax	—		—			—			(106,138		)	—			(106,138		)
Issuance of common stock	34		99,966			—			—			—			100,000
Dividends	—		—			—			—			(1,036		)	(1,036		)
Vesting of restricted stock	—		(5,726		)	—			—			—			(5,726		)
Restricted stock retained to cover taxes	—		(2,174		)	—			—			—			(2,174		)
Amortization of stock-based deferred compensation	—		2,273			—			—			—			2,273
Balance, September 30, 2013	$	2,207	$	15,267,249		$	(3,797,557	)	$	(80,080	)	$	29,577		$	11,421,396

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	Nine Months Ended September 30,
	2013			2012
	(In Thousands)
Operating Activities:
Net income	$	350,624		$	382,442
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	126,595			201,358
Securities impairment	1,430			987
Amortization of intangibles	46,386			68,006
Accretion of discount, loan fees and purchase market adjustments, net	(145,400		)	(264,207		)
Net change in FDIC indemnification asset	211,706			230,997
Provision for loan losses	81,386			26,710
Amortization of stock based compensation	2,273			8,869
Net change in trading account assets	169,792			(1,777		)
Net change in trading account liabilities	(195,062		)	(31,407		)
Net change in loans held for sale	201,174			(14,603		)
Deferred tax expense	27,445			49,599
Investment securities gains, net	(33,030		)	(7,917		)
Gain on prepayment of FHLB and other borrowings	(21,775		)	(38,500		)
Loss on sale of premises and equipment	1,401			3,288
Net loss on sale of other real estate and other assets	1,875			37,369
Increase in other assets	(101,424		)	(3,978		)
Increase in other liabilities	48,379			119,465
Net cash provided by operating activities	773,775			766,701
Investing Activities:
Proceeds from sales of investment securities available for sale	803,347			265,336
Proceeds from prepayments, maturities and calls of investment securities available for sale	1,588,350			1,467,546
Purchases of investment securities available for sale	(2,921,969		)	(1,971,602		)
Proceeds from prepayments, maturities and calls of investment securities held to maturity	175,855			111,853
Purchases of investment securities held to maturity	(210,811		)	(291,866		)
Net change in loan portfolio	(4,447,549		)	(2,984,254		)
Net cash paid in post acquisition earnout	—			(3,589		)
Purchase of premises and equipment	(102,064		)	(147,059		)
Proceeds from sale of premises and equipment	6,762			2,347
Proceeds from sales of loans	162,958			194,515
(Payments to) reimbursements from FDIC for covered losses	(20,323		)	3,430
Proceeds from sales of other real estate owned	64,365			135,051
Net cash used in investing activities	(4,901,079		)	(3,218,292		)
Financing Activities:
Net increase in demand deposits, NOW accounts and savings accounts	1,300,215			2,711,670
Net (decrease) increase in time deposits	(701,292		)	1,267,762
Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase	16,437			(314,911		)
Net increase in other short-term borrowings	25,113			17,483
Proceeds from FHLB and other borrowings	425,000			2,185,484
Repayment of FHLB and other borrowings	(344,003		)	(1,550,999		)
Vesting of restricted stock	(5,726		)	(11,547		)
Restricted stock grants retained to cover taxes	(2,174		)	(1,458		)
Issuance of common stock	100,000			—
Preferred dividends paid	(1,036		)	(1,039		)
Net cash provided by financing activities	812,534			4,302,445
Net (decrease) increase in cash and cash equivalents	(3,314,770		)	1,850,854
Cash and cash equivalents at beginning of year	6,158,442			3,093,160
Cash and cash equivalents at end of period	$	2,843,672		$	4,944,014

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Basis of Presentation

General

The accounting and reporting policies of the Company and the methods of applying those policies that materially affect the consolidated financials conform with U.S. GAAP and with general financial services industry practices. The accompanying interim financial statements have been prepared in accordance with the rules and regulations of the SEC and, therefore, do not include all information and notes to the consolidated financial statements necessary for a complete presentation of financial position, results of operations, comprehensive income and cash flows in conformity with U.S. GAAP. In the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the consolidated financial statements have been included. Operating results for the nine months ended September 30, 2013, are not necessarily indicative of the results that may be expected for the year ended December 31, 2013. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s audited consolidated financial statements for the year-ended December 31, 2012.

The Company has evaluated all subsequent events for potential recognition and disclosure through November 22, 2013, the date of issuance of the Consolidated Financial Statements, to determine if either recognition or disclosure of significant events or transactions is required.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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, the most significant of which relate to the allowance for loan losses, goodwill impairment, valuations and securities impairment. Actual results could differ from those estimates.

Correction of Accounting Error

During the nine months ended September 30, 2013, provision for loan losses included a $20.4 million benefit related to the correction of an error in prior period that resulted from a calculation by the Company of an adjustment to the allowance for loan losses for commercial loans less than $1 million. This error primarily related to the second quarter of 2012 and was corrected in the second quarter of 2013.

The Company has evaluated the effect of this correction on prior annual periods' consolidated financial statements in accordance with the guidance provided by SEC Staff Accounting Bulletin No. 108, codified as SAB Topic 1.N, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements, and concluded that no prior annual period is materially misstated. In addition, the Company has considered the effect of this correction on the Company's nine months ended September 30, 2013 financial results and forecasted annual results of operations for the year ended December 31, 2013, and concluded that the impact on these periods is not material.

Changes in Accounting Principles and Effects of New Accounting Pronouncements

Disclosures about Offsetting Assets and Liabilities

In December 2011, the FASB issued ASU 2011-11, Disclosures about Offsetting Assets and Liabilities, which is an amendment to ASC Topic 210, Balance Sheet. This ASU requires companies to disclose information about financial instruments that have been offset and related arrangements to enable investors and other users of their financial statements to understand the effect or potential effect of those arrangements on their financial positions. This ASU did not change the existing offsetting eligibility criteria or the permitted balance sheet presentation for those instruments that meet the eligibility criteria, but does require new disclosures.

110

In January 2013, the FASB issued ASU 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies the scope of the offsetting disclosures and addresses any unintended consequences due to feedback from stakeholders that standard commercial provisions of many contracts would equate to a master netting arrangement. The amendments are required for annual reporting periods beginning on or after January 1, 2013, and interim periods within these annual periods and was adopted by the Company on January 1, 2013. See Note 7, Assets and Liabilities Subject to Enforceable Master Netting Arrangements, for the newly adopted disclosures related to this standard.

Indemnification Asset Accounting

In October 2012, the FASB issued ASU 2012-06, Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution (a consensus of the FASB Emerging Issues Task Force), which amends ASC Topic 805, Business Combinations. The amendment requires an indemnification asset resulting from a government-assisted acquisition of a financial institution to be subsequently measured on the same basis as the subsequent measurement of the underlying asset subject to indemnification. For public and nonpublic entities, the amendments are effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2012, and was adopted by the Company on January 1, 2013. The adoption of this standard did not have a material impact on the financial condition or results of operations of the Company.

Presentation of Comprehensive Income

In February 2013, the FASB released ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which seeks to improve the reporting of reclassifications out of accumulated other comprehensive income. The amendments in this ASU require an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. GAAP to be reclassified in its entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. These changes were effective for the Company as of January 1, 2013, with prospective application. This new guidance did not change the current requirements for reporting net income or other comprehensive income in the financial statements and only impacted the nature of certain accumulated other comprehensive income disclosures in the consolidated financial statements. See Note 10, Comprehensive Income.

Obligations Resulting from Joint and Several Liability Arrangements with Fixed Obligations

In February 2013, the FASB released ASU 2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (a consensus of the FASB Emerging Issues Task Force), which provides guidance for the recognition, measurement and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, except for obligations addressed within existing guidance in U.S. GAAP. Examples of obligations within the scope of this ASU include debt arrangements, other contractual obligations, and settled litigation and judicial rulings. The guidance in this ASU requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date as the sum of (a) the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and (b) any additional amount the reporting entity expects to pay on behalf of its co-obligors. The guidance in this ASU also requires an entity to disclose the nature and amount of the obligations as well as other information about those obligations. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, with retrospective application. The adoption of this standard is not expected to have a material impact on the financial condition or results of operations of the Company.

Inclusion of the Fed Funds Effective Swap Rate

In July 2013, the FASB released ASU 2013-10, Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes (a consensus of the FASB Emerging Issues Task Force), which permits the Fed Funds Effective Swap Rate (OIS) to be used as a U.S. benchmark interest rate for hedge accounting purposes, in addition to the interest rates on direct Treasury obligations of the U.S. government and LIBOR. This ASU also removes the restrictions on using different benchmark rates for similar hedges. These

111

amendments are effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. The adoption of this standard is not expected to have a material impact on the financial condition or results of operations of the Company.

Presentation of Unrecognized Tax Benefits

In July 2013, the FASB released ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The ASU requires that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. However, if a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this standard is not expected to have a material impact on the financial condition or results of operations of the Company.

(2) Acquisition Activity

On April 8, 2013, BBVA contributed all of the outstanding stock of its wholly-owned subsidiary, BSI, to the Parent.  BSI is a registered broker-dealer and engages in investment banking and institutional sales of fixed income securities. At December 31, 2012, BSI had total assets of $130.9 million. Because of the related nature of the Company and BSI, this transaction was accounted for as a merger of entities under common control resulting in all periods prior to the transaction being retrospectively adjusted to include the historical activity of BSI.

(3)Investment Securities Available for Sale and Investment Securities Held to Maturity

The following table presents the amortized cost and fair value of investment securities available for sale and investment securities held to maturity at September 30, 2013 and December 31, 2012.

	September 30, 2013
			Gross Unrealized
	Amortized Cost		Gains		Losses		Fair Value
	(In Thousands)
Investment securities available for sale:
Debt securities:
U.S. Treasury and other U.S. government agencies	$	143,778	$	4,413	$	959	$	147,232
Mortgage-backed securities	5,778,830		75,997		78,480		5,776,347
Collateralized mortgage obligations	1,238,735		25,809		6,320		1,258,224
States and political subdivisions	522,972		9,465		15,493		516,944
Other	50,641		153		31		50,763
Equity securities	509,209		36		—		509,245
Total	$	8,244,165	$	115,873	$	101,283	$	8,258,755
Investment securities held to maturity:
Collateralized mortgage obligations	$	155,696	$	19,034	$	7,162	$	167,568
Asset-backed securities	72,521		3,850		7,564		68,807
States and political subdivisions	1,246,233		641		153,386		1,093,488
Other	80,231		14,611		1,849		92,993
Total	$	1,554,681	$	38,136	$	169,961	$	1,422,856

112

	December 31, 2012
			Gross Unrealized
	Amortized Cost		Gains		Losses		Fair Value
	(In Thousands)
Investment securities available for sale:
Debt securities:
U.S. Treasury and other U.S. government agencies	$	89,419	$	6,706	$	—	$	96,125
Mortgage-backed securities	5,080,353		124,671		5,511		5,199,513
Collateralized mortgage obligations	1,656,128		69,878		3,181		1,722,825
States and political subdivisions	329,335		14,319		1,757		341,897
Other	129,594		671		43		130,222
Equity securities	497,824		24		—		497,848
Total	$	7,782,653	$	216,269	$	10,492	$	7,988,430
Investment securities held to maturity:
Collateralized mortgage obligations	$	185,684	$	3,866	$	14,597	$	174,953
Asset-backed securities	87,503		3,896		10,306		81,093
States and political subdivisions	1,151,742		3,267		84,391		1,070,618
Other	83,000		9,135		2,076		90,059
Total	$	1,507,929	$	20,164	$	111,370	$	1,416,723

In the above table, equity securities include $509 million and $498 million at September 30, 2013 and December 31, 2012, respectively, of FHLB and Federal Reserve stock carried at par.

The investments held within the states and political subdivision caption of investment securities held to maturity relates to private placement transactions underwritten as loans by the Company but that meet the definition of a security within ASC Topic 320, Investments – Debt and Equity Securities at origination.

The following table discloses the fair value and the gross unrealized losses of the Company’s available for sale securities and held to maturity securities that were in a loss position at September 30, 2013 and December 31, 2012. This information is aggregated by investment category and the length of time the individual securities have been in an unrealized loss position.

	September 30, 2013
	Securities in a loss position for less than 12 months				Securities in a loss position for 12 months or longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In Thousands)
Investment securities available for sale:
Debt securities:
U.S. Treasury and other U.S. government agencies	$	68,390	$	959	$	—	$	—	$	68,390	$	959
Mortgage-backed securities	3,177,465		74,701		204,506		3,779		3,381,971		78,480
Collateralized mortgage obligations	306,758		2,448		111,362		3,872		418,120		6,320
States and political subdivisions	221,234		15,493		—		—		221,234		15,493
Other	1,091		31		—		—		1,091		31
Equity securities	—		—		—		—		—		—
Total	$	3,774,938	$	93,632	$	315,868	$	7,651	$	4,090,806	$	101,283
Investment securities held to maturity:
Collateralized mortgage obligations	$	4,080	$	470	$	40,089	$	6,692	$	44,169	$	7,162
Asset-backed securities	5,093		284		28,928		7,280		34,021		7,564
States and political subdivisions	550,810		55,852		455,271		97,534		1,006,081		153,386
Other	—		—		4,647		1,849		4,647		1,849
Total	$	559,983	$	56,606	$	528,935	$	113,355	$	1,088,918	$	169,961

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	December 31, 2012
	Securities in a loss position for less than 12 months				Securities in a loss position for 12 months or longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In Thousands)
Investment securities available for sale:
Debt securities:
Mortgage-backed securities	$	1,186,724	$	4,198	$	87,583	$	1,313	$	1,274,307	$	5,511
Collateralized mortgage obligations	140,808		3,181		—		—		140,808		3,181
States and political subdivisions	81,768		1,645		5,275		112		87,043		1,757
Other	4,950		43		—		—		4,950		43
Equity securities	—		—		—		—		—		—
Total	$	1,414,250	$	9,067	$	92,858	$	1,425	$	1,507,108	$	10,492
Investment securities held to maturity:
Collateralized mortgage obligations	$	23,889	$	1,891	$	84,607	$	12,706	$	108,496	$	14,597
Asset-backed securities	11,274		223		29,480		10,083		40,754		10,306
States and political subdivisions	274,218		8,989		466,060		75,402		740,278		84,391
Other	—		—		4,515		2,076		4,515		2,076
Total	$	309,381	$	11,103	$	584,662	$	100,267	$	894,043	$	111,370

As noted in the previous tables, at September 30, 2013, the Company held certain investment securities in unrealized loss positions. The increase in the total amount of unrealized losses from December 31, 2012 was primarily due to changes in interest rates. The Company does not have the intent to sell these securities and believes it is not more likely than not it will be required to sell these securities before their anticipated recovery.

The Company regularly evaluates each available for sale and held to maturity security in a loss position for OTTI. In its evaluation, the Company considers such factors as the length of time and the extent to which the fair value has been below cost, the financial condition of the issuer, the Company’s intent to hold the security to an expected recovery in market value and whether it is more likely than not that the Company will have to sell the security before its fair value recovers. Activity related to the credit loss component of the OTTI on debt and equity securities is recognized in earnings. For debt securities, the portion of OTTI related to all other factors is recognized in other comprehensive income.

At September 30, 2013, the unrealized loss within investment securities held to maturity was primarily comprised of $15 million in non-agency collateralized mortgage obligations and asset-backed securities and $153 million of losses in states and political subdivision investments. The non-agency securities include purchased and retained interests from securitizations whose value is reflective of the current liquidity and risk premiums reflected in the market.

Management does not believe that any individual unrealized loss in the Company’s investment securities available for sale and held to maturity portfolios, presented in the preceding tables, represents an OTTI at either September 30, 2013 or December 31, 2012, other than those noted below.

The following table discloses activity related to credit losses for debt securities where a portion of the OTTI was recognized in other comprehensive income for the nine months ended September 30, 2013 and 2012:

	Nine Months Ended September 30,
	2013			2012
	(In Thousands)
Balance at beginning of period	$	17,318		$	16,331
Reductions for securities paid off during the period (realized)	(239		)	—
Additions for the credit component on debt securities in which OTTI was not previously recognized	—			449
Additions for the credit component on debt securities in which OTTI was previously recognized	1,430			538
Balance at end of period	$	18,509		$	17,318

114

During the nine months ended September 30, 2013, the Company recognized $1.4 million of OTTI on held to maturity securities. For the nine months ended September 30, 2012, the Company recognized $987 thousand of OTTI on held to maturity securities. The investment securities primarily impacted by credit impairment are held to maturity non-agency collateralized mortgage obligations and asset-backed securities.

The maturities of the securities portfolios at September 30, 2013 are presented in the following table.

	Amortized Cost		Fair Value
	(In Thousands)
Investment securities available for sale:
Maturing within one year	$	12,214	$	12,322
Maturing after one but within five years	163,929		171,980
Maturing after five but within ten years	153,246		155,650
Maturing after ten years	897,211		884,232
	1,226,600		1,224,184
Mortgage-backed securities and collateralized mortgage obligations	7,017,565		7,034,571
Total	$	8,244,165	$	8,258,755
Investment securities held to maturity:
Maturing within one year	$	95	$	96
Maturing after one but within five years	311,169		287,327
Maturing after five but within ten years	284,881		262,642
Maturing after ten years	802,840		705,223
	1,398,985		1,255,288
Collateralized mortgage obligations	155,696		167,568
Total	$	1,554,681	$	1,422,856

In the investment securities available for sale portion of the preceding table, equity securities with an amortized cost and fair value both of $509 million are included within the maturing after ten years caption.

The gross realized gains and losses recognized on sales of investment securities available for sale are shown in the table below.

	Nine Months Ended   September 30,
	2013		2012
	(In Thousands)
Gross gains	$	33,030	$	7,917
Gross losses	—		—
Net realized gains (losses)	$	33,030	$	7,917

115

(4) Loans and Allowance for Loan Losses

The following table presents the composition of the loan portfolio at September 30, 2013 and December 31, 2012.

	September 30, 2013		December 31, 2012
	(In Thousands)
Commercial loans:
Commercial, financial and agricultural	$	19,504,300	$	16,980,957
Real estate – construction	1,663,819		1,895,931
Commercial real estate – mortgage	8,769,810		7,707,548
Total commercial loans	29,937,929		26,584,436
Consumer loans:
Residential real estate – mortgage	12,419,845		11,443,973
Equity lines of credit	2,244,754		2,393,271
Equity loans	658,058		671,616
Credit card	643,530		625,395
Consumer – direct	519,361		522,995
Consumer – indirect	2,026,714		1,593,175
Total consumer loans	18,512,262		17,250,425
Total loans, excluding covered loans	48,450,191		43,834,861
Covered loans (1)	832,884		1,176,682
Total loans	$	49,283,075	$	45,011,543

(1) Represents loans acquired from the FDIC subject to loss sharing agreements.

Purchased Impaired Loans

Purchased Impaired Loans are recognized on the Company’s Condensed Consolidated Balance Sheets within loans, net of recorded discount. Purchased Impaired Loans had a carrying value of $391 million and $442 million, net of discount and the allowance for loan losses, at September 30, 2013 and December 31, 2012, respectively. The unpaid principal balance of Purchased Impaired Loans at September 30, 2013 and December 31, 2012, approximated $468 million and $570 million, respectively.

Ananalysis of the accretable yield related to the purchased impaired loans follows.

	Accretable Yield
	(In Thousands)
Balance, January 1, 2012	$	167,275
Transfer from nonaccretable difference	79,299
Accretion	(76,241		)
Other	(1,911		)
Balance, September 30, 2012	$	168,422
Balance, January 1, 2013	$	136,992
Transfer from nonaccretable difference	32,831
Accretion	(49,916		)
Other	1,516
Balance, September 30, 2013	$	121,423

The Company had allowances of $324 thousand and $8.9 million related to Purchased Impaired Loans at September 30, 2013 and December 31, 2012, respectively. During the nine months ended September 30, 2013 and 2012, the Company recognized provisions for loan losses totaling $(5.4) million and $(14.9) million, respectively, attributable to credit improvements subsequent to acquisition of these loans.

116

Purchased Nonimpaired Loans

At acquisition, Purchased Nonimpaired Loans were determined to have fair value discounts, some of which were related to credit. The portion of the fair value discount not related to credit is being accreted to interest income over the expected remaining life of the loans based on expected cash flows. For the nine months ended September 30, 2013 and 2012, approximately $221.4 million and $256.2 million, respectively, of interest income was recognized on these loans. At September 30, 2013 the unpaid principal balance, carrying value (net of discount and allowance for loan losses) and remaining fair value discount of these loans approximated $637 million, $438 million and $214 million, respectively. At December 31, 2012, the unpaid principal balance, carrying value (net of discount and allowance for loan losses) and remaining fair value discount of these loans approximated $1.1 billion, $718 million and $388 million, respectively. The discount related to credit on the Purchased Nonimpaired Loans is reviewed for adequacy at each balance sheet date. If the expected losses exceed the credit discount, an allowance for loan losses is provided. If the expected losses are reduced, the related credit discount is accreted to interest income over the expected remaining life of the loans.

The following table reflects the recorded investment in all covered Purchased Impaired Loans and Purchased Nonimpaired Loans at September 30, 2013 and December 31, 2012.

	September 30, 2013						December 31, 2012
	Purchased Impaired Loans		Purchased Nonimpaired Loans		Total Covered Loans		Purchased Impaired Loans		Purchased Nonimpaired Loans		Total Covered Loans
	(In Thousands)
Commercial, financial and agricultural	$	—	$	49,621	$	49,621	$	1,095	$	8,184	$	9,279
Commercial real estate (1)	1,316		219,966		221,282		19,563		513,122		532,685
Residential real estate – mortgage(2)	390,225		164,083		554,308		429,228		196,258		625,486
Consumer loans	13		7,660		7,673		37		9,195		9,232
Total loans	$	391,554	$	441,330	$	832,884	$	449,923	$	726,759	$	1,176,682

(1) Includes real estate – construction and commercial real estate – mortgage.

(2) Includes residential real estate – mortgage, equity lines of credit and equity loans.

117

Allowance for Loan Losses and Credit Quality

The following tables, which exclude loans held for sale, present a summary of the activity in the allowance for loan losses for the nine months ended September 30, 2013 and 2012. The portion of the allowance that has not been identified by the Company as related to specific loan categories has been allocated to the individual loan categories on a pro rata basis for purposes of the tables below.

	Commercial, Financial and Agricultural			Commercial Real Estate (1)			Residential Real Estate (2)			Consumer (3)			Covered			Total Loans
	(In Thousands)
Nine months ended September 30, 2013
Allowance for loan losses:
Beginning balance	$	283,058		$	254,324		$	172,265		$	75,403		$	17,803		$	802,853
Provision charged to income	37,167			(70,315		)	73,709			50,936			(10,111		)	81,386
Loans charged off	(31,044		)	(34,268		)	(96,289		)	(52,744		)	(6,444		)	(220,789		)
Loan recoveries	13,549			15,566			8,900			13,804			2,668			54,487
Net charge offs	(17,495		)	(18,702		)	(87,389		)	(38,940		)	(3,776		)	(166,302		)
Ending balance	$	302,730		$	165,307		$	158,585		$	87,399		$	3,916		$	717,937
Nine months ended September 30, 2012
Allowance for loan losses:
Beginning balance	$	252,399		$	489,284		$	206,763		$	76,467		$	26,883		$	1,051,796
Provision charged to income	49,107			(58,408		)	31,665			23,751			(19,405		)	26,710
Loans charged off	(42,036		)	(91,870		)	(97,530		)	(52,886		)	(2,916		)	(287,238		)
Loan recoveries	26,911			28,788			25,230			14,805			16,831			112,565
Net charge offs	(15,125		)	(63,082		)	(72,300		)	(38,081		)	13,915			(174,673		)
Ending balance	$	286,381		$	367,794		$	166,128		$	62,137		$	21,393		$	903,833

(1) Includes commercial real estate – mortgage and real estate – construction loans.

(2) Includes residential real estate – mortgage, equity lines of credit and equity loans.

(3) Includes credit card, consumer – direct and consumer – indirect loans.

Prior to 2013, residential loan deficiencies were charged-off at foreclosure. During the nine months ended September 30, 2013, charge-offs on residential loans are now recognized in the month the loan becomes 180 days past due.

118

The table below provides a summary of the allowance for loan losses and related loan balances by portfolio for the periods ended September 30, 2013 and December 31, 2012.

	Commercial, Financial and Agricultural		Commercial Real Estate (1)		Residential Real Estate (2)		Consumer (3)		Covered		Total Loans
	(In Thousands)
September 30, 2013
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	45,369	$	15,960	$	45,055	$	1,719	$	—	$	108,103
Collectively evaluated for impairment	257,361		149,257		113,530		85,680		—		605,828
Noncovered purchased impaired	—		90		—		—		—		90
Covered purchased impaired	—		—		—		—		234		234
Covered purchased nonimpaired	—		—		—		—		3,682		3,682
Total allowance for loan losses	$	302,730	$	165,307	$	158,585	$	87,399	$	3,916	$	717,937
Loans:
Ending balance of loans:
Individually evaluated for impairment	$	160,672	$	212,938	$	201,201	$	1,829	$	—	$	576,640
Collectively evaluated for impairment	19,343,628		10,220,497		15,121,456		3,187,776		—		47,873,357
Noncovered purchased impaired	—		194		—		—		—		194
Covered purchased impaired	—		—		—		—		391,554		391,554
Covered purchased nonimpaired	—		—		—		—		441,330		441,330
Total loans	$	19,504,300	$	10,433,629	$	15,322,657	$	3,189,605	$	832,884	$	49,283,075
December 31, 2012
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	15,495	$	37,115	$	20,195	$	3	$	—	$	72,808
Collectively evaluated for impairment	267,563		216,999		152,070		75,400		—		712,032
Noncovered purchased impaired	—		210		—		—		—		210
Covered purchased impaired	—		—		—		—		8,697		8,697
Covered purchased nonimpaired	—		—		—		—		9,106		9,106
Total allowance for loan losses	$	283,058	$	254,324	$	172,265	$	75,403	$	17,803	$	802,853
Loans:
Ending balance of loans:
Individually evaluated for impairment	$	96,004	$	373,220	$	196,240	$	137	$	—	$	665,601
Collectively evaluated for impairment	16,884,953		9,229,567		14,312,620		2,741,428		—		43,168,568
Noncovered purchased impaired	—		692		—		—		—		692
Covered purchased impaired	—		—		—		—		449,923		449,923
Covered purchased nonimpaired	—		—		—		—		726,759		726,759
Total loans	$	16,980,957	$	9,603,479	$	14,508,860	$	2,741,565	$	1,176,682	$	45,011,543

(1) Includes commercial real estate – mortgage and real estate – construction loans.

(2) Includes residential real estate – mortgage, equity lines of credit and equity loans.

(3) Includes credit card, consumer – direct and consumer – indirect loans.

119

The following table presents information on individually analyzed impaired loans, by loan class, as of September 30, 2013 and December 31, 2012.

	September 30, 2013
	Individually Analyzed Impaired Loans With No Recorded Allowance						Individually Analyzed Impaired Loans With a Recorded Allowance
	Recorded Investment		Unpaid Principal Balance		Allowance		Recorded Investment		Unpaid Principal Balance		Allowance
	(In Thousands)
Commercial, financial and agricultural	$	5,430	$	12,466	$	—	$	155,242	$	169,461	$	45,369
Real estate – construction	7,435		7,980		—		10,878		12,426		1,218
Commercial real estate – mortgage	47,159		50,439		—		147,466		156,317		14,742
Residential real estate – mortgage	2,000		2,000		—		122,547		123,704		9,009
Equity lines of credit	—		—		—		24,229		24,229		24,229
Equity loans	—		—		—		52,425		52,625		11,817
Credit card	—		—		—		—		—		—
Consumer – direct	—		—		—		212		212		102
Consumer – indirect	—		—		—		1,617		1,617		1,617
Total loans	$	62,024	$	72,885	$	—	$	514,616	$	540,591	$	108,103

	December 31, 2012
	Individually Analyzed Impaired Loans With No Recorded Allowance						Individually Analyzed Impaired Loans With a Recorded Allowance
	Recorded Investment		Unpaid Principal Balance		Allowance		Recorded Investment		Unpaid Principal Balance		Allowance
	(In Thousands)
Commercial, financial and agricultural	$	36,601	$	43,120	$	—	$	59,403	$	71,497	$	15,495
Real estate – construction	62,972		68,004		—		72,907		88,919		10,452
Commercial real estate – mortgage	49,169		54,576		—		188,172		207,499		26,663
Residential real estate – mortgage	17,294		17,466		—		153,301		155,922		18,286
Equity lines of credit	—		—		—		1,800		1,800		487
Equity loans	—		—		—		23,845		23,845		1,422
Credit card	—		—		—		—		—		—
Consumer – direct	—		—		—		137		137		3
Consumer – indirect	—		—		—		—		—		—
Total loans	$	166,036	$	183,166	$	—	$	499,565	$	549,619	$	72,808

120

The following table summarizes average individually analyzed impaired loans and interest income by class for the nine months ended September 30, 2013 and September 30, 2012:

	Nine Months Ended September 30, 2013				Nine Months Ended September 30, 2012
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In Thousands)
Commercial, financial and agricultural	$	128,472	$	1,007	$	129,527	$	941
Real estate – construction	64,136		637		344,399		3,304
Commercial real estate – mortgage	222,189		3,478		350,135		3,147
Residential real estate – mortgage	147,853		2,710		164,242		3,173
Equity lines of credit	10,527		335		3,101		10
Equity loans	40,600		1,086		22,404		648
Credit card	—		—		—		—
Consumer – direct	170		30		125		7
Consumer – indirect	801		12		—		—
Total loans	$	614,748	$	9,295	$	1,013,933	$	11,230

The tables above do not include noncovered purchased impaired loans, covered purchased impaired loans, or loans held for sale. At September 30, 2013 and December 31, 2012, there were no noncovered purchased impaired loans with credit deterioration subsequent to acquisition that met the requirements for individual review. At September 30, 2013, there were no covered purchased impaired loans with credit deterioration subsequent to acquisition that were individually reviewed for impairment. At December 31, 2012, there were $17.3 million of recorded investment, $26.4 million unpaid principal balance, and $3.7 million allowance for loan losses on covered purchased impaired loans with credit deterioration subsequent to acquisition that were individually reviewed for impairment, respectively. Covered purchased nonimpaired loans are not included in the tables above as they are evaluated on a pool basis and not on an individual basis.

Detailed information on the Company’s allowance for loan losses methodology and the Company’s impaired loan policy are included in the Company’s audited consolidated financial statements for the year ended December 31, 2012.

The Company monitors the credit quality of its commercial portfolio using an internal dual risk rating, which considers both the obligor and the facility. The obligor risk ratings are defined by ranges of default probabilities of the borrowers (AAA through D) and the facility risk ratings are defined by ranges of the loss given default. The combination of those two approaches results in the assessment of the likelihood of loss and it is mapped to the regulatory classifications. The Company assigns internal risk ratings at loan origination and at regular intervals subsequent to origination. Loan review intervals are dependent on the size and risk grade of the loan, and are generally conducted at least annually. Additional reviews are conducted when information affecting the loan’s risk grade becomes available. These ratings have been mapped to the regulatory classifications. The general characteristics of the risk grades are as follows:

• The Company’s internally assigned letter grades “AAA” through “B-” correspond to the regulatory classification “Pass.” These assets do not have any identified potential or well-defined weaknesses and have a high likelihood of orderly repayment. Exceptions exist when either the facility is fully secured by a CD and held at the Company or the facility is secured by properly margined and controlled marketable securities.

• Internally assigned letter grades “CCC+” through “CCC” correspond to the regulatory classification “Special Mention.” Assets with this classification have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

• Internally assigned letter grades “CCC-” through “D1” correspond to the regulatory classification “Substandard." An asset classified as substandard is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

121

• The internally assigned letter grade “D2” corresponds to the regulatory classification “Doubtful.” Assets classified as doubtful have all the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

The Company considers payment history as the best indicator of credit quality for the consumer portfolio. Nonperforming loans in the tables below include loans classified as nonaccrual, loans 90 days or more past due, and loans modified in a TDR 90 days or more past due.

The following tables, which exclude loans held for sale and covered loans, illustrate the credit quality indicators associated with the Company’s loans, by loan class, as of September 30, 2013 and December 31, 2012.

	Commercial
	September 30, 2013
	Commercial, Financial and Agricultural		Real Estate – Construction		Commercial Real Estate – Mortgage
	(In Thousands)
Noncovered loans:
Pass	$	18,888,351	$	1,616,393	$	8,127,640
Special Mention	292,073		24,795		291,069
Substandard	300,509		20,478		310,953
Doubtful	23,367		1,959		40,148
	$	19,504,300	$	1,663,625	$	8,769,810
Noncovered purchased impaired loans:
Substandard	$	—	$	194	$	—
	$	—	$	194	$	—

	December 31, 2012
	Commercial, Financial and Agricultural		Real Estate – Construction		Commercial Real Estate – Mortgage
	(In Thousands)
Noncovered loans:
Pass	$	16,621,782	$	1,665,032	$	6,798,282
Special Mention	187,384		99,204		431,688
Substandard	144,002		122,388		387,454
Doubtful	27,789		9,082		89,657
	$	16,980,957	$	1,895,706	$	7,707,081
Noncovered purchased impaired loans:
Substandard	$	—	$	225	$	467
	$	—	$	225	$	467

	Consumer
	September 30, 2013
	Residential Real Estate – Mortgage		Equity Lines of Credit		Equity Loans		Credit Card		Consumer – Direct		Consumer –Indirect
	(In Thousands)
Noncovered loans:
Performing	$	12,295,772	$	2,203,111	$	632,383	$	635,504	$	515,873	$	2,022,553
Nonperforming	124,073		41,643		25,675		8,026		3,488		4,161
	$	12,419,845	$	2,244,754	$	658,058	$	643,530	$	519,361	$	2,026,714

122

	December 31, 2012
	Residential Real Estate – Mortgage		Equity Lines of Credit		Equity Loans		Credit Card		Consumer – Direct		Consumer –Indirect
	(In Thousands)
Noncovered loans:
Performing	$	11,245,863	$	2,368,467	$	652,165	$	617,666	$	520,593	$	1,592,037
Nonperforming	198,110		24,804		19,451		7,729		2,402		1,138
	$	11,443,973	$	2,393,271	$	671,616	$	625,395	$	522,995	$	1,593,175

Covered loans are excluded from the tables above as an initial estimate of credit losses was embedded within the purchase discount established at acquisition. Periodically, the Company updates its estimated cash flows related to these covered loans. Increases in these updated cash flows over those expected at the purchase date are recognized as interest income prospectively. Decreases in cash flows after the purchase date are recognized by recording an allowance for credit losses. Generally, since the acquisition of these covered loans, there has been considerable improvement in the expected credit losses with some minimal deterioration in credit quality seen within specific loans and pools of loans. To account for the subsequent deterioration in credit, an allowance for loan losses of $3.9 million was recorded on the $832.9 million covered portfolio at September 30, 2013 and an allowance for loan losses of $17.8 million was recorded on the $1.2 billion covered portfolio at December 31, 2012.

The following tables present an aging analysis of the Company’s past due loans as of September 30, 2013 and December 31, 2012, excluding loans classified as held for sale and purchased impaired loans.

	September 30, 2013
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Accruing TDRs		Total Past Due and Impaired		Not Past Due or Impaired		Total
	(In Thousands)
Noncovered loans:
Commercial, financial and agricultural	$	29,469	$	2,449	$	2,452	$	160,372	$	25,994	$	220,736	$	19,283,564	$	19,504,300
Real estate – construction	5,166		918		824		19,592		5,192		31,692		1,631,933		1,663,625
Commercial real estate – mortgage	12,711		2,939		1,494		166,916		78,773		262,833		8,506,977		8,769,810
Residential real estate – mortgage	49,056		15,803		5,137		118,546		75,421		263,963		12,155,882		12,419,845
Equity lines of credit	10,971		5,017		2,342		39,301		—		57,631		2,187,123		2,244,754
Equity loans	8,448		2,642		2,129		23,197		39,127		75,543		582,515		658,058
Credit card	6,391		4,248		8,026		—		—		18,665		624,865		643,530
Consumer – direct	7,269		1,954		3,216		272		103		12,814		506,547		519,361
Consumer – indirect	19,675		4,592		1,924		2,237		—		28,428		1,998,286		2,026,714
Total noncovered loans	$	149,156	$	40,562	$	27,544	$	530,433	$	224,610	$	972,305	$	47,477,692	$	48,449,997
Covered loans	$	992	$	9,199	$	4,974	$	5,807	$	2,090	$	23,062	$	418,268	$	441,330

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	December 31, 2012
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Accruing TDRs		Total Past Due and Impaired		Not Past Due or Impaired		Total
	(In Thousands)
Noncovered loans:
Commercial, financial and agricultural	$	36,663	$	4,035	$	1,853	$	112,135	$	17,832	$	172,518	$	16,808,439	$	16,980,957
Real estate – construction	5,222		5,742		1,907		104,458		49,215		166,544		1,729,162		1,895,706
Commercial real estate – mortgage	40,644		8,492		2,771		270,267		56,520		378,694		7,328,387		7,707,081
Residential real estate –mortgage	37,989		16,312		3,645		193,983		91,384		343,313		11,100,660		11,443,973
Equity lines of credit	12,711		7,511		4,661		20,143		—		45,026		2,348,245		2,393,271
Equity loans	12,112		4,621		2,335		16,943		21,929		57,940		613,676		671,616
Credit card	5,770		3,869		7,729		—		—		17,368		608,027		625,395
Consumer – direct	6,876		1,852		2,065		337		138		11,268		511,727		522,995
Consumer – indirect	17,891		4,225		1,138		—		—		23,254		1,569,921		1,593,175
Total noncovered loans	$	175,878	$	56,659	$	28,104	$	718,266	$	237,018	$	1,215,925	$	42,618,244	$	43,834,169
Covered loans	$	12,136	$	583	$	7,452	$	1,232	$	7,079	$	28,482	$	698,277	$	726,759

Policies related to the Company’s nonaccrual and past due loans are included in the Company’s audited consolidated financial statements for the year ended December 31, 2012.

It is the Company’s policy to classify TDRs that are not accruing interest as nonaccrual loans. It is also the Company’s policy to classify past due TDRs that are accruing interest as TDRs and not according to their past due status. The tables above reflect this policy. The following table provides a breakout of all TDRs, including nonaccrual loans, loans classified as held for sale and covered loans, at September 30, 2013 and December 31, 2012.

	September 30, 2013
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Total Past Due And Nonaccrual		Not Past Due or Nonaccrual		Total
	(In Thousands)
Commercial, financial and agricultural	$	5	$	—	$	—	$	27,524	$	27,529	$	25,989	$	53,518
Real estate – construction	—		—		—		2,386		2,386		5,192		7,578
Commercial real estate – mortgage	—		—		—		17,364		17,364		78,773		96,137
Residential real estate – mortgage	3,787		668		390		34,123		38,968		70,576		109,544
Equity lines of credit	—		—		—		24,409		24,409		—		24,409
Equity loans	2,445		849		349		13,299		16,942		35,484		52,426
Credit card	—		—		—		—		—		—		—
Consumer – direct	—		—		—		115		115		103		218
Consumer – indirect	—		—		—		1,617		1,617		—		1,617
Total loans	$	6,237	$	1,517	$	739	$	120,837	$	129,330	$	216,117	$	345,447
Covered loans	$	—	$	—	$	—	$	2,420	$	2,420	$	2,090	$	4,510
Loans held for sale	$	—	$	—	$	—	$	3,679	$	3,679	$	—	$	3,679

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	December 31, 2012
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Total Past Due And Nonaccrual		Not Past Due or Nonaccrual		Total
	(In Thousands)
Commercial, financial and agricultural	$	—	$	—	$	207	$	45,041	$	45,248	$	17,625	$	62,873
Real estate – construction	—		—		—		28,423		28,423		49,215		77,638
Commercial real estate – mortgage	—		—		—		47,015		47,015		56,520		103,535
Residential real estate – mortgage	4,742		2,695		482		28,895		36,814		83,465		120,279
Equity lines of credit	–		—		—		—		—		—		—
Equity loans	1,027		370		173		2,251		3,821		20,359		24,180
Credit card	—		—		—		—		—		—		—
Consumer – direct	5		—		—		—		5		133		138
Consumer – indirect	—		—		—		—		—		—		—
Total loans	$	5,774	$	3,065	$	862	$	151,625	$	161,326	$	227,317	$	388,643
Covered loans	$	3	$	1	$	—	$	312	$	316	$	7,075	$	7,391

As of December 31, 2012, there were no loans held for sale classified as a TDR.

Modifications to a borrower’s debt agreement are considered a TDR if a concession is granted for economic or legal reasons related to a borrower’s financial difficulties that otherwise would not be considered. Within each of the Company’s loan classes, TDRs typically involve modification of the loan interest rate to a below market rate or an extension or deferment of the loan. During the nine months ended September 30, 2013 and 2012, $24.1 million and $27.6 million, respectively, of TDR modifications included an interest rate concession and $57.9 million and $34.9 million, respectively, of TDR modifications resulted from modifications to the loan’s structure.

The following table presents an analysis of the types of loans that were restructured and classified as TDRs during the nine months ended September 30, 2013 and 2012, excluding loans classified as held for sale.

	Nine Months Ended September 30, 2013			Nine Months Ended September 30, 2012
	Number of Contracts	Post-Modification Outstanding Recorded Investment		Number of Contracts	Post-Modification Outstanding Recorded Investment
	(Dollars in Thousands)
Commercial, financial and agricultural	7	$	6,410	8	$	11,608
Real estate – construction	3	2,409		19	12,989
Commercial real estate – mortgage	14	3,947		10	11,221
Residential real estate – mortgage	190	26,038		97	20,299
Equity lines of credit	482	24,134		2	2
Equity loans	390	16,648		90	6,246
Credit card	—	—		—	—
Consumer – direct	17	138		2	136
Consumer – indirect	404	2,188		—	—
Covered	3	71		3	29

A national bank regulatory agency has issued guidance that requires certain loans that have been discharged in bankruptcy and not reaffirmed by the borrower to be accounted for as nonperforming TDRs and charged-down to their collateral value. During the second quarter of 2013, the Company concluded that these loans should be classified as nonperforming TDRs. The Company elected not to charge-off these loans since a majority of borrowers continue to make payments on the loans. The Company estimated the allowance for loan losses for these loans based on collateral shortfall and accordingly the allowance for loan losses was increased by $33.5 million during the 2nd quarter.

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For the nine months ended September 30, 2013 and 2012, charge-offs and changes to the allowance for loan losses related to modifications classified as TDRs, excluding the nonreaffirmed loans discharged in bankruptcy, were insignificant.

The Company considers TDRs aged 90 days or more past due, charged off or classified as nonaccrual subsequent to modification, where the loan was not classified as a nonperforming loan at the time of modification, as subsequently defaulted.

The following tables provide a summary of initial subsequent defaults that occurred during the nine months ended September 30, 2013 and 2012 that occurred within one year of the restructure date. The table excludes loans classified as held for sale as of period-end and includes loans no longer in default as of period-end.

	Nine Months Ended September 30, 2013			Nine Months Ended September 30, 2012
	Number of Contracts	Recorded Investment at Default		Number of Contracts	Recorded Investment at Default
	(Dollars in Thousands)
Commercial, financial and agricultural	1	$	9,531	—	$	—
Real estate – construction	—	—		3	1,656
Commercial real estate – mortgage	2	529		13	24,289
Residential real estate – mortgage	12	2,336		10	1,649
Equity lines of credit	5	309		—	—
Equity loans	6	424		5	407
Credit card	—	—		—	—
Consumer – direct	—	—		—	—
Consumer – indirect	—	—		—	—
Covered	1	35		2	2,051

The Company’s allowance for loan losses is largely driven by updated risk ratings assigned to commercial loans, updated borrower credit scores on consumer loans, and borrower delinquency history in both commercial and consumer portfolios.  As such, the provision for credit losses is impacted primarily by changes in borrower payment performance rather than TDR classification.  In addition, all commercial and consumer loans modified in a TDR are considered to be impaired, even if they maintain their accrual status.

At September 30, 2013 and December 31, 2012, there were $3.7 million and $6.5 million, respectively, of commitments to lend additional funds to debtors owing loans whose terms have been modified in a TDR.

(5) Loan Sales

The following table presents the composition of the loans held for sale portfolio at September 30, 2013 and December 31, 2012.

	September 30, 2013		December 31, 2012
	(In Thousands)
Loans held for sale:
Real estate – construction	$	4,501	$	877
Commercial real estate – mortgage	2,964		9,017
Residential real estate – mortgage	168,426		312,171
Total loans held for sale	$	175,891	$	322,065

During the nine months ended September 30, 2013, the Company transferred loans with a recorded balance immediately preceding the transfer totaling $76.4 million from the held for investment portfolio to loans held for sale. The Company recognized charge-offs upon transfer of these loans totaling $22.0 million. During the nine months ended September 30, 2012, the Company transferred loans, with a recorded balance immediately preceding the transfer, totaling $128 million from the held for investment portfolio to loans held for sale. The Company recognized charge-

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offs upon transfer of these loans totaling $54.4 million. The Company sold loans and loans held for sale, excluding loans originated for sale in the secondary market, with a recorded balance of $163 million and $173 million during the nine months ended September 30, 2013 and 2012, respectively.

Sales of residential real estate – mortgage loans originated for sale in the secondary market were $1.3 billion and $822 million for the nine months ended September 30, 2013 and 2012, respectively. The Company recognized net gains of $15.7 million and $33.9 million on the sale of residential mortgage loans originated for sale during the nine months ended September 30, 2013 and 2012, respectively. These net gains were recorded in mortgage banking income in the Company’s Condensed Consolidated Statements of Income.

At September 30, 2013 and December 31, 2012, the Company had recorded $29.1 million and $10.5 million of servicing assets, respectively, under the fair value method in other assets on the Company’s Condensed Consolidated Balance Sheets.

The value of MSRs is significantly affected by mortgage interest rates available in the marketplace, which influence mortgage loan prepayment speeds. In general, during periods of declining rates, the value of MSRs declines due to increasing prepayments attributable to increased mortgage-refinance activity. During periods of rising interest rates, the value of mortgage servicing rights generally increases due to reduced refinance activity. The Company maintains a non-qualifying hedging strategy to manage a portion of the risk associated with changes in the value of the MSR portfolio.  This strategy includes the purchase of various trading securities.  The interest income, mark-to-market adjustments and gain or loss from sale activities associated with these securities are expected to economically hedge a portion of the change in the value of the MSR portfolio.

The following table is an analysis of the activity in the Company’s residential MSRs for the nine months ended September 30, 2013 and 2012:

	Nine Months Ended September 30,
	2013			2012
	(In Thousands)
Carrying value, January 1	$	13,255		$	4,264
Additions	13,998			7,794
Increase (decrease) in fair value:
Due to changes in valuation inputs or assumptions	2,960			(1,035		)
Due to other changes in fair value(1)	(1,152		)	(509		)
Carrying value, September 30,	$	29,061		$	10,514

(1) Represents the realization of expected net servicing cash flows, expected borrower repayments and the passage of time.

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See Note 9, Fair Value of Financial Instruments, for additional disclosures related to the assumptions and estimates used in determining fair value of residential MSRs. At September 30, 2013, the sensitivity of the current fair value of the residential MSRs to immediate 10% and 20% adverse changes in key economic assumptions are included in the following table:

	September 30, 2013
	(Dollars in Thousands)
Fair value of residential mortgage servicing rights	$	29,061
Composition of residential loans serviced for others:
Fixed rate mortgage loans	96.4		%
Adjustable rate mortgage loans	3.6
Total	100.0		%
Weighted average life (in years)	7.1
Prepayment speed:	8.3		%
Effect on fair value of a 10% increase	(598)
Effect on fair value of a 20% increase	(1,212)
Weighted average discount rate:	10.0		%
Effect on fair value of a 10% increase	(1,093)
Effect on fair value of a 20% increase	(2,104)

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of an adverse variation in a particular assumption on the fair value of the MSRs is calculated without changing any other assumption; while in reality, changes in one factor may result in changes in another, which may magnify or counteract the effect of the change.

(6)Derivatives and Hedging

The Company is a party to derivative instruments in the normal course of business for trading purposes and for purposes other than trading to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates and foreign currency exchange rates. The Company has made an accounting policy decision to not offset fair value amounts under master netting agreements.

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The following table reflects the notional amount and fair value of derivative instruments included on the Company’s Condensed Consolidated Balance Sheets on a gross basis as of September 30, 2013 and December 31, 2012.

	September 30, 2013						December 31, 2012
			Fair Value						Fair Value
	Notional Amount		Derivative Assets (1)		Derivative Liabilities (2)		Notional Amount		Derivative Assets (1)		Derivative Liabilities (2)
	(In Thousands)
Derivatives designated as hedging instruments:
Fair value hedges:
Interest rate swaps related to long-term debt	$	423,950	$	74,819	$	—	$	550,000	$	140,768	$	—
Total fair value hedges			74,819		—				140,768		—
Cash flow hedges:
Interest rate contracts:
Swaps related to commercial loans	200,000		4,033		—		200,000		5,570		—
Swaps related to FHLB advances	320,000		—		14,880		320,000		—		26,221
Total cash flow hedges			4,033		14,880				5,570		26,221
Total derivatives designated as hedging instruments			$	78,852	$	14,880			$	146,338	$	26,221
Free-standing derivatives not designated as hedging instruments:
Free-standing derivative instruments-risk management and other purposes:
Interest rate contracts:
Forward contracts related to held for sale mortgages	$	243,000	$	1,397	$	7,031	$	432,112	$	209	$	935
Equity contracts:
Purchased equity option related to equity-linked CDs	525,698		35,130		—		237,526		23,361		—
Swap associated with sale of Visa, Inc. Class B shares	42,693		—		1,067		33,864		—		827
Foreign exchange contracts:
Forwards related to commercial loans	432,541		149		3,624		275,689		641		1,415
Spots related to commercial loans	51,667		1		39		—		—		—
Total free-standing derivative instruments-risk management and other purposes			$	36,677	$	11,761			$	24,211	$	3,177
Free-standing derivative instruments – customer accommodation:
Future contracts (3)	$	764,000	$	—	$	—	$	1,219,000	$	—	$	—
Interest rate lock commitments	216,797		3,834		12		296,566		5,094		78
Written equity option related to equity-linked CDs	514,916		—		34,053		229,181		—		22,416
Trading account assets and liabilities:
Interest rate contracts for customers	12,863,151		288,743		229,583		13,987,883		431,765		377,655
Commodity contracts for customers	1,112,877		33,582		29,033		1,953,574		80,004		75,842
Foreign exchange contracts for customers	157,836		3,750		3,233		187,704		3,519		3,414
Total trading account assets and liabilities			326,075		261,849				515,288		456,911
Total free-standing derivative instruments- customer accommodations			$	329,909	$	295,914			$	520,382	$	479,405

(1) Derivative assets, except for trading account assets that are recorded as a component of trading account assets on the Condensed Consolidated Balance Sheets, are recorded in other assets on the Company’s Condensed Consolidated Balance sheets.

(2) Derivative liabilities are recorded in accrued expenses and other liabilities on the Company’s Condensed Consolidated Balance Sheets.

(3) Changes in fair value are cash settled daily; therefore, there is no ending balance at any given reporting period.

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Hedging Derivatives

The Company uses derivative instruments to manage the risk of earnings fluctuations caused by interest rate volatility. For those financial instruments that qualify and are designated as a hedging relationship, either a fair value hedge or cash flow hedge, the effect of interest rate movements on the hedged assets or liabilities will generally be offset by the derivative instrument. See Note 1,Summary of Significant Accounting Policies, in the Notes to the December 31, 2012, Consolidated Financial Statements for additional information on the Company’s accounting policies related to derivative instruments and hedging activities.

Fair Value Hedges

The Company enters into fair value hedging relationships using interest rate swaps to mitigate the Company’s exposure to losses in value due to changes in interest rates. Derivative instruments used as part of the Company’s interest rate risk management strategy include interest rate swaps that relate to the pricing of specific balance sheet assets and liabilities. Interest rate swaps generally involve the exchange of fixed and variable rate interest payments between two parties, based on a common notional principal amount and maturity date.

Interest rate swaps are used to convert the Company’s fixed rate long-term debt to a variable rate. The critical terms of the interest rate swaps match the terms of the corresponding hedged items. All components of each derivative instrument’s gain or loss are included in the assessment of hedge effectiveness. For the nine months ended September 30, 2013 and 2012, the Company recognized approximately $797 thousand and $629 thousand, respectively, of fair value hedging gains as a result of hedge ineffectiveness. For the nine months ended September 30, 2013 and 2012, the Company recognized decreases of $18.3 million and $22.6 million, respectively, to interest expense related to interest rate swaps accounted for as fair value hedges.

There was no gain or loss recognized by the Company for the nine months ended September 30, 2013 and 2012 related to hedged firm commitments no longer qualifying as a fair value hedge. At September 30, 2013, the fair value hedges had a weighted average expected remaining term of 5.68 years.

During nine months ended September 30, 2013, the Company partially extinguished $126 million in aggregate principal amount of subordinated debentures. In connection with this extinguishment, the Company unwound $126 million of swaps associated with this issuance and recognized a proportional amount of the swap gains related to the terminated swaps as a component of gain on prepayment of FHLB and other borrowings in the Company's Condensed Consolidated Statements of Income for the nine months ended September 30, 2013.

During the nine months ended September 30, 2012, the Company partially extinguished $150 million in aggregate principal amount of subordinated debentures. In connection with this extinguishment, the Company unwound $150 million of swaps associated with this issuance and recognized a proportional amount of the swap gains related to the terminated swaps as a component of gain on prepayment of FHLB and other borrowings in the Company's Condensed Consolidated Statements of Income for the nine months ended September 30, 2012.

The following table reflects the change in fair value for interest rate contracts and the related hedged items as well as other gains and losses related to fair value hedges included in the Company’s Condensed Consolidated Statements of Income.

		Gain (Loss) for the
	Condensed Consolidated Statements	Nine Months Ended September 30,
	of Income Caption	2013			2012
		(In Thousands)
Change in fair value of interest rate contracts:
Interest rate swaps hedging long term debt	Interest on FHLB and other borrowings	$	(29,995	)	$	1,179
Hedged long term debt	Interest on FHLB and other borrowings	30,792			(550		)
Other gains on interest rate contracts:
Interest and amortization related to interest rate swaps on hedged long term debt	Interest on FHLB and other borrowings	17,550			21,924

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Cash Flow Hedges

The Company enters into cash flow hedging relationships using interest rate swaps and options, such as caps and floors, to mitigate exposure to the variability in future cash flows or other forecasted transactions associated with its floating rate assets and liabilities. The Company uses interest rate swaps and options to hedge the repricing characteristics of its floating rate commercial loans and FHLB advances. All components of each derivative instrument’s gain or loss are included in the assessment of hedge effectiveness. The initial assessment of expected hedge effectiveness is based on regression analysis. The ongoing periodic measures of hedge ineffectiveness are based on the expected change in cash flows of the hedged item caused by changes in the benchmark interest rate. There were no material cash flow hedging gains or losses recognized because of hedge ineffectiveness for the nine months ended September 30, 2013 and 2012.

For the nine months ended September 30, 2013 and 2012, the Company reclassified from accumulated other comprehensive income (loss) to interest income $(3.8) million and $1.7 million, respectively, related to interest rate swaps and floors accounted for as cash flow hedges. At September 30, 2013, cash flow hedges not terminated had a fair value of $(10.8) million and a weighted average life of 3.66 years. Based on the current interest rate environment, $4.3 million of losses are expected to be reclassified to net interest income over the next 12 months as net settlements occur. The maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for forecasted transactions is 7.83 years.

The following table presents the effect of derivative instruments designated and qualifying as cash flow hedges on the Company’s Condensed Consolidated Balance Sheets and the Company’s Condensed Consolidated Statements of Income:

	Gain (Loss) for the
	Nine Months Ended September 30,
	2013			2012
	(In Thousands)
Interest rate contracts:
Net change in amount recognized in other comprehensive income	$	6,491		$	(3,734	)
Amount reclassified from accumulated other comprehensive income (loss) into net interest income	(3,800		)	1,679
Amount of ineffectiveness recognized in net interest income	—			—

Derivatives Not Designated As Hedges

Derivatives not designated as hedges include those that are entered into as either economic hedges as part of the Company’s overall risk management strategy or to facilitate transactions for customers. Economic hedges are those that do not qualify to be treated as a fair value hedge, cash flow hedge or foreign currency hedge for accounting purposes, but are necessary to economically manage the risk exposure associated with the assets and liabilities of the Company.

The Company also enters into a variety of interest rate contracts, commodity contracts, written equity options and foreign exchange contracts in its trading activities. The primary purpose for using these derivative instruments in the trading account is to facilitate transactions for customers. The trading interest rate contract portfolio is actively managed and hedged with similar products to limit market value risk of the portfolio. Changes in the estimated fair value of contracts in the trading account along with the related interest settlements on the contracts are recorded in noninterest income as corporate and correspondent investment sales in the Company’s Condensed Consolidated Statements of Income.

Free-Standing Derivative Instruments – Risk Management and Other Purposes

The Company enters into forward and option contracts to economically hedge the change in fair value of certain residential mortgage loans held for sale due to changes in interest rates. Revaluation gains and losses from free-standing derivatives related to mortgage banking activity are recorded as a component of mortgage banking income in the Company’s Condensed Consolidated Statements of Income.

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In conjunction with the sale of its Visa, Inc. Class B shares in the second quarter of 2009, the Company entered into a total return swap in which the Company will make or receive payments based on subsequent changes in the conversion rate of the Class B shares into Class A shares. This total return swap is accounted for as a free-standing derivative.

The Company offers its customers equity-linked CDs that have a return linked to equity indices. Under appropriate accounting guidance, a CD that pays interest based on changes in an equity index is a hybrid instrument that requires separation into a host contract (the CD) and an embedded derivative contract (written equity call option). The Company has entered into an offsetting derivative contract in order to economically hedge the exposure related to the issuance of equity-linked CDs. Both the embedded derivative and derivative contract entered into by the Company are recorded at fair value with offsetting gains and losses recognized within noninterest expense in the Company’s Condensed Consolidated Statements of Income. The embedded derivative is classified as a free-standing derivative instrument to accommodate customers while the offsetting derivative contract intended to hedge the Company’s exposure is classified as a free-standing derivative instrument for risk management and other purposes.

The Company also enters into foreign currency contracts to hedge its exposure to fluctuations in foreign currency exchange rates due to its funding of commercial loans in foreign currencies.

The net gains and losses recorded in the Company’s Condensed Consolidated Statements of Income from free-standing derivative instruments used for risk management and other purposes are summarized in the following table:

		Gain (Loss) for the
	Condensed Consolidated Statements	Nine Months Ended September 30,
	of Income Caption	2013			2012
		(In Thousands)
Interest rate contracts:
Forward contracts related to residential mortgage loans held for sale	Mortgage banking income	$	(4,907	)	$	(5,362	)
Option contracts related to mortgage servicing rights	Mortgage banking income	(54		)	—
Equity contracts:
Purchased equity option related to equity-linked CDs	Other noninterest expense	11,769			1,985
Foreign currency contracts:
Forward contracts related to commercial loans	Corporate and correspondent investment sales	(4,700		)	(872		)
Spot contracts related to commercial loans	Corporate and correspondent investment sales	878			—

Free-Standing Derivative Instruments – Customer Accommodation

The majority of free-standing derivative instruments the Company enters into are for the benefit of its commercial customers. These derivative contracts are not designated against specific assets or liabilities on the Company’s Condensed Consolidated Balance Sheets or to forecasted transactions and, therefore, do not qualify for hedge accounting. The Company may economically hedge significant exposures related to these derivative contracts entered into for the benefit of customers by entering into offsetting contracts with high-quality counterparties with substantially matching terms. Revaluation gains and losses on commodity and other commercial customer derivative contracts are recorded as a component of corporate and correspondent investment sales in the Company’s Condensed Consolidated Statements of Income.

Interest rate lock commitments issued on residential mortgage loan commitments that will be held for resale are also considered free-standing derivative instruments, and the interest rate exposure on these commitments is economically hedged primarily with forward contracts. Revaluation gains and losses from free-standing derivatives related to mortgage banking activities are recorded as a component of mortgage banking income in the Company’s Condensed Consolidated Statements of Income.

As previously noted, the Company offers its customers equity-linked CDs that have a return linked to equity indices. The embedded derivative is classified as a free-standing derivative instrument to accommodate customers.

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The net gains and losses recorded in the Company’s Condensed Consolidated Statements of Income relating to free-standing derivative instruments used as a customer accommodation are summarized in the following table.

		Gain (Loss) for the
	Condensed Consolidated Statements	Nine Months Ended September 30,
	of Income Caption	2013			2012
		(In Thousands)
Futures contracts	Corporate and correspondent investment sales	$	278		$	(1,618	)
Interest rate contracts:
Interest rate contracts for customers	Corporate and correspondent investment sales	22,252			17,775
Interest rate lock commitments	Mortgage banking income	(1,194		)	7,031
Commodity contracts:
Commodity contracts for customers	Corporate and correspondent investment sales	20			970
Foreign currency contracts:
Foreign currency exchange contracts for customers	Corporate and correspondent investment sales	346			142
Equity contracts:
Written equity option related to equity-linked CDs	Other noninterest expense	(11,637		)	(1,793		)

Derivatives Credit and Market Risks

By using derivative instruments, the Company is exposed to credit and market risk. If the counterparty fails to perform, credit risk is equal to the extent of the Company’s fair value gain in a derivative. When the fair value of a derivative instrument contract is positive, this generally indicates that the counterparty owes the Company and, therefore, creates a credit risk for the Company. When the fair value of a derivative instrument contract is negative, the Company owes the counterparty and, therefore, it has no credit risk. The Company minimizes the credit risk in derivative instruments by entering into transactions with high-quality counterparties that are reviewed periodically. Credit losses are also mitigated through collateral agreements and other contract provisions with derivative counterparties.

Market risk is the adverse effect that a change in interest rates or implied volatility rates has on the value of a financial instrument. The Company manages the market risk associated with interest rate contracts by establishing and monitoring limits as to the types and degree of risk that may be undertaken.

The Company’s derivatives activities are monitored by its Asset/Liability Committee as part of its risk-management oversight of the Company’s treasury function. The Company’s Asset/Liability Committee is responsible for mandating various hedging strategies that are developed through its analysis of data from financial simulation models and other internal and industry sources. The resulting hedging strategies are then incorporated into the Company’s overall interest rate risk management and trading strategies.

Entering into interest rate swap agreements and options involves not only the risk of dealing with counterparties and their ability to meet the terms of the contracts but also the interest rate risk associated with unmatched positions. At September 30, 2013, interest rate swap agreements and options classified as trading were substantially matched. The Company had credit risk of $326 million related to derivative instruments in the trading account portfolio, which does not take into consideration master netting arrangements or the value of the collateral. There were $3.3 million and $2.9 million in credit losses associated with derivative instruments classified as trading for the nine months ended September 30, 2013 and 2012, respectively. At September 30, 2013, there were $15 thousand of nonperforming derivative positions classified as trading and at December 31, 2012 there were none.

The Company’s derivative positions held for hedging purposes are primarily executed in the over-the-counter market. These positions at September 30, 2013 have credit risk of $79 million, which does not take into consideration master netting arrangements or the value of the collateral.

There were no credit losses associated with derivative instruments classified as nontrading for the nine months ended September 30, 2013 and 2012. At September 30, 2013 and December 31, 2012, there were no nonperforming derivative positions classified as nontrading.

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As of September 30, 2013 and December 31, 2012, the Company had recorded the right to reclaim cash collateral of $45 million and $77 million, respectively, within other assets on the Company’s Condensed Consolidated Balance Sheets and had recorded the obligation to return cash collateral of $18.6 million and $30 million, respectively, within deposits on the Company’s Condensed Consolidated Balance Sheets.

Contingent Features

Certain of the Company’s derivative instruments contain provisions that require the Company’s debt to maintain a certain credit rating from each of the major credit rating agencies. If the Company’s debt were to fall below this rating, it would be in violation of these provisions, and the counterparties to the derivative instruments could demand immediate and ongoing full overnight collateralization on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a liability position on September 30, 2013 was $73 million for which the Company had collateral requirements of $70 million in the normal course of business. If the credit-risk-related contingent features underlying these agreements were triggered on September 30, 2013, the Company’s collateral requirements to its counterparties would have increased by $3 million. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a liability position on December 31, 2012 was $186 million for which the Company has collateral requirements of $182 million in the normal course of business. If the credit-risk-related contingent features underlying these agreements were triggered on December 31, 2012, the Company’s collateral requirements to its counterparties would have increased by $4 million.

(7)Assets and Liabilities Subject to Enforceable Master Netting Arrangements

Derivatives

In conjunction with the derivative and hedging activity discussed in Note 6, Derivatives and Hedging, the Company is party to master netting arrangements with its financial institution counterparties for some of its derivative and hedging activities. The Company does not offset assets and liabilities under these master netting arrangements for financial statement presentation purposes. The master netting arrangements provide for single net settlement of all derivative instrument arrangements, as well as collateral, in the event of default, or termination of, any one contract with the respective counterparties. Cash collateral is usually posted by the counterparty with a net liability position in accordance with contract thresholds.

Securities Sold Under Agreements to Repurchase

The Company enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Securities sold under agreements to repurchase are generally accounted for as collateralized financing transactions and recorded at the amounts at which the securities were sold plus accrued interest. The securities pledged as collateral are generally U.S. government and federal agency securities. The obligation to repurchase the securities is reflected as a liability in the Company’s Condensed Consolidated Balance Sheets, while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts available for sale. There is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities. As of September 30, 2013 and December 31, 2012, the Company has not entered into any repurchase agreements that were subject to enforceable master netting arrangements.

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The following represents the Company’s assets/ liabilities subject to an enforceable master netting arrangement as of September 30, 2013 and December 31, 2012. The derivative instruments the Company has with its customers are not subject to an enforceable master netting arrangement.

							Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
	Gross Amounts Recognized		Gross Amounts Offset in the Condensed Consolidated Balance Sheets		Net Amount Presented in the Condensed Consolidated Balance Sheets		Financial Instruments (1)		Cash Collateral Received/ Pledged (1)		Net Amount
	(In Thousands)
September 30, 2013
Derivative financial assets:
Total derivatives subject to a master netting arrangement	$	167,580	$	—	$	167,580	$	5,238	$	18,144	$	144,198
Total derivatives not subject to a master netting arrangement	277,858		—		277,858		—		—		277,858
Total derivative financial assets	$	445,438	$	—	$	445,438	$	5,238	$	18,144	$	422,056
Derivative financial liabilities:
Total derivatives subject to a master netting arrangement	$	248,611	$	—	$	248,611	$	55,242	$	34,444	$	158,925
Total derivatives not subject to a master netting arrangement	73,944		—		73,944		—		—		73,944
Total derivative financial liabilities	$	322,555	$	—	$	322,555	$	55,242	$	34,444	$	232,869
December 31, 2012
Derivative financial assets:
Total derivatives subject to a master netting arrangement	$	216,760	$	—	$	216,760	$	146,127	$	70,633	$	—
Total derivatives not subject to a master netting arrangement	474,171		—		474,171		—		—		474,171
Total derivative financial assets	$	690,931	$	—	$	690,931	$	146,127	$	70,633	$	474,171
Derivative financial liabilities:
Total derivatives subject to a master netting arrangement	$	414,701	$	—	$	414,701	$	—	$	29,936	$	384,765
Total derivatives not subject to a master netting arrangement	94,102		—		94,102		—		—		94,102
Total derivative financial liabilities	$	508,803	$	—	$	508,803	$	—	$	29,936	$	478,867

(1) The actual amount of collateral received/ pledged is limited to the derivative asset/ liability balance and does not include excess collateral received/pledged. When excess collateral exists the collateral shown in the table above has been allocated based on the percentage of the actual amount of collateral posted.

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(8) Commitments, Contingencies and Guarantees

Commitments to Extend Credit & Standby and Commercial Letters of Credit

The following represents the Company’s commitments to extend credit, standby letters of credit and commercial letters of credit as of September 30, 2013 and December 31, 2012:

	September 30, 2013		December 31, 2012
	(In Thousands)
Commitments to extend credit	$	24,882,205	$	20,965,717
Standby and commercial letters of credit	2,099,111		2,306,556

Commitments to extend credit are agreements to lend to customers as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Standby and commercial letters of credit are commitments issued by the Company to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions, and expire in decreasing amounts with terms ranging from one to four years.

The credit risk involved in issuing letters of credit and commitments is essentially the same as that involved in extending loan facilities to customers. The fair value of the letters of credit and commitments typically approximates the fee received from the customer for issuing such commitments. These fees are deferred and are recognized over the commitment period. At September 30, 2013 and December 31, 2012, the recorded amount of these deferred fees was $6 million and $11.3 million, respectively. The Company holds various assets as collateral supporting those commitments for which collateral is deemed necessary. At September 30, 2013, the maximum potential amount of future undiscounted payments the Company could be required to make under outstanding standby letters of credit was $27 billion. At September 30, 2013 and December 31, 2012, the Company had $75 million and $76 million, respectively, of reserves related to letters of credit and unfunded commitments recorded in accrued expenses and other liabilities on the Company’s Condensed Consolidated Balance Sheet.

Loan Sale Recourse

The Company has potential recourse related to FNMA securitizations. At September 30, 2013 and December 31, 2012, the amount of potential recourse was $20 million and $21 million, respectively, of which the Company had reserved $818 thousand and $513 thousand in accrued expenses and other liabilities on its Condensed Consolidated Balance Sheets for the respective years.

The Company also issues standard representations and warranties related to mortgage loan sales to government-sponsored agencies. Although these agreements often do not specify limitations, the Company does not believe that any payments related to these warranties would materially change the financial condition or results of operations of the Company. The Company recorded $2 million of reserves in accrued expenses and other liabilities on the Company’s Condensed Consolidated Balance Sheets related to potential losses from loans sold at both September 30, 2013 and December 31, 2012.

Loss Sharing Agreement

In connection with a 2009 acquisition, the Bank entered into loss sharing agreements with the FDIC that covered approximately $9.7 billion of loans and OREO. In accordance with the terms of the loss sharing agreements, the FDIC’s obligation to reimburse the Bank for losses with respect to the acquired loans and acquired OREO begins with the first dollar of incurred losses, as defined in the loss sharing agreements. The terms of the loss sharing agreements provide that the FDIC will reimburse the Bank for 80% of incurred losses up to $2.3 billion and 95% of incurred losses in excess of $2.3 billion. Gains and recoveries on covered assets offset incurred losses, or are paid to the FDIC, at the

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applicable loss share percentage at the time of recovery. The loss sharing agreements provide for FDIC loss sharing for 5 years for commercial loans and 10 years for single family residential loans.

The provisions of the loss sharing agreements may also require a payment by the Bank to the FDIC on October 15, 2019. On that date, the Bank is required to pay the FDIC 60% of the excess, if any, of (i) $457 million over (ii) the sum of (a) 25% of the total net amounts paid to the Bank under both of the loss share agreements plus (b) 20% of the deemed total cost to the Bank of administering the covered assets under the loss sharing agreements. The deemed total cost to the Bank of administering the covered assets is the sum of 2% of the average of the principal amount of covered assets based on the beginning and end of year balances for each of the 10 years during which the loss share agreements are in effect. At September 30, 2013, the Company estimates the potential amount of payment due to the FDIC in 2019, at the end of the loss share agreements, to be $138 million.

Legal and Regulatory Proceedings

In the ordinary course of business, the Company is subject to legal proceedings, including claims, litigation, investigations and administrative proceedings, all of which are considered incidental to the normal conduct of business. The Company believes it has substantial defenses to the claims asserted against it in its currently outstanding legal proceedings and, with respect to such legal proceedings, intends to continue to defend itself vigorously against such legal proceedings.

Set forth below are descriptions of certain of the Company’s legal proceedings.

In October 2010, the Company was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Northern District of Florida, Stephen T. Anderson, on behalf of himself and others so situated v. Compass Bank, wherein the plaintiff alleges the Company inappropriately assessed and collected overdraft and insufficient fund fees. On June 27, 2012, the parties agreed to settle this matter as a nationwide class of consumer customers for $11.5 million. The settlement was contingent upon court approval. The court granted preliminary approval on March 18, 2013, and the $11.5 million settlement amount was paid into escrow on March 29, 2013. Notice was provided to the class members in April 2013. The deadline to object to or opt out of the settlement was June 6, 2013. The court granted final approval on August 7, 2013. The deadline to file a claim was September 30, 2013.

In February 2012, the Company was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Southern District of Texas, Kevin Vaughan, on behalf of himself and all others similarly situated v. Compass Bank, wherein the plaintiff alleges the Company denied earned wages, including overtime pay, to its MBOs, and discouraged MBOs from entering more than 40 hours per workweek in the timekeeping system. The plaintiff seeks unspecified monetary relief. This case is currently stayed pending a decision from the United States Court of Appeals for the Fifth Circuit regarding whether class action waivers violate employees' collective bargaining rights under the National Labor Relations Act. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In May 2012, the Company was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Western District of Texas, JacquelineGarza, on behalf of herself and similarly situated employees v. BBVA Bancomer USA, Inc. and Compass Bank, wherein the plaintiff alleges the Company denied overtime pay to its Assistant Branch Managers who were allegedly improperly classified as exempt from the overtime pay mandates of the Fair Labor Standards Act. The plaintiff seeks unspecified monetary relief. This case is currently stayed pending a decision from the United States Court of Appeals for the Fifth Circuit regarding whether class action waivers violate employees' collective bargaining rights under the National Labor Relations Act. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In November 2012, the Company was named as a defendant in a putative class action lawsuit filed in the Superior Court of the State of California, County of Alameda, Cheryl Deaver, on behalf of herself and others so situated v. Compass Bank, wherein the plaintiff alleges the Company failed to provide lawful meal periods or wages in lieu thereof, full compensation for hours worked, or timely wages due at termination (the plaintiff had previously filed a similar lawsuit in May 2011 which was dismissed without prejudice when the plaintiff failed to meet certain filing deadlines). The plaintiff further alleges that the Company did not comply with

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wage statement requirements. The plaintiff seeks unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In March 2013, the Company filed a declaratory judgment action in the United States District Court for the Southern District of California against Morris Cerullo World Evangelism, BBVA Compass v. Morris Cerullo World Evangelism, wherein the Company seeks a declaration that a fraudulent standby letter of credit in the amount of $5.2 million is invalid and unenforceable. In May 2013, the plaintiff filed counterclaims against the Company, seeking damages of at least $5.2 million on causes of action alleging breach of contract and detrimental reliance, and promissory estoppel. The Company believes there are substantial defenses to these counter claims and intends to defend them vigorously.

In June 2013, the Company was named as a defendant in a lawsuit filed in the United States District Court of the Northern District of Alabama, Intellectual Ventures II, LLC v. BBVA Compass Bancshares, Inc. and BBVA Compass, wherein the plaintiff alleges the Company is infringing five patents owned by the plaintiff and related to the security infrastructure for the Company's online banking services. The plaintiff seeks unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

The Company (including the Bank) is or may become involved from time to time in information-gathering requests, reviews, investigations and proceedings (both formal and informal) by various governmental regulatory agencies, law enforcement authorities and self-regulatory bodies regarding the Company’s business. Such matters may result in material adverse consequences, including without limitation adverse judgments, settlements, fines, penalties, orders, injunctions, alterations in the Company’s business practices or other actions, and could result in additional expenses and collateral costs, including reputational damage, which could have a material adverse impact on the Company’s business, consolidated financial position, results of operations or cash flows.

The Company owns all of the outstanding stock of BSI, a registered broker-dealer. Applicable law limits BSI from deriving more than 25 percent of its gross revenues from underwriting or dealing in bank-ineligible securities (“ineligible revenue”). Prior to the contribution of BSI to the Company in April 2013, BSI’s ineligible revenues in certain periods exceeded the 25 percent limit. It is possible that the Federal Reserve Board may take either formal or informal enforcement action against BSI and the Company and civil money penalties cannot be excluded. At this time, the Company does not know the amount of any potential civil money penalty.

There are other litigation matters that arise in the normal course of business. The Company assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Company will incur a loss and the amount of the loss can be reasonably estimated, the Company records a liability in its consolidated financial statements. These legal reserves may be increased or decreased to reflect any relevant developments. Where a loss is not probable or the amount of loss is not estimable, the Company does not accrue legal reserves. At September 30, 2013, the Company had accrued legal reserves in the amount of $5 million. Additionally, for those matters where a loss is both estimable and reasonably possible, the Company estimates losses that it could incur beyond the accrued legal reserves. Under U.S. GAAP, an event is “reasonably possible” if “the chance of the future event or events occurring is more than remote but less than likely” and an event is “remote” if “the chance of the future event or events occurring is slight.” At September 30, 2013, there were no such matters where a loss was both estimable and reasonably possible beyond the accrued legal reserves.

While the outcome of legal proceedings and the timing of the ultimate resolution are inherently difficult to predict, based on information currently available, advice of counsel and available insurance coverage, the Company believes that it has established adequate legal reserves. Further, based upon available information, the Company is of the opinion that these legal proceedings, individually or in the aggregate, will not have a material adverse effect on the Company’s financial condition or results of operations. However, in the event of unexpected future developments, it is possible that the ultimate resolution of those matters, if unfavorable, may be material to the Company’s results of operations for any particular period, depending, in part, upon the size of the loss or liability imposed and the operating results for the applicable period.

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Income Tax Review

The Company is subject to review and examination from various tax authorities. The Company is currently under examination by the IRS and a number of states, and has received notices of proposed adjustments related to federal and state income taxes due for prior years. Management believes that adequate provisions for income taxes have been recorded.

(9) Fair Value of Financial Instruments

The Company applies the fair value accounting guidance required under ASC Topic 820 which establishes a framework for measuring fair value. This guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. This guidance also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within this fair value hierarchy is based upon the lowest level of input that is significant to the instrument’s fair value measurement. The three levels within the fair value hierarchy are described as follows.

• Level 1 – Fair value is based on quoted prices in an active market for identical assets or liabilities.

• Level 2 – Fair value is based on quoted market prices for similar instruments traded in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market.

• Level 3 – Fair value is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities would include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar pricing techniques based on the Company’s own assumptions about what market participants would use to price the asset or liability.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments under the fair value hierarchy, is set forth below. These valuation methodologies were applied to the Company’s financial assets and financial liabilities carried at fair value. In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use observable market based parameters as inputs. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the Company’s creditworthiness, among other things, as well as other unobservable parameters. Any such valuation adjustments are applied consistently over time. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, the reported fair value amounts have not been comprehensively revalued since the presentation dates, and, therefore, estimates of fair value after the balance sheet date may differ significantly from the amounts presented herein.

Financial Instruments Measured at Fair Value on a Recurring Basis

Trading account assets and liabilities, securities available for sale, certain mortgage loans held for sale, derivative assets and liabilities, and mortgage servicing rights are recorded at fair value on a recurring basis. The following is a description of the valuation methodologies for these assets and liabilities.

Trading account assets and liabilities and investment securities available for sale – Trading account assets and liabilities and investment securities available for sale consist of U.S. Treasury and other U.S. government agencies securities, mortgage-backed securities, collateralized mortgage obligations, debt obligations of state and political subdivisions, other debt and equity securities, and derivative contracts.

• U.S. Treasury and other U.S. government agencies securities are valued based on a market approach using observable inputs such as benchmark yields, reported trades, broker/dealer quotes, benchmark securities and bids/offers of government-sponsored enterprise securities. These valuations are Level 2 measurements.

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• Mortgage-backed securities are primarily valued using market-based pricing matrices that are based on observable inputs including benchmark To Be Announced security prices, U.S. Treasury yields, U.S. dollar swap yields and benchmark floating-rate indices. Mortgage-backed securities pricing may also give consideration to pool-specific data such as prepayment history and collateral characteristics. Valuations for mortgage-backed securities are therefore classified as Level 2 measurements.

• Collateralized mortgage obligations are valued using market-based pricing matrices that are based on observable inputs including reported trades, bids, offers, dealer quotes, U.S. Treasury yields, U.S. dollar swap yields, market convention prepayment speeds, tranche-specific characteristics, prepayment history and collateral characteristics. Fair value measurements for collateralized mortgage obligations are classified as Level 2.

• Debt obligations of states and political subdivisions are primarily valued using market-based pricing matrices that are based on observable inputs including Municipal Securities Rulemaking Board reported trades, issuer spreads, material event notices and benchmark yield curves. These valuations are Level 2 measurements. For less than 1% of municipal securities where comparable market data is not readily available, the Company uses an external pricing source to assess valuations based on information and assumptions that are not readily observable in the market place. The valuations for these municipals are classified as Level 3.

• Other debt and equity securities consist of mutual funds, foreign and corporate debt, and U.S. government agency equity securities. Mutual funds are valued based on quoted market prices of identical assets trading on active exchanges. These valuations are Level 1 measurements. Foreign and corporate debt valuations are based on information and assumptions that are observable in the market place. The valuations for these securities are therefore classified as Level 2. U.S. government agency equity securities are valued based on quoted market prices of identical assets trading on active exchanges. These valuations thus qualify as Level 1 measurements.

• Other derivative assets and liabilities consist primarily of interest rate and commodity contracts. The Company’s interest rate contracts are valued utilizing Level 2 observable inputs (yield curves and volatilities) to determine a current market price for each interest rate contract. Commodity contracts are priced using raw market data, primarily in the form of quotes for fixed and basis swaps with monthly, quarterly, seasonal or calendar-year terms. Proprietary models provided by a third party are used to generate forward curves and volatility surfaces. As a result of the valuation process and observable inputs used, commodity contracts are classified as Level 2 measurements. To validate the reasonableness of these calculations, management compares the assumptions with market information.

• Other trading assets consist of interest-only strips which are valued by an independent third-party. The independent third-party values the assets on a loan-by-loan basis using a discounted cash flow analysis that employs prepayment assumptions, discount rate assumptions and default curves. The prepayment assumptions are created from actual SBA pool prepayment history. The discount rates are derived from actual SBA loan secondary market transactions. The default curves are created using historical observable and unobservable inputs. As such, interest-only strips are classified as Level 3 measurements. The Company’s SBA department is responsible for ensuring the appropriate application of the valuation, capitalization and amortization policies of the Company’s interest-only strips. The department performs independent, internal valuations of the interest-only strips on a quarterly basis, which are then reconciled to the third-party valuations to ensure their validity.

Loans held for sale – The Company has elected to apply the fair value option for single family real estate mortgage loans originated for resale in the secondary market. The election allows for a more effective offset of the changes in fair values of the loans and the derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting. The Company has not elected the fair value option for other loans held for sale primarily because they are not economically hedged using derivative instruments.

The fair value of loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics. The changes in fair value of these assets are largely driven by changes in interest rates subsequent to loan funding and changes in the fair value of servicing associated with the mortgage loan held for sale. Both the mortgage loans held for sale and the related forward contracts are classified as Level 2.

At both September 30, 2013 and December 31, 2012, no loans held for sale for which the fair value option was elected were 90 days or more past due or were in nonaccrual. Interest income on mortgage loans held for sale is recognized based on contractual rates and is reflected in interest and fees on loans in the Condensed Consolidated Statements of Income. Net gains (losses) of $(8.1) million and $13.6 million resulting from changes in fair value of these loans were recorded in noninterest income during the nine months ended September 30, 2013 and 2012, respectively.

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The Company also had fair value changes on forward contracts related to residential mortgage loans held for sale of approximately $(4.9) million and $(5.4) million for the nine months ended September 30, 2013 and 2012, respectively. An immaterial portion of these amounts was attributable to changes in instrument-specific credit risk.

The following tables summarize the difference between the aggregate fair value and the aggregate unpaid principal balance for residential mortgage loans measured at fair value at September 30, 2013 and December 31, 2012.

	Aggregate Fair Value		Aggregate Unpaid Principal Balance		Difference
	(In Thousands)
September 30, 2013
Residential mortgage loans held for sale	$	168,426	$	162,226	$	6,200
December 31, 2012
Residential mortgage loans held for sale	$	312,171	$	299,069	$	13,102

Derivative assets and liabilities – Derivative assets and liabilities are measured using models that primarily use market observable inputs, such as quoted security prices, and are accordingly classified as Level 2. The derivative assets and liabilities classified within Level 3 of the fair value hierarchy were comprised of interest rate contract agreements that are valued using third-party software that calculates fair market value considering current quoted TBA and other market based prices and then applies closing ratio assumptions based on software-produced pull through ratios that are generated using the Company’s historical fallout activity. Based upon this process, the fair value measurement obtained for these financial instruments is deemed a Level 3 classification. The Company's Secondary Marketing Committee is responsible for the appropriate application of the valuation policies and procedures surrounding the Company’s interest rate lock commitments. Policies established to govern mortgage pipeline risk management activities must be approved by the Company’s Asset/Liability Committee on an annual basis.

Other assets – Other assets measured at fair value on a recurring basis and classified within Level 3 of the fair value hierarchy were comprised of MSRs that are valued through a discounted cash flow analysis using a third-party commercial valuation system. The valuation takes into consideration the objective characteristics of the MSR portfolio, such as loan amount, note rate, service fee, loan term and common industry assumptions, such as servicing costs, ancillary income, prepayment estimates, earning rates, cost of fund rates, discount rates, etc. The Company’s portfolio-specific factors are also considered in calculating the fair value of MSRs to the extent one can reasonably assume a buyer would also incorporate these factors. Examples of such factors are geographical concentrations of the portfolio, liquidity considerations such as housing authority loans which have a limited number of approved servicers, or additional views of risk not inherently accounted for in prepayment assumptions. Product liquidity and these other risks are generally incorporated through adjustment of discount factors applied to forecasted cash flows. Based on this method of pricing MSRs, the fair value measurement obtained for these financial instruments is deemed a Level 3 classification. The value of the MSR is calculated by a third-party firms that specialize in the MSR market and valuation services. Additionally, the Company obtains a valuation from an independent party to compare for reasonableness. The Company’s Secondary Marketing Committee is responsible for ensuring the appropriate application of valuation, capitalization, and fair value decay policies for the MSR portfolio. The Committee meets at least monthly to review the status of the MSR portfolio.

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The following tables summarize the financial assets and liabilities measured at fair value on a recurring basis at September 30, 2013 and December 31, 2012.

			Fair Value Measurements at the End of the Reporting Period Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	September 30, 2013		(Level 1)		(Level 2)		(Level 3)
	(In Thousands)
Recurring fair value measurements:
Assets:
Trading account assets:
U.S. Treasury and other U.S. government agencies	$	25,250	$	—	$	25,250	$	—
Mortgage-backed securities	22,271		—		22,271		—
Collateralized mortgage obligations	—		—		—		—
State and political subdivisions	356		—		356		—
Interest rate contracts	288,743		—		288,743		—
Commodity contracts	33,582		—		33,582		—
Foreign exchange contracts	3,750		—		3,750		—
Other trading assets	2,036		—		246		1,790
Total trading account assets	375,988		—		374,198		1,790
Investment securities available for sale:
U.S. Treasury and other U.S. government agencies	147,232		—		147,232		—
Mortgage-backed securities	5,776,347		—		5,776,347		—
Collateralized mortgage obligations	1,258,224		—		1,258,224		—
States and political subdivisions	516,944		—		516,944		—
Other debt securities	50,763		50,713		50		—
Equity securities(1)	45		39		—		6
Total investment securities available for sale	7,749,555		50,752		7,698,797		6
Loans held for sale	168,426		—		168,426		—
Derivative assets:
Interest rate contracts	84,083		—		80,249		3,834
Equity contracts	35,130		—		35,130		—
Foreign exchange contracts	150		—		150		—
Total derivative assets	119,363		—		115,529		3,834
Other assets	29,061		—		—		29,061
Liabilities:
Trading account liabilities:
Mortgage-backed securities	$	28,630	$	—	$	28,630	$	—
Interest rate contracts	229,583		—		229,583		—
Commodity contracts	29,033		—		29,033		—
Foreign exchange contracts	3,233		—		3,233		—
Other trading liabilities	246		—		246		—
Total trading account liabilities	290,725		—		290,725		—
Derivative liabilities:
Interest rate contracts	21,923		—		21,911		12
Equity options	34,053		—		34,053		—
Foreign exchange contracts	3,663		—		3,663		—
Total derivative liabilities	59,639		—		59,627		12

(1) Excludes $509 million of FHLB and Federal Reserve stock required to be owned by the Company at September 30, 2013. These securities are carried at par.

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			Fair Value Measurements at the End of the Reporting Period Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	December 31, 2012		(Level 1)		(Level 2)		(Level 3)
	(In Thousands)
Recurring fair value measurements:
Assets:
Trading account assets:
U.S. Treasury and other U.S. government agencies	$	17,114	$	—	$	17,114	$	—
Mortgage-backed securities	4,029		—		4,029		—
State and political subdivisions	3,744		—		3,744		—
Interest rate contracts	431,765		—		431,765		—
Commodity contracts	80,004		—		80,004		—
Foreign exchange contracts	3,519		—		3,519		—
Other trading assets	5,605		—		3,522		2,083
Total trading account assets	545,780		—		543,697		2,083
Investment securities available for sale:
U.S. Treasury and other U.S. government agencies	96,125		—		96,125		—
Mortgage-backed securities	5,199,513		—		5,199,513		—
Collateralized mortgage obligations	1,722,825		—		1,722,825		—
States and political subdivisions	341,897		—		341,889		8
Other debt securities	130,222		125,222		5,000		—
Equity securities (1)	33		27		—		6
Total investment securities available for sale	7,490,615		125,249		7,365,352		14
Loans held for sale	312,171		—		312,171		—
Derivative assets:
Interest rate contracts	151,641		—		146,547		5,094
Equity contracts	23,361		—		23,361		—
Foreign exchange contracts	641		—		641		—
Total derivative assets	175,643		—		170,549		5,094
Other assets	13,255		—		—		13,255
Liabilities:
Trading account liabilities:
Mortgage-backed securities	$	3,763	$	—	$	3,763	$	—
Interest rate contracts	377,655		—		377,655		—
Commodity contracts	75,842		—		75,842		—
Foreign exchange contracts	3,414		—		3,414		—
Total trading account liabilities	460,674		—		460,674		—
Derivative liabilities:
Interest rate contracts	27,234		—		27,156		78
Equity contracts	22,416		—		22,416		—
Foreign exchange contracts	1,415		—		1,415		—
Total derivative liabilities	51,065		—		50,987		78

(1) Excludes $498 million of FHLB and Federal Reserve stock required to be owned by the Company at December 31, 2012. These securities are carried at par.

There were no transfers between Levels 1 or 2 of the fair value hierarchy for the nine months ended September 30, 2013 and 2012. It is the Company’s policy to value any transfers between levels of the fair value hierarchy based on end of period fair values.

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The following table reconciles the assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2013 and 2012.

.	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Nine Months Ended September 30, 2013	Other Trading Assets			States and Political Subdivisions			Equity Securities		Interest Rate Contracts, net			Other Assets
	(In Thousands)
Balance, January 1, 2013	$	2,083		$	8		$	6	$	5,016		$	13,255
Transfers into Level 3 (1)	—			—			—		—			—
Transfers out of Level 3 (2)	—			—			—		—			—
Total gains or losses (realized/unrealized):
Included in earnings (3)	(293		)	—			—		(1,194		)	1,808
Included in other comprehensive income	—			—			—		—			—
Purchases, issuances, sales and settlements:
Purchases	—			—			—		—			—
Issuances	—			—			—		—			13,998
Sales	—			—			—		—			—
Settlements	—			(8		)	—		—			—
Balance, September 30, 2013	$	1,790		$	—		$	6	$	3,822		$	29,061
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at September 30, 2013	$	(293	)	$	—		$	—	$	(1,194	)	$	1,808

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Nine Months Ended September 30, 2012	Other Trading Assets			Mortgage-backed Securities			States and Political Subdivisions			Other Debt Securities			Equity Securities		Interest Rate Contracts, net		Other Assets
	(In Thousands)
Balance, January 1, 2012	$	2,412		$	817		$	24		$	5,008		$	6	$	2,091	$	4,264
Transfers into Level 3 (1)	—			—			—			—			—		—		—
Transfers out of Level 3 (2)	—			—			—			—			—		—		—
Total gains or losses (realized/unrealized):
Included in earnings (3)	(259		)	—			—			—			—		7,031		(1,545		)
Included in other comprehensive income	—			(386		)	(16		)	(8		)	—		—		—
Purchases, issuances, sales and settlements:
Purchases	—			—			—			—			—		—		—
Issuances	—			—			—			—			—		—		7,795
Sales	—			—			—			—			—		—		—
Settlements	—			—			—			—			—		—		—
Balance, September 30, 2012	$	2,153		$	431		$	8		$	5,000		$	6	$	9,122	$	10,514
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at September 30, 2012	$	(259	)	$	—		$	—		$	—		$	—	$	7,031	$	(1,545	)

(1) Transferred from Level 2 to Level 3 due to a lack of observable market data resulting from a decrease in market activity.

(2) Transferred from Level 3 to Level 2 due to observable market data resulting from an increase in market activity.

(3) Included in noninterest income in the CondensedConsolidated Statements of Income.

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Assets Measured at Fair Value on a Nonrecurring Basis

Periodically, certain assets may be recorded at fair value on a non-recurring basis. These adjustments to fair value usually result from the application of lower of cost or fair value accounting or write-downs of individual assets due to impairment. The following table represents those assets that were subject to fair value adjustments during the nine months ended September 30, 2013 and 2012 and still held as of the end of the period, and the related losses from fair value adjustments on assets sold during the period as well as assets still held as of the end of the period.

			Fair Value Measurements at the End of the Reporting Period Using						Total Gains (Losses)
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Nine Months Ended September 30, 2013
	September 30, 2013		(Level 1)		(Level 2)		(Level 3)
	(In Thousands)
Nonrecurring fair value measurements:
Assets:
Investment securities held to maturity	$	2,793	$	—	$	—	$	2,793	$	(1,430	)
Loans held for sale	7,465		—		—		7,465		182
Impaired loans	160,659		—		—		160,659		(36,872		)
OREO	41,493		—		—		41,493		3,396

			Fair Value Measurements at the End of the Reporting Period Using						Total Gains (Losses)
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Nine Months Ended September 30, 2012
	September 30, 2012		(Level 1)		(Level 2)		(Level 3)
	(In Thousands)
Nonrecurring fair value measurements:
Assets:
Investment securities held to maturity	$	38,566	$	—	$	—	$	38,566	$	(987	)
Loans held for sale	14,597		—		—		14,597		(35		)
Impaired loans	487,686		—		—		487,686		(19,155		)
OREO	102,604		—		—		102,604		(23,458		)

The following is a description of the methodologies applied for valuing these assets:

Investment securities held to maturity – Nonrecurring fair value adjustments on investment securities held to maturity reflect impairment write-downs which the Company believes are other than temporary. For analyzing these securities, the Company has retained a third party valuation firm. Impairment is determined through the use of cash flow models that estimate cash flows on the underlying mortgages using security specific collateral and the transaction structure. The cash flow models incorporate the remaining cash flows which are adjusted for future expected credit losses. Future expected credit losses are determined by using various assumptions such as current default rates, prepayment rates, and loss severities. The Company develops these assumptions through the use of market data published by third party sources in addition to historical analysis which includes actual delinquency and default information through the current period. The expected cash flows are then discounted at the interest rate used to recognize interest income on the security to arrive at a present value amount. As the fair value assessments are derived using a discounted cash flow modeling approach, the nonrecurring fair value adjustments are classified as Level 3.

Loans held for sale – Loans held for sale for which the fair value option has not been elected are carried at the lower of cost or fair value and are evaluated on an individual basis. The fair value of each loan held for sale is based on the collateral value of the underlying asset. Therefore, loans held for sale subjected to nonrecurring fair value adjustments are classified as Level 3.

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Impaired Loans – Nonrecurring fair value adjustments to impaired loans reflect full or partial write-downs that are based on the loan’s observable market price or current estimated value of the collateral. Loans subjected to nonrecurring fair value adjustments based on the current estimated value of the collateral are classified as Level 3.

OREO – OREO is recorded on the Company’s Consolidated Balance Sheets at the lower of recorded balance or fair value, which is based on appraisals and third-party price opinions, less estimated costs to sell. The fair value is classified as Level 3.

The table below presents quantitative information about the significant unobservable inputs for material assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring and nonrecurring basis at September 30, 2013.

			Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at				Range of Unobservable Inputs
	September 30, 2013		Valuation Technique	Unobservable Input(s)	(Weighted Average)
	(In Thousands)
Recurring fair value measurements:
Other trading assets	$	1,790	Discounted cash flow	Default rate	13.1%
				Prepayment rate	5.0% - 9.5% (6.5%)
Interest rate contracts	3,822		Discounted cash flow	Closing ratios (pull-through)	0.0% - 99.0% (56.4%)
				Cap grids	0.3% - 2.1% (1.0%)
Other assets - MSRs	29,061		Discounted cash flow	Discount rate	10.0% - 11.0% (10.0%)
				Constant prepayment rate or life speed	6.0% - 45.3% (8.3%)
				Cost to service	57.6% - 550.7% (60.0%)
Nonrecurring fair value measurements:
Investment securities held to maturity	$	2,793	Discounted cash flow	Prepayment rate	4.9%
				Default rate	19.1%
				Loss severity	62.2%
Loans held for sale	$	7,465	Appraised value	Appraised value	NM*
Impaired loans	160,659		Appraised value	Appraised value	0% - 100.0% (33%)
OREO	41,493		Appraised value	Appraised value	8.0%

*NM – not meaningful

The following provides a description of the sensitivity of the valuation technique to changes in unobservable inputs for recurring fair value measurements.

Recurring Fair Value Measurements Using Significant Unobservable Inputs

Trading Account Assets – Interest-Only Strips

Significant unobservable inputs used in the valuation of the Company’s interest-only strips include default rates and prepayment assumptions. Significant increases in either of these inputs in isolation would result in significantly lower fair value measurements. Generally, a change in the assumption used for the probability of default is accompanied by a directionally opposite change in the assumption used for prepayment rates.

Derivative assets and liabilities

Significant unobservable inputs used in the valuation of interest rate lock commitments are pull-through and cap grids. Increases or decreases in the pull-through or cap grids will have a corresponding impact in the value of interest rate locks.

Other Assets - MSRs

The significant unobservable inputs used in the fair value measurement of MSRs are discount rates, constant prepayment rate or life speed, and cost to service assumptions. The impact of prepayments and changes in the discount rate are based on a variety of underlying inputs such as servicing costs. Increases or decreases to the underlying cash flow inputs will have a

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corresponding impact on the value of the MSR asset. The impact of the costs to service assumption will have a directionally opposite change in the fair value of the MSR asset.

Fair Value of Financial Instruments

The carrying amounts and estimated fair values, as well as the level within the fair value hierarchy, of the Company’s financial instruments as of September 30, 2013 and December 31, 2012 are as follows:

	September 30, 2013
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(In Thousands)
Financial Instruments:
Assets:
Cash and cash equivalents	$	2,843,672	$	2,843,672	$	2,843,672	$	—	$	—
Trading account assets	375,988		375,988		—		374,198		1,790
Investment securities available for sale	8,258,755		8,258,755		50,752		7,698,797		509,206
Investment securities held to maturity	1,554,681		1,422,856		—		—		1,422,856
Loans held for sale	175,891		175,891		—		168,426		7,465
Loans, net	48,565,138		46,323,606		—		—		46,323,606
Derivative assets	119,363		119,363		—		115,529		3,834
Other assets	29,061		29,061		—		—		29,061
Liabilities:
Deposits	$	52,242,409	$	52,308,269	$	—	$	52,308,269	$	—
FHLB and other borrowings	4,307,546		4,410,191		—		4,410,191		—
Federal funds purchased and securities sold under agreements to repurchase	1,118,028		1,118,028		—		1,118,028		—
Other short-term borrowings	28,876		28,876		—		28,876		—
Derivative liabilities	59,639		59,639		—		59,627		12

	December 31, 2012
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(In Thousands)
Financial Instruments:
Assets:
Cash and cash equivalents	$	6,158,442	$	6,158,442	$	6,158,442	$	—	$	—
Trading account assets	545,780		545,780		—		543,697		2,083
Investment securities available for sale	7,988,430		7,988,430		125,249		7,365,352		497,829
Investment securities held to maturity	1,507,929		1,416,723		—		—		1,416,723
Loans held for sale	322,065		322,065		—		312,171		9,894
Loans, net	44,208,690		42,147,832		—		—		42,147,832
Derivative assets	175,643		175,643		—		170,549		5,094
Other assets	13,255		13,255		—		—		13,255
Liabilities:
Deposits	$	51,642,778	$	51,683,469	$	—	$	51,683,469	$	—
FHLB and other borrowings	4,273,279		4,205,553		—		4,205,553		—
Federal funds purchased and securities sold under agreements to repurchase	1,101,591		1,101,591		—		1,101,591		—
Other short-term borrowings	3,763		3,763		—		3,763		—
Derivative liabilities	51,065		51,065		—		50,987		78

The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments not carried at fair value:

Cash and cash equivalents: Cash and cash equivalents have maturities of three months or less. Accordingly, the carrying amount approximates fair value. Because these amounts generally relate to either currency or highly liquid assets, these are considered a Level 1 measurement.

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Investment securities held to maturity: The fair values of securities held to maturity are estimated using a discounted cash flow approach. The discounted cash flow model uses inputs such as estimated prepayment speed, loss rates, and default rates. They are considered a level 3 measurement as the valuation employs significant unobservable inputs.

Loans: Loans are presented net of the allowance for loan losses and are valued using discounted cash flows. The discount rates used to determine the present value of these loans are based on current market interest rates for loans with similar credit risk and term. They are considered a Level 3 measurement as the valuation employs significant unobservable inputs.

Deposits: The fair values of demand deposits are equal to the carrying amounts. Demand deposits include noninterest bearing demand deposits, savings accounts, NOW accounts and money market demand accounts. Discounted cash flows have been used to value fixed rate term deposits and variable rate term deposits having an interest rate floor that has been reached. The discount rate used is based on interest rates currently being offered by the Company on comparable deposits as to amount and term. They are considered a Level 2 measurement as the valuation primarily employs observable inputs for similar instruments.

Short-term borrowings: The carrying amounts of federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings approximates fair value. They are therefore considered a Level 2 measurement.

FHLB and other borrowings: The fair value of the Company’s fixed rate borrowings, which includes the Company’s Capital Securities, are estimated using discounted cash flows, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. The carrying amount of the Company’s variable rate borrowings approximates fair value. As such, these borrowings are considered a Level 2 measurement as the valuation primarily employs observable inputs for similar instruments.

(10)Comprehensive Income

Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances arising from nonowner sources. The following summarizes the change in the components of other comprehensive income (loss) for the nine months ended September 30, 2013 and 2012.

	Nine Months Ended
	September 30, 2013									September 30, 2012
	Pretax			Tax Expense/ (Benefit)			After-tax			Pretax			Tax Expense/ (Benefit)			After-tax
	(In Thousands)
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during period from securities available for sale	$	(158,157	)	$	(57,896	)	$	(100,261	)	$	35,294		$	12,820		$	22,474
Less: reclassification adjustment for net gains on sale of securities in net income	33,030			12,089			20,941			7,917			2,876			5,041
Net change in unrealized gains (losses) on securities available for sale	(191,187		)	(69,985		)	(121,202		)	27,377			9,944			17,433
Change in unamortized net holding losses on investment securities held to maturity	12,753			4,668			8,085			28,893			10,494			18,399
Less: non-credit related impairment on investment securities held to maturity	2,288			838			1,450			4,728			1,717			3,011
Change in unamortized non-credit related impairment on investment securities held to maturity	1,982			725			1,257			629			228			401
Net change in unamortized holding losses on securities held to maturity	12,447			4,555			7,892			24,794			9,005			15,789
Unrealized holding losses arising during period from cash flow hedge instruments	10,198			3,707			6,491			(5,857		)	(2,123		)	(3,734		)
Change in defined benefit plans	1,018			337			681			154			56			98
Other comprehensive income (loss)	$	(167,524	)	$	(61,386	)	$	(106,138	)	$	46,468		$	16,882		$	29,586

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Activity in accumulated other comprehensive income (loss), net of tax, for the nine months ended September 30, 2013 was as follows:

	Unrealized Gains (Losses) on Securities Available for Sale and Transferred to Held to Maturity			Accumulated (Gains) Losses on Cash Flow Hedging Instruments			Defined Benefit Plan Adjustment			Unamortized Impairment Losses on Investment Securities Held to Maturity			Total
	(In Thousands)
Balance, January 1, 2013	$	86,379		$	(13,387	)	$	(38,243	)	$	(8,691	)	$	26,058
Other comprehensive income (loss) before reclassifications	(100,261		)	4,072			—			(1,450		)	(97,639		)
Amounts reclassified from accumulated other comprehensive income (loss)	(12,856		)	2,419			681			1,257			(8,499		)
Net current period other comprehensive income	(113,117		)	6,491			681			(193		)	(106,138		)
Balance, September 30, 2013	$	(26,738	)	$	(6,896	)	$	(37,562	)	$	(8,884	)	$	(80,080	)

The following table presents information on reclassifications out of accumulated other comprehensive income for the nine months ended September 30, 2013.

Details About Accumulated Other Comprehensive Income Components	Amounts Reclassified From Accumulated Other Comprehensive Income(1)			Condensed Consolidated Statement of Income Caption
	Nine Months Ended   September 30, 2013
	(In Thousands)
Unrealized Gains (Losses) on Securities Available for Sale and Transferred to Held to Maturity	$	33,030		Investment securities gains, net
	(12,753		)	Interest on investment securities held to maturity
	20,277
	7,421			Income tax expense
	$	12,856		Net of tax
Accumulated (Gains) Losses on Cash Flow Hedging Instruments	$	1,396		Interest and fees on loans
	(5,196		)	Interest and fees on FHLB advances
	(3,800		)
	(1,381		)	Income tax benefit
	$	(2,419	)	Net of tax
Defined Benefit Plan Adjustment	$	(1,018	)	(2)
	(337		)	Income tax benefit
	$	(681	)	Net of tax
Unamortized Impairment Losses on Investment Securities Held to Maturity	$	(1,982	)	Interest on investment securities held to maturity
	(725		)	Income tax benefit
	$	(1,257	)	Net of tax

(1) Amounts in parentheses indicate debits to the condensed consolidated statement of income.

(2) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 18, Benefit Plans, in the Notes to the December 31, 2012, Consolidated Financial Statements for additional details).

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(11)Supplemental Disclosure for Statement of Cash Flows

The following table presents the Company’s noncash investing and financing activities for the nine months ended September 30, 2013 and 2012.

	Nine Months Ended September 30,
	2013			2012
	(In Thousands)
Supplemental disclosures of cash flow information:
Interest paid	$	197,911		$	151,908
Net income taxes paid	87,838			120,589
Supplemental schedule of noncash investing and financing activities:
Transfer of loans and loans held for sale to OREO	$	39,165		$	57,184
Transfer of loans to loans held for sale	55,000			74,876
Change in unrealized gain (loss) on available for sale securities	(191,187		)	27,377
Issuance of restricted stock, net of cancellations	(596		)	1,581

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(12)Segment Information

The Company’s operating segments are based on the Company’s lines of business. Each line of business is a strategic unit that serves a particular group of customers that have certain common characteristics through various products and services. The segment results include certain internal methodologies, including overhead allocations and intercompany transactions. All intercompany transactions have been eliminated to determine the consolidated balances. The Company operates primarily in the United States, and, accordingly, the geographic distribution of revenue and assets is not significant. There are no individual customers whose revenues exceeded 10% of consolidated revenue. The Company’s operating segments are Retail Banking, Commercial Banking, Corporate and Investment Banking, Wealth Management and Treasury.

The Retail Banking segment serves the Company’s consumer customers through its 687 full-service banking centers and through the use of alternative delivery channels such as the internet, mobile devices and telephone banking. The Retail Banking segment provides individuals with comprehensive products and services including home mortgages, credit and debit cards, deposit accounts, insurance products, mutual funds and brokerage services. In addition, the Retail Banking segment serves the Company’s small business customers.

The Commercial Banking segment is responsible for providing a full array of banking and investment services to businesses in the Company’s markets. In addition to traditional credit and deposit products, the Commercial Banking segment also supports its customers with capabilities in treasury management, leasing, accounts receivable purchasing, asset-based lending, international services, and insurance and interest rate protection and investment products.

The Corporate and Investment Banking segment is responsible for providing a full array of banking and investment services to corporate and institutional clients. In addition to traditional credit and deposit products, the Corporate and Investment Banking segment also supports its customers with capabilities in treasury management, leasing, accounts receivable purchasing, asset-based lending, international services, and interest rate protection and investment products.

The Wealth Management segment provides private banking to high net worth individuals and wealth management services, including specialized investment portfolio management, traditional credit products, traditional trust and estate services, investment advisory services, financial counseling and customized services to companies and their employees.

The Treasury segment’s primary function is to manage the investment securities portfolio and the interest rate sensitivity of the Company’s Condensed Consolidated Balance Sheets and the liquidity and funding positions of the Company.

Activities that are not directly attributable to the operating segments, for example, the activities of the Parent and support functions and the elimination of intercompany transactions, are presented under Corporate Support and Other.

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The following table presents the segment information for the Company’s segments as of and for the nine months ended September 30, 2013 and 2012.

	Nine Months Ended September 30, 2013
	Retail Banking		Commercial Banking			Corporate & Investment Banking		Wealth Management		Treasury			Corporate Support and Other			Consolidated
	(In Thousands)
Net interest income	$	710,850	$	707,563		$	49,282	$	118,326	$	(32,445	)	$	(18,404	)	$	1,535,172
Allocated provision for loan losses	90,455		(23,881		)	2,817		1,152		—			10,843			81,386
Noninterest income	361,456		141,591			97,216		58,206		74,479			(67,573		)	665,375
Noninterest expense	844,189		338,523			87,869		108,659		11,399			231,865			1,622,504
Net income (loss) before income tax expense (benefit)	137,662		534,512			55,812		66,721		30,635			(328,685		)	496,657
Income tax expense (benefit)	51,279		199,105			20,790		24,854		11,412			(161,407		)	146,033
Net income (loss)	86,383		335,407			35,022		41,867		19,223			(167,278		)	350,624
Less: net income attributable to noncontrolling interests	—		283			—		—		1,325			—			1,608
Net income (loss) attributable to shareholder	$	86,383	$	335,124		$	35,022	$	41,867	$	17,898		$	(167,278	)	$	349,016
Average assets	$	16,621,772	$	25,477,805		$	3,090,201	$	4,035,630	$	13,385,470		$	7,095,557		$	69,706,435

	Nine Months Ended September 30, 2012
	Retail Banking		Commercial Banking			Corporate & Investment Banking		Wealth Management		Treasury		Corporate Support and Other			Consolidated
	(In Thousands)
Net interest income	$	682,883	$	715,278		$	41,563	$	106,160	$	18,387	$	77,282		$	1,641,553
Allocated provision for loan losses	88,358		(73,939		)	3,399		6,096		—		2,796			26,710
Noninterest income	378,380		92,167			83,418		50,474		66,080		(23,962		)	646,557
Noninterest expense	831,964		380,496			72,708		102,736		14,380		304,249			1,706,533
Net income (loss) before income tax expense (benefit)	140,941		500,888			48,874		47,802		70,087		(253,725		)	554,867
Income tax expense (benefit)	52,497		186,503			21,326		17,807		25,608		(131,316		)	172,425
Net income (loss)	88,444		314,385			27,548		29,995		44,479		(122,409		)	382,442
Less: net income attributable to noncontrolling interests	—		209			—		—		1,341		—			1,550
Net income (loss) attributable to shareholder	$	88,444	$	314,176		$	27,548	$	29,995	$	43,138	$	(122,409	)	$	380,892
Average assets	$	16,067,241	$	24,251,986		$	2,560,737	$	3,230,435	$	12,348,793	$	7,210,634		$	65,669,826

The financial information presented was derived from the internal profitability reporting system used by management to monitor, evaluate and manage the financial performance of the Company. This information is based on internal management accounting policies that have been developed to reflect the underlying economics of the businesses. The policies address the methodologies applied and include policies related to funds transfer pricing, cost allocations and capital allocations.

Funds transfer pricing was used in the determination of net interest income earned primarily on loans and deposits. The method employed for funds transfer pricing is a matched funding concept whereby lines of business which are fund providers are credited and those that are fund users are charged based on maturity, prepayment and/or repricing characteristics applied on an instrument level. Costs for centrally managed operations are generally allocated to the

152

lines of business based on the utilization of services provided or other appropriate indicators. Capital is allocated to the lines of business based upon the underlying risks in each business considering economic and regulatory capital standards.

The development and application of these methodologies is a dynamic process. In addition, unlike financial accounting, there is no authoritative literature for management accounting similar to U.S. GAAP. Consequently, reported results are not necessarily comparable with those presented by other financial institutions.

(13)Related Party Transactions

The Company enters into various contracts with BBVA that affect the Company’s business and operations. The following discloses the significant transactions between the Company and BBVA during the nine months ended September 30, 2013 and 2012 and as of December 31, 2012.

The Company believes all of the transactions entered into between the Company and BBVA were transacted on terms that were no more or less beneficial to the Company than similar transactions entered into with unrelated market participants, including interest rates and transaction costs. The Company foresees executing similar transactions with BBVA in the future.

Derivatives

The Company has entered into various derivative contracts as noted below with BBVA as the upstream counterparty. The fair value of outstanding derivative contracts between the Company and BBVA are detailed below.

	September 30, 2013			December 31, 2012
	(In Thousands)
Derivative contracts:
Cash flow hedges	$	4,033		$	5,570
Free-standing derivative instruments – risk management and other purposes	17,188			20,974
Free-standing derivative instruments – customer accommodation	(11,699		)	(51,674		)

153

REPORT OF INDEPENDENT REGISTERED PULBIC ACCOUNTING FIRM

To the Board of Directors and Stockholder of

BBVA Compass Bancshares, Inc.

Birmingham, AL

We have audited the accompanying consolidated balance sheets of BBVA Compass Bancshares, Inc. and subsidiaries (the "Company") as of December 31, 2012 and 2011, and the related consolidated statements of income, comprehensive income (loss), shareholder's equity, and cash flows for each of the three years in the period ended December 31, 2012. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of BBVA Compass Bancshares, Inc. and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2012, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

Birmingham, AL

November 22, 2013

154

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
	December 31,
	2012			2011
	(In Thousands)
Assets:
Cash and due from banks	$	6,139,018		$	3,085,258
Federal funds sold, securities purchased under agreements to resell and interest bearing deposits	19,424			7,902
Cash and cash equivalents	6,158,442			3,093,160
Trading account assets	545,780			611,518
Investment securities available for sale	7,988,430			8,023,681
Investment securities held to maturity (fair value of $1,416,723 and $1,206,081 for 2012 and 2011, respectively)	1,507,929			1,305,173
Loans held for sale (includes $312,171 and $150,989 measured at fair value for 2012 and 2011, respectively)	322,065			170,351
Loans	45,011,543			41,942,327
Allowance for loan losses	(802,853		)	(1,051,796		)
Net loans	44,208,690			40,890,531
Premises and equipment, net	1,433,961			1,383,468
Bank owned life insurance	671,888			655,007
Goodwill	4,971,645			4,977,256
Other intangible assets	169,731			266,780
FDIC indemnification asset	271,928			646,245
Other real estate owned	68,568			217,840
Other assets	917,638			1,078,357
Total assets	$	69,236,695		$	63,319,367
Liabilities:
Deposits:
Noninterest bearing	$	14,436,539		$	12,707,330
Interest bearing	37,206,239			33,349,863
Total deposits	51,642,778			46,057,193
FHLB and other borrowings	4,273,279			4,168,434
Federal funds purchased and securities sold under agreements to repurchase	1,101,591			1,336,842
Other short-term borrowings	3,763			2,603
Accrued expenses and other liabilities	1,131,711			1,137,231
Total liabilities	58,153,122			52,702,303
Shareholder’s Equity:
Common stock — $0.01 par value:
Authorized — 300,000,000 shares
Issued — 217,280,083 shares for both 2012 and 2011	2,173			2,173
Surplus	15,172,910			15,179,420
Retained deficit	(4,146,573		)	(4,623,446		)
Accumulated other comprehensive income	26,058			29,955
Total BBVA Compass Bancshares, Inc. shareholder’s equity	11,054,568			10,588,102
Noncontrolling interests	29,005			28,962
Total shareholder’s equity	11,083,573			10,617,064
Total liabilities and shareholder’s equity	$	69,236,695		$	63,319,367

See accompanying Notes to Consolidated Financial Statements.

155

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
	Years Ended December 31,
	2012		2011			2010
	(In Thousands)
Interest income:
Interest and fees on loans	$	2,239,161	$	2,336,273		$	2,417,776
Interest on investment securities available for sale	220,353		242,870			285,699
Interest on investment securities held to maturity	29,406		29,046			29,010
Interest on federal funds sold, securities purchased under agreements to resell and interest bearing deposits	230		149			96
Interest on trading account assets	2,386		1,436			936
Total interest income	2,491,536		2,609,774			2,733,517
Interest expense:
Interest on deposits	192,644		218,957			297,570
Interest on FHLB and other borrowings	66,014		57,892			91,445
Interest on federal funds purchased and securities sold under agreements to repurchase	2,783		3,828			5,195
Interest on other short-term borrowings	113		48			123
Total interest expense	261,554		280,725			394,333
Net interest income	2,229,982		2,329,049			2,339,184
Provision for loan losses	29,471		428,633			825,049
Net interest income after provision for loan losses	2,200,511		1,900,416			1,514,135
Noninterest income:
Service charges on deposit accounts	254,675		250,332			282,163
Card and merchant processing fees	101,540		153,804			159,450
Retail investment sales	97,504		108,767			73,464
Mortgage banking income	50,759		13,958			2,734
Asset management fees	37,848		39,160			39,845
Corporate and correspondent investment sales	38,014		3,126			35,267
Bank owned life insurance	20,335		21,115			15,469
Insurance commissions	9,469		27,367			36,107
Investment securities gains, net	12,832		50,078			69,127
Gain on prepayment of FHLB and other borrowings	38,359		5,351			—
Other	188,713		180,155			172,571
Total noninterest income	850,048		853,213			886,197
Noninterest expense:
Salaries, benefits and commissions	1,003,010		1,005,276			873,184
FDIC indemnification expense	372,496		358,486			219,110
Professional services	176,266		163,768			148,234
Equipment	173,459		151,225			146,369
Net occupancy	153,429		153,703			154,618
Amortization of intangibles	91,746		108,336			140,400
FDIC insurance	86,925		121,145			106,333
Marketing	28,233		30,253			41,393
Communications	30,349		31,876			30,006
Merger and integration	—		—			16,709
Goodwill impairment	—		2,003,800			523,310
Securities impairment:
Other-than-temporary impairment	5,715		3,607			4,534
Less: non-credit portion recognized in other comprehensive income	4,728		61			217
Total securities impairment	987		3,546			4,317
Other	234,947		261,404			272,965
Total noninterest expense	2,351,847		4,392,818			2,676,948
Net income (loss) before income tax expense	698,712		(1,639,189		)	(276,616		)
Income tax expense	219,701		98,175			59,845
Net income (loss)	479,011		(1,737,364		)	(336,461		)
Less: net income attributable to noncontrolling interests	2,138		2,011			2,010
Net income (loss) attributable to shareholder	$	476,873	$	(1,739,375	)	$	(338,471	)

See accompanying Notes to Consolidated Financial Statements.

156

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
	Years Ended December 31,
	2012			2011			2010
	(In Thousands)
Net income (loss)	$	479,011		$	(1,737,364	)	$	(336,461	)
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) arising during period from securities available for sale	(4,922		)	57,836			11,651
Less: reclassification adjustment for net gains (losses) on sale of securities available for sale in net income	8,352			31,699			44,525
Net change in unrealized holding gains (losses) on securities available for sale	(13,274		)	26,137			(32,874		)
Change in unamortized net holding losses on investment securities held to maturity	21,904			17,075			23,906
Less: non-credit related impairment on investment securities held to maturity	3,077			39			139
Change in unamortized non-credit related impairment on investment securities held to maturity	562			960			8,777
Net change in unamortized holding losses on securities held to maturity	19,389			17,996			32,544
Unrealized holding gains (losses) arising during period from cash flow hedge instruments	(2,824		)	(1,844		)	(27,267		)
Net change in accumulated gain (loss) on cash flow hedging instruments	(2,824		)	(1,844		)	(27,267		)
Change in defined benefit plans	(7,188		)	10,983			(4,819		)
Net change in defined benefit pension plans	(7,188		)	10,983			(4,819		)
Other comprehensive income (loss), net of tax	(3,897		)	53,272			(32,416		)
Comprehensive income	475,114			(1,684,092		)	(368,877		)
Less: comprehensive income attributable to noncontrolling interests	2,138			2,011			2,010
Comprehensive income attributable to shareholder	$	472,976		$	(1,686,103	)	$	(370,887	)

See accompanying Notes to Consolidated Financial Statements.

157

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
	Common Stock		Surplus			Retained Deficit			Accumulated Other Comprehensive Income (Loss)			Non-controlling Interests			Total Shareholder’s Equity
	(In Thousands)
Balance, January 1, 2010	$	2,051	$	14,374,222		$	(2,545,600	)	$	9,099		$	29,127		$	11,868,899
Net income (loss)	—		—			(338,471		)	—			2,010			(336,461		)
Other comprehensive income (loss), net of tax	—		—			—			(32,416		)	—			(32,416		)
Issuance of common stock	122		707,821			—			—			—			707,943
Dividends	—		—			—			—			(2,093		)	(2,093		)
Settlement of BBVA forward contract	—		4,098			—			—			—			4,098
Vesting of restricted stock	—		(3,052		)	—			—			—			(3,052		)
Restricted stock retained to cover taxes	—		(1,299		)	—			—			—			(1,299		)
Restricted stock grant moved to accrued expenses and other liabilities	—		(1,550		)	—			—			—			(1,550		)
Amortization of stock-based deferred compensation	—		9,032			—			—			—			9,032
Balance, December 31, 2010	$	2,173	$	15,089,272		$	(2,884,071	)	$	(23,317	)	$	29,044		$	12,213,101
Net income (loss)	—		—			(1,739,375		)	—			2,011			(1,737,364		)
Other comprehensive income (loss), net of tax	—		—			—			53,272			—			53,272
Dividends	—		—			—			—			(2,093		)	(2,093		)
Capital contributions	—		75,000			—			—			—			75,000
Settlement of BBVA forward contract	—		2,598			—			—			—			2,598
Forfeiture of restricted stock	—		1,550			—			—			—			1,550
Restricted stock retained to cover taxes	—		(2,196		)	—			—			—			(2,196		)
Amortization of stock-based deferred compensation	—		13,196			—			—			—			13,196
Balance, December 31, 2011	$	2,173	$	15,179,420		$	(4,623,446	)	$	29,955		$	28,962		$	10,617,064
Net income	—		—			476,873			—			2,138			479,011
Other comprehensive income (loss), net of tax	—		—			—			(3,897		)	—			(3,897		)
Dividends	—		—			—			—			(2,095		)	(2,095		)
Vesting of restricted stock	—		(11,872		)	—			—			—			(11,872		)
Restricted stock retained to cover taxes	—		(1,458		)	—			—			—			(1,458		)
Amortization of stock-based deferred compensation	—		6,820			—			—			—			6,820
Balance, December 31, 2012	$	2,173	$	15,172,910		$	(4,146,573	)	$	26,058		$	29,005		$	11,083,573

See accompanying Notes to Consolidated Financial Statements.

158

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
	Years Ended December 31,
	2012			2011			2010
	(In Thousands)
Operating Activities:
Net income (loss)	$	479,011		$	(1,737,364	)	$	(336,461	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	283,483			217,180			186,500
Goodwill impairment	—			2,003,800			523,310
Securities impairment	987			3,546			4,317
Amortization of intangibles	91,746			108,336			140,400
Accretion of discount, loan fees and purchase market adjustments, net	(406,410		)	(489,986		)	(503,872		)
Net change in FDIC indemnification asset	372,496			358,486			219,110
Provision for loan losses	29,471			428,633			825,049
Amortization of stock based compensation	6,820			13,196			9,032
Net change in trading account assets	65,738			(159,734		)	(131,321		)
Net change in trading account liabilities	(107,021		)	203,092			149,113
Net change in loans held for sale	55,434			(54,236		)	(4,118		)
Deferred tax expense (benefit)	109,337			51,750			(20,004		)
Investment securities gains, net	(12,832		)	(50,078		)	(69,127		)
Gain on prepayment of FHLB and other borrowings	(38,359		)	(5,351		)	—
(Gain) loss on sale of premises and equipment	4,959			3,172			(8,756		)
Gain on sale of student loans	—			—			(428		)
Net loss on sale of other real estate and other assets	37,449			29,964			32,769
Gain on sale of insurance business unit	(15,100		)	—			—
Decrease in other assets	22,904			165,933			158,380
Increase (decrease) in other liabilities	111,033			30,425			(155,787		)
Net cash provided by operating activities	1,091,146			1,120,764			1,018,106
Investing Activities:
Proceeds from sales of investment securities available for sale	540,993			967,959			1,498,902
Proceeds from prepayments, maturities and calls of investment securities available for sale	2,018,249			1,548,964			2,281,622
Purchases of investment securities available for sale	(2,669,103		)	(3,206,972		)	(4,154,562		)
Proceeds from prepayments, maturities and calls of investment securities held to maturity	146,537			136,798			170,543
Purchases of investment securities held to maturity	(320,699		)	(184,833		)	(315,705		)
Net change in loan portfolio	(3,598,463		)	(2,119,609		)	449,366
Net cash paid in post acquisition earnout	(3,589		)	—			—
Purchase of premises and equipment	(203,900		)	(268,746		)	(299,263		)
Proceeds from sale of premises and equipment	4,780			24,564			52,469
Net proceeds from divestiture	29,323			—			3,862
Proceeds from sales of loans	382,934			276,352			1,093,220
Reimbursements from FDIC for covered losses	1,821			74,937			455,856
Proceeds from sales of other real estate owned	179,017			321,290			347,060
Net cash (used in) provided by investing activities	(3,492,100		)	(2,429,296		)	1,583,370
Financing Activities:
Net increase in demand deposits, NOW accounts and savings accounts	4,173,939			2,549,064			2,601,252
Net increase (decrease) in time deposits	1,407,844			(1,896,650		)	(3,733,680		)
Net decrease in federal funds purchased and securities sold under agreements	(235,251		)	(490,206		)	(149,291		)
Net increase (decrease) in other short-term borrowings	1,160			(72,359		)	(64,926		)
Proceeds from FHLB and other borrowings	2,185,992			2,775,000			1,375,000
Repayment of FHLB and other borrowings	(2,052,023		)	(1,706,986		)	(978,615		)
Capital contribution from parent	—			75,000			—
Vesting of restricted stock	(11,872		)	—			—
Restricted stock grants retained to cover taxes	(1,458		)	(2,196		)	(1,299		)
Forward contract cancellation	—			—			1,046
Preferred dividends paid	(2,095		)	(2,093		)	(2,093		)
Net cash provided by (used in) financing activities	5,466,236			1,228,574			(952,606		)
Net increase (decrease) in cash and cash equivalents	3,065,282			(79,958		)	1,648,870
Cash and cash equivalents, January 1	3,093,160			3,173,118			1,524,248
Cash and cash equivalents, December 31	$	6,158,442		$	3,093,160		$	3,173,118

See accompanying Notes to Consolidated Financial Statements.

159

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Summary of Significant Accounting Policies

BBVA Compass Bancshares, Inc. is a wholly owned subsidiary of BBVA. BBVA operates in more than 30 countries, is based in Spain, and has substantial banking interests in the Americas.

At December 31, 2012, the Company operated under a two-tier holding company structure that consisted of BBVA USA Bancshares, Inc., the top tier U.S. holding company, which controlled a mid-tier holding company, BBVA Compass Bancshares, Inc. On May 14, 2013, the mid-tier holding company was merged into the top tier U.S. holding company. Subsequent to the merger, the surviving entity's name was changed to BBVA Compass Bancshares, Inc. All references to the “Company” herein shall be used to describe the activities of BBVA Compass Bancshares, Inc. (formerly known as BBVA USA Bancshares, Inc.) and its subsidiaries. Where a distinction is necessary, the term “Parent” shall be used to describe those activities of BBVA Compass Bancshares (formerly known as BBVA USA Bancshares, Inc.). All references to the mid-tier holding company shall be used to describe the activities of BBVA Compass Bancshares, Inc. prior to the May 14, 2013 merger and name change.

The accompanying Consolidated Financial Statements include the accounts of the Company and its subsidiaries for the years ended December 31, 2012, 2011 and 2010. All intercompany accounts and transactions and balances have been eliminated in consolidation.

The Company has evaluated subsequent events through November 22, 2013, the date of issuance of the Consolidated Financial Statements, to determine if either recognition or disclosure of significant events or transactions is required.

The accounting policies followed by the Company and its subsidiaries and the methods of applying these policies conform with U.S. GAAP and with general practices within the banking industry. Certain policies that significantly affect the determination of financial position, results of operations and cash flows are summarized below.

Nature of Operations

The Bank, headquartered in Birmingham, Alabama, operates banking centers in Alabama, Arizona, California, Colorado, Florida, New Mexico and Texas. The Bank operates under the brand name BBVA Compass, which is a trade name and trademark of BBVA Compass Bancshares, Inc.

The Bank performs banking services customary for full service banks of similar size and character. Such services include receiving demand and time deposits, making personal and commercial loans and furnishing personal and commercial checking accounts. The Bank offers, either directly or through its subsidiaries and affiliates, a variety of fiduciary services, including portfolio management and administration and investment services to estates, trusts and employee benefit plans; term life insurance, variable annuities, property and casualty insurance and other insurance products; investment advisory services; a variety of investment services and products to institutional and individual investors; discount brokerage services, mutual funds and fixed-rate annuities; and lease financing services.

Retrospective Adjustment of Prior Period Amounts

On April 8, 2013, BBVA contributed all of the outstanding stock of its wholly-owned subsidiary, BSI, to the Parent. BSI is a registered broker-dealer and engages in investment banking and institutional sales of fixed income securities. Because of the related nature of the Company and BSI, this transaction was accounted for as a merger of entities under common control resulting in all periods prior to the transaction being retrospectively adjusted to include the historical activity of BSI.

160

The following table summarizes the impact of the acquisition of BSI to certain captions within the Company’s Consolidated Balance Sheet as of December 31, 2012 and 2011 and the Company’s Consolidated Statements of Income for the years ended December 31, 2012, 2011, and 2010.

Balance Sheet	As Previously Reported		BBVA Securities, Inc. Merger		As Retrospectively Adjusted
	(In Thousands)
December 31, 2012
Assets:
Cash and due from banks	$	6,056,132	$	82,886	$	6,139,018
Trading account assets	545,550		230		545,780
Premises and equipment, net	1,430,259		3,702		1,433,961
Other assets	873,557		44,081		917,638
Total assets	69,105,796		130,899		69,236,695
Liabilities:
Accrued expenses and other liabilities	$	1,084,228	$	47,483	$	1,131,711
Total liabilities	58,105,639		47,483		58,153,122
Shareholder’s equity	11,000,157		83,416		11,083,573
Total liabilities and shareholder’s equity	69,105,796		130,899		69,236,695
December 31, 2011
Assets:
Cash and due from banks	$	2,962,258	$	123,000	$	3,085,258
Premises and equipment, net	1,382,540		928		1,383,468
Other assets	1,066,303		12,054		1,078,357
Total assets	63,183,385		135,982		63,319,367
Liabilities:
Accrued expenses and other liabilities	$	1,098,028	$	39,203	$	1,137,231
Total liabilities	52,663,100		39,203		52,702,303
Shareholder’s equity	10,520,285		96,779		10,617,064
Total liabilities and shareholder’s equity	63,183,385		135,982		63,319,367

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Income Statement	As Previously Reported			BBVA Securities Inc. Merger			As Retrospectively Adjusted
	(Dollars in thousands)
Year Ended December 31, 2012
Interest income	$	2,491,531		$	5		$	2,491,536
Noninterest income	815,906			34,142			850,048
Noninterest expense	2,304,416			47,431			2,351,847
Income tax expense	219,671			30			219,701
Net income (loss)	492,325			(13,314		)	479,011
Net income (loss) available to shareholder	490,187			(13,314		)	476,873
Year Ended December 31, 2011
Interest income	$	2,609,726		$	48		$	2,609,774
Noninterest income	806,476			46,737			853,213
Noninterest expense	4,324,200			68,618			4,392,818
Income tax expense	97,374			801			98,175
Net income (loss)	(1,714,730		)	(22,634		)	(1,737,364		)
Net income (loss) available to shareholder	(1,716,741		)	(22,634		)	(1,739,375		)
Year Ended December 31, 2010
Interest income	$	2,733,458		$	59		$	2,733,517
Noninterest income	849,004			37,193			886,197
Noninterest expense	2,648,891			28,057			2,676,948
Income tax expense	58,015			1,830			59,845
Net income (loss)	(343,826		)	7,365			(336,461		)
Net income (loss) available to shareholder	(345,836		)	7,365			(338,471		)

Use of Estimates

The preparation of the Consolidated Financial Statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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, the most significant of which relate to the allowance for loan losses, goodwill impairment, valuations and securities impairment. Actual results could differ from those estimates.

Cash and cash equivalents

The Company classifies cash on hand, amounts due from banks, federal funds sold, securities purchased under agreements to resell and interest bearing deposits as cash and cash equivalents. These instruments have original maturities of less than three months. Accordingly, the carrying amount is considered to be a reasonable estimate of fair value.

Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase

Securities purchased under agreements to resell and securities sold under agreements to repurchase are generally accounted for as collateralized financing transactions and are recorded at the amounts at which the securities were acquired or sold plus accrued interest. The securities pledged or received as collateral are generally U.S. government and federal agency securities. The fair value of collateral either received from or provided to a third party is continually monitored and adjusted as deemed appropriate.

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Securities

The Company classifies its investment securities into one of three categories based upon management’s intent and ability to hold the investment securities: (i) trading account assets and liabilities, (ii) investment securities held to maturity or (iii) investment securities available for sale. Investment securities held in a trading account are required to be reported at fair value, with unrealized gains and losses included in earnings. Investment securities held to maturity are stated at cost adjusted for amortization of premiums and accretion of discounts. The related amortization and accretion is determined by the interest method and is included as a noncash adjustment in the net cash provided by operating activities in the Company’s Consolidated Statements of Cash Flows. The Company has the ability, and it is management’s intention, to hold such securities to maturity. Investment securities available for sale are recorded at fair value. Increases and decreases in the net unrealized gain or loss on the portfolio of investment securities available for sale are reflected as adjustments to the carrying value of the portfolio and as an adjustment, net of tax, to accumulated other comprehensive income. See Note 20, Fair Value of Financial Instruments, for information on the determination of fair value.

Interest earned on trading account assets, investment securities available for sale and investment securities held to maturity is included in interest income in the Company’s Consolidated Statements of Income. Net realized gains and losses on the sale of investment securities available for sale, computed principally on the specific identification method, are shown separately in noninterest income in the Company’s Consolidated Statements of Income. Net gains and losses on the sale of trading account assets and liabilities are recognized as a component of other noninterest income in the Company’s Consolidated Statements of Income.

The Company regularly evaluates each held to maturity and available for sale security in an unrealized loss position for other-than-temporary impairment OTTI. The Company evaluates for OTTI on a specific identification basis. In its evaluation, the Company considers such factors as the length of time and the extent to which the fair value has been below cost, the financial condition of the issuer, the Company’s intent to hold the security to an expected recovery in fair value and whether it is more likely than not that the Company will have to sell the security before its fair value recovers. The credit loss component of the OTTI on debt and equity securities is recognized in earnings. For debt securities, the portion of OTTI related to all other factors is recognized in other comprehensive income. See Note 3, Investment Securities Available for Sale and Investment Securities Held to Maturity, for details of OTTI.

Loans Held for Sale

Loans held for sale include single-family real estate mortgage loans, real estate construction loans and commercial real estate mortgage loans. The Company applies the fair value option accounting guidance codified under the FASB's ASC Topic 825, Financial Instruments, for single family real estate mortgage loans originated for sale in the secondary market. Under the fair value option, all changes in the applicable loans’ fair value are recorded in earnings. Loans classified as held for sale that were not originated for resale in the secondary market are accounted for under the lower of cost or fair value method and are evaluated on an individual basis.

Accounting for Certain Loans or Debt Securities Acquired in a Transfer

Loans with evidence of credit deterioration since acquisition for which it is probable all contractual payments will not be received are accounted for under ASC Subtopic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, and are classified as Purchased Impaired Loans. The Company evaluates loans meeting the requirements of ASC Subtopic 310-30 by considering expected prepayments and estimating the expected amount and timing of undiscounted principal, interest and other cash flows at the date of acquisition. Those loans are recorded at fair value at acquisition and no allowance for loan losses is recorded at the purchase date. Revolving loans, including lines of credit and credit cards loans, and leases are excluded from ASC Subtopic 310-30 accounting.

An AICPA letter dated December 18, 2009 summarized the SEC staff’s view regarding the recognition of discount accretion for acquired loans with a fair value that is lower than the contractual amounts due that are not required to be accounted for in accordance with ASC Subtopic 310-30. The AICPA understands that the SEC staff would not object to an accounting policy based on contractual cash flows (ASC Subtopic 310-20 approach) or an accounting policy based on expected cash flows approach (ASC Subtopic 310-30 approach). The Company believes the ASC Subtopic 310-30 approach is the more appropriate option to follow in accounting for the fair value discount for Purchased

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Nonimpaired Loans and, accordingly, has made a policy election to account for Purchased Nonimpaired Loans under an expected cash flows approach.

In determining the acquisition date fair value of loans subject to ASC Subtopic 310-30, and in subsequent accounting, the Company generally aggregates purchased loans into pools of loans with common risk characteristics, while accounting for certain commercial loans individually. Expected cash flows at the purchase date in excess of the fair value of loans are recorded as interest income over the life of the loans if the timing and amount of the future cash flows are reasonably estimable. Subsequent to the purchase date, increases in cash flows over those expected at the purchase date are recognized as interest income prospectively. Decreases in expected cash flows after the purchase date are recognized by recording an allowance for loan losses.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are considered held for investment. Loans are stated at principal outstanding adjusted for charge-offs, deferred fees and direct costs on originated loans and unamortized premiums or discounts on purchased loans. Interest income on loans is recognized on the level yield method. Loan fees, net of direct costs, and unamortized premiums and discounts are deferred and amortized as an adjustment to the yield of the related loan over the term of the loan and are included as a noncash adjustment in the net cash provided by operating activities in the Company’s Consolidated Statements of Cash Flows. For additional information related to the Company’s loan portfolio by type, refer to Note 4, Loans and Allowance for Loan Losses.

It is the general policy of the Company to stop accruing interest income and apply subsequent interest payments as principal reductions when any commercial, industrial, commercial real estate or construction loan is 90 days or more past due as to principal or interest and/or the ultimate collection of either is in doubt, unless collection of both principal and interest is assured by way of collateralization, guarantees or other security, or the loan is accounted for under the ASC Subtopic 310-30. Accrual of interest income on consumer loans, including residential real estate loans, is generally suspended when any payment of principal or interest is more than 120 days delinquent or when foreclosure proceedings have been initiated or repossession of the underlying collateral has occurred. When a loan is placed on a nonaccrual status, any interest previously accrued but not collected is reversed against current interest income unless the fair value of the collateral for the loan is sufficient to cover the accrued interest.

In general, a loan is returned to accrual status when none of its principal and interest is due and unpaid and the Company expects repayments of the remaining contractual principal and interest or when it is determined to be well secured and in the process of collection. Charge-offs on commercial loans are recognized when available information confirms that some or all of the balance is uncollectible. Consumer loans are subject to mandatory charge-off at a specified delinquency date consistent with regulatory guidelines. In general, charge-offs on consumer loans are recognized at the earlier of the month of liquidation or the month the loan becomes 120 days past due; residential loan deficiencies are charged off at foreclosure; and credit card loans are charged off before the end of the month when the loan becomes 180 days past due with the related interest accrued but not collected reversed against current income. The Company determines past due or delinquency status of a loan based on contractual payment terms.

All nonaccrual loans and loans modified in a troubled debt restructuring are considered impaired, excluding Purchased Impaired Loans. Purchased Impaired Loans are classified as impaired only if there is evidence of credit deterioration subsequent to acquisition. The Company’s policy for recognizing interest income on impaired loans classified as nonaccrual is consistent with its nonaccrual policy. The Company’s policy for recognizing interest income on accruing impaired loans is consistent with its interest recognition policy for accruing loans.

Troubled Debt Restructurings

A loan is accounted for as a TDR if the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. A TDR typically involves a modification of terms such as establishment of a below market interest rate, a reduction in the face amount of the loan, a reduction of accrued interest or an extension of the maturity date at a stated interest rate lower than the current market rate for a new loan with similar risk. The Company’s policy for measuring impairment on TDRs, including TDRs that have defaulted, is consistent with its impairment measurement process for all impaired loans. The Company’s policy for returning nonaccrual TDRs to accrual status is consistent with its return to accrual policy for all other loans.

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Allowance for Loan Losses

The amount of the provision for loan losses charged to income is determined on the basis of numerous factors including actual loss experience, identified loan impairment, current economic conditions and periodic examinations and appraisals of the loan portfolio. Such provisions, less net loan charge-offs, comprise the allowance for loan losses which is deducted from loans and is maintained at a level management considers to be adequate to absorb losses inherent in the portfolio.

The Company monitors the entire loan portfolio, including loans acquired in business combinations, in an effort to identify problem loans so that risks in the portfolio can be identified on a timely basis and an appropriate allowance maintained. Loan review procedures, including loan grading, periodic credit rescoring and trend analysis of portfolio performance, are utilized by the Company in order to ensure that potential problem loans are identified. Management’s involvement continues throughout the process and includes participation in the work-out process and recovery activity. These formalized procedures are monitored internally and by regulatory agencies.

The allowance for loan losses is established as follows:

• Loans with outstanding balances greater than $1 million that are nonaccrual and all TDRs are evaluated individually with specific reserves allocated based on the present value of the loan’s expected future cash flows, discounted at the loan’s effective interest rate, except where foreclosure or liquidation is probable or when the primary source of repayment is provided by real estate collateral. In these circumstances, impairment is measured based upon the fair value less cost to sell of the collateral. In addition, in certain rare circumstances, impairment may be based on the loan’s observable fair value.

• Loans in the remainder of the portfolio, including nonaccrual loans with balances of less than $1 million, are collectively evaluated for impairment with the allowance based on historical loss experience or an expected loss calculation estimating inherent losses by loan product in the event the Company believes a specific portfolio’s historical loss experience does not adequately capture all inherent losses.

Additionally, a portion of the allowance is for inherent losses which are probable to exist as of the valuation date even though they may not have been identified by the objective processes used for the allocated portion of the allowance. This portion of the allowance is particularly subjective and requires judgment based upon qualitative factors. Some of the factors considered are changes in credit concentrations, loan mix, changes in underwriting practices, including the extent of portfolios of acquired institutions, historical loss experience and the general economic environment in the Company’s markets. While the total allowance is described as consisting of separate portions, these terms are primarily used to describe a process. All portions of the allowance are available to support inherent losses in the loan portfolio.

In order to estimate a reserve for unfunded commitments, the Company uses a process consistent with that used in developing the allowance for loan losses. The Company estimates the future funding of current unfunded commitments based on historical funding experience of these commitments before default. Allowance for loan loss factors, which are based on product and loan grade and are consistent with the factors used for portfolio loans, are applied to these funding estimates to arrive at the reserve balance. This reserve for unfunded commitments is recognized in accrued expenses and other liabilities on the Company’s Consolidated Balance Sheets with changes recognized in other noninterest expense in the Company’s Consolidated Statements of Income.

Premises and Equipment

Premises, furniture, fixtures, equipment, assets under capital leases and leasehold improvements are stated at cost less accumulated depreciation or amortization. Land is stated at cost. In addition, purchased software and costs of computer software developed for internal use are capitalized provided certain criteria are met. Depreciation is computed principally using the straight-line method over the estimated useful lives of the related assets, which ranges between 1 and 40 years. Leasehold improvements are amortized on a straight-line basis over the lesser of the lease terms or the estimated useful lives of the improvements.

Bank Owned Life Insurance

The Company purchases life insurance policies on the lives of certain employees and is the owner and beneficiary of the policies. The Company invests in these policies, known as BOLI, to provide an efficient form of funding for

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long-term retirement and other employee benefits costs. The Company records these BOLI policies within bank owned life insurance on the Company’s Consolidated Balance Sheets at each policy’s respective cash surrender value, with changes recorded in noninterest income in the Company’s Consolidated Statements of Income.

Goodwill

Goodwill represents the excess of the purchase price over the estimated fair value of identifiable net assets associated with acquisition transactions. Goodwill is assigned to each of the Company’s reporting units and tested for impairment annually or on an interim basis if events or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value.

The Company has defined its reporting unit structure to include: Retail Banking, Commercial Banking, Corporate and Investment Banking and Wealth Management. The fair value of each reporting unit was estimated using a combination of the present value of future expected cash flows and hypothetical market prices of similar entities and like transactions.

Each of the defined reporting units was tested for impairment as of October 31, 2012. During 2012, the Company changed its annual goodwill impairment testing date from November 30^th to October 31^st. The change in testing dates has and will allow for the timely completion of the annual impairment test prior to year end. This change was accounted for as a change in the method of applying an accounting principle and did not have a retrospective effect or an impact on the current or prior periods. The Company’s October 31, 2012, impairment test indicated no impairment at the test date. See Note 8, Goodwill and Other Acquired Intangible Assets, for a further discussion.

Other Intangible Assets

Other intangible assets represent purchased assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in a combination with a related contract, asset or liability. Generally, other intangible assets are deemed to have finite lives. Accordingly, other intangible assets are amortized over their anticipated estimated useful lives and are subject to impairment testing if events or changes in circumstances warrant an evaluation. Other intangible assets are amortized over a period based on the expected life of the intangible, generally 8-10 years for core deposits and up to 20 years for other intangible assets.

Other Real Estate Owned

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at the lower of recorded balance or fair value less costs to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, OREO is carried at the lower of carrying amount or fair value less costs to sell. Gains and losses on the sales and write downs on such properties are included in other noninterest income. Operating expenses from these OREO properties are included in other noninterest expense.

Mortgage Servicing Rights

The Company has one primary class of MSR related to residential real estate mortgages. These mortgage servicing rights are recorded in other assets on the Consolidated Balance Sheets at fair value with changes in fair value recorded as a component of mortgage banking income in the Company’s Consolidated Statements of Income. See Note 5, Loan Sales and Servicing, for a further discussion.

Advertising Costs

Advertising costs are generally expensed as incurred and recorded as marketing expense, a component of noninterest expense in the Company’s Consolidated Statements of Income.

Income Taxes

The Company and its eligible subsidiaries file a consolidated federal income tax return. The Company files separate tax returns for subsidiaries that are not eligible to be included in the consolidated federal income tax return. Based on the laws of the respective states where it conducts business operations, the Company either files consolidated, combined or separate tax returns.

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Deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities and are measured using the tax rates and laws that are expected to be in effect when the differences are anticipated to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period the change is incurred. In evaluating the Company's ability to recover its deferred tax assets within the jurisdiction from which they arise, the Company must consider all available evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and the results of recent operations. A valuation allowance is recognized for a deferred tax asset, if based on the available evidence, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

The Company recognizes income tax benefits associated with uncertain tax positions, when, in its judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the Company initially and subsequently measures the tax benefit as the largest amount that the Company judges to have a greater than 50% likelihood of being realized upon ultimate settlement with the taxing authority.

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of other noninterest expense in the Company’s Consolidated Statements of Income. Accrued interest and penalties are included within accrued expenses and other liabilities on the Company’s Consolidated Balance Sheets.

Merger and Integration Expenses

Merger and integration expenses, as presented in the Company’s Consolidated Statements of Income, represent costs associated with business combinations completed by the Company and integration costs of acquired companies. These costs primarily include compensation expense, data processing systems conversion costs, costs to close facilities, professional fees and broker fees.

Noncontrolling Interests

The Company applies the accounting guidance codified in ASC Topic 810, Consolidation, related to the treatment of noncontrolling interests. This guidance requires the amount of consolidated net income attributable to the parent and to the noncontrolling interests be clearly identified and presented on the face of the consolidated financial statements.

Upon adoption of this guidance, the Company no longer reports the noncontrolling interests attributable to its REIT preferred securities and mezzanine investment fund as liabilities on the Company’s Consolidated Balance Sheets (see Note 12, Capital Securities and Preferred Stock, for a discussion of the preferred securities). Rather, the noncontrolling interests are reported within shareholder’s equity, separately from the equity attributable to the Company’s shareholder. Additionally, the dividends paid to the REIT preferred shareholders and other mezzanine investment fund investors, previously reported in the Company’s Consolidated Statements of Income as an expense, are now reported as reductions in shareholder’s equity in the Consolidated Statements of Shareholder’s Equity, separately from changes in the equity attributable to the Company’s shareholder.

Accounting for Derivatives and Hedging Activities

A derivative is a financial instrument that derives its cash flows, and therefore its value, by reference to an underlying instrument, index or referenced interest rate. These instruments include interest rate swaps, caps, floors, financial forwards and futures contracts, foreign exchange contracts, options written and purchased, and commodity contracts. The Company mainly uses derivatives to manage economic risk related to commercial loans, long-term debt and other funding sources. The Company also uses derivatives to facilitate transactions on behalf of its customers.

All derivative instruments are recognized on the Company’s Consolidated Balance Sheets at their fair value. Fair values are estimated using pricing models and current market data. On the date the derivative instrument contract is entered into, the Company designates the derivative as (1) a fair value hedge, (2) a cash flow hedge, or (3) a free-standing derivative. Changes in the fair value of a derivative instrument that is highly effective and that is designated and qualifies as a fair value hedge, along with the loss or gain on the hedged asset or liability that is attributable to the hedged risk (including losses or gains on firm commitments), are recorded in earnings. Changes in the fair value of a derivative instrument that is highly effective and that is designated and qualifies as a cash flow hedge are recorded in accumulated other comprehensive income, until earnings are affected by the variability of cash flows (e.g., when

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periodic settlements on a variable-rate asset or liability are recorded in earnings). Changes in the fair value of a free-standing derivative and settlements on the instruments are reported in earnings.

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivative instruments that are designated as fair value or cash flow hedges to specific assets and liabilities on the Company’s Consolidated Balance Sheets or to specific firm commitments or forecasted transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative instruments that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

The Company discontinues hedge accounting prospectively when: (1) it is determined that the derivative instrument is no longer highly effective in offsetting changes in the fair value or cash flows of a hedged item (including firm commitments or forecasted transactions); (2) the derivative instrument expires or is sold, terminated or exercised; (3) the derivative instrument is de-designated as a hedge instrument because it is unlikely that a forecasted transaction will occur; (4) a hedged firm commitment no longer meets the definition of a firm commitment; or (5) management determines that designation of the derivative instrument as a hedge instrument is no longer appropriate.

When hedge accounting is discontinued because it is determined that the derivative instrument no longer qualifies as an effective fair value or cash flow hedge, the derivative instrument continues to be carried on the Company’s Consolidated Balance Sheets at its fair value, with changes in the fair value included in earnings. Additionally, for fair value hedges, the hedged asset or liability is no longer adjusted for changes in fair value and the existing basis adjustment is amortized or accreted as an adjustment to the yield over the remaining life of the asset or liability. For cash flow hedges, when hedge accounting is discontinued, but the hedged cash flows or forecasted transaction are still expected to occur, the unrealized gains and losses that were accumulated in other comprehensive income are recognized in earnings in the same period when the earnings are affected by the hedged cash flows or forecasted transaction. When a cash flow hedge is discontinued, because the hedged cash flows or forecasted transactions are not expected to occur, unrealized gains and losses that were accumulated in other comprehensive income are recognized in earnings immediately.

Sales of Receivables

The Company periodically sells receivables to third parties. Gains or losses on the sale of the receivables depend in part on the previous carrying amount of the financial assets involved in the transfer, allocated between the assets sold and the retained interests based on their relative fair value at the date of transfer.

Recently Issued Accounting Standards

Repurchase Agreements

In April 2011, the FASB released ASU 2011-03, Reconsideration of Effective Control for Repurchase Agreements, which is codified in ASC Topic 860, Transfers and Servicing. The ASU removes the criterion in assessing effective control that requires a transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee. The ASU is intended to reduce structuring opportunities that would allow a repurchase agreement to be accounted for as a sale by making irrelevant the level of cash collateral received by the transferor in a repurchase agreement in determining if it should be accounted for as a sale. As a result, more agreements will be accounted for as financings. The guidance is effective for interim and annual periods beginning on or after December 15, 2011. The adoption of this standard did not have a material impact on the financial condition or results of operations of the Company.

Fair Value Measurements – Convergence with IFRS

In May 2011, the FASB released ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The update is codified in ASC Topic 820, Fair Value Measurement and Disclosures. Under the amended guidance, the Company is required to expand its disclosure for fair value instruments categorized within Level 3 of the fair value hierarchy to include the valuation process used by the Company and a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs for recurring fair value measurements and the interrelationships between those unobservable inputs, if any. The Company is also required to disclose the categorization by level of the fair value hierarchy for items that are not measured at fair

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value in the statement of financial position but for which the fair value is required to be disclosed. See Note 20, Fair Value of Financial Instruments, for the newly adopted disclosures related to this standard.

Presentation of Comprehensive Income

In June 2011, the FASB released ASU 2011-05, Presentation of Comprehensive Income, which is codified in ASC Topic 220, Comprehensive Income. Most notably, the ASU eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments are effective for fiscal years beginning after December 15, 2011. The adoption of this standard required the Company to change its practice of presenting components of other comprehensive income in the Consolidated Statements of Shareholder’s Equity. In December 2011, the FASB issued ASU 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05, which defers indefinitely the requirement to present reclassification adjustments on the statement of income. The remaining provisions were effective for the Company as of January 1, 2012 with retrospective application. Adoption of the ASU required the Company to add a statement of comprehensive income. See Consolidated Statements of Comprehensive Income.

Testing Goodwill for Impairment

In September 2011, the FASB issued ASU 2011-08, Testing Goodwill for Impairment. Under the ASU, which is codified in ASC Topic 350, Intangibles – Goodwill and Other, an entity would not be required to calculate the fair value of a reporting unit unless it determines, based on the qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The ASU is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 and was adopted by the Company on January 1, 2012. The adoption of this standard did not have a material impact on the financial condition or results of operations of the Company.

Disclosures about Offsetting Assets and Liabilities

In December 2011, the FASB issued ASU 2011-11, Disclosures about Offsetting Assets and Liabilities, which is an amendment to ASC Topic 210, Balance Sheet. The ASU requires companies to disclose information about financial instruments that have been offset and related arrangements to enable investors and other users of their financial statements to understand the effect or potential effect of those arrangements on their financial positions. The ASU does not change the existing offsetting eligibility criteria or the permitted balance sheet presentation for those instruments that meet the eligibility criteria, but will require new disclosures. The amendments are required for annual reporting periods beginning on or after January 1, 2013, and interim periods within these annual periods. The adoption of this standard did not have a material impact on the financial condition or results of operations of the Company. See Note 14, Assets and Liabilities Subject to Enforceable Master Netting Arrangements.

Indemnification Asset Accounting

In October 2012, the FASB issued ASU 2012-06, Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution (a consensus of the FASB Emerging Issues Task Force), which amends ASC Topic 805, Business Combinations. The amendments require an indemnification asset resulting from a government-assisted acquisition of a financial institution to be subsequently measured on the same basis as the subsequent measurement of the underlying asset subject to indemnification. For public and nonpublic entities, the amendments are effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2012. The adoption of this standard did not have a material impact on the financial condition or results of operations of the Company.

(2)Disposition Activity

Disposition Activity

During 2010, the Company sold, through an asset sale, a portion of an insurance agency located in Tucson, Arizona. The transaction resulted in a write-off of $3.2 million of goodwill, attributable to the insurance reporting unit, and the recognition of a $489 thousand gain on the sale of business, included in other noninterest income in the Company’s Consolidated Statements of Income for the year ended December 31, 2010.

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In April 2012, the Company sold, through an asset sale, its insurance business unit, specializing in property and casualty insurance sales. The sale transaction generated net cash of $29.3 million and a gain on sale of business of $15.1 million, which is included in other noninterest income in the Company’s Consolidated Statements of Income for the year ended December 31, 2012. This transaction also resulted in the reduction of $9.2 million of goodwill and $5.3 million of intangible assets.

(3)Investment Securities Available for Sale and Investment Securities Held to Maturity

The following table presents the adjusted cost and approximate fair value of investment securities available for sale and investment securities held to maturity at December 31, 2012 and 2011.

	December 31, 2012
			Gross Unrealized
	Amortized Cost		Gains		Losses		Fair Value
	(In Thousands)
Investment securities available for sale:
Debt securities:
U.S. Treasury and other U.S. government agencies	$	89,419	$	6,706	$	—	$	96,125
Mortgage-backed securities	5,080,353		124,671		5,511		5,199,513
Collateralized mortgage obligations	1,656,128		69,878		3,181		1,722,825
States and political subdivisions	329,335		14,319		1,757		341,897
Other	129,594		671		43		130,222
Equity securities	497,824		24		—		497,848
Total	$	7,782,653	$	216,269	$	10,492	$	7,988,430
Investment securities held to maturity:
Collateralized mortgage obligations	$	185,684	$	3,866	$	14,597	$	174,953
Asset-backed securities	87,503		3,896		10,306		81,093
States and political subdivisions	1,151,742		3,267		84,391		1,070,618
Other	83,000		9,135		2,076		90,059
Total	$	1,507,929	$	20,164	$	111,370	$	1,416,723

170

	December 31, 2011
			Gross Unrealized
	Amortized Cost		Gains		Losses		Fair Value
	(In Thousands)
Investment securities available for sale:
Debt securities:
U.S. Treasury and other U.S. government agencies	$	115,194	$	7,104	$	2	$	122,296
Mortgage-backed securities	4,630,216		127,155		4,428		4,752,943
Collateralized mortgage obligations	2,087,385		77,324		177		2,164,532
States and political subdivisions	285,017		18,903		93		303,827
Other	121,903		592		220		122,275
Equity securities	557,795		13		—		557,808
Total	$	7,797,510	$	231,091	$	4,920	$	8,023,681
Investment securities held to maturity:
Collateralized mortgage obligations	$	231,256	$	12,753	$	13,762	$	230,247
Asset-backed securities	106,783		3,861		15,708		94,936
States and political subdivisions	886,807		2,654		86,178		803,283
Other	80,327		837		3,549		77,615
Total	$	1,305,173	$	20,105	$	119,197	$	1,206,081

In the above table, equity securities include $498 million and $558 million at December 31, 2012 and 2011, respectively, of FHLB and Federal Reserve stock carried at par. At December 31, 2012, approximately $4.5 billion of investment securities available for sale were pledged to secure public deposits and FHLB advances and for other purposes as required or permitted by law.

The investments held within the states and political subdivision caption of investment securities held to maturity relates to private placement transactions underwritten as loans by the Company but that met the definition of a security within ASC Topic 320, Investments – Debt and Equity Securities.

At December 31, 2012, approximately 96% of the total securities classified within available for sale are rated “AAA,” the highest possible rating by nationally recognized rating agencies. The remainder of the investment securities classified within available for sale are classified as either Federal Reserve stock, FHLB stock or money market funds.

171

The following table discloses the fair value and the gross unrealized losses of the Company’s available for sale securities and held to maturity securities that were in a loss position at December 31, 2012 and 2011. This information is aggregated by investment category and the length of time the individual securities have been in an unrealized loss position.

	December 31, 2012
	Securities in a loss position for less than 12 months				Securities in a loss position for 12 months or longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In Thousands)
Investment securities available for sale:
Debt securities:
Mortgage-backed securities	$	1,186,724	$	4,198	$	87,583	$	1,313	$	1,274,307	$	5,511
Collateralized mortgage obligations	140,808		3,181		—		—		140,808		3,181
States and political subdivisions	81,768		1,645		5,275		112		87,043		1,757
Other	4,950		43		—		—		4,950		43
Equity securities	—		—		—		—		—		—
Total	$	1,414,250	$	9,067	$	92,858	$	1,425	$	1,507,108	$	10,492
Investment securities held to maturity:
Collateralized mortgage obligations	$	23,889	$	1,891	$	84,607	$	12,706	$	108,496	$	14,597
Asset-backed securities	11,274		223		29,480		10,083		40,754		10,306
States and political subdivisions	274,218		8,989		466,060		75,402		740,278		84,391
Other	—		—		4,515		2,076		4,515		2,076
Total	$	309,381	$	11,103	$	584,662	$	100,267	$	894,043	$	111,370

	December 31, 2011
	Securities in a loss position for less than 12 months				Securities in a loss position for 12 months or longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In Thousands)
Investment securities available for sale:
Debt securities:
U.S. Treasury and other U.S. government agencies	$	—	$	—	$	404	$	2	$	404	$	2
Mortgage-backed securities	640,726		4,334		20,441		94		661,167		4,428
Collateralized mortgage obligations	51,354		133		7,405		44		58,759		177
States and political subdivisions	—		—		5,392		93		5,392		93
Other	—		—		4,758		220		4,758		220
Equity securities	—		—		—		—		—		—
Total	$	692,080	$	4,467	$	38,400	$	453	$	730,480	$	4,920
Investment securities held to maturity:
Collateralized mortgage obligations	$	76,329	$	6,876	$	51,666	$	6,886	$	127,995	$	13,762
Asset-backed securities	—		—		45,216		15,708		45,216		15,708
States and political subdivisions	94,083		7,785		479,243		78,393		573,326		86,178
Other	60,771		1,325		4,432		2,224		65,203		3,549
Total	$	231,183	$	15,986	$	580,557	$	103,211	$	811,740	$	119,197

172

As noted in the previous tables, at December 31, 2012, the Company held certain investment securities in unrealized loss positions. The Company does not have the intent to sell these securities and believes it is not more likely than not it will be required to sell these securities before their anticipated recovery. Market changes in interest rates and credit spreads will result in temporary unrealized losses as the market price of securities fluctuates. As a result of credit spreads widening, market yields on certain securities have increased. This shift in market yields resulted in unrealized losses on certain securities within the Company’s portfolio.

The Company regularly evaluates each available for sale and held to maturity security in a loss position for OTTI. In its evaluation, the Company considers such factors as the length of time and the extent to which the fair value has been below cost, the financial condition of the issuer, the Company’s intent to hold the security to an expected recovery in market value and whether it is more likely than not that the Company will have to sell the security before its fair value recovers. Activity related to the credit loss component of the OTTI on debt and equity securities is recognized in earnings. For debt securities, the portion of OTTI related to all other factors is recognized in other comprehensive income.  

At December 31, 2012, the unrealized loss within investment securities held to maturity was primarily comprised of $25 million in non-agency collateralized mortgage obligations and asset-backed securities and $84 million of losses in states and political subdivision investments. The non-agency securities include purchase and retained interests from securitizations whose value is reflective of the current liquidity and risk premiums reflected in the market.

Management does not believe that any individual unrealized loss in the Company’s investment securities available for sale and held to maturity portfolios, presented in the preceding tables, represents an OTTI at either December 31, 2012 or 2011, other than those noted below.

The following table discloses activity related to credit losses for debt securities where a portion of the OTTI was recognized in other comprehensive income for the years ended December 31,:

	2012		2011
	(In Thousands)
Balance, January 1	$	16,331	$	12,805
Reductions for securities paid off during the period (realized)	—		(20		)
Additions for the credit component on debt securities in which OTTI was not previously recognized	449		446
Additions for the credit component on debt securities in which OTTI was previously recognized	538		3,100
Balance, December 31	$	17,318	$	16,331

During the years ended December 31, 2012, 2011 and 2010, OTTI recognized on held to maturity securities totaled $987 thousand, $3.5 million and $4.3 million, respectively. The investment securities primarily impacted by credit impairment are held to maturity non-agency collateralized mortgage obligations and asset-backed securities.

173

The maturities of the securities portfolios at December 31, 2012 are presented in the following table.

	Amortized Cost		Fair Value
	(In Thousands)
Investment securities available for sale:
Maturing within one year	$	22,086	$	22,331
Maturing after one but within five years	142,801		151,641
Maturing after five but within ten years	122,165		130,427
Maturing after ten years	759,120		761,693
	1,046,172		1,066,092
Mortgage-backed securities and collateralized mortgage obligations	6,736,481		6,922,338
Total	$	7,782,653	$	7,988,430
Investment securities held to maturity:
Maturing within one year	$	1,375	$	1,377
Maturing after one but within five years	186,919		181,599
Maturing after five but within ten years	294,903		280,553
Maturing after ten years	839,048		778,241
	1,322,245		1,241,770
Collateralized mortgage obligations	185,684		174,953
Total	$	1,507,929	$	1,416,723

In the investment securities available for sale portion of the preceding table, equity securities with a fair value and amortized cost of $498 million are included within the maturing after ten years caption.

The gross realized gains and losses recognized on sales of investment securities available for sale are in the following table.

	December 31,
	2012		2011		2010
	(In Thousands)
Gross gains	$	12,832	$	50,078	$	69,127
Gross losses	—		—		—
Net realized gains (losses)	$	12,832	$	50,078	$	69,127

During 2008, the Company transferred securities with a carrying value and market value of $1.1 billion and $859 million, respectively, from investment securities available for sale to investment securities held to maturity. At December 31, 2012 and 2011 there were $45 million and $65 million, respectively, of unrealized losses, net of tax related to these securities in accumulated other comprehensive income, which are being amortized over the remaining life of those securities.

The Company had investments classified as investment securities available for sale within the mortgage-backed securities and collateralized mortgage obligations caption which were issued by FNMA, FHLMC, and GNMA that approximated 63% of total shareholder’s equity as of December 31, 2012. At December 31, 2012, these investments had market values of $4.1 billion, $2.5 billion and $327 million, respectively, and total amortized cost of $3.9 billion, $2.5 billion and $312 million, respectively.

174

(4) Loans and Allowance for Loan Losses

The following table presents the composition of the loan portfolio at December 31, 2012 and 2011.

	2012		2011
	(In Thousands)
Commercial loans:
Commercial, financial and agricultural	$	16,980,957	$	13,700,779
Real estate – construction	1,895,931		3,367,413
Commercial real estate – mortgage	7,707,548		7,235,458
Total commercial loans	26,584,436		24,303,650
Consumer loans:
Residential real estate – mortgage	11,443,973		9,669,114
Equity lines of credit	2,393,271		2,563,706
Equity loans	671,616		849,369
Credit card	625,395		582,244
Consumer – direct	522,995		528,818
Consumer – indirect	1,593,175		1,366,060
Total consumer loans	17,250,425		15,559,311
Total loans, excluding covered loans	43,834,861		39,862,961
Covered loans	1,176,682		2,079,366
Total loans	$	45,011,543	$	41,942,327

Unearned income totaled $177.8 million and $173.8 million at December 31, 2012 and December 31, 2011, respectively. Unamortized deferred costs totaled $123.9 million and $108.6 million at December 31, 2012 and December 31, 2011, respectively. Unamortized purchase discounts totaled $530.3 million and $927.7 million at December 31, 2012 and December 31, 2011, respectively.

The loan portfolio is diversified geographically, by product type and by industry exposure.  Geographically, the portfolio is predominantly in the Sunbelt states, including Alabama, Arizona, Colorado, Florida, New Mexico and Texas, as well as growing but modest exposure in northern and southern California. The loan portfolio’s most significant geographic presence is within Texas.  The Company monitors its exposure to various industries and adjusts loan production based on current and anticipated changes in the macro-economic environment as well as specific structural, legal and business conditions affecting each broad industry category. 

At December 31, 2012, approximately $11.1 billion of loans were pledged to secure deposits and FHLB advances and for other purposes as required or permitted by law.

Covered loans represent loans acquired from the FDIC subject to loss sharing agreements.

Purchased Impaired Loans

The Company has acquired through acquisitions Purchased Impaired Loans which are recognized on the Company’s Consolidated Balance Sheets within loans, net of recorded discount and allowance for loan losses. The Purchased Impaired Loans had a carrying value of $442 million, $600 million and $842 million, net of discount and the allowance for loan losses at December 31, 2012, 2011 and 2010, respectively. The unpaid principal balance of Purchased Impaired Loans at December 31, 2012, 2011 and 2010, approximated $570 million, $825 million and $1.3 billion, respectively.

175

Ananalysis of the accretable yield related to the Purchased Impaired Loans follows.

	(In Thousands)
Balance at December 31, 2010	$	366,002
Transfer from nonaccretable difference	118,186
Accretion	(259,879		)
Other	(57,034		)
Balance at December 31, 2011	$	167,275
Transfer from nonaccretable difference	84,803
Accretion	(97,661		)
Other	(17,425		)
Balance at December 31, 2012	$	136,992

The Company had allowances of $8.9 million, $14.4 million and $5.7 million related to Purchased Impaired Loans at December 31, 2012, 2011 and 2010, respectively. During the years ended December 31, 2012, 2011 and 2010, the Company recognized $(18.3) million, $14.7 million and $39.2 million, respectively, of provision for loan losses attributable to credit (improvements) deterioration subsequent to acquisition of these loans.

Purchased Nonimpaired Loans

At acquisition, Purchase Nonimpaired Loans were determined to have fair value discounts, some of which were related to credit. The portion of the fair value discount not related to credit is being accreted to interest income over the expected remaining life of the loans based on expected cash flows. For the years ended December 31, 2012, 2011 and 2010, approximately $387 million, $385 million and $419 million of interest income was recognized on these loans, respectively. At December 31, 2012, the unpaid principal balance, carrying value (net of discount and allowance for loan losses) and remaining fair value discount of these loans approximated $1.1 billion, $718 million and $388 million, respectively. At December 31, 2011 the unpaid principal balance, carrying value (net of discount and allowance for loan losses) and remaining fair value discount of these loans approximated $2.1 billion, $1.5 billion and $675 million, respectively. The discount related to credit on the Purchased Nonimpaired Loans is reviewed for adequacy at each balance sheet date. If the expected losses exceed the credit discount, an allowance for loan losses is provided. If the expected losses are reduced, the related credit discount is accreted to interest income over the expected remaining life of the loans.

The following table reflects the recorded investment in all covered Purchased Impaired Loans and Purchased Nonimpaired Loans at December 31, 2012 and 2011.

	December 31, 2012						December 31, 2011
	Purchased Impaired Loans		Purchased Nonimpaired Loans		Total Covered Loans		Purchased Impaired Loans		Purchased Nonimpaired Loans		Total Covered Loans
	(In Thousands)
Commercial, financial and agricultural	$	1,095	$	8,184	$	9,279	$	3,121	$	89,912	$	93,033
Commercial real estate (1)	19,563		513,122		532,685		148,808		1,138,481		1,287,289
Residential real estate – mortgage (2)	429,228		196,258		625,486		461,198		225,474		686,672
Consumer loans	37		9,195		9,232		82		12,290		12,372
Total loans	$	449,923	$	726,759	$	1,176,682	$	613,209	$	1,466,157	$	2,079,366

(1) Includes real estate – construction and commercial real estate - mortgage.

(2) Includes residential real estate – mortgage, equity lines of credit and equity loans

176

Allowance for Loan Losses and Credit Quality

A summary of the activity in the allowance for loan losses for the years ended December 31, 2012, 2011 and 2010follows.

	2012		2011		2010
	(In Thousands)
Balance, January 1	$	1,051,796	$	1,109,017	$	1,268,046
Provision charged to income	29,471		428,633		825,049
Loans charged off	(417,077)		(608,440)		(1,110,651)
Loan recoveries	138,663		122,586		126,573
Net charge-offs	(278,414)		(485,854)		(984,078)
Balance, December 31	$	802,853	$	1,051,796	$	1,109,017

The following table, which excludes loans held for sale, presents a summary of the activity in the allowance for loan losses and related loan balances by loan type as of December 31, 2012 and 2011:

	Commercial, Financial and Agricultural			Commercial Real Estate (1)			Residential Real Estate (2)			Consumer (3)			Covered			Total Loans
	(In Thousands)
December 31, 2012
Allowance for loan losses:
Beginning balance	$	252,399		$	489,284		$	206,763		$	76,467		$	26,883		$	1,051,796
Provision charged to income	63,263			(118,923		)	64,158			51,646			(30,673		)	29,471
Loans charged off	(63,678		)	(151,918		)	(126,087		)	(71,587		)	(3,807		)	(417,077		)
Loan recoveries	31,074			35,881			27,431			18,877			25,400			138,663
Net charge offs	(32,604		)	(116,037		)	(98,656		)	(52,710		)	21,593			(278,414		)
Ending balance	$	283,058		$	254,324		$	172,265		$	75,403		$	17,803		$	802,853
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	15,495		$	37,115		$	20,195		$	3		$	—		$	72,808
Collectively evaluated for impairment	267,563			216,999			152,070			75,400			—			712,032
Noncovered purchased impaired	—			210			—			—			—			210
Covered purchased impaired	—			—			—			—			8,697			8,697
Covered purchased nonimpaired	—			—			—			—			9,106			9,106
Total allowance for loan losses	$	283,058		$	254,324		$	172,265		$	75,403		$	17,803		$	802,853
Ending balance of loans:
Individually evaluated for impairment	$	96,004		$	373,220		$	196,240		$	137		$	—		$	665,601
Collectively evaluated for impairment	16,884,953			9,229,567			14,312,620			2,741,428			—			43,168,568
Noncovered purchased impaired	—			692			—			—			—			692
Covered purchased impaired	—			—			—			—			449,923			449,923
Covered purchased nonimpaired	—			—			—			—			726,759			726,759
Total loans	$	16,980,957		$	9,603,479		$	14,508,860		$	2,741,565		$	1,176,682		$	45,011,543

(1) Includes commercial real estate – mortgage and real estate – construction loans.

(2) Includes residential real estate – mortgage, equity lines of credit and equity loans.

(3) Includes credit card, consumer – direct and consumer – indirect loans.

177

	Commercial, Financial and Agricultural			Commercial Real Estate (1)			Residential Real Estate (2)			Consumer (3)			Covered			Total Loans
	(In Thousands)
December 31, 2011
Allowance for loan losses:
Beginning balance	$	207,992		$	624,357		$	163,271		$	94,648		$	18,749		$	1,109,017
Provision charged to income	159,255			38,352			182,747			36,223			12,056			428,633
Loans charged off	(154,721		)	(215,241		)	(147,060		)	(79,220		)	(12,198		)	(608,440		)
Loan recoveries	39,873			41,816			7,805			24,816			8,276			122,586
Net charge offs	(114,848		)	(173,425		)	(139,255		)	(54,404		)	(3,922		)	(485,854		)
Ending balance	$	252,399		$	489,284		$	206,763		$	76,467		$	26,883		$	1,051,796
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	35,377		$	70,189		$	10,434		$	—		$	—		$	116,000
Collectively evaluated for impairment	217,022			417,951			196,329			76,467			—			907,769
Noncovered purchased impaired	—			1,144			—			—			—			1,144
Covered purchased impaired	—			—			—			—			13,286			13,286
Covered purchased nonimpaired	—			—			—			—			13,597			13,597
Total allowance for loan losses	$	252,399		$	489,284		$	206,763		$	76,467		$	26,883		$	1,051,796
Ending balance of loans:
Individually evaluated for impairment	$	116,795		$	553,407		$	57,426		$	—		$	—		$	727,628
Collectively evaluated for impairment	13,583,984			10,048,320			13,024,763			2,477,122			—			39,134,189
Noncovered purchased impaired	—			1,144			—			—			—			1,144
Covered purchased impaired	—			—			—			—			613,209			613,209
Covered purchased nonimpaired	—			—			—			—			1,466,157			1,466,157
Total loans	$	13,700,779		$	10,602,871		$	13,082,189		$	2,477,122		$	2,079,366		$	41,942,327

(1) Includes commercial real estate – mortgage and real estate – construction loans.

(2) Includes residential real estate – mortgage, equity lines of credit and equity loans.

(3) Includes credit card, consumer – direct and consumer – indirect loans.

The following table presents information on individually analyzed impaired loans, by loan class, as of December 31, 2012 and 2011.

	December 31, 2012
	Individually Analyzed Impaired Loans With No Recorded Allowance						Individually Analyzed Impaired Loans With a Recorded Allowance						Total Individually Analyzed Impaired Loans
	Recorded Investment		Unpaid Principal Balance		Allowance		Recorded Investment		Unpaid Principal Balance		Allowance		Average Recorded Investment		Interest Income Recognized
	(In Thousands)
Commercial, financial and agricultural	$	36,601	$	43,120	$	—	$	59,403	$	71,497	$	15,495	$	119,673	$	1,277
Real estate – construction	62,972		68,004		—		72,907		88,919		10,452		304,680		5,153
Commercial real estate – mortgage	49,169		54,576		—		188,172		207,499		26,663		331,003		4,312
Residential real estate – mortgage	17,294		17,466		—		153,301		155,922		18,286		165,172		4,417
Equity lines of credit	—		—		—		1,800		1,800		487		2,476		10
Equity loans	—		—		—		23,845		23,845		1,422		22,880		902
Credit card	—		—		—		—		—		—		—		—
Consumer – direct	—		—		—		137		137		3		130		9
Consumer – indirect	—		—		—		—		—		—		—		—
Total loans	$	166,036	$	183,166	$	—	$	499,565	$	549,619	$	72,808	$	946,014	$	16,080

178

	December 31, 2011
	Individually Analyzed Impaired Loans With No Recorded Allowance						Individually Analyzed Impaired Loans With a Recorded Allowance						Total Individually Analyzed Impaired Loans
	Recorded Investment		Unpaid Principal Balance		Allowance		Recorded Investment		Unpaid Principal Balance		Allowance		Average Recorded Investment		Interest Income Recognized
	(In Thousands)
Commercial, financial and agricultural	$	31,316	$	34,076	$	—	$	85,479	$	102,233	$	35,377	$	130,001	$	137
Real estate – construction	113,104		125,780		—		191,489		223,642		39,270		437,315		249
Commercial real estate – mortgage	80,753		88,778		—		168,061		186,361		30,919		261,538		1,049
Residential real estate – mortgage	21,063		21,843		—		29,378		29,603		10,434		50,149		83
Equity lines of credit	—		—		—		—		—		—		767		—
Equity loans	6,985		7,288		—		—		—		—		6,170		—
Credit card	—		—		—		—		—		—		—		—
Consumer – direct	—		—		—		—		—		—		972		—
Consumer – indirect	—		—		—		—		—		—		—		—
Total loans	$	253,221	$	277,765	$	—	$	474,407	$	541,839	$	116,000	$	886,912	$	1,518

The tables above do not include noncovered purchased impaired loans, covered purchased impaired loans, or loans held for sale. At December 31, 2012 and 2011, there were no noncovered purchased impaired loans with credit deterioration subsequent to acquisition that met the requirements for individual review. At December 31, 2012, there were $17.3 million, $26.4 million and $3.7 million, respectively, of recorded investment, unpaid principal balance and allowance for loan losses on covered purchased impaired loans with credit deterioration subsequent to acquisition that were individually reviewed for impairment, respectively. At December 31, 2011, there were $99.3 million, $118.8 million, and $12.9 million, respectively, of recorded investment, unpaid principal balance and allowance for loan losses on covered purchased impaired loans with credit deterioration subsequent to acquisition that were individually reviewed for impairment, respectively. Covered purchased nonimpaired loans are not included in the tables above as they are evaluated on a pool basis and not on an individual basis.

Nonperforming assets, which include loans held for sale and purchased impaired loans, at December 31, 2012 and 2011 are detailed in the following table.

	2012		2011
	(In Thousands)
Nonaccrual loans	$	727,776	$	1,357,649
Loans 90 days or more past due and accruing (1)	140,852		183,277
TDRs 90 days or more past due and accruing	862		8,049
Nonperforming loans	869,490		1,548,975
OREO	68,568		217,840
Other repossessed assets	3,890		4,285
Total nonperforming assets	$	941,948	$	1,771,100

(1) Excludes loans classified as TDRs

During 2012, the Company modified its reported definitions for nonperforming loans and nonperforming assets. For comparability purposes, prior periods were adjusted to reflect this reclassification.

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The Company monitors the credit quality of its commercial portfolio using an internal dual risk rating, which considers both the obligor and the facility. The obligor risk ratings are defined by ranges of default probabilities of the borrowers (AAA through D) and the facility risk ratings are defined by ranges of the loss given default. The combination of those two approaches results in the assessment of the likelihood of loss and it is mapped to the regulatory classifications. The Company assigns internal risk ratings at loan origination and at regular intervals subsequent to origination. Loan review intervals are dependent on the size and risk grade of the loan, and are generally conducted at least annually. Additional reviews are conducted when information affecting the loan’s risk grade becomes available. These ratings have been mapped to the regulatory classifications. The general characteristics of the risk grades are as follows:

• The Company’s internally assigned letter grades “AAA” through “B-” correspond to the regulatory classification “Pass.” These assets do not have any identified potential or well-defined weaknesses and have a high likelihood of orderly repayment. Exceptions exist when either the facility is fully secured by a CD and held at the Company or the facility is secured by properly margined and controlled marketable securities.

• Internally assigned letter grades “CCC+” through “CCC” correspond to the regulatory classification “Special Mention.” Assets with this classification have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

• Internally assigned letter grades “CCC-” through “D1” correspond to the regulatory classification “Substandard.” An asset classified as substandard is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

• The internally assigned letter grade “D2” corresponds to the regulatory classification “Doubtful.” Assets classified as doubtful have all the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

The Company considers payment history as the best indicator of credit quality for the consumer portfolio. Nonperforming loans in the tables below include loans classified as nonaccrual, loans 90 days or more past due and loans modified in a TDR 90 days or more past due.

The following tables, which exclude loans held for sale and covered loans, illustrate the credit quality indicators associated with the Company’s loans, by loan class, as of December 31, 2012 and 2011.

	Commercial
	December 31, 2012
	Commercial, Financial and Agricultural		Real Estate - Construction		Commercial Real Estate - Mortgage
	(In Thousands)
Noncovered loans:
Pass	$	16,621,782	$	1,665,032	$	6,798,282
Special Mention	187,384		99,204		431,688
Substandard	144,002		122,388		387,454
Doubtful	27,789		9,082		89,657
	$	16,980,957	$	1,895,706	$	7,707,081
Noncovered purchased impaired loans:
Substandard	$	—	$	225	$	467
	$	—	$	225	$	467

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	December 31, 2011
	Commercial, Financial and Agricultural		Real Estate - Construction		Commercial Real Estate - Mortgage
	(In Thousands)
Noncovered loans:
Pass	$	13,181,314	$	2,377,561	$	5,779,810
Special Mention	258,417		359,870		649,904
Substandard	196,133		570,046		727,050
Doubtful	64,915		58,792		78,694
	$	13,700,779	$	3,366,269	$	7,235,458
Noncovered purchased impaired loans:
Substandard	$	—	$	1,144	$	—
	$	—	$	1,144	$	—

	Consumer
	December 31, 2012
	Residential Real Estate – Mortgage		Equity Lines of Credit		Equity Loans		Credit Card		Consumer - Direct		Consumer –Indirect
	(In Thousands)
Noncovered loans:
Performing	$	11,245,863	$	2,368,467	$	652,165	$	617,666	$	520,593	$	1,592,037
Nonperforming	198,110		24,804		19,451		7,729		2,402		1,138
	$	11,443,973	$	2,393,271	$	671,616	$	625,395	$	522,995	$	1,593,175

	December 31, 2011
	Residential Real Estate -Mortgage		Equity Lines of Credit		Equity Loans		Credit Card		Consumer -Direct		Consumer –Indirect
	(In Thousands)
Noncovered loans:
Performing	$	9,446,305	$	2,533,219	$	816,784	$	573,860	$	525,803	$	1,364,564
Nonperforming	222,809		30,487		32,585		8,384		3,015		1,496
	$	9,669,114	$	2,563,706	$	849,369	$	582,244	$	528,818	$	1,366,060

Covered loans are excluded from the table above as an initial estimate of credit losses was embedded within the initial purchase discount established at acquisition. Periodically, the Company updates its estimated cash flows related to these covered loans. Increases in these updated cash flows over those expected at the purchase date are recognized as interest income prospectively. Decreases in cash flows after the purchase date are recognized by recording an allowance for credit losses. Generally, since the acquisition of these covered loans, there has been considerable improvement in the expected credit losses with some minimal deterioration in credit quality seen within specific loans and pools of loans. To account for the subsequent deterioration in credit, an allowance for loan losses of $17.8 million was recorded on the $1.2 billion covered portfolio at December 31, 2012 and an allowance for loan losses of $26.9 million was recorded on the $2.1 billion covered portfolio at December 31, 2011.

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The following tables present an aging analysis of the Company’s past due loans as of December 31, 2012 and 2011, excluding loans classified as held for sale and purchased impaired loans.

	December 31, 2012
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Accruing TDRs		Total Past Due and Impaired		Not Past Due or Impaired		Total
	(In Thousands)
Noncovered loans:
Commercial, financial and agricultural	$	36,663	$	4,035	$	1,853	$	112,135	$	17,832	$	172,518	$	16,808,439	$	16,980,957
Real estate – construction	5,222		5,742		1,907		104,458		49,215		166,544		1,729,162		1,895,706
Commercial real estate – mortgage	40,644		8,492		2,771		270,267		56,520		378,694		7,328,387		7,707,081
Residential real estate – mortgage	37,989		16,312		3,645		193,983		91,384		343,313		11,100,660		11,443,973
Equity lines of credit	12,711		7,511		4,661		20,143		—		45,026		2,348,245		2,393,271
Equity loans	12,112		4,621		2,335		16,943		21,929		57,940		613,676		671,616
Credit card	5,770		3,869		7,729		—		—		17,368		608,027		625,395
Consumer – direct	6,876		1,852		2,065		337		138		11,268		511,727		522,995
Consumer – indirect	17,891		4,225		1,138		—		—		23,254		1,569,921		1,593,175
Total noncovered loans	$	175,878	$	56,659	$	28,104	$	718,266	$	237,018	$	1,215,925	$	42,618,244	$	43,834,169
Covered loans	$	12,136	$	583	$	7,452	$	1,232	$	7,079	$	28,482	$	698,277	$	726,759

	December 31, 2011
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Accruing TDRs		Total Past Due and Impaired		Not Past Due or Impaired		Total
	(In Thousands)
Noncovered loans:
Commercial, financial and agricultural	$	12,847	$	4,202	$	2,501	$	185,629	$	22,658	$	227,837	$	13,472,942	$	13,700,779
Real estate – construction	10,840		1,517		502		415,629		97,126		525,614		2,841,799		3,367,413
Commercial real estate – mortgage	18,877		4,302		496		446,926		59,690		530,291		6,705,167		7,235,458
Residential real estate – mortgage	34,526		16,835		1,885		220,844		75,170		349,260		9,319,854		9,669,114
Equity lines of credit	16,619		10,839		6,917		23,570		203		58,148		2,505,558		2,563,706
Equity loans	14,037		5,579		2,276		30,309		13,597		65,798		783,571		849,369
Credit card	5,736		3,970		8,384		—		—		18,090		564,154		582,244
Consumer – direct	9,710		1,842		1,798		1,217		8		14,575		514,243		528,818
Consumer – indirect	20,438		3,990		1,496		—		—		25,924		1,340,136		1,366,060
Total noncovered loans	$	143,630	$	53,076	$	26,255	$	1,324,124	$	268,452	$	1,815,537	$	38,047,424	$	39,862,961
Covered loans	$	29,280	$	654	$	27,780	$	16,298	$	9,545	$	83,557	$	1,382,600	$	1,466,157

It is the Company’s policy to classify TDRs that are not accruing interest as nonaccrual loans. It is also the Company’s policy to classify TDR past due loans that are accruing interest as TDRs and not according to their past due status. The

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tables above reflect this policy. The following table provides a breakout of all TDRs, including nonaccrual loans, loans classified as held for sale and covered loans, at December 31, 2012 and 2011.

	December 31, 2012
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Total Past Due and Nonaccrual		Not Past Due or Nonaccrual		Total
	(In Thousands)
Commercial, financial and agricultural	$	—	$	—	$	207	$	45,041	$	45,248	$	17,625	$	62,873
Real estate – construction	—		—		—		28,423		28,423		49,215		77,638
Commercial real estate – mortgage	—		—		—		47,015		47,015		56,520		103,535
Residential real estate – mortgage	4,742		2,695		482		28,895		36,814		83,465		120,279
Equity lines of credit	—		—		—		—		—		—		—
Equity loans	1,027		370		173		2,251		3,821		20,359		24,180
Credit card	—		—		—		—		—		—		—
Consumer – direct	5		—		—		—		5		133		138
Consumer – indirect	—		—		—		—		—		—		—
Total loans	$	5,774	$	3,065	$	862	$	151,625	$	161,326	$	227,317	$	388,643
Covered loans	$	3	$	1	$	—	$	312	$	316	$	7,075	$	7,391

	December 31, 2011
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Total Past Due and Nonaccrual		Not Past Due or Nonaccrual		Total
	(In Thousands)
Commercial, financial and agricultural	$	253	$	23	$	71	$	80,720	$	81,067	$	22,311	$	103,378
Real estate – construction	—		—		—		156,028		156,028		97,126		253,154
Commercial real estate – mortgage	475		—		—		125,658		126,133		59,215		185,348
Residential real estate – mortgage	4,196		1,548		80		28,055		33,879		69,346		103,225
Equity lines of credit	—		—		—		—		—		203		203
Equity loans	707		590		—		9,352		10,649		12,300		22,949
Credit card	—		—		—		—		—		—		—
Consumer – direct	8		—		—		109		117		—		117
Consumer – indirect	—		—		—		—		—		—		—
Total loans	$	5,639	$	2,161	$	151	$	399,922	$	407,873	$	260,501	$	668,374
Covered loans	$	79	$	16	$	7,898	$	12,970	$	20,963	$	1,552	$	22,515

As of December 31, 2012 and 2011 there were no loans held for sale classified as TDRs.

Modifications to a borrower’s debt agreement are considered TDRs if a concession is granted for economic or legal reasons related to a borrower’s financial difficulties that otherwise would not be considered. Within each of the Company’s loan classes, TDRs typically involve modification of the loan interest rate to a below market rate or an extension or deferment of the loan. During the year ended December 31, 2012, $38.6 million of TDR modifications included an interest rate concession and $61.3 million of TDR modifications resulted from modifications to the loan’s structure.

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The following table presents an analysis of the types of loans that were restructured and classified as TDRs during the years ended December 31, 2012 and 2011, excluding loans classified as held for sale.

	December 31, 2012
	Number of Contracts	Post-Modification Outstanding Recorded Investment
	(Dollars in Thousands)
Commercial, financial and agricultural	8	$	23,828
Real estate – construction	21	13,334
Commercial real estate – mortgage	18	25,001
Residential real estate – mortgage	139	28,343
Equity lines of credit	3	2
Equity loans	127	9,190
Credit card	1	—
Consumer – direct	2	136
Consumer – indirect	—	—
Covered	5	34

	December 31, 2011
	Number of Contracts	Post-Modification Outstanding Recorded Investment
	(Dollars in Thousands)
Commercial, financial and agricultural	106	$	164,466
Real estate – construction	131	274,348
Commercial real estate – mortgage	133	200,133
Residential real estate – mortgage	206	59,211
Equity lines of credit	—	—
Equity loans	76	13,320
Credit card	—	—
Consumer – direct	6	377
Consumer – indirect	—	—
Covered	52	35,187

For the year ended December 31, 2012, charge-offs and changes to the allowance related to modifications classified as TDRs were insignificant.

The Company considers TDRs aged 90 days or more past due, charged off or classified as nonaccrual subsequent to modification, where the loan was not classified as a nonperforming loan at the time of modification, as subsequently defaulted.

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The following tables provide a summary of initial subsequent defaults that occurred during the years ended December 31, 2012 and 2011 that occurred within one year of the restructure date. The table excludes loans classified as held for sale as of period-end and includes loans no longer in default as of year-end.

	December 31, 2012
	Number of Contracts	Recorded Investment at December 31, 2012		Recorded Investment at Default
	(Dollars in Thousands)
Commercial, financial and agricultural	—	$	—	$	—
Real estate – construction	4	1,097		1,792
Commercial real estate – mortgage	13	2,107		24,289
Residential real estate – mortgage	12	2,355		2,619
Equity lines of credit	—	—		—
Equity loans	8	345		692
Credit card	—	—		—
Consumer – direct	—	—		—
Consumer – indirect	—	—		—
Covered	2	—		2,051

	December 31, 2011
	Number of Contracts	Recorded Investment at December 31, 2011		Recorded Investment at Default
	(Dollars in Thousands)
Commercial, financial and agricultural	6	$	653	$	1,001
Real estate – construction	5	889		1,308
Commercial real estate – mortgage	4	869		875
Residential real estate – mortgage	18	2,205		3,843
Equity lines of credit	—	—		—
Equity loans	8	1,519		1,637
Credit card	—	—		—
Consumer – direct	—	—		—
Consumer – indirect	—	—		—
Covered	5	4,209		54,756

The Company’s allowance for loan losses is largely driven by updated risk ratings assigned to commercial loans, updated borrower credit scores on consumer loans, and borrower delinquency history in both commercial and consumer portfolios.  As such, the provision for credit losses is impacted primarily by changes in borrower payment performance rather than TDR classification.  In addition, all commercial and consumer loans modified in a TDR are considered to be impaired, even if they maintain their accrual status.

At December 31, 2012 and 2011, there were $6.5 million and $15.2 million, respectively, of commitments to lend additional funds to debtors owing loans whose terms have been modified in a TDR.

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(5)Loan Sales and Servicing

The following table presents the composition of the loans held for sale portfolio at December 31, 2012 and 2011.

	2012		2011
	(In Thousands)
Loans held for sale:
Real estate – construction	$	877	$	8,396
Commercial real estate – mortgage	9,017		10,966
Residential real estate – mortgage	312,171		150,989
Total loans held for sale	$	322,065	$	170,351

During the years ended December 31, 2012 and 2011, the Company transferred loans, with a recorded balance immediately preceding the transfer, totaling $315.6 million and $51.9 million, respectively, from the held for investment portfolio to loans held for sale. The Company recognized charge-offs upon transfer of these loans totaling $111.3 million and $7.2 million during the years ended December 31, 2012 and 2011, respectively. The Company sold loans and loans held for sale with a recorded balance of $352 million and $326 million, excluding loans originated for sale in the secondary market, during the years ended December 31, 2012 and 2011, respectively.

Sales of residential real estate – mortgage loans originated for sale in the secondary market, including loans originated for sale where the Company retained servicing responsibilities, were $1.2 billion and $550 million for the years ended December 31, 2012 and 2011, respectively. The Company recognized net gains of $49 million and $16 million on the sale of residential mortgage loans originated for sale during 2012 and 2011, respectively. These gains were recorded in mortgage banking income in the Company’s Consolidated Statements of Income.

Residential Real Estate Mortgage Loans Sold with Retained Servicing

During 2012 and 2011, the Company sold $1.1 billion and $462 million, respectively, of residential mortgage loans originated for sale where the Company retained servicing responsibilities. For these sold loans, there is no recourse to the Company for the failures of debtors to pay when due. At December 31, 2012 and 2011, the Company was servicing $1.5 billion and $451 million, respectively, of residential mortgage loans sold with retained servicing. These loans are not included in loans on the Company’s Consolidated Balance Sheets.

In connection with residential mortgage loans sold with retained servicing, the Company receives annual servicing fees based on a percentage of the outstanding balance. The Company recognized servicing fees of $2.0 million and $232 thousand during 2012 and 2011, respectively, as a component of other noninterest income in the Company’s Consolidated Statements of Income. At December 31, 2012 and 2011, the Company had recorded $13.3 million and $4.3 million of servicing assets, respectively, under the fair value method in other assets on the Company’s Consolidated Balance Sheets.

The value of MSRs is significantly affected by mortgage interest rates available in the marketplace, which influence mortgage loan prepayment speeds. In general, during periods of declining rates, the value of MSRs declines due to increasing prepayments attributable to increased mortgage-refinance activity. During periods of rising interest rates, the value of mortgage servicing rights generally increases due to reduced refinance activity. The Company maintains a non-qualifying hedging strategy to manage a portion of the risk associated with changes in the value of the MSR portfolio.  This strategy includes the purchase of various trading securities.  The interest income, mark-to-market adjustments and gain or loss from sale activities associated with these securities are expected to economically hedge a portion of the change in the value of the MSR portfolio.

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The following table is an analysis of the activity in the Company’s residential MSRs for the years ended December 31, 2012 and 2011:

	Years Ended December 31,
	2012			2011
	(In Thousands)
Carrying value, January 1	$	4,264		$	—
Additions	11,472			4,633
Increase (decrease) in fair value:
Due to changes in valuation inputs or assumptions	(1,512		)	(295		)
Due to other changes in fair value (1)	(969		)	(74		)
Carrying value, December 31	$	13,255		$	4,264

(1) Represents the realization of expected net servicing cash flows, expected borrower repayments and the passage of time.

See Note 20, Fair Value of Financial Instruments, for additional disclosures related to the assumptions and estimates used in determining fair value of residential MSRs.

At December 31, 2012, the sensitivity of the current fair value of the residential MSRs to immediate 10% and 20% adverse changes in key economic assumptions are included in the following table:

	2012
(Dollars in Thousands)
Fair value of residential mortgage servicing rights	$	13,255
Composition of residential loans serviced for others:
Fixed rate mortgage loans	97.1		%
Adjustable rate mortgage loans	2.9
Total	100.0		%
Weighted average life (in years)	5.6
Prepayment speed:	12.0		%
Effect on fair value of a 10% increase	(541)
Effect on fair value of a 20% increase	(1,042)
Weighted average discount rate:	10.0		%
Effect on fair value of a 10% increase	(434)
Effect on fair value of a 20% increase	(840)

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of an adverse variation in a particular assumption on the fair value of the MSRs is calculated without changing any other assumption; while in reality, changes in one factor may result in changes in another, which may magnify or counteract the effect of the change.

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(6)Premises and Equipment

A summary of the Company’s premises and equipment at December 31, 2012 and 2011 follows.

	2012		2011
	(In Thousands)
Land	$	346,236	$	350,518
Buildings	563,925		552,789
Furniture, fixtures and equipment	366,177		313,666
Software	437,844		182,075
Leasehold improvements	133,618		116,367
Construction / projects in progress	162,353		326,778
	2,010,153		1,842,193
Less: Accumulated depreciation and amortization	576,192		458,725
Total premises and equipment	$	1,433,961	$	1,383,468

The Company recognized $135.8 million, $114.0 million and $112.4 million of depreciation expense related to the above premises and equipment for the years ended December 31, 2012, 2011 and 2010, respectively.

During 2010, the Company sold a building located in Houston, Texas, generating a $16.1 million gain on sale which is included in other noninterest income in the Company’s Consolidated Statements of Income. Separate from the sale, the Company entered into an agreement to lease a minor portion of the building.

(7)Bank Owned Life Insurance

The Company maintains life insurance policies on certain of its executives and employees. At December 31, 2012 and 2011, the cash surrender values on the underlying life insurance policies totaled $672 million and $655 million, respectively, which are recorded as bank owned life insurance on the Company’s Consolidated Balance Sheets. These cash surrender values are classified separately from related split dollar life insurance arrangements of $7 million and $6 million at December 31, 2012 and 2011, respectively, which are recorded on the Company’s Consolidated Balance Sheets as accrued expenses and other liabilities. Changes to the underlying cash surrender value are recorded in noninterest income in the Company’s Consolidated Statements of Income and for the years ended December 31, 2012, 2011 and 2010 totaled $20.3 million, $21.1 million and $15.5 million, respectively.

(8)Goodwill and Other Acquired Intangible Assets

A summary of the activity related to the Company’s goodwill for the year ended December 31, 2012 and 2011 follows.

	2012			2011
	(In Thousands)
Balance, January 1:
Goodwill	$	9,739,959		$	9,738,715
Accumulated impairment losses	(4,762,703		)	(2,758,903		)
Goodwill, net at January 1	4,977,256			6,979,812
Annual activity:
Goodwill acquired during the year	3,589			1,244
Disposition adjustments	(9,200		)	—
Impairment losses	—			2,003,800
Balance, December 31:
Goodwill	9,734,348			9,739,959
Accumulated impairment losses	(4,762,703		)	(4,762,703		)
Goodwill, net at December 31	$	4,971,645		$	4,977,256

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During the year, through an asset sale, the Company sold its insurance business unit, specializing in property and casualty insurance sales. As a result of the sale of the insurance business unit, the Company disposed of $9.2 million of goodwill attributable to this business unit. Additionally, the Company made a $3.6 million payment related to a previously executed acquisition agreement. This payment was recognized as goodwill.

In accordance with the applicable accounting guidance, the Company performs annual tests to identify potential impairment of goodwill. The tests are required to be performed annually and more frequently if events or circumstances indicate a potential impairment may exist. In step one of the impairment test, the Company compares the fair value of each reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, step two of the impairment test is required to be performed to measure the amount of impairment loss, if any. Step two compares the implied fair value of goodwill attributable to each reporting unit to the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination; an entity allocates the fair value determined in step one for the reporting unit to all of the assets and liabilities of that unit as if the reporting unit had been acquired in a business combination. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

The Company tested its four identified reporting units with goodwill for impairment as of October 31, 2012. This test indicated no goodwill impairment was required in any of the Company’s identified reporting units. During the year ended December 31, 2011, the Company recognized a goodwill impairment of $2.0 billion within all of its then identified reporting units, including: Retail Banking – $810.5 million, Commercial Banking – $640.1 million, Wealth Management – $285.8 million, Corporate and Investment Banking - $249.4 million and Insurance – $18.0 million.

At December 31, 2012, the goodwill, net of accumulated impairment losses, attributable to each of the Company’s four identified reporting units is as follows: Retail Banking - $1.7 billion, Commercial Banking - $2.4 billion, Wealth Management - $390 million and Corporate and Investment Banking - $568 million. During 2012, the Company reorganized its management reporting structure for a division of the Corporate and Investment Banking reporting unit, designating the division’s responsibility to the Commercial Banking reporting unit. In connection with this reorganization, management reallocated goodwill between the reporting units using a relative fair value approach, resulting in $411 million of goodwill being transferred from the Corporate and Investment Banking reporting unit to the Commercial Banking reporting unit.

Through December 31, 2012, the Company had recognized accumulated goodwill impairment losses within its four identified reporting units with goodwill of $1.1 billion, $2.5 billion, $286 million and $249 million within the Retail Banking, Commercial Banking, Wealth Management and Corporate and Investment Banking reporting units, respectively. In addition, the Company has previously recognized $695 million of accumulated goodwill impairment losses from reporting units that no longer have a goodwill balance.

Both the step one fair values of the reporting units and the step two allocations of the fair values of the reporting units’ assets and liabilities are based upon management’s estimates and assumptions. Although management has used the estimates and assumptions it believes to be most appropriate in the circumstances, it should be noted that even relatively minor changes in certain valuation assumptions used in management’s calculations would result in significant differences in the results of the impairment tests. As an example, the discount rates used in the step one valuation are a key valuation assumption. In the Company’s step one test at October 31, 2012, the combined carrying value of the reporting units with goodwill exceeded the combined fair value by approximately $486 million. If the discount rates used in the step one test were increased by 50 basis points and 100 basis points, the $486 million excess carrying value would increase to $1.3 billion and $2.0 billion, respectively.

A further protracted stagnation of the U.S. and global economies during 2013, especially in the banking sector, could further negatively impact future goodwill impairment tests for the Company, resulting in additional goodwill impairment charges.

In addition to goodwill, the Company also has finite-lived intangible assets in the form of core deposit intangibles and other identifiable intangibles. These core deposit intangibles and other identifiable intangibles are amortized over their estimated useful lives, which, at December 31, 2012, approximated 4.8 years for core deposit intangibles and 3.4 years for other identifiable intangible assets. The Company reviews intangible assets for possible impairment whenever events or circumstances indicate that carrying amounts may not be recoverable.

189

Intangible assets as of December 31, 2012 and 2011 are detailed in the following table.

	2012						2011
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
	(In Thousands)
Other intangible assets:
Core deposit intangibles	$	807,924	$	650,763	$	157,161	$	940,069	$	699,204	$	240,865
Other identifiable intangibles	42,447		29,877		12,570		103,649		77,734		25,915
Total other intangible assets	$	850,371	$	680,640	$	169,731	$	1,043,718	$	776,938	$	266,780

The Company recognized $91.7 million, $108.3 million and $140.4 million of intangible amortization expense during the years ended December 31, 2012, 2011 and 2010, respectively. Intangible amortization expense for the years ending December 31, 2013 through December 31, 2017, is estimated to be $60.7 million, $46.7 million, $36.3 million, $13.8 million, and $7.6 million, respectively, and $4.7 million thereafter.

(9)Deposits

Time deposits of less than $100,000 totaled $3.9 billion at December 31, 2012, while time deposits of $100,000 or more totaled $8.2 billion. At December 31, 2012, the scheduled maturities of time deposits were as follows.

	(In Thousands)
2013	$	7,109,391
2014	3,219,725
2015	399,947
2016	269,496
2017	809,503
Thereafter	265,153
Total	$	12,073,215

At December 31, 2012 and 2011, demand deposit overdrafts reclassified to loans totaled $13 million and $15 million, respectively. In addition to the securities and loans the Company has pledged as collateral to secure public deposits and FHLB advances at December 31, 2012, the Company also had $4.2 billion of standby letters of credit issued by the FHLB to secure public deposits.

190

(10)Short-Term Borrowings

The short-term borrowings table below shows the distribution of the Company’s short-term borrowed funds.

	Ending Balance		Ending Average Interest Rate		Average Balance		Maximum Outstanding Balance
	(Dollars in Thousands)
As of and for the year ended
December 31, 2012
Federal funds purchased	$	901,980	0.26	%	$	1,048,741	$	1,347,795
Securities sold under agreements to repurchase	199,611		0.04		177,560		211,055
Total	1,101,591				1,226,301		1,558,850
Other short-term borrowings	3,763		—		15,617		29,295
Total short-term borrowings	$	1,105,354			$	1,241,918	$	1,588,145
As of and for the year ended
December 31, 2011
Federal funds purchased	$	1,163,670	0.25	%	$	1,466,149	$	1,967,670
Securities sold under agreements to repurchase	173,172		0.06		191,700		219,040
Total	1,336,842				1,657,849		2,186,710
Other short-term borrowings	2,603		0.12		51,227		76,218
Total short-term borrowings	$	1,339,445			$	1,709,076	$	2,262,928

191

(11) FHLB and Other Borrowings

The following table details the Company’s FHLB advances and other borrowings at December 31, 2012 and 2011, including maturities and interest rates as of December 31, 2012.

		December 31,
	Maturity Dates	2012			2011
		(In Thousands)
FHLB advances:
LIBOR-based floating rate (weighted average rate of 0.63%)	2013-2021	$	525,000		$	1,840,000
Fixed rate (weighted average rate of 1.08%)	2014-2035	2,725,836			1,118,389
Unamortized discount		(647		)	(1,392		)
Total FHLB advances		3,250,189			2,956,997
Subordinated debentures:
6.40% subordinated debentures	2017	350,000			350,000
5.90% subordinated debentures	2026	125,000			275,000
5.50% subordinated debentures	2020	300,000			300,000
Fair value of hedged subordinated debentures		154,316			202,698
Net unamortized discount		(20,334		)	(30,400		)
Total subordinated debentures		908,982			1,097,298
Capital securities:
LIBOR plus 2.85% floating rate debentures payable to Texas Regional Statutory Trust I (1)	2034	51,547			51,547
LIBOR plus 2.60% floating rate debentures payable to TexasBanc Capital Trust I (1)	2034	25,774			25,774
LIBOR plus 3.05% floating rate debentures payable to State National Capital Trust I (1)	2033	15,470			15,470
LIBOR plus 2.79% floating rate debentures payable to State National Statutory Trust II (1)	2034	10,310			10,310
10.18% fixed rate debentures payable to Riverway Holdings Capital Trust I (1)	2031	10,310			10,310
Unamortized premium		697			728
Total capital securities		114,108			114,139
Total FHLB and other borrowings		$	4,273,279		$	4,168,434

(1) Majority of amounts qualify for Tier 1 Capital.

At December 31, 2012, the FHLB advances were secured by loans and investment securities totaling $12.1 billion.

In May 2012, the Company completed a tender offer to purchase $150 million in aggregate principal amount of the Company’s 5.90% subordinated debentures due 2026.  The tender offer resulted in a partial extinguishment of the Bank’s outstanding 2026 subordinated debentures.  A gain of $38.4 million related to the partial extinguishment was recorded in noninterest income for the year ended December 31, 2012. 

192

The following table presents maturity information for the Company’s FHLB and other borrowings, including the fair value of hedged subordinated debentures and unamortized discounts and premiums, as of December 31, 2012.

	FHLB Advances		Subordinated Debentures		Capital Securities
	(In Thousands)
Maturing:
2013	$	2,455	$	—	$	—
2014	750,821		—		—
2015	1,047,718		—		—
2016	1,012,744		—		—
2017	200,144		503,179		—
Thereafter	236,307		405,803		114,108
Total	$	3,250,189	$	908,982	$	114,108

(12)Capital Securities and Preferred Stock

Capital Securities

At December 31, 2012, the Company had five subsidiary business trusts (TexasBanc Capital Trust I, State National Capital Trust I, State National Statutory Trust II, Texas Regional Statutory Trust I and Riverway Holdings Capital Trust I), as noted in Note 11, FHLB and Other Borrowings, which had issued Trust Preferred Securities. As guarantor, the Company unconditionally guarantees payment of accrued and unpaid distributions required to be paid on the Trust Preferred Securities, the redemption price when the Trust Preferred Securities are called for redemption, and amounts due if a trust is liquidated or terminated.

The Company owns all of the outstanding common stock of each of the five trusts. The trusts used the proceeds from the issuance of their Trust Preferred Securities and common securities to buy debentures issued by the Parent. These Capital Securities are the trusts’ only assets, and the interest payments the subsidiary business trusts receive from the Capital Securities are used to finance the distributions paid on the Trust Preferred Securities. In accordance with ASC Topic 810, the subsidiary business trusts are not consolidated by the Company. The Capital Securities are included as FHLB and other borrowings on the Company’s Consolidated Balance Sheets as of December 31, 2012 and 2011.

The Trust Preferred Securities must be redeemed when the related Capital Securities mature, or earlier, if provided in the governing indenture. Each issue of Trust Preferred Securities carries an interest rate identical to that of the related Capital Securities. The Trust Preferred Securities qualify as Tier 1 Capital, subject to regulatory limitations, under guidelines established by the Federal Reserve.

All of the subsidiary business trusts have the right to redeem their Trust Preferred Securities currently.

Class B Preferred Stock

In December 2000, a subsidiary of the Company issued $21 million of Class B Preferred Stock. The Preferred Stock outstanding was approximately $24 million and $25 million at December 31, 2012 and 2011, respectively, and is classified as noncontrolling interests on the Company’s Consolidated Balance Sheets. The Preferred Stock qualifies as Tier 1 Capital under Federal Reserve guidelines. The Preferred Stock dividends are preferential, non-cumulative and payable semi-annually in arrears on June 15 and December 15 of each year, commencing June 15, 2001, at a rate per annum equal to 9.875% of the liquidation preference of $1,000 per share when and if declared by the board of directors of the subsidiary, in its sole discretion, out of funds legally available for such payment.

The Preferred Stock is redeemable for cash, at the option of the subsidiary, in whole or in part, at any time on or after June 15, 2021. Prior to June 15, 2021, the Preferred Stock is not redeemable, except that prior to such date, the Preferred Stock may be redeemed for cash, at the option of the subsidiary, in whole but not in part, only upon the occurrence of certain tax or regulatory events. Any such redemption is subject to the prior approval of the Federal Reserve. The Preferred Stock is not redeemable at the option of the holders thereof at any time.

193

(13)Derivatives and Hedging

The Company is a party to derivative instruments in the normal course of business for trading purposes and for purposes other than trading to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates and foreign currency exchange rates. The Company has made an accounting policy decision to not offset fair value amounts under master netting agreements. See Note 1, Summary of Significant Accounting Policies, for additional information on the Company’s accounting policies related to derivative instruments and hedging activities. The following table reflects the notional amount and fair value of derivative instruments included on the Company’s Consolidated Balance Sheets on a gross basis as of December 31, 2012 and 2011.

	December 31, 2012						December 31, 2011
			Fair Value						Fair Value
	Notional Amount		Derivative Assets (1)		Derivative Liabilities (2)		Notional Amount		Derivative Assets (1)		Derivative Liabilities (2)
	(In Thousands)
Derivatives designated as hedging instruments:
Fair value hedges:
Interest rate swaps related to long-term debt	$	550,000	$	140,768	$	—	$	700,000	$	194,637	$	—
Total fair value hedges			140,768		—				194,637		—
Cash flow hedges:
Interest rate contracts:
Swaps related to commercial loans	200,000		5,570		—		200,000		4,166		—
Swaps related to FHLB advances	320,000		—		26,221		320,000		—		20,364
Total cash flow hedges			5,570		26,221				4,166		20,364
Total derivatives designated as hedging instruments			$	146,338	$	26,221			$	198,803	$	20,364
Free-standing derivatives not designated as hedging instruments:
Free-standing derivative instruments-risk management and other purposes:
Interest rate contracts:
Forward contracts related to held for sale mortgages	$	432,112	$	209	$	935	$	189,901	$	—	$	1,952
Equity contracts:
Purchased equity option related to equity-linked CDs	237,526		23,361		—		210,016		21,153		—
Swap associated with sale of Visa, Inc. Class B shares	33,864		—		827		26,323		—		3,903
Foreign exchange contracts:
Forwards related to commercial loans	275,689		641		1,415		94,764		775		340
Total free-standing derivative instruments-risk management and other purposes			$	24,211	$	3,177			$	21,928	$	6,195
Free-standing derivative instruments – customer accommodation:
Future contracts (3)	$	1,219,000	$	—	$	—	$	1,031,000	$	—	$	—
Interest rate lock commitments	296,566		5,094		78		131,723		2,091		—
Written equity option related to equity-linked CDs	229,181		—		22,416		204,194		—		20,474
Trading account assets and liabilities:
Interest rate contracts for customers	13,987,883		431,765		377,655		12,526,812		442,180		399,379
Commodity contracts for customers	1,953,574		80,004		75,842		3,337,027		162,403		166,024
Foreign exchange contracts for customers	187,704		3,519		3,414		43,246		789		786
Total trading account assets and liabilities			515,288		456,911				605,372		566,189
Total free-standing derivative instruments- customer accommodations			$	520,382	$	479,405			$	607,463	$	586,663

(1) Derivative assets, except for trading account assets that are recorded as a component of trading account assets on the Consolidated Balance Sheets, are recorded in other assets on the Company’s Consolidated Balance sheets.

(2) Derivative liabilities are recorded in accrued expenses and other liabilities on the Company’s Consolidated Balance Sheets.

(3) Changes in fair value are cash settled daily; therefore, there is no ending balance at any given reporting period.

194

Hedging Derivatives

The Company uses derivative instruments to manage the risk of earnings fluctuations caused by interest rate volatility. For those financial instruments that qualify and are designated as a hedging relationship, either a fair value hedge or cash flow hedge, the effect of interest rate movements on the hedged assets or liabilities will generally be offset by the derivative instrument. See Note 1, Summary of Significant Accounting Policies, for additional information on the Company’s accounting policies related to derivative instruments and hedging activities.

Fair Value Hedges

The Company enters into fair value hedging relationships using interest rate swaps to mitigate the Company’s exposure to losses in value as interest rates change. Derivative instruments that are used as part of the Company’s interest rate risk management strategy include interest rate swaps that relate to the pricing of specific balance sheet assets and liabilities. Interest rate swaps generally involve the exchange of fixed and variable rate interest payments between two parties, based on a common notional principal amount and maturity date.

Interest rate swaps are used to convert the Company’s fixed rate long-term debt to a variable rate. The critical terms of the interest rate swaps match the terms of the corresponding hedged items. All components of each derivative instrument’s gain or loss are included in the assessment of hedge effectiveness. The Company recognized approximately $814 thousand, $4.6 million and $3.9 million of fair value hedging gains as a result of hedge ineffectiveness for the years ended December 31, 2012, 2011 and 2010, respectively. For the years ended December 31, 2012, 2011 and 2010, the Company recognized decreases of $29.4 million, $39.2 million and $38.2 million, respectively, to interest expense related to interest rate swaps accounted for as fair value hedges.

The Company did not recognize any gain or loss for the years ended December 31, 2012, 2011 and 2010 related to hedged firm commitments no longer qualifying as a fair value hedge. At December 31, 2012, the fair value hedges had a weighted average expected remaining term of 7.2 years.

In connection with the 2012 partial extinguishment of the $150 million in aggregate principal amount of 2026 subordinated debentures, the Company unwound $150 million of swaps associated with this issuance and recognized a proportional amount of the swap gains related to the terminated swaps as a component of gain on prepayment of FHLB and other borrowings in the Company’s Consolidated Statements of Income for the year ended December 31, 2012.  See Note 11, FHLB and Other Borrowings, for further discussion.

The following table reflects the change in fair value for interest rate contracts and the related hedged items as well as other gains and losses related to fair value hedges included in the Company’s Consolidated Statements of Income.

		Gain (Loss) for the Years Ended
		December 31,
	Consolidated Statements of Income Caption	2012			2011			2010
		(In Thousands)
Change in fair value of interest rate contracts:
Interest rate swaps hedging long term debt	Interest on FHLB and other borrowings	$	(6,500	)	$	83,151		$	40,492
Hedged long term debt	Interest on FHLB and other borrowings	7,314			(78,504		)	(36,569		)
Other gains on interest rate contracts:
Interest and amortization related to interest rate swaps on hedged long term debt	Interest on FHLB and other borrowings	28,628			34,550			34,282

195

Cash Flow Hedges

The Company enters into cash flow hedging relationships using interest rate swaps and options, such as caps and floors, to mitigate exposure to the variability in future cash flows or other forecasted transactions associated with its floating rate assets and liabilities. The Company uses interest rate swaps and options to hedge the repricing characteristics of its floating rate commercial loans and FHLB advances. All components of each derivative instrument’s gain or loss are included in the assessment of hedge effectiveness. The initial assessment of expected hedge effectiveness is based on regression analysis. The ongoing periodic measures of hedge ineffectiveness are based on the expected change in cash flows of the hedged item caused by changes in the benchmark interest rate. There were no cash flow hedging gains or losses recognized because of hedge ineffectiveness for the years ended December 31, 2012, 2011 and 2010. There were no gains or losses reclassified from other comprehensive income (loss) because of the discontinuance of cash flow hedges related to certain forecasted transactions that are probable of not occurring for the years ended December 31, 2012, 2011 and 2010.

For the years ended December 31, 2012, 2011 and 2010, the Company reclassified from accumulated other comprehensive income (loss) to interest income $2.3 million, $7.7 million and $30.7 million, respectively, related to interest rate swaps and floors accounted for as cash flow hedges. At December 31, 2012, cash flow hedges not terminated had a fair value of $(20.7) million and a weighted average life of 4.4 years. Based on the current interest rate environment, $1.7 million of losses are expected to be reclassified to net interest income over the next 12 months as net settlements occur. The maximum length of time over which the entity is hedging its exposure to the variability in future cash flows for forecasted transactions is 8.6 years.

The following table presents the effect of derivative instruments designated and qualifying as cash flow hedges on the Company’s Consolidated Balance Sheets and the Company’s Consolidated Statements of Income for the years ended December 31, 2012, 2011 and 2010.

	Gain (Loss) for the Years Ended
	December 31,
	2012			2011			2010
	(In Thousands)
Interest rate contracts:
Net change in amount recognized in other comprehensive income	$	(2,824	)	$	(1,844	)	$	(27,267	)
Amount reclassified from accumulated other comprehensive income into net interest income	2,261			7,727			30,667
Amount of ineffectiveness recognized in net interest income	—			—			—

Derivatives Not Designated As Hedges

Derivatives not designated as hedges include those that are entered into as either economic hedges as part of the Company’s overall risk management strategy or to facilitate client needs. Economic hedges are those that do not qualify to be treated as a fair value hedge, cash flow hedge or foreign currency hedge for accounting purposes, but are necessary to economically manage the risk exposure associated with the assets and liabilities of the Company.

The Company also enters into a variety of interest rate contracts, commodity contracts, written equity options and foreign exchange contracts in its trading activities. The primary purpose for using these derivative instruments in the trading account is to facilitate customer transactions. The trading interest rate contract portfolio is actively managed and hedged with similar products to limit market value risk of the portfolio. Changes in the estimated fair value of contracts in the trading account along with the related interest settlements on the contracts are recorded in noninterest income as corporate and correspondent investment sales in the Company’s Consolidated Statements of Income.

Free-Standing Derivative Instruments – Risk Management and Other Purposes

The Company enters into forward contracts to economically hedge the change in fair value of certain residential mortgage loans held for sale due to changes in interest rates. Revaluation gains and losses from free-standing derivatives related to mortgage banking activity are recorded as a component of mortgage banking income in the Company’s Consolidated Statements of Income.

196

In conjunction with the sale of its Visa, Inc. Class B shares in the second quarter of 2009, the Company entered into a total return swap in which the Company will make or receive payments based on subsequent changes in the conversion rate of the Class B shares into Class A shares. This total return swap is accounted for as a free-standing derivative.

The Company offers its customers equity-linked CDs that have a return linked to equity indices. Under appropriate accounting guidance, a CD that pays interest based on changes in an equity index is a hybrid instrument that requires separation into a host contract (the CD) and an embedded derivative contract (written equity call option). The Company has entered into an offsetting derivative contract in order to economically hedge the exposure related to the issuance of equity-linked CDs. Both the embedded derivative and derivative contract entered into by the Company are recorded at fair value with offsetting gains and losses recognized within noninterest expense in the Company’s Consolidated Statements of Income. The embedded derivative is classified as a free-standing derivative instrument to accommodate customers while the offsetting derivative contract intended to hedge the Company’s exposure is classified as a free-standing derivative instrument for risk management and other purposes.

The Company also enters into foreign currency contracts to hedge its exposure to fluctuations in foreign currency exchange rates due to its funding of commercial loans in foreign currencies.

The net gains and losses recorded in the Company’s Consolidated Statements of Income from free-standing derivative instruments used for risk management and other purposes are summarized in the following table for the years ended December 31, 2012, 2011 and 2010.

		Gain (Loss) for the Years Ended
		December 31,
	Consolidated Statements of Income Caption	2012			2011			2010
		(In Thousands)
Interest rate contracts:
Forward contracts related to residential mortgage loans held for sale	Mortgage banking income	$	(1,225	)	$	(2,251	)	$	(447	)
Equity contracts:
Purchased equity option related to equity-linked CDs	Other noninterest expense	2,209			(3,419		)	4,944
Foreign currency contracts:
Forward contracts related to commercial loans	Corporate and correspondent investment sales	(1,975		)	539			(2,250		)

Free-Standing Derivative Instruments – Customer Accommodation

The majority of free-standing derivative instruments the Company enters into are for the benefit of its commercial customers. These derivative contracts are not designated against specific assets or liabilities on the Company’s Consolidated Balance Sheets or to forecasted transactions and, therefore, do not qualify for hedge accounting. The Company may economically hedge significant exposures related to these derivative contracts entered into for the benefit of customers by entering into offsetting contracts with high-quality counterparties with substantially matching terms. Revaluation gains and losses on commodity and other commercial customer derivative contracts are recorded as a component of corporate and correspondent investment sales in the Company’s Consolidated Statements of Income.

Interest rate lock commitments issued on residential mortgage loan commitments that will be held for resale are also considered free-standing derivative instruments, and the interest rate exposure on these commitments is economically hedged primarily with forward contracts. Revaluation gains and losses from free-standing derivatives related to mortgage banking activity are recorded as a component of mortgage banking income in the Company’s Consolidated Statements of Income.

As previously noted, the Company offers its customers equity-linked CDs that have a return linked to equity indices. The embedded derivative is classified as a free-standing derivative instrument to accommodate customers.

197

The net gains and losses recorded in the Company’s Consolidated Statements of Income relating to free-standing derivative instruments used as a customer accommodation are summarized in the following table for the years ended December 31, 2012, 2011 and 2010.

		Gain (Loss) For the Year Ended
		December 31,
	Consolidated Statements of Income Caption	2012			2011			2010
		(In Thousands)
Futures contracts	Corporate and correspondent investment sales	$	(1,622	)	$	(3,437	)	$	(3,185	)
Interest rate contracts:
Interest rate contracts for customers	Corporate and correspondent investment sales	28,755			(6,749		)	(759		)
Interest rate lock commitments	Mortgage banking income	2,925			1,905			(639		)
Commodity contracts:
Commodity contracts for customers	Corporate and correspondent investment sales	982			4,846			4,286
Foreign currency contracts:
Foreign currency exchange contracts for customers	Corporate and correspondent investment sales	143			60			98
Equity contracts:
Written equity option related to equity-linked CDs	Other noninterest expense	(1,942		)	3,672			(4,513		)

Derivatives Credit and Market Risks

By using derivative instruments, the Company is exposed to credit and market risk. If the counterparty fails to perform, credit risk is equal to the extent of the Company’s fair value gain in a derivative. When the fair value of a derivative instrument contract is positive, this generally indicates that the counterparty owes the Company and, therefore, creates a credit risk for the Company. When the fair value of a derivative instrument contract is negative, the Company owes the counterparty and, therefore, it has no credit risk. The Company minimizes the credit risk in derivative instruments by entering into transactions with high-quality counterparties that are reviewed periodically. Credit losses are also mitigated through collateral agreements and other contract provisions with derivative counterparties.

Market risk is the adverse effect that a change in interest rates or implied volatility rates has on the value of a financial instrument. The Company manages the market risk associated with interest rate contracts by establishing and monitoring limits as to the types and degree of risk that may be undertaken.

The Company’s derivatives activities are monitored by its Asset/Liability Committee as part of its risk-management oversight of the Company’s treasury function. The Company’s Asset/Liability Committee is responsible for mandating various hedging strategies that are developed through its analysis of data from financial simulation models and other internal and industry sources. The resulting hedging strategies are then incorporated into the Company’s overall interest rate risk management and trading strategies.

Entering into interest rate swap agreements and options involves not only the risk of dealing with counterparties and their ability to meet the terms of the contracts but also the interest rate risk associated with unmatched positions. At December 31, 2012, interest rate swap agreements and options classified as trading were substantially matched. The Company had credit risk of $515 million related to derivative instruments in the trading account portfolio, which does not take into consideration master netting arrangements or the value of the collateral. There were $7.2 million, $11.5 million and $11.3 million in credit losses associated with derivative instruments classified as trading for the years ended December 31, 2012, 2011 and 2010, respectively. At December 31, 2012, there were no nonperforming derivative positions classified as trading and at December 31, 2011 there were $690 thousand of nonperforming derivative positions classified as trading.

198

The Company’s derivative positions held for hedging purposes are primarily executed in the over-the-counter market. These positions have credit risk of $147 million, which does not take into consideration master netting arrangements or the value of the collateral.

There were no credit losses associated with derivative instruments classified as nontrading for the years ended December 31, 2012, 2011 and 2010. At December 31, 2012 and 2011, there were no nonperforming derivative positions classified as nontrading.

As of December 31, 2012 and 2011, the Company had recorded the right to reclaim cash collateral of $76.7 million and $101.1 million, respectively, within other assets on the Company’s Consolidated Balance Sheets and had recorded the obligation to return cash collateral of $29.7 million and $47.1 million, respectively, within deposits on the Company’s Consolidated Balance Sheets.

Contingent Features

Certain of the Company’s derivative instruments contain provisions that require the Company’s debt to maintain a certain credit rating from each of the major credit rating agencies. If the Company’s debt were to fall below this rating, it would be in violation of these provisions, and the counterparties to the derivative instruments could demand immediate and ongoing full overnight collateralization on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a liability position on December 31, 2012 was $186 million for which the Company has collateral requirements of $182 million in the normal course of business. If the credit-risk-related contingent features underlying these agreements were triggered on December 31, 2012, the Company’s collateral requirements to its counterparties would increase by $4 million. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a liability position on December 31, 2011 was $163 million for which the Company had collateral requirements of $137 million in the normal course of business. If the credit-risk-related contingent features underlying these agreements were triggered on December 31, 2011, the Company’s collateral requirements to its counterparties would have increased by $26 million.

(14) Assets and Liabilities Subject to Enforceable Master Netting Arrangements

Derivatives

In conjunction with the derivative and hedging activity discussed in Note 6, Derivatives and Hedging, the Company is party to master netting arrangements with its financial institution counterparties for some of its derivative and hedging activities. The Company does not offset assets and liabilities under these master netting arrangements for financial statement presentation purposes. The master netting arrangements provide for single net settlement of all derivative instrument arrangements, as well as collateral, in the event of default, or termination of, any one contract with the respective counterparties. Cash collateral is usually posted by the counterparty with a net liability position in accordance with contract thresholds.

Securities Sold Under Agreements to Repurchase

The Company enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Securities sold under agreements to repurchase are generally accounted for as collateralized financing transactions and recorded at the amounts at which the securities were sold plus accrued interest. The securities pledged as collateral are generally U.S. government and federal agency securities. The obligation to repurchase the securities is reflected as a liability in the Company’s Consolidated Balance Sheets, while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts available for sale. There is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities. As of December 31, 2012 and December 31, 2011, the Company has not entered into any repurchase agreements that were subject to enforceable master netting arrangements.

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The following represents the Company’s assets/liabilities subject to an enforceable master netting arrangement as of December 31, 2012 and December 31, 2011. The derivative instruments the Company has with its customers are not subject to an enforceable master netting arrangement.

							Gross Amounts Not Offset in the Consolidated Balance Sheets
	Gross Amounts Recognized		Gross Amounts Offset in the Consolidated Balance Sheets		Net Amount Presented in the Consolidated Balance Sheets		Financial Instruments (1)		Cash Collateral Received/ Pledged (1)		Net Amount
	(In Thousands)
December 31, 2012
Derivative financial assets:
Total derivatives subject to a master netting arrangement	$	216,760	$	—	$	216,760	$	146,127	$	70,633	$	—
Total derivatives not subject to a master netting arrangement	474,171		—		474,171		—		—		474,171
Total derivative financial assets	$	690,931	$	—	$	690,931	$	146,127	$	70,633	$	474,171
Derivative financial liabilities:
Total derivatives subject to a master netting arrangement	$	414,701	$	—	$	414,701	$	—	$	29,936	$	384,765
Total derivatives not subject to a master netting arrangement	94,102		—		94,102		—		—		94,102
Total derivative financial liabilities	$	508,803	$	—	$	508,803	$	—	$	29,936	$	478,867
December 31, 2011
Derivative financial assets:
Total derivatives subject to a master netting arrangement	$	298,946	$	—	$	298,946	$	12,726	$	47,077	$	239,143
Total derivatives not subject to a master netting arrangement	529,248		—		529,248		—		—		529,248
Total derivative financial assets	$	828,194	$	—	$	828,194	$	12,726	$	47,077	$	768,391
Derivative financial liabilities:
Total derivatives subject to a master netting arrangement	$	473,206	$	—	$	473,206	$	134,160	$	101,012	$	238,034
Total derivatives not subject to a master netting arrangement	140,016		—		140,016		—		—		140,016
Total derivative financial liabilities	$	613,222	$	—	$	613,222	$	134,160	$	101,012	$	378,050

(1) The actual amount of collateral received/pledged is limited to the derivative asset/liability balance and does not include excess collateral received/pledged. When excess collateral exists the collateral shown in the table above has been allocated based on the percentage of the actual amount of collateral posted.

(15)Commitments, Contingencies and Guarantees

Lease Commitments

The Company leases certain facilities and equipment for use in its businesses. The leases for facilities are generally for periods of 10 to 20 years with various renewal options, while leases for equipment generally have terms not in excess of five years. The majority of the leases for facilities contain rental escalation clauses tied to changes in price indices. Certain real property leases contain purchase options. Management expects that most leases will be renewed

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or replaced with new leases in the normal course of business. At December 31, 2012, the Company had $34.5 million of assets recorded as capital leases for which $12.7 million of accumulated depreciated had been recognized.

The following table provides the annual future minimum payments under capital leases and noncancelable operating leases at December 31, 2012:

	Operating Lease		Capital Lease
	(In Thousands)
2013	$	51,802	$	3,317
2014	54,522		2,907
2015	50,194		2,147
2016	45,621		2,188
2017	40,240		2,272
Thereafter	217,099		20,919
Total	$	459,478	$	33,750

The Company incurred lease expense of $64.6 million, $62.0 million and $65.2 million for the years ended December 31, 2012, 2011 and 2010, respectively. The Company received lease income of $4.5 million, $4.8 million and $9.4 million for the years ended December 31, 2012, 2011 and 2010, respectively, related to space leased to third parties.

Commitments to Extend Credit & Standby and Commercial Letters of Credit

The following represents the Company’s commitments to extend credit, standby letters of credit and commercial letters of credit as of December 31:

	2012		2011
	(In Thousands)
Commitments to extend credit	$	20,965,717	$	18,768,170
Standby and commercial letters of credit	2,306,556		2,481,447

Commitments to extend credit are agreements to lend to customers as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Standby and commercial letters of credit are commitments issued by the Company to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions, and expire in decreasing amounts with terms ranging from one to four years.

The credit risk involved in issuing letters of credit and commitments is essentially the same as that involved in extending loan facilities to customers. The fair value of the letters of credit and commitments typically approximates the fee received from the customer for issuing such commitments. These fees are deferred and are recognized over the commitment period. At December 31, 2012 and 2011, the recorded amount of these deferred fees was $11.3 million and $13.3 million, respectively. The Company holds various assets as collateral supporting those commitments for which collateral is deemed necessary. At December 31, 2012, the maximum potential amount of future undiscounted payments the Company could be required to make under outstanding standby letters of credit was $2.3 billion. At December 31, 2012 and 2011, the Company had $76 million and $42 million, respectively, of reserves related to letters of credit and unfunded commitments recorded in accrued expenses and other liabilities on the Company’s Consolidated Balance Sheet.

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Loan Sale Recourse

The Company has potential recourse related to FNMA securitizations. At December 31, 2012 and 2011, the amount of potential recourse was $21 million, of which the Company had reserved $513 thousand and $421 thousand, respectively, which is recorded in accrued expenses and other liabilities on its Consolidated Balance Sheets for the respective years.

The Company also issues standard representations and warranties related to mortgage loan sales to government-sponsored agencies. Although these agreements often do not specify limitations, the Company does not believe that any payments related to these warranties would materially change the financial condition or results of operations of the Company. The Company recorded $2 million and $3 million of reserves in accrued expenses and other liabilities on the Company’s Consolidated Balance Sheets related to potential losses from loans sold at December 31, 2012 and 2011, respectively.

Loss Sharing Agreement

In connection with a 2009 acquisition, the Bank entered into loss sharing agreements with the FDIC that covered approximately $9.7 billion of loans and OREO, excluding the impact of purchase accounting adjustments. In accordance with the terms of the loss sharing agreements, the FDIC’s obligation to reimburse the Bank for losses with respect to the acquired loans and acquired OREO begins with the first dollar of incurred losses, as defined in the loss sharing agreements. The terms of the loss sharing agreements provide that the FDIC will reimburse the Bank for 80% of incurred losses up to $2.3 billion and 95% of incurred losses in excess of $2.3 billion. Gains and recoveries on covered assets offset incurred losses, or are paid to the FDIC, at the applicable loss share percentage at the time of recovery. The loss sharing agreements provide for FDIC loss sharing for five years for commercial loans and 10 years for single family residential loans.

The provisions of the loss sharing agreements may also require a payment by the Bank to the FDIC on October 15, 2019. On that date, the Bank is required to pay the FDIC 60% of the excess, if any, of (i) $457 million over (ii) the sum of (a) 25% of the total net amounts paid to the Bank under both of the loss share agreements plus (b) 20% of the deemed total cost to the Bank of administering the covered assets under the loss sharing agreements. The deemed total cost to the Bank of administering the covered assets is the sum of 2% of the average of the principal amount of covered assets based on the beginning and end of year balances for each of the 10 years during which the loss share agreements are in effect. At December 31, 2012, the Company estimates the potential amount of payment due to the FDIC in 2019, at the end of the loss share agreements, to be $123 million.

Legal and Regulatory Proceedings

In the ordinary course of business, the Company is subject to legal proceedings, including claims, litigation, investigations and administrative proceedings, all of which are considered incidental to the normal conduct of business. The Company believes it has substantial defenses to the claims asserted against it in its currently outstanding legal proceedings and, with respect to such legal proceedings, intends to continue to defend itself vigorously against such legal proceedings.

Set forth below are descriptions of certain of the Company’s legal proceedings.

In October 2010, the Company was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Northern District of Florida, Stephen T. Anderson, on behalf of himself and others so situated v. Compass Bank, wherein the plaintiff alleges the Company inappropriately assessed and collected overdraft and insufficient fund fees. On June 27, 2012, the parties agreed to settle this matter as a nationwide class of consumer customers for $11.5 million. The settlement is contingent upon preliminary and final approval by the court.

In February 2012, the Company was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Southern District of Texas, Kevin Vaughan, on behalf of himself and all others similarly situated v. Compass Bank, wherein the plaintiff alleges the Company denied earned wages, including overtime pay, to its MBOs, and discouraged MBOs from entering more than 40 hours per workweek in the timekeeping system. The plaintiff seeks unspecified monetary relief. This case is currently stayed pending a decision from the United States Court of Appeals for the Fifth Circuit regarding whether class action

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waivers violate employees' collective bargaining rights under the National Labor Relations Act. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In May 2012, the Company was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Western District of Texas, JacquelineGarza, on behalf of herself and similarly situated employees v. BBVA Bancomer USA, Inc. and Compass Bank, wherein the plaintiff alleges the Company denied overtime pay to its Assistant Branch Managers who were allegedly improperly classified as exempt from the overtime pay mandates of the Fair Labor Standards Act. The plaintiff seeks unspecified monetary relief. This case is currently stayed pending a decision from the United States Court of Appeals for the Fifth Circuit regarding whether class action waivers violate employees' collective bargaining rights under the National Labor Relations Act. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In November 2012, the Company was named as a defendant in a putative class action lawsuit in the Superior Court of the State of California, County of Alameda, Cheryl Deaver, on behalf of herself and others so situated v. Compass Bank, wherein the plaintiff alleges the Company failed to provide lawful meal periods or wages in lieu thereof, full compensation for hours worked, or timely wages due at termination (the plaintiff had previously filed a similar lawsuit in May 2011 which was dismissed without prejudice when Plaintiff failed to meet certain filing deadlines). Plaintiff further alleges that the Company did not comply with wage statement requirements. The plaintiff seeks unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

There are other litigation matters that arise in the normal course of business. The Company assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Company will incur a loss and the amount of the loss can be reasonably estimated, the Company records a liability in its consolidated financial statements. These legal reserves may be increased or decreased to reflect any relevant developments. Where a loss is not probable or the amount of loss is not estimable, the Company does not accrue legal reserves. At December 31, 2012, the Company had accrued legal reserves in the amount of $22 million. Additionally, where the Company was able to reasonably estimate losses, at December 31, 2012, the Company estimated that it was reasonably possible that it could incur additional losses of $4.6 million above the accrued legal reserves, with it also being reasonably possible that no additional losses would be incurred in these matters.

While the outcome of legal proceedings and the timing of the ultimate resolution are inherently difficult to predict, based on information currently available, advice of counsel and available insurance coverage, the Company believes that it has established adequate legal reserves. Further, based upon available information, the Company is of the opinion that these legal proceedings, individually or in the aggregate, will not have a material adverse effect on the Company’s financial condition or results of operations. However, in the event of unexpected future developments, it is possible that the ultimate resolution of those matters, if unfavorable, may be material to the Company’s results of operations for any particular period, depending, in part, upon the size of the loss or liability imposed and the operating results for the applicable period.

Income Tax Review

The Company is subject to review and examination from various tax authorities. The Company is currently under examination by the IRS and a number of states, and has received notices of proposed adjustments related to federal and state income taxes due for prior years. Management believes that adequate provisions for income taxes have been recorded. Refer to Note 19, Income Taxes, for additional information on various tax audits.

(16) Regulatory Matters and Dividends from Subsidiaries

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s Consolidated Financial Statements. Under capital adequacy guidelines, the regulatory framework for prompt corrective action and the Gramm-Leach-Bliley Act, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of each bank’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting

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practices. The capital amounts and classification of the Company and the Bank are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by the regulators to ensure capital adequacy require the Company and the Bank to maintain minimum Tier 1 Risk-Based capital ratio of at least 4% of risk-weighted assets, minimum Total Risk-Based capital ratio of at least 8% of risk-weighted assets and a minimum leverage ratio of 4% of adjusted quarterly assets.

At December 31, 2012, the regulatory capital ratios of the Company and the Bank exceeded the minimum ratios required for “well-capitalized” banks as defined by federal banking laws. To be categorized as “well-capitalized,” the Company and the Subsidiary Bank must maintain minimum Total Risk-Based Capital, Tier 1 Risk-Based Capital and leverage ratios of at least 10%, 6% and 5%, respectively.

The following table presents the actual capital amounts and ratios of the Company and the Bank at December 31, 2012 and 2011.

	Total Risk-Based Capital				Tier 1 Risk-Based Capital				Leverage
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in Thousands)
December 31, 2012
BBVA Compass Bancshares, Inc. (formally known as BBVA USA Bancshares, Inc.) (1)	$	7,296,721	14.28	%	$	5,969,976	11.68	%	$	5,969,976	9.43	%
BBVA Compass Bancshares, Inc. (1)	7,269,302		14.22	%	5,942,569		11.63	%	5,942,569		9.39	%
Compass Bank	7,122,274		13.94	%	5,795,780		11.34	%	5,795,780		9.16	%
December 31, 2011
BBVA Compass Bancshares, Inc. (formally known as BBVA USA Bancshares, Inc.) (1)	$	6,909,516	14.63	%	$	5,418,207	11.47	%	$	5,418,207	9.14	%
BBVA Compass Bancshares, Inc. (1)	6,874,995		14.55	%	5,383,697		11.40	%	5,383,697		9.09	%
Compass Bank	6,724,185		14.24	%	5,233,106		11.08	%	5,233,106		8.83	%

(1) At December 31, 2012 and 2011, the Company operated under a two tier holding company structure that consisted of BBVA USA Bancshares, Inc., the top tier U.S. holding company, which controlled a mid-tier holding company, BBVA Compass Bancshares, Inc. On May 14, 2013, BBVA Compass Bancshares, Inc., the mid-tier holding company, was merged into BBVA USA Bancshares, Inc., the top tier U.S. holding company. Subsequent to the merger, BBVA USA Bancshares, Inc.'s name was changed to BBVA Compass Bancshares, Inc.

Dividends paid by the Bank are the primary source of funds available to the Parent for payment of dividends to its shareholder and other needs. Applicable federal and state statutes and regulations impose restrictions on the amount of dividends that may be declared by the Bank. In addition to the formal statutes and regulations, regulatory authorities also consider the adequacy of each bank’s total capital in relation to its assets, deposits and other such items. Capital adequacy considerations could further limit the availability of dividends from the Bank. The Bank could have paid additional dividends to the Parent in the amount of $2.0 billion while continuing to meet the capital requirements for “well-capitalized” banks at December 31, 2012; however, due to the net earnings restrictions on dividend distributions, the Bank did not have the ability to pay any dividends at December 31, 2012 without regulatory approval.

The Bank is required to maintain cash balances with the Federal Reserve. The average amount of these balances for the years ended December 31, 2012 and 2011 approximated $3.3 billion and $2.4 billion, respectively.

(17)Stock Based Compensation

The Company awards restricted share units to certain of the Company’s employees payable in ADSs. The vesting period for the restricted share units range from one to three years after the date of grant. Accordingly, the fair value of the restricted share units is expensed over the appropriate vesting period. Fair value represents the closing price of the ADSs on the date of grant. The Company purchases shares from BBVA at fair value to fulfill its obligations with the employee upon vesting. The Company recognized compensation expense in connection with restricted share units awarded of $6.8 million, $13.2 million and $9.0 million for the years ended December 31, 2012, 2011 and 2010, respectively. At December 31, 2012, 2011 and 2010, the Company had $8.5 million, $6.6 million and $7.4 million,

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respectively, of unrecognized compensation costs related to nonvested restricted common stock granted and expected to vest.

The following summary sets forth the activity related to the restricted share units for the years ended December 31,:

	2012			2011			2010
	Restricted Share Units	Weighted Average Grant Price		Restricted Share Units	Weighted Average Grant Price		Restricted Share Units	Weighted Average Grant Price
Nonvested, January 1	1,727,384	$	13.15	1,452,052	$	17.49	821,511	$	19.77
Granted	1,191,807	9.50		1,632,435	10.20		933,394	16.17
Vested	(1,053,265)	13.40		(1,018,581)	13.76		(240,649)	19.90
Forfeited	(147,433)	15.86		(338,522)	15.70		(62,204)	18.42
Nonvested, December 31	1,718,493	$	10.42	1,727,384	$	13.15	1,452,052	$	17.49

(18)Benefit Plans

Defined Benefit Plan

The Company sponsors a defined benefit pension plan that is intended to meet the requirements of Sections 401(a) and 501(a) of the Internal Revenue Code of 1986, as amended, and the requirements of the Employee Retirement Income Security Act of 1974. Under the plan, vested participants are entitled to a monthly benefit upon retirement equal to a percentage of their eligible compensation (generally defined as direct cash compensation exclusive of bonuses and commissions) earned in the five consecutive years of benefit service that produce the highest average. Prior to January 1, 2003, the percentage amount of the benefit was determined by multiplying the number of years, up to 30, of a participant’s service with the Company by 1.8%. Benefits were reduced by Social Security payments at the rate of 1.8% of the primary Social Security benefit multiplied by years of service up to 30 years. Effective January 1, 2003, participants were given the option to remain in the defined benefit pension plan or move to an enhanced defined contribution plan. For those participants electing to remain in the defined benefit pension plan, the plan was modified to eliminate the Social Security offset feature of the monthly benefit calculation. Under the modified formula, benefits are generally based on years of service, age at retirement and the employee’s average compensation earned in the five consecutive years of service that produce the highest average. Employees of the Company who are over the age of 21 and have worked 1000 hours or more in their first 12 months of employment or 1000 hours or more in any calendar year thereafter are eligible to participate in the plan, except for project consultants, employees of certain insurance and investment management affiliates, and employees hired for the first time by the Company after January 1, 2002. Effective January 1, 2003, the defined benefit pension plan was closed to new participants. Participants are vested in benefits accruing under the plan after five years of qualifying service. Benefits are payable monthly commencing on the later of age 65 or the participant’s date of retirement. Eligible participants with at least five years of service may retire at reduced benefit levels after reaching age 55.

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The following tables summarize the Company’s defined benefit pension plan for the years ended December 31, 2012 and 2011.

Obligations and Funded Status

	2012			2011
	(In Thousands)
Change in benefit obligation:
Benefit obligation, January 1	$	317,075		$	262,523
Service cost	6,843			5,577
Interest cost	13,464			14,039
Actuarial gain	14,184			54,620
Benefits paid	(8,718		)	(19,684		)
Benefit obligation, December 31	342,848			317,075
Change in plan assets:
Fair value of plan assets, January 1	353,056			242,968
Actual return on plan assets	22,222			89,772
Employer contribution	—			40,000
Benefits paid	(8,718		)	(19,684		)
Fair value of plan assets, December 31	366,560			353,056
Funded status	23,712			35,981
Net actuarial loss	43,987			41,666
Net prior service cost	—			—
Net amount recognized	$	67,699		$	77,647

Amounts recognized on the Company’s Consolidated Balance Sheets at December 31, 2012 and 2011 consist of:

	2012		2011
	(In Thousands)
Prepaid benefit cost	$	23,712	$	35,981
Accrued expenses and other liabilities	—		—
Deferred tax – other assets	16,139		15,195
Accumulated other comprehensive income	27,848		26,471
Net amount recognized	$	67,699	$	77,647

The accumulated benefit obligation for the Company’s defined benefit pension plan was $311 million and $291 million at December 31, 2012 and 2011, respectively. The Company anticipates amortizing $713 thousand of the actuarial loss from accumulated other comprehensive income over the next twelve months.

The components of net periodic benefit cost recognized in the Company’s Consolidated Statements of Income for the years ended December 31, 2012, 2011 and 2010 are as follows.

	2012			2011			2010
	(In Thousands)
Service cost	$	6,843		$	5,577		$	5,706
Interest cost	13,464			14,039			13,465
Expected return on plan assets	(11,158		)	(17,740		)	(16,478		)
Recognized actuarial loss	799			3,431			3,144
Net periodic benefit cost	$	9,948		$	5,307		$	5,837

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The following table provides additional information related to the Company’s defined benefit pension plan for the years ended December 31, 2012 and 2011.

	2012			2011
	(Dollars in Thousands)
Change in defined benefit plan included in other comprehensive income	$	1,377		$	(13,117	)
Weighted average assumptions used to determine benefit obligation at December 31:
Discount rate	4.03		%	4.28		%
Rate of compensation increase	3.50		%	3.50		%
Weighted average assumptions used to determine net pension income for year ended December 31:
Discount rate	4.28		%	5.44		%
Expected return on plan assets	3.22		%	6.41		%
Rate of compensation increase	3.50		%	3.50		%

To establish the discount rate utilized, the Company performs an analysis of matching anticipated cash flows for the duration of the plan liabilities to third party forward discount curves. To develop the expected return on plan assets, the Company considers the current level of expected returns on risk free investments (primarily government bonds), the historical level of risk premium associated with other asset classes in which plan assets are invested, and the expectations for future returns of each asset class. The expected return for each asset class is then weighted based on the target asset allocation, and a range of expected return on plan assets is developed. Based on this information, the plan’s Retirement Committee sets the discount rate and expected rate of return assumption.

Future Benefit Payments

The following table summarizes the estimated benefits to be paid in the following periods.

	(In Thousands)
2013	$	9,770
2014	10,948
2015	12,131
2016	13,207
2017	14,264
2018-2022	89,222

The expected benefits above were estimated based on the same assumptions used to measure the Company’s benefit obligation at December 31, 2012 and include benefits attributable to estimated future employee service.

Plan Assets

The Company’s Retirement Committee sets the investment policy for the defined benefit pension plan and reviews investment performance and asset allocation on a quarterly basis. The current asset allocation for the plan is entirely allocated to fixed income securities, including: U.S Treasury and other U.S. government securities, corporate debt securities and municipal debt securities, as well as cash and cash equivalent securities.

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The following table presents the fair value of the Company’s defined benefit pension plan assets as of December 31, 2012.

			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
	(In Thousands)
December 31, 2012
Assets:
Cash and cash equivalents	$	4,820	$	4,820	$	—	$	—
Fixed income securities:
U.S. Treasury and government agency	237,493		219,658		17,835		—
State and political subdivisions	12,263		—		12,263		—
Corporate bonds	111,984		—		111,984		—
Total fixed income securities	361,740		219,658		142,082		—
Fair value of plan assets	$	366,560	$	224,478	$	142,082	$	—
December 31, 2011
Assets:
Cash and cash equivalents	$	24,538	$	24,538	$	—	$	—
Fixed income securities:
U.S. Treasury and government agency	231,725		231,725		—		—
State and political subdivisions	8,548		8,548		—		—
Corporate bonds	88,245		88,245		—		—
Total fixed income securities	328,518		328,518		—		—
Fair value of plan assets	$	353,056	$	353,056	$	—	$	—

In general, the fair value applied to the Company’s defined benefit pension plan assets is based upon quoted market prices or Level 1 measurements, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use observable market based parameters as inputs, or Level 2 measurements. Level 3 measurements include discounted cash flow analyses based on assumptions that are not readily observable in the market place, such as projections of future cash flows, loss assumptions and discount rates. See Note 20, Fair Value of Financial Instruments, for a further discussion of the fair value hierarchy.

Supplemental Retirement Plans

The Company maintains unfunded defined benefit plans for certain key executives that are intended to meet the requirements of Section 409A of the Internal Revenue Code and provide additional retirement benefits not otherwise provided through the Company’s basic retirement benefit plans. These plans had unfunded projected benefit obligations and net plan liabilities of $36 million and $29 million at December 31, 2012 and 2011, respectively, which are reflected on the Company’s Consolidated Balance Sheets as accrued expenses and other liabilities. Net periodic expenses of these plans were $1.3 million for each of the years ended December 31, 2012, 2011 and 2010. At December 31, 2012 and 2011, the Company had $10.1 million and $4.6 million, respectively, recognized in accumulated other comprehensive income, net of tax, related to these plans.

Defined Contribution Profit Sharing Plan

Since January 1, 2003, the Company has sponsored a defined contribution profit sharing plan that is intended to meet the requirements of Sections 401(a) and 501(a) of the Internal Revenue Code of 1986, as amended, and the requirements of the Employee Retirement Income Security Act of 1974. During 2002, employees participating in the defined benefit pension plan could choose to participate in the newly established defined contribution profit sharing plan in lieu of accumulating future benefit service in the defined benefit pension plan. The Company makes contributions on behalf of each participant in the plan based on eligible pay and years of service. The Company’s contribution ranges from 2% to 4% of the employee’s base pay based on the employee’s years of service. Participation in the plan is limited to employees hired for the first time after January 1, 2002 and those participants in the defined benefit pension plan

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who, in 2002, chose to forego future accumulation of benefit service. The Company recognized $13.7 million, $13.6 million, and $12.0 million of expense related to this defined contribution profit sharing plan for the years ended December 31, 2012, 2011 and 2010, respectively.

Employee Defined Contribution Plan

At December 31, 2012, the Company sponsored a defined contribution plan that was intended to meet the requirements of Sections 401(a), 401(k), 409 and 501(a) of the Internal Revenue Code of 1986, as amended, and the requirements of the Employee Retirement Income Security Act of 1974. Under this plan, employees may contribute up to 75% of their compensation on a pretax basis subject to statutory limits. The Company makes matching contributions equal to 100% of the first 3% of compensation deferred, plus 50% of the next 2% of compensation deferred. The Company may make additional non-matching contributions to the plan. The Company’s matching contributions totaled $17.4 million, $16.7 million and $15.7 million for the years ended December 31, 2012, 2011 and 2010, respectively. The Company did not make non-matching contributions in 2012, 2011 or 2010. Company matching contributions are vested immediately for employees. Company non-matching contributions are vested after three years of employment.

(19) Income Taxes

For the years ended December 31, 2012, 2011 and 2010 income tax expense consisted of the following:

	2012		2011			2010
	(In Thousands)
Current income tax expense (benefit):
Federal	$	99,468	$	56,085		$	75,485
State	10,896		(9,660		)	4,364
Total	110,364		46,425			79,849
Deferred income tax expense (benefit):
Federal	104,756		42,767			(21,510		)
State	4,581		8,983			1,506
Total	109,337		51,750			(20,004		)
Total income tax expense	$	219,701	$	98,175		$	59,845

Income tax expense (benefit) for the years ended December 31, 2012, 2011 and 2010 differed from the amount computed by applying the federal statutory income tax rate to pretax earnings for the following reasons:

	2012					2011					2010
	Amount			Percent of Pretax Earnings		Amount			Percent of Pretax Earnings		Amount			Percent of Pretax Earnings
	(Dollars in Thousands)
Income tax expense (benefit) at federal statutory rate	$	244,549		35.0	%	$	(573,716	)	35.0	%	$	(96,816	)	35.0	%
Increase (decrease) resulting from:
Goodwill impairment	—			—		696,704			(42.5	)	181,950			(65.8	)
Tax-exempt interest income	(30,176		)	(4.3	)	(22,521		)	1.4		(18,446		)	6.7
Change in valuation allowance	2,713			0.4		13,831			(0.8	)	3,149			(1.1	)
Bank owned life insurance	(7,117		)	(1.0	)	(7,390		)	0.5		(5,414		)	2.0
Income tax credits	(6,300		)	(0.9	)	(5,596		)	0.2		(5,403		)	2.0
State income tax, net of federal income taxes	12,075			1.7		(441		)	0.1		3,815			(1.4	)
Other	3,957			0.5		(2,696		)	0.1		(2,990		)	1.0
Income tax expense	$	219,701		31.4	%	$	98,175		(6.0	)%	$	59,845		(21.6	)%

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The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2012 and 2011 are presented below.

	2012			2011
	(In Thousands)
Deferred tax assets:
Allowance for loan losses	$	286,269		$	368,022
Accrued expenses	107,527			87,426
Loan valuation	22,332			42,722
Net unrealized losses on investment securities available for sale, hedging instruments and defined benefit plan adjustment	29,875			23,946
Other real estate owned	7,468			9,377
Other	91,501			99,165
Gross deferred taxes	544,972			630,658
Valuation allowance	(36,851		)	(34,138		)
Total deferred tax assets	508,121			596,520
Deferred tax liabilities:
Premises and equipment	217,469			165,936
Core deposit and other acquired intangibles	61,986			93,568
Capitalized loan costs	43,499			44,607
Net unrealized gains on securities available for sale, hedging instruments and defined benefit plan adjustment	44,752			41,471
Other	43,187			47,021
Total deferred tax liabilities	410,893			392,603
Net deferred tax asset	$	97,228		$	203,917

The Company has approximately $48.1 million of net operating loss carryforwards for future utilization for Federal income tax purposes.  The net operating loss carryforwards will begin to expire in 2020.  A full valuation allowance has been set up against the asset at both December 31, 2012 and 2011. 

A real estate investment subsidiary of the Company has net operating loss carryforwards of approximately $14.7 million at both December 31, 2012 and 2011. These losses begin to expire in 2030.  The Company has determined that it is more likely than not the benefit from this deferred tax asset will not be realized in the carryforward period and has recorded a full valuation allowance of approximately $6.6 million against the asset at both December 31, 2012 and 2011.

Additionally, the Company has state net operating loss carryforwards of approximately $13.9 million and $14.7 million at December 31, 2012 and 2011, respectively.  These state net operating losses expire in years 2013 through 2032.  The Company believes it is more likely than not the benefit from certain state net operating loss carryforwards will not be realized, and, accordingly, has established a valuation allowance associated with these net operating loss carryforwards.  The Company had recorded a valuation allowance of approximately $13.0 million and $13.1 million at December 31, 2012 and 2011, respectively, related to these state net operating loss carryforwards.

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The following is a tabular reconciliation of the total amounts of the gross unrecognized tax benefits for the years ended December 31, 2012, 2011 and 2010:

	2012			2011			2010
	(In Thousands)
Unrecognized income tax benefits, January 1	$	33,357		$	40,031		$	38,011
Increases for tax positions related to:
Prior years	451			—			2,109
Current year	4,438			1,001			8,720
Decreases for tax positions related to:
Prior years	(382		)	(352		)	(297		)
Current year	(8,180		)	(1,633		)	(4,301		)
Settlement with taxing authorities	—			—			—
Expiration of applicable statutes of limitation	(1,045		)	(5,690		)	(4,211		)
Unrecognized income tax benefits, December 31	$	28,639		$	33,357		$	40,031

During the years ended December 31, 2012, 2011 and 2010, the Company recognized $(364) thousand, $844 thousand and $700 thousand of interest related to the unrecognized tax benefits noted above, respectively. During the years ended December 31, 2012, 2011 and 2010, the Company recognized no penalties related to unrecognized tax benefits. At December 31, 2012 and 2011, the Company had approximately $5.0 million and $5.4 million, respectively, of accrued interest and penalties recognized related to unrecognized tax benefits within accrued expenses and other liabilities. Included in the balance of unrecognized tax benefits at December 31, 2012, 2011 and 2010 were $22.6 million, $19.1 million, and $24.1 million, respectively, of tax benefits that, if recognized after the balance sheet date, would affect the effective tax rate. Also included in the balance of unrecognized tax benefits at December 31, 2012, 2011 and 2010 were $6.0 million, $14.2 million and $15.9 million, respectively, of tax benefits that, if recognized after the balance sheet date, would result in adjustments to other tax accounts, primarily deferred taxes.

The Company and its subsidiaries are routinely examined by various taxing authorities. The Company is currently under audit for open years by the IRS, and no material effect is anticipated on final resolution. The earliest year that remains open under U.S. federal statute for examination by the IRS of the Company and its subsidiaries is 2005. The earliest years that were open to examination by the major state taxing authorities of the Company’s subsidiaries at December 31, 2012, include: Alabama – 2006; Arizona – 2008; California – 2008; Colorado – 2008; Florida – 2005; New Mexico – 2009; Texas – 2007, and New York - 2009.

It is reasonably possible that the above unrecognized tax benefits could be reduced by approximately $6.0 million, plus applicable interest, in 2013 due to a change in tax accounting method by the Company. If this were to occur, there would be no effect to income tax expense as this change would impact the net deferred tax asset.

(20)Fair Value of Financial Instruments

The Company applies the fair value accounting guidance required under ASC Topic 820 which establishes a framework for measuring fair value. This guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. This guidance also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within this fair value hierarchy is based upon the lowest level of input that is significant to the instrument’s fair value measurement. The three levels within the fair value hierarchy are described as follows.

• Level 1 – Fair value is based on quoted prices in an active market for identical assets or liabilities.

• Level 2 – Fair value is based on quoted market prices for similar instruments traded in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market.

211

• Level 3 – Fair value is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities would include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar pricing techniques based on the Company’s own assumptions about what market participants would use to price the asset or liability.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments under the fair value hierarchy, is set forth below. These valuation methodologies were applied to the Company’s financial assets and financial liabilities carried at fair value. In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use observable market based parameters as inputs. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the Company’s creditworthiness, among other things, as well as other unobservable parameters. Any such valuation adjustments are applied consistently over time. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, the reported fair value amounts have not been comprehensively revalued since the presentation dates, and, therefore, estimates of fair value after the balance sheet date may differ significantly from the amounts presented herein.

Financial Instruments Measured at Fair Value on a Recurring Basis

Trading account assets and liabilities, securities available for sale, certain mortgage loans held for sale, derivative assets and liabilities, and mortgage servicing rights are recorded at fair value on a recurring basis. The following is a description of the valuation methodologies for these assets and liabilities.

Trading account assets and liabilities and investment securities available for sale – Trading account assets and liabilities and investment securities available for sale consist of U.S. Treasury and other U.S. government agencies, mortgage-backed securities, collateralized mortgage obligations, debt obligations of state and political subdivisions, other debt and equity securities, and derivative contracts.

• U.S. Treasury and other U.S. government agencies are valued based on a market approach using observable inputs such as benchmark yields, reported trades, broker/dealer quotes, benchmark securities, and bids/offers of government-sponsored enterprise securities. These valuations are Level 2 measurements.

• Mortgage-backed securities are primarily valued using market-based pricing matrices that are based on observable inputs including benchmark To Be Announced security prices, U.S. Treasury yields, U.S. dollar swap yields, and benchmark floating-rate indices. Mortgage-backed securities pricing may also give consideration to pool-specific data such as prepayment history and collateral characteristics. Valuations for mortgage-backed securities are therefore classified as Level 2 measurements. Where such comparable data is not available, the Company develops valuations based on assumptions that are not readily observable in the market place; these valuations are Level 3 measurements.

• Collateralized mortgage obligations are valued using market-based pricing matrices that are based on observable inputs including reported trades, bids, offers, dealer quotes, U.S. Treasury yields, U.S. dollar swap yields, market convention prepayment speeds, tranche-specific characteristics, prepayment history, and collateral characteristics. Fair value measurements for collateralized mortgage obligations are classified as Level 2.

• Debt obligations of states and political subdivisions are primarily valued using market-based pricing matrices that are based on observable inputs including Municipal Securities Rulemaking Board reported trades, issuer spreads, material event notices, and benchmark yield curves. These valuations are Level 2 measurements. For less than 1% of municipal securities where comparable market data is not readily available, the Company uses an external pricing source to assess valuations based on information and assumptions that are not readily observable in the market place. The valuations for these municipals are classified as Level 3.

212

• Other debt and equity securities consist of mutual funds, foreign and corporate debt, and U.S. government agency equity securities. Mutual funds are valued based on quoted market prices of identical assets trading on active exchanges. These valuations are Level 1 measurements. Foreign and corporate debt valuations are based on information and assumptions that are observable in the market place. The valuations for these securities are therefore classified as Level 2. U.S. government agency equity securities are valued based on quoted market prices of identical assets trading on active exchanges. These valuations thus qualify as Level 1 measurements.

• Other derivative assets consist primarily of interest rate and commodity contracts. The Company’s interest rate contracts are valued utilizing Level 2 observable inputs (yield curves and volatilities) to determine a current market price for each interest rate contract. Commodity contracts are priced using raw market data, primarily in the form of quotes for fixed and basis swaps with monthly, quarterly, seasonal or calendar-year terms. Proprietary models provided by a third party are used to generate forward curves and volatility surfaces. As a result of the valuation process and observable inputs used, commodity contracts are classified as Level 2 measurements. To validate the reasonableness of these calculations, management compares the assumptions with market information.

• Other trading assets consist of interest-only strips which are valued by an independent third-party. The independent third-party values the assets on a loan-by-loan basis using a discounted cash flow analysis that employs prepayment assumptions, discount rate assumptions, and default curves. The prepayment assumptions are created from actual SBA pool prepayment history. The discount rates are derived from actual SBA loan secondary market transactions. The default curves are created using historical observable and unobservable inputs. As such, interest-only strips are classified as Level 3 measurements. The Company’s SBA department is responsible for ensuring the appropriate application of the valuation, capitalization, and amortization policies of the Company’s interest-only strips. The department performs independent, internal valuations of the interest-only strips on a quarterly basis, which are then reconciled to the third-party valuations to ensure their validity.

Loans held for sale – The Company has elected to apply the fair value option for single family real estate mortgage loans originated for resale in the secondary market. The election allows for a more effective offset of the changes in fair values of the loans and the derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting. The Company has not elected the fair value option for other loans held for sale primarily because they are not economically hedged using derivative instruments.

The fair value of loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics. The changes in fair value of these assets are largely driven by changes in interest rates subsequent to loan funding and changes in the fair value of servicing associated with the mortgage loan held for sale. Both the mortgage loans held for sale and the related forward contracts are classified as Level 2.

At both December 31, 2012 and 2011, no loans held for sale for which the fair value option was elected were 90 days or more past due or were in nonaccrual. Interest income on mortgage loans held for sale is recognized based on contractual rates and is reflected in interest and fees on loans in the Consolidated Statements of Income. Net gains of $9.7 million and $8.1 million resulting from changes in fair value of these loans were recorded in noninterest income during the years ended 2012 and 2011, respectively.

The Company also had fair value changes of approximately $1.2 million, $2.2 million and $450 thousand on forward contracts related to residential mortgage loans held for sale during the years ended December 31, 2012, 2011, and 2010, respectively. An immaterial portion of these amounts was attributable to changes in instrument-specific credit risk.

213

The following tables summarize the difference between the aggregate fair value and the aggregate unpaid principal balance for residential mortgage loans measured at fair value at December 31, 2012 and 2011.

	Aggregate Fair Value		Aggregate Unpaid Principal Balance		Difference
	(In Thousands)
December 31, 2012
Residential mortgage loans held for sale	$	312,171	$	299,069	$	13,102
December 31, 2011
Residential mortgage loans held for sale	$	150,989	$	144,613	$	6,376

Derivative assets and liabilities – Derivative assets and liabilities are measured using models that primarily use market observable inputs, such as quoted security prices, and are accordingly classified as Level 2. The derivative assets and liabilities classified within Level 3 of the fair value hierarchy were comprised of interest rate swap agreements that are valued using third-party software that calculates fair market value considering current quoted TBA and other market based prices and then applies closing ratio assumptions based on software-produced pull through ratios that are generated using the Company’s historical fallout activity. Based upon this process, the fair value measurement obtained for these financial instruments is deemed a Level 3 classification. The Secondary Marketing Committee is responsible for the appropriate application of the valuation policies and procedures surrounding the Company’s interest rate lock commitments. Policies established to govern mortgage pipeline risk management activities must be approved by the Company’s Asset Liability Committee on an annual basis.

Other assets – Other assets measured at fair value on a recurring basis and classified within Level 3 of the fair value hierarchy were comprised of MSRs that are valued through a discounted cash flow analysis using a third-party commercial valuation system. The valuation takes into consideration the objective characteristics of the MSR portfolio, such as loan amount, note rate, service fee, loan term, and common industry assumptions, such as servicing costs, ancillary income, prepayment estimates, earning rates, cost of fund rates, discount rates, etc. The Company’s portfolio-specific factors are also considered in calculating the fair value of MSRs to the extent one can reasonably assume a buyer would also incorporate these factors. Examples of such factors are geographical concentrations of the portfolio, liquidity considerations such as housing authority loans which have a limited number of approved servicers, or additional views of risk not inherently accounted for in prepayment assumptions. Product liquidity and these other risks are generally incorporated through adjustment of discount factors applied to forecasted cash flows. Based on this method of pricing MSRs, the fair value measurement obtained for these financial instruments is deemed a Level 3 classification. The value of the MSR is calculated by two third-party firms that specialize in the MSR market and valuation services. Additionally, the Company obtains a monthly valuation as well as an annual valuation from two independent parties to compare for reasonableness. The Company’s Secondary Marketing Committee is responsible for ensuring the appropriate application of valuation, capitalization, and fair value decay policies for the MSR portfolio. The Committee meets at least monthly to review the status of the MSR portfolio.

214

The following tables summarize the assets and liabilities measured at fair value on a recurring basis at December 31, 2012 and 2011.

			Fair Value Measurements at the End of the Reporting Period Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	December 31, 2012		(Level 1)		(Level 2)		(Level 3)
	(In Thousands)
Recurring fair value measurements
Assets:
Trading account assets:
U.S. Treasury and other U.S. government agencies	$	17,114	$	—	$	17,114	$	—
Mortgage-backed securities	4,029		—		4,029		—
State and political subdivisions	3,744		—		3,744		—
Interest rate contracts	431,765		—		431,765		—
Commodity contracts	80,004		—		80,004		—
Foreign exchange contracts	3,519		—		3,519		—
Other trading assets	5,605		—		3,522		2,083
Total trading account assets	545,780		—		543,697		2,083
Loans held for sale	312,171		—		312,171		—
Investment securities available for sale:
U.S. Treasury and other U.S. government agencies	96,125		—		96,125		—
Mortgage-backed securities	5,199,513		—		5,199,513		—
Collateralized mortgage obligations	1,722,825		—		1,722,825		—
States and political subdivisions	341,897		—		341,889		8
Other debt securities	130,222		125,222		5,000		—
Equity securities (1)	33		27		—		6
Total investment securities available for sale	7,490,615		125,249		7,365,352		14
Derivative assets:
Interest rate contracts	151,641		—		146,547		5,094
Equity contracts	23,361		—		23,361		—
Foreign exchange contracts	641		—		641		—
Total derivative assets	175,643		—		170,549		5,094
Other assets	13,255		—		—		13,255
Liabilities:
Trading account liabilities:
Mortgage-backed securities	$	3,763	$	—	$	3,763	$	—
Interest rate contracts	377,655		—		377,655		—
Commodity contracts	75,842		—		75,842		—
Foreign exchange contracts	3,414		—		3,414		—
Total trading account liabilities	460,674		—		460,674		—
Derivative liabilities:
Interest rate contracts	27,234		—		27,156		78
Equity contracts	22,416		—		22,416		—
Foreign exchange contracts	1,415		—		1,415		—
Total derivative liabilities	51,065		—		50,987		78

(1) Excludes $498 million of FHLB and Federal Reserve stock required to be owned by the Company at December 31, 2012. These securities are carried at par.

215

			Fair Value Measurements at the End of the Reporting Period Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	December 31, 2011		(Level 1)		(Level 2)		(Level 3)
	(In Thousands)
Recurring fair value measurements
Assets:
Trading account assets:
U.S. Treasury and other U.S. government agencies	$	501	$	—	$	501	$	—
Mortgage-backed securities	2,632		—		2,632		—
State and political subdivisions	2,411		—		2,411		—
Interest rate contracts	439,474		—		439,474		—
Commodity contracts	162,403		—		162,403		—
Other derivative assets	789		—		789		—
Other trading assets	3,308		—		896		2,412
Total trading account assets	611,518		—		609,106		2,412
Loans held for sale	150,989		—		150,989		—
Investment securities available for sale:
U.S. Treasury and other U.S. government agencies	122,296		—		122,296		—
Mortgage-backed securities	4,752,943		—		4,752,126		817
Collateralized mortgage obligations	2,164,532		—		2,164,532		—
States and political subdivisions	303,827		—		303,803		24
Other debt securities	122,275		117,217		50		5,008
Equity securities (1)	21		15		—		6
Total investment securities available for sale	7,465,894		117,232		7,342,807		5,855
Derivative assets:
Interest rate swaps	200,895		—		198,804		2,091
Interest rate options	21,153		—		21,153		—
Other derivative assets	775		—		775		—
Total derivative assets	222,823		—		220,732		2,091
Other assets	4,264		—		—		4,264
Liabilities:
Trading account liabilities:
Mortgage-backed securities	$	2,603	$	—	$	2,603	$	—
Interest rate contracts	397,122		—		397,122		—
Commodity contracts	166,024		—		166,024		—
Other derivative liabilities	786		—		786		—
Total trading account liabilities	566,535		—		566,535		—
Derivative liabilities:
Interest rate swaps	22,317		—		22,317		—
Interest rate options	20,474		—		20,474		—
Other derivative liabilities	340		—		340		—
Total derivative liabilities	43,131		—		43,131		—

(1) Excludes $558 million of FHLB and Federal Reserve stock required to be owned by the Company at December 31, 2011. These securities are carried at par.

216

There were no significant transfers between Levels 1 or 2 of the fair value hierarchy during the years ended December 31, 2012 and 2011. It is the Company’s policy to value any transfers between levels of the fair value hierarchy based on end of period fair values.

The following table reconciles the assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2012 and 2011.

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Other Trading Assets			Mortgage-backed Securities			States and Political Subdivisions			Other Debt Securities			Equity Securities		Interest Rate Contracts, net		Other Assets
	(In Thousands)
Balance, January 1, 2011	$	2,856		$	88		$	5,054		$	4,959		$	6	$	530	$	—
Transfers into Level 3 (1)	—			817			—			—			—		—		—
Transfers out of Level 3 (2)	—			(38		)	(4,957		)	—			—		—		—
Total gains or losses (realized/unrealized):
Included in earnings (3)	(444		)	(50		)	(73		)	49			—		1,561		—
Included in other comprehensive income	—			—			—			—			—		—		—
Purchases, issuances, sales and settlements:
Purchases	—			—			—			—			—		—		4,264
Issuances	—			—			—			—			—		—		—
Sales	—			—			—			—			—		—		—
Settlements	—			—			—			—			—		—		—
Balance, December 31, 2011	$	2,412		$	817		$	24		$	5,008		$	6	$	2,091	$	4,264
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at December 31, 2011	$	(444	)	$	(50	)	$	(73	)	$	49		$	—	$	1,561	$	—
Balance, January 1, 2012	$	2,412		$	817		$	24		$	5,008		$	6	$	2,091	$	4,264
Transfers into Level 3 (1)	—			—			—			—			—		—		—
Transfers out of Level 3 (2)	—			(327		)	—			(4,950		)	—		—		—
Total gains or losses (realized/unrealized):
Included in earnings (3)	(329		)	—			—			—			—		2,925		(2,481		)
Included in other comprehensive income	—			(490		)	(16		)	192			—		—		—
Purchases, issuances, sales and settlements:
Purchases	—			—			—			—			—		—		—
Issuances	—			—			—			—			—		—		11,472
Sales	—			—			—			—			—		—		—
Settlements	—			—			—			(250		)	—		—		—
Balance, December 31, 2012	$	2,083		$	—		$	8		$	—		$	6	$	5,016	$	13,255
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at December 31, 2012	$	(329	)	$	—		$	—		$	—		$	—	$	2,925	$	(2,481	)

(1) Transferred from Level 2 to Level 3 due to a lack of observable market data resulting from a decrease in market activity.

(2) Transferred from Level 3 to Level 2 due to observable market data resulting from an increase in market activity.

(3) Included in noninterest income in the Consolidated Statements of Income.

Assets Measured at Fair Value on a Nonrecurring Basis

217

Periodically, certain assets may be recorded at fair value on a non-recurring basis. These adjustments to fair value usually result from the application of lower of cost or fair value accounting or write-downs of individual assets due to impairment. The following is a description of the methodologies applied for valuing these assets:

Investment securities held to maturity – Nonrecurring fair value adjustments on investment securities held to maturity reflect impairment write-downs which the Company believes are other than temporary. For analyzing these securities, the Company has retained a third party valuation firm. Impairment is determined through the use of cash flow models that estimate cash flows on the underlying mortgages using security specific collateral and the transaction structure. The cash flow models incorporate the remaining cash flows which are adjusted for future expected credit losses. Future expected credit losses are determined by using various assumptions such as current default rates, prepayment rates, and loss severities. The Company develops these assumptions through the use of market data published by third party sources in addition to historical analysis which includes actual delinquency and default information through the current period. The expected cash flows are then discounted at the interest rate used to recognize interest income on the security to arrive at a present value amount. As the fair value assessments are derived using a discounted cash flow modeling approach, the nonrecurring fair value adjustments are classified as Level 3.

At December 31, 2012 and 2011, investment securities held to maturity included $39 million and $93 million, respectively, of securities that have had impairment write-downs. The Company recorded OTTI related to these investment securities held to maturity of $987 thousand, $3.5 million, and $4.3 million during the years ended December 31, 2012, 2011, and 2010, respectively.

Loans held for sale – Loans held for sale for which the fair value option has not been elected are carried at the lower of cost or fair value and are evaluated on an individual basis. The fair value of each loan held for sale is based on the collateral value of the underlying asset. Therefore, loans held for sale subjected to nonrecurring fair value adjustments are classified as Level 3.

At December 31, 2012 and 2011, the Company had recorded $10 million and $19 million, respectively, of loans held for sale for which the fair value option has not been elected. During the years ended December 31, 2012, 2011, and 2010, the Company recognized $2.2 million, $6.5 million, and $12.0 million, respectively, of fair value changes to the loans held for sale portfolio measured on a nonrecurring basis.

Impaired Loans – Nonrecurring fair value adjustments to impaired loans reflect full or partial write-downs that are based on the loan’s observable market price or current estimated value of the collateral. Loans subjected to nonrecurring fair value adjustments based on the current estimated value of the collateral are classified as Level 3.

At December 31, 2012 and 2011, the Company identified $336 million and $612 million, respectively, of impaired loans, net of allowance for loan losses, for which the fair value is recorded based primarily on collateral value. During the years ended December 31, 2012, 2011, and 2010, the Company recognized $24.2 million, $124.9 million, and $114.8 million, respectively, of net write-downs on its impaired loan portfolio.

Goodwill – Nonrecurring fair value adjustments on goodwill represent impairment write-downs based on the Company’s annual goodwill impairment test. The fair value derived in the annual goodwill impairment test is based on a combination of the present value of future expected cash flows and hypothetical market prices of similar entities and like transactions. As the amount of non-market based information utilized in the estimation of fair value for the annual goodwill impairment is significant, the associated fair value is classified as Level 3. There was no impairment charge on the Company’s goodwill during the year ended December 31, 2012. During the years ended December 31, 2011 and 2010, the Company recognized $2.0 billion and $523.3 million, respectively, of impairment charges on its goodwill. The recorded amount of goodwill, adjusted for the impairment charges, at December 31, 2011 was $5.0 billion.

OREO – OREO is recorded on the Company’s Consolidated Balance Sheets at the lower of recorded balance or fair value, which is based on appraisals and third-party price opinions, less estimated costs to sell. The fair value is classified as Level 3.

At December 31, 2012 and 2011, the Company had recorded OREO of $69 million and $218 million, respectively. During the years ended December 31, 2012, 2011, and 2010, the Company recognized $22.0 million, $30.0 million, and $33.2 million, respectively, of net write-downs on its OREO portfolio.

218

The table below presents quantitative information about the significant unobservable inputs for material assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring and nonrecurring basis at December 31, 2012.

			Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at				Range of Unobservable Inputs
	December 31, 2012		Valuation Technique	Unobservable Input(s)	(Weighted Average)
	(In Thousands)
Recurring fair value measurements:
Other trading assets	$	2,083	Discounted cash flow	Default rate	14.0%
				Prepayment rate	8%
Interest rate contracts	5,016		Discounted cash flow	Closing ratios (pull-through)	23.0% - 97.0% (56.0%)
				Cap grids	0.4% - 1.5% (1.0%)
Other assets - MSRs	13,255		Discounted cash flow	Discount rate	10.0% - 10.5% (10.0%)
				Constant prepayment rate or life speed	5.8% - 51.9% (12.0%)
Nonrecurring fair value measurements:
Investment securities held to maturity	$	38,566	Discounted cash flow	Prepayment rate	6.1% - 37.7% (9.6%)
				Default rate	0.2% - 20.9% (5.9%)
				Loss severity	20.3% - 100% (59.5%)
Loans held for sale	9,984		Appraised value	Appraised value	NM*
Impaired loans	336,336		Appraised value	Appraised value	0% - 100.0% (32.4%)
OREO	68,568		Appraised value	Appraised value	8.0%

*NM – not meaningful

The following provides a description of the sensitivity of the valuation technique to changes in unobservable inputs for recurring fair value measurements.

Recurring Fair Value Measurements Using Significant Unobservable Inputs

Trading Account Assets – Interest-Only Strips

Significant unobservable inputs used in the valuation of the Company’s interest-only strips include default rates and prepayment assumptions. Significant increases in either of these inputs in isolation would result in significantly lower fair value measurements. Generally, a change in the assumption used for the probability of default is accompanied by a directionally opposite change in the assumption used for prepayment rates.

Derivative assets and liabilities

Significant unobservable inputs used in the valuation of interest rate lock commitments are pull-through and cap grids. Increases or decreases in the pull-through or cap grids will have a corresponding impact in the value of interest rate locks.

Other Assets - MSRs

The significant unobservable inputs used in the fair value measurement of MSRs are discount rates and constant prepayment rate or life speed. The impact of prepayments and changes in the discount rate are based on a variety of underlying inputs such as servicing costs. Increases or decreases to the underlying cash flow inputs will have a corresponding impact on the value of the MSR asset. The impact of the costs to service assumption will have a directionally opposite change in the fair value of the MSR asset.

219

Fair Value of Financial Instruments

The carrying amounts and estimated fair values, as well as the level within the fair value hierarchy, of the Company’s financial instruments as of December 31, 2012 are as follows:

	December 31, 2012
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(In Thousands)
Financial Instruments:
Assets:
Cash and cash equivalents	$	6,158,442	$	6,158,442	$	6,158,442	$	—	$	—
Trading account assets	545,780		545,780		—		543,697		2,083
Investment securities available for sale	7,988,430		7,988,430		125,249		7,365,352		497,829
Investment securities held to maturity	1,507,929		1,416,723		—		—		1,416,723
Loans held for sale	322,065		322,065		—		312,171		9,894
Loans, net	44,208,690		42,147,832		—		—		42,147,832
Derivative assets	175,643		175,643		—		170,549		5,094
Other assets	13,255		13,255		—		—		13,255
Liabilities:
Deposits	$	51,642,778	$	51,683,469	$	—	$	51,683,469	$	—
FHLB and other borrowings	4,273,279		4,205,553		—		4,205,553		—
Federal funds purchased and securities sold under agreements to repurchase	1,101,591		1,101,591		—		1,101,591		—
Other short-term borrowings	3,763		3,763		—		3,763		—
Derivative liabilities	51,065		51,065		—		50,987		78

The carrying amounts and estimated fair values of the Company’s financial instruments as of December 31, 2011 are as follows:

	December 31, 2011
	Carrying Amount		Estimated Fair Value
	(In Thousands)
Financial Instruments:
Assets:
Cash and cash equivalents	$	3,093,160	$	3,093,160
Trading account assets	611,518		611,518
Investment securities available for sale	8,023,681		8,023,681
Investment securities held to maturity	1,305,173		1,206,081
Loans held for sale	170,351		170,351
Loans, net	40,890,531		38,182,200
Derivative assets	222,823		222,823
Other assets	4,264		4,264
Liabilities:
Deposits	$	46,057,193	$	46,050,993
FHLB and other borrowings	4,168,434		3,979,894
Federal funds purchased and securities sold under agreements to repurchase	1,336,842		1,336,842
Other short-term borrowings	2,603		2,603
Derivative liabilities	43,131		43,131

220

The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments not carried at fair value:

Cash and cash equivalents: Cash and cash equivalents have maturities of three months or less. Accordingly, the carrying amount approximates fair value. Because these amounts generally relate to either currency or highly liquid assets, these are considered a Level 1 measurement.

Investment securities held to maturity: The fair values of securities held to maturity are estimated in the same manner as the corresponding securities available for sale, which are measured at fair value on a recurring basis.

Loans: Loans are presented net of the allowance for loan losses and are valued using discounted cash flows. The discount rates used to determine the present value of these loans are based on current market interest rates for loans with similar credit risk and term. They are considered a Level 3 measurement as the valuation employs significant unobservable inputs.

Deposits: The fair values of demand deposits are equal to the carrying amounts. Demand deposits include noninterest bearing demand deposits, savings accounts, NOW accounts and money market demand accounts. Discounted cash flows have been used to value fixed rate term deposits and variable rate term deposits having an interest rate floor that has been reached. The discount rate used is based on interest rates currently being offered by the Company on comparable deposits as to amount and term. They are considered a Level 2 measurement as the valuation primarily employs observable inputs for similar instruments.

Short-term borrowings: The carrying amounts of federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings approximates fair value. They are therefore considered a Level 2 measurement.

FHLB and other borrowings: The fair value of the Company’s fixed rate borrowings, which includes the Company’s Capital Securities, are estimated using discounted cash flows, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. The carrying amount of the Company’s variable rate borrowings approximates fair value. As such, these borrowings are considered a Level 2 measurement as the valuation primarily employs observable inputs for similar instruments.

221

(21)Comprehensive Income

Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances arising from nonowner sources. The following summarizes the change in the components of other comprehensive income (loss) for the years ended December 31, 2012, 2011 and 2010.

	December 31, 2012
	Pretax			Tax Expense/ (Benefit)			After-tax
	(In Thousands)
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during period from securities available for sale	$	(7,562	)	$	(2,640	)	$	(4,922	)
Less: reclassification adjustment for net gains on sale of securities in net income	12,832			4,480			8,352
Net change in unrealized gains (losses) on securities available for sale	(20,394		)	(7,120		)	(13,274		)
Change in unamortized net holding losses on investment securities held to maturity	33,655			11,751			21,904
Less: non-credit related impairment on investment securities held to maturity	4,728			1,651			3,077
Change in unamortized non-credit related impairment on investment securities held to maturity	863			301			562
Net change in unamortized holding losses on securities held to maturity	29,790			10,401			19,389
Unrealized holding losses arising during period from cash flow hedge instruments	(4,416		)	(1,592		)	(2,824		)
Change in defined benefit plans	(11,524		)	(4,336		)	(7,188		)
Other comprehensive income (loss)	$	(6,544	)	$	(2,647	)	$	(3,897	)

	December 31, 2011
	Pretax			Tax Expense/ (Benefit)			After-tax
	(In Thousands)
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during period from securities available for sale	$	91,157		$	33,321		$	57,836
Less: reclassification adjustment for net gains on sale of securities in net income	50,438			18,739			31,699
Net change in unrealized gains (losses) on securities available for sale	40,719			14,582			26,137
Change in unamortized net holding losses on investment securities held to maturity	26,974			9,899			17,075
Less: non-credit related impairment on investment securities held to maturity	61			22			39
Change in unamortized non-credit related impairment on investment securities held to maturity	1,517			557			960
Net change in unamortized holding losses on securities held to maturity	28,430			10,434			17,996
Unrealized holding losses arising during period from cash flow hedge instruments	(2,849		)	(1,005		)	(1,844		)
Change in defined benefit plans	17,497			6,514			10,983
Other comprehensive income (loss)	$	83,797		$	30,525		$	53,272

222

	December 31, 2010
	Pretax			Tax Expense/ (Benefit)			After-tax
	(In Thousands)
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during period from securities available for sale	$	18,709		$	7,058		$	11,651
Less: reclassification adjustment for net gains on sale of securities in net income	69,127			24,602			44,525
Net change in unrealized gains (losses) on securities available for sale	(50,418		)	(17,544		)	(32,874		)
Unamortized net holding losses on investment securities held to maturity	37,115			13,209			23,906
Less: non-credit related impairment on investment securities held to maturity	217			78			139
Unamortized non-credit related impairment on investment securities held to maturity	13,629			4,852			8,777
Net change in unamortized holding losses on securities held to maturity	50,527			17,983			32,544
Unrealized holding losses arising during period from cash flow hedge instruments	(42,837		)	(15,570		)	(27,267		)
Defined benefit plans	(7,600		)	(2,781		)	(4,819		)
Other comprehensive income (loss)	$	(50,328	)	$	(17,912	)	$	(32,416	)

At December 31, 2012, accumulated other comprehensive income was comprised of $86 million of net unrealized gains on securities available for sale and securities transferred to held to maturity, a $38 million defined benefit plan adjustment, $13 million of accumulated losses on cash flow hedging instruments and $9 million of unamortized impairment losses on investment securities held to maturity. At December 31, 2011, accumulated other comprehensive income was comprised of $73 million of net unrealized gains on securities available for sale and securities transferred to held to maturity, a $31 million defined benefit plan adjustment, $11 million of accumulated losses on cash flow hedging instruments, and $2 million of unamortized impairment losses on investment securities held to maturity.

(22)Supplemental Disclosure for Statement of Cash Flows

The following table presents the Company’s noncash investing and financing activities for the years ended December 31, 2012, 2011 and 2010.

	2012			2011			2010
	(In Thousands)
Supplemental disclosures of cash flow information:
Interest paid	$	238,119		$	297,231		$	407,574
Net income taxes (refunded) paid	142,174			(47,616		)	30,629
Supplemental schedule of noncash investing and financing activities:
Transfer of loans and loans held for sale to OREO	$	67,194		$	235,201		$	422,980
Transfer of loans to loans held for sale	207,148			47,052			583,718
Loans to facilitate the sale of OREO	—			1,902			6,026
Transfer of investment securities held to maturity to loans	—			—			116,051
Change in unrealized gain (loss) on available for sale securities	(20,394		)	41,079			(50,418		)
Issuance of restricted stock, net of cancellations	8,585			13,797			13,276
Common stock issued in exchange for forgiveness of debt and interest	—			—			707,943
Cancellation of forward contract on restricted stock	—			4,148			—
Business combinations and divestitures:
Divestiture:
Assets sold	$	1,414		$	—		$	3,373
Removal of goodwill and intangibles	14,503			—			—
Liabilities sold	(1,694		)	—			—
Gain on divestiture	15,100			—			489
Net cash received	$	29,323		$	—		$	3,862

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(23) Segment Information

The Company’s operating segments are based on the Company’s lines of business. Each line of business is a strategic unit that serves a particular group of customers that have certain common characteristics through various products and services. The segment results include certain overhead allocations and intercompany transactions. All intercompany transactions have been eliminated to determine the consolidated balances. The Company operates primarily in the United States, and, accordingly, the geographic distribution of revenue and assets is not significant. There are no individual customers whose revenues exceeded 10% of consolidated revenue. The Company’s operating segments are Retail Banking, Commercial Banking, Corporate and Investment Banking, Wealth Management and Treasury.

The Retail Banking segment serves the Company’s consumer customers through its 708 full-service banking centers and through the use of alternative delivery channels such as the internet, mobile devices and telephone banking. The Retail Banking segment provides individuals with comprehensive products and services including home mortgages, credit and debit cards, deposit accounts, insurance products, mutual funds and brokerage services. In addition, the Retail Banking segment serves the Company’s small business customers and the Company’s indirect automobile portfolio.

The Commercial Banking segment is responsible for providing a full array of banking and investment services to businesses in the Company’s markets. In addition to traditional credit and deposit products, the Commercial Banking segment also supports its customers with capabilities in treasury management, leasing, accounts receivable purchasing, asset-based lending, international services, and insurance and interest rate protection and investment products.

The Corporate and Investment Banking segment is responsible for providing a full array of banking and investment services to corporate and institutional clients. In addition to traditional credit and deposit products, the Corporate and Investment Banking segment also supports its customers with capabilities in treasury management, leasing, accounts receivable purchasing, asset-based lending, international services, and interest rate protection and investment products.

The Wealth Management segment provides private banking to high net worth individuals and wealth management services, including specialized investment portfolio management, traditional credit products, traditional trust and estate services, investment advisory services, financial counseling and customized services to companies and their employees.

The Treasury segment’s primary function is to manage the investment securities portfolio, public entity deposits, the interest rate sensitivity of the Company’s Consolidated Balance Sheets and the liquidity and funding positions of the Company.

Activities that are not directly attributable to the operating segments, for example, the activities of the Parent and support functions, including accounting, loan review and the elimination of intercompany transactions, are presented under Corporate Support and Other.

224

The following table presents the segment information for the Company’s segments as of and for the year ended December 31, 2012, 2011 and 2010.

	December 31, 2012
	Retail Banking		Commercial Banking			Corporate & Investment Banking		Wealth Management		Treasury		Corporate Support and Other			Consolidated
	(In Thousands)
Net interest income	$	895,244	$	990,594		$	57,015	$	144,527	$	2,805	$	139,797		$	2,229,982
Allocated provision for loan losses	122,171		(108,812		)	5,634		6,395		395		3,688			29,471
Noninterest income	530,375		133,534			68,903		69,840		79,343		(31,947		)	850,048
Noninterest expense	1,155,962		515,370			47,522		136,065		18,604		478,324			2,351,847
Net income (loss) before income tax expense (benefit)	147,486		717,570			72,762		71,907		63,149		(374,162		)	698,712
Income tax expense (benefit)	59,917		267,296			27,104		26,785		23,523		(184,924		)	219,701
Net income (loss)	87,569		450,274			45,658		45,122		39,626		(189,238		)	479,011
Less: net income attributable to noncontrolling interests	—		—			—		—		—		2,138			2,138
Net income (loss) attributable to shareholder	$	87,569	$	450,274		$	45,658	$	45,122	$	39,626	$	(191,376	)	$	476,873
Average assets	$	15,123,518	$	25,492,975		$	2,481,834	$	3,344,281	$	12,818,387	$	7,207,820		$	66,468,815

	December 31, 2011
	Retail Banking			Commercial Banking		Corporate & Investment Banking			Wealth Management			Treasury		Corporate Support and Other			Consolidated
	(In Thousands)
Net interest income	$	856,023		$	922,873	$	52,228		$	130,338		$	41,169	$	326,418		$	2,329,049
Allocated provision for loan losses	226,097			182,838		2,340			5,590			463		11,305			428,633
Noninterest income	561,657			95,552		60,821			74,485			76,189		(15,491		)	853,213
Noninterest expense	1,984,738			491,896		290,420			416,387			22,436		1,186,941			4,392,818
Net income (loss) before income tax expense (benefit)	(793,155		)	343,691		(179,711		)	(217,154		)	94,459		(887,319		)	(1,639,189		)
Income tax expense (benefit)	15,395			128,025		25,959			25,571			35,186		(131,961		)	98,175
Net income (loss)	(808,550		)	215,666		(205,670		)	(242,725		)	59,273		(755,358		)	(1,737,364		)
Less: net income attributable to noncontrolling interests	—			—		—			—			—		2,011			2,011
Net income (loss) attributable to shareholder	$	(808,550	)	$	215,666	$	(205,670	)	$	(242,725	)	$	59,273	$	(757,369	)	$	(1,739,375	)
Average assets	$	14,117,525		$	24,494,797	$	1,980,079		$	2,692,804		$	11,474,742	$	8,975,444		$	63,735,391

225

	December 31, 2010
	Retail Banking		Commercial Banking		Corporate & Investment Banking		Wealth Management		Treasury		Corporate Support and Other			Consolidated
	(In Thousands)
Net interest income	$	794,745	$	963,209	$	47,210	$	119,263	$	81,799	$	332,958		$	2,339,184
Allocated provision for loan losses	202,791		590,953		6,186		18,892		388		5,839			825,049
Noninterest income	541,444		101,654		73,340		65,684		89,797		14,278			886,197
Noninterest expense	1,112,444		467,988		39,459		113,078		19,583		924,396			2,676,948
Net income (loss) before income tax expense (benefit)	20,954		5,922		74,905		52,977		151,625		(582,999		)	(276,616		)
Income tax expense (benefit)	6,210		2,206		27,902		19,734		56,480		(52,687		)	59,845
Net income (loss)	14,744		3,716		47,003		33,243		95,145		(530,312		)	(336,461		)
Less: net income attributable to noncontrolling interests	—		—		—		—		—		2,010			2,010
Net income (loss) attributable to shareholder	$	14,744	$	3,716	$	47,003	$	33,243	$	95,145	$	(532,322	)	$	(338,471	)
Average assets	$	12,279,348	$	27,660,698	$	1,697,809	$	2,367,640	$	11,043,549	$	9,578,416		$	64,627,460

The financial information presented was derived from the internal profitability reporting system used by management to monitor and manage the financial performance of the Company. This information is based on internal management accounting policies that have been developed to reflect the underlying economics of the businesses. The policies address the methodologies applied and include policies related to funds transfer pricing. Funds transfer pricing was used in the determination of net interest income by assigning a standard cost (credit) for funds used (provided) to assets and liabilities based on their maturity, prepayment and/or repricing characteristics.

The development and application of these methodologies is a dynamic process. In addition, unlike financial accounting, there is no authoritative literature for management accounting similar to generally accepted accounting principles. Consequently, reported results are not necessarily comparable with those presented by other financial institutions.

(24)Parent Company Financial Statements

The condensed financial information for BBVA Compass Bancshares, Inc. (formally known as BBVA USA, Bancshares, Inc.) (Parent company only) is presented as follows:

Parent Company Balance Sheets
	December 31,
	2012		2011
	(In Thousands)
Assets:
Cash and cash equivalents	$	26,531	$	34,159
Investment in subsidiaries	11,027,161		10,553,592
Other assets	969		849
Total assets	$	11,054,661	$	10,588,600
Liabilities and Shareholder’s Equity:
Accrued expenses and other liabilities	$	93	$	498
Shareholder’s equity	11,054,568		10,588,102
Total liabilities and shareholder’s equity	$	11,054,661	$	10,588,600

226

Parent Company Statements of Income
	Years Ended December 31,
	2012			2011			2010
	(In Thousands)
Income:
Other	$	—		$	4		$	—
Total income	—			4			—
Expense:
Other	982			1,104			897
Total expense	982			1,104			897
Loss before income tax benefit and equity in undistributed earnings (losses) of subsidiaries	(982		)	(1,100		)	(897		)
Income tax benefit	(340		)	(385		)	(314		)
Loss before equity in undistributed earnings (losses) of subsidiaries	(642		)	(715		)	(583		)
Equity in undistributed earnings (losses) of subsidiaries	477,515			(1,738,660		)	(337,888		)
Net income (loss)	$	476,873		$	(1,739,375	)	$	(338,471	)
Other comprehensive income (loss) (1)	(3,897		)	53,272			(32,416		)
Comprehensive income (loss)	$	472,976		$	(1,686,103	)	$	(370,887	)

(1) See Consolidated Statement of Comprehensive Income (Loss) detail.

Parent Company Statements of Cash Flows
	Years Ended December 31,
	2012			2011			2010
	(In Thousands)
Operating Activities:
Net income (loss)	$	476,873		$	(1,739,375	)	$	(338,471	)
Adjustments to reconcile net income (loss) to cash provided by operations:
Amortization of stock based compensation	6,698			13,050			8,968
Depreciation	—			27			—
Equity in undistributed (earnings) losses of subsidiaries	(477,515		)	1,738,660			337,888
(Increase) decrease in other assets	(120		)	(238		)	428
Decrease in other liabilities	(405		)	(5,907		)	(3,499		)
Net cash provided by operating activities	5,531			6,217			5,314
Investing Activities:
Capital receipts from (contributions to) subsidiaries	—			—			—
Net cash (used in) provided by investing activities	—			—			—
Financing Activities:
Vesting of restricted stock	(11,701		)	—			—
Restricted stock grants retained to cover taxes	(1,458		)	(2,196		)	(1,299		)
Net cash used in financing activities	(13,159		)	(2,196		)	(1,299		)
Net (decrease) increase in cash and cash equivalents	(7,628		)	4,021			4,015
Cash and cash equivalents at beginning of the year	34,159			30,138			26,123
Cash and cash equivalents at end of the year	$	26,531		$	34,159		$	30,138

(25)Related Party Transactions

The Company enters into various contracts with BBVA that affect the Company’s business and operations. The following discloses the significant transactions between the Company and BBVA during 2012 and 2011.

227

The Company believes all of the transactions entered into between the Company and BBVA were transacted on terms that were no more or less beneficial to the Company than similar transactions entered into with unrelated market participants, including interest rates and transaction costs. The Company foresees executing similar transactions with BBVA in the future.

Derivatives

The Company has entered into various derivative contracts as noted below with BBVA as the upstream counterparty. The fair value of outstanding derivative contracts between the Company and BBVA at December 31, 2012 and 2011 are detailed below.

	2012			2011
	(In Thousands)
Derivative contracts
Cash flow hedges	$	5,570		$	4,166
Free-standing derivative instruments – risk management and other purposes	20,974			20,900
Free-standing derivative instruments – customer accommodation	(51,674		)	(83,682		)

Loan Sales and Purchases

During 2011 and 2010, the Company sold nonperforming loans with a fair value of $47 million and $481 million, respectively, to BBVA. Prior to the sale, these loans were transferred to loans held for sale and adjusted to fair value. As a result of this transfer, no gain or loss was recognized on the sale. The Company did not sell any loans to related parties during 2012. The Company purchased performing loans with an approximated fair value of $37 million and $320 million from BBVA during 2012 and 2010, respectively.

228

Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

229

Item 15. Financial Statements and Exhibits

(a) The following consolidated financial statements required to be filed as part of this Registration Statement are included in Item 13 hereof:

(1) Unaudited Condensed Consolidated Financial Statements:

Unaudited Condensed Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012

Unaudited Condensed Consolidated Statements of Income for the nine months ended September 30, 2013 and 2012

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the nine months ended September 30, 2013 and 2012

Unaudited Condensed Consolidated Statements of Shareholder's Equity for the nine months ended September 30, 2013 and 2012

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012

Notes to Unaudited Condensed Consolidated Financial Statements

(2) Audited Consolidated Financial Statements:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2012 and 2011

Consolidated Statements of Income for the years ended December 31, 2012, 2011 and 2010

Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2012, 2011 and 2010

Consolidated Statements of Shareholder’s Equity for the years ended December 31, 2012, 2011 and 2010

Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010

Notes to Consolidated Financial Statements

230

(b) Exhibits

Exhibit Number	Description of Documents
2.1	Purchase and Assumption Agreement Whole Bank All Deposits among the Federal Deposit Insurance Corporation, Receiver of Guaranty Bank, Austin, Texas, the Federal Deposit Insurance Corporation and Compass Bank, dated as of August 21, 2009.
3.1	Certificate of Formation of BBVA Compass Bancshares, Inc., as amended (restated for filing with the SEC)
3.2	Bylaws of BBVA Compass Bancshares, Inc.
21	List of Subsidiaries of BBVA Compass Bancshares, Inc.

Certain instruments defining rights of holders of long-term debt of the Company and its subsidiaries constituting less than 10% of the Company’s total assets are not filed herewith pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K. At the SEC’s request, the Company agrees to furnish the SEC a copy of any such agreement.

231

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 22, 2013	BBVA Compass Bancshares, Inc.
	By:	/s/ Angel Reglero
		Name:	Angel Reglero
		Title:	Senior Executive Vice President and Chief Financial Officer

232

EX-2.1

Exhibit 2.1

PURCHASE AND ASSUMPTION AGREEMENT

WHOLE BANK

ALL DEPOSITS

AMONG

FEDERAL DEPOSIT INSURANCE CORPORATION, RECEIVER OF GUARANTY BANK,

AUSTIN, TEXAS

FEDERAL DEPOSIT INSURANCE CORPORATION

and

COMPASS BANK

DATED AS OF

AUGUST 21, 2009

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TABLE OF CONTENTS

ARTICLE I	DEFINITIONS	2
ARTICLE II	ASSUMPTION OF LIABILITIES	8
2.1	Liabilities Assumed by Assuming Bank	8
2.2	Interest on Deposit Liabilities	10
2.3	Unclaimed Deposits	10
2.4	Employee Plans	11
ARTICLE III	PURCHASE OF ASSETS	11
3.1	Assets Purchased by Assuming Bank	11
3.2	Asset Purchase Price	11
3.3	Manner of Conveyance; Limited Warranty; Nonrecourse; Etc	12
3.4	Puts of Assets to the Receiver	12
3.5	Assets Not Purchased by Assuming Bank	14
3.6	Assets Essential to Receiver	15
ARTICLE IV	ASSUMPTION OF CERTAIN DUTIES AND OBLIGATIONS	16
4.1	Continuation of Banking Business.	16
4.2	Reserved	16
4.3	Agreement with Respect to Safe Deposit Business	17
4.4	Agreement with Respect to Safekeeping Business	17
4.5	Reserved	17
4.6	Agreement with Respect to Bank Premises	17
4.7	Agreement with Respect to Leased Data Processing Equipment	20
4.8	Agreement with Respect to Certain Existing Agreements	20
4.9	Informational Tax Reporting	21
4.10	Insurance	21
4.11	Office Space for Receiver and Corporation	21
4.12	Agreement with Respect to Continuation of Group Health Plan Coverage for Former Employees	22
4.13	Agreement with Respect to Interim Asset Servicing	23
ARTICLE V	DUTIES WITH RESPECT TO DEPOSITORS OF THE FAILED BANK	23
5.1	Payment of Checks, Drafts and Orders	23
5.2	Certain Agreements Related to Deposits	24
5.3	Notice to Depositors	24

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ARTICLE VI	RECORDS	24
6.1	Transfer of Records	24
6.2	Delivery of Assigned Records	25
6.3	Preservation of Records	25
6.4	Access to Records; Copies	25
ARTICLE VII	FIRST LOSS TRANCHE	26
ARTICLE VIII	ADJUSTMENTS	26
8.1	Pro Forma Statement	26
8.2	Correction of Errors and Omissions; Other Liabilities
8.3	Payments	27
8.4	Interest	27
8.5	Subsequent Adjustments	27
8.6	Disagreements	28
ARTICLE IX	CONTINUING COOPERATION	29
9.1	General Matters	29
9.2	Additional Title Documents	29
9.3	Claims and Suits	29
9.4	Payment of Deposits	30
9.6	Withheld Payments	30
9.7	Proceedings with Respect to Certain Assets and Liabilities	31
9.8	Information	31
ARTICLE X	CONDITION PRECEDENT	31
ARTICLE XI	REPRESENTATIONS AND WARRANTIES OF THE ASSUMING BANK	32
ARTICLE XII	INDEMNIFICATION	33
12.1	Indemnification of Indemnitees	33
12.2	Conditions Precedent to Indemnification	36
12.3	No Additional Warranty	37
12.4	Indemnification of Corporation and Receiver	37
12.5	Obligations Supplemental	37
12.6	Criminal Claims	38
12.7	Limited Guaranty of the Corporation	38
12.8	Subrogation	38

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ARTICLE XIII	MISCELLANEOUS	38
13.1	Entire Agreement	38
13.2	Headings	38
13.3	Counterparts	38
13.4	Governing Law	39
13.5	Successors	39
13.6	Modification; Assignment	39
13.7	Notice	39
13.8	Manner of Payment	40
13.9	Costs, Fees and Expenses	40
13.10	Waiver	40
13.11	Severability	40
13.12	Term of Agreement	41
13.13	Survival of Covenants, Etc	41
SCHEDULES
2.1	Certain Liabilities Assumed	43
2.1(a)	Excluded Deposit Liability Accounts	44
3.1	Certain Assets Purchased	45
3.2	Purchase Price of Assets or assets	47
3.5(1)	Excluded Private Label Asset-Backed Securities	49
4.15A	Single Family Loss Share Loans.	51
4.15B	Commercial Loss Share Loans	52
4.15C	Shared-Loss MTM Assets.	52
7	Calculation of Deposit Premium	54
EXHIBITS
3.2	Valuation of Certain Qualified Financial Contracts	55
4.13	Interim Asset Servicing Arrangement	57
4.15A	Single Family Shared-Loss Agreement	59
4.15B	Commercial Shared-Loss Agreement	100

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PURCHASE AND ASSUMPTION AGREEMENT

WHOLE BANK

ALL DEPOSITS

THIS AGREEMENT, made and entered into as of the 21st day of August, 2009, by and among the FEDERAL DEPOSIT INSURANCE CORPORATION, RECEIVER of

GUARANTY BANK, AU5BSTIN, TEXAS (the "Receiver"), COMPASS BANK, organized under the laws of the State of Alabama, and having its principal place of business in BIRMINGHAM, ALABAMA (the "Assuming Bank"), and the FEDERAL DEPOSIT INSURANCE CORPORATION, organized under the laws of the United States of America and having its principal office in Washington, D.C., acting in its corporate capacity (the "Corporation").

WITNESSETH:

WHEREAS, on Bank Closing, the Chartering Authority closed GUARANTY BANK (the "Failed Bank") pursuant to applicable law and the Corporation was appointed Receiver thereof; and

WHEREAS, the Assuming Bank desires to purchase certain assets and assume certain deposit and other liabilities of the Failed Bank on the terms and conditions set forth in this Agreement; and

WHEREAS, pursuant to 12 U.S.C. Section 1823(c)(2)(A), the Corporation may provide assistance to the Assuming Bank to facilitate the transactions contemplated by this Agreement, which assistance may include indemnification pursuant to Article XII; and

WHEREAS, the Board of Directors of the Corporation (the "Board") has determined to provide assistance to the Assuming Bank on the terms and subject to the conditions set forth in this Agreement; and

WHEREAS, the Board has determined pursuant to 12 U.S.C. Section 1823(c)(4)(A) that such assistance is necessary to meet the obligation of the Corporation to provide insurance coverage for the insured deposits in the Failed Bank.

NOW THEREFORE, in consideration of the mutual promises herein set forth and other valuable consideration, the parties hereto agree as follows:

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ARTICLE I

DEFINITIONS

Capitalized terms used in this Agreement shall have the meanings set forth in this Article I, or elsewhere in this Agreement. As used herein, words imparting the singular include the plural and vice versa.

"Accounting Records" means the general ledger and subsidiary ledgers and supporting schedules which support the general ledger balances.

"Acquired Subsidiaries" means the Subsidiaries of the Failed Bank acquired pursuant to Section 3.1 and as provided for on Schedule 3.1a.

"Affiliate" of any Person means any director, officer, or employee of that Person and any other Person (i) who is directly or indirectly controlling, or controlled by, or under direct or indirect common control with, such Person, or (ii) who is an affiliate of such Person as the term "affiliate" is defined in Section 2 of the Bank Holding Company Act of 1956, as amended, 12 U.S.C. Section 1841.

"Agreement" means this Purchase and Assumption Agreement by and among the Assuming Bank, the Corporation and the Receiver, as amended or otherwise modified from time to time.

"Assets" means all assets of the Failed Bank purchased pursuant to Section 3.1. Assets owned by Subsidiaries of the Failed Bank are not "Assets" within the meaning of this definition.

"Assumed Deposits" means Deposits.

"Bank Closing" means the close of business of the Failed Bank on the date on which the Chartering Authority closed such institution.

"Bank Premises" means the banking houses, drive-in banking facilities, and teller facilities (staffed or automated) together with appurtenant parking, storage and service facilities and structures connecting remote facilities to banking houses, and land on which the foregoing are located, that are owned or leased by the Failed Bank and that have formerly been utilized, are currently utilized, or are intended to be utilized in the future by the Failed Bank as shown on the Accounting Record of the Failed Bank as of Bank Closing.

"Book Value" means, with respect to any Asset and any Liability Assumed, the dollar amount thereof stated on the Accounting Records of the Failed Bank. The Book Value of any item shall be determined as of Bank Closing after adjustments made by the Receiver for differences in accounts, suspense items, unposted debits and credits, and other similar adjustments or corrections and for setoffs, whether voluntary or involuntary. The Book Value of a Subsidiary of the Failed Bank acquired by the Assuming Bank shall be determined from the

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investment in subsidiary and related accounts on the "bank only" (unconsolidated) balance sheet of the Failed Bank based on the equity method of accounting. Without limiting the generality of the foregoing, (i) the Book Value of a Liability Assumed shall include all accrued and unpaid interest thereon as of Bank Closing, and (ii) the Book Value of a Loan shall reflect adjustments for earned interest, or unearned interest (as it relates to the "rule of 78s" or add-on-interest loans, as applicable), if any, as of Bank Closing, adjustments for the portion of earned or unearned loan-related credit life and/or disability insurance premiums, if any, attributable to the Failed Bank as of Bank Closing, and adjustments for Failed Bank Advances, if any, in each case as determined for financial reporting purposes. The Book Value of an Asset shall not include any adjustment for loan premiums, discounts or any related deferred income, fees or expenses, or general or specific reserves on the Accounting Records of the Failed Bank. For Shared-Loss Securities, Book Value means the fair value of the security set forth in the Information Package provided to prospective acquirers.

"Business Day" means a day other than a Saturday, Sunday, Federal legal holiday or legal holiday under the laws of the State where the Failed Bank is located, or a day on which the principal office of the Corporation is closed.

"Chartering Authority" means (i) with respect to a national bank, the Office of the Comptroller of the Currency, (ii) with respect to a Federal savings association or savings bank, the Office of Thrift Supervision, (iii) with respect to a bank or savings institution chartered by a State, the agency of such State charged with primary responsibility for regulating and/or closing banks or savings institutions, as the case may be, (iv) the Corporation in accordance with 12 U.S.C. Section 1821(c), with regard to self appointment, or (v) the appropriate Federal banking agency in accordance with 12 U.S.C. § 1821(c)(9).

"Commitment" means the unfunded portion of a line of credit or other commitment reflected on the books and records of the Failed Bank to make an extension of credit (or additional advances with respect to a Loan) that was legally binding on the Failed Bank as of Bank Closing, other than extensions of credit pursuant to overdraft protection plans of the Failed Bank, if any.

"Credit Documents" mean the agreements, instruments, certificates or other documents at any time evidencing or otherwise relating to, governing or executed in connection with or as security for, a Loan, including without limitation notes, bonds, loan agreements, letter of credit applications, lease financing contracts, banker's acceptances, drafts, interest protection agreements, currency exchange agreements, repurchase agreements, reverse repurchase agreements, guarantees, deeds of trust, mortgages, assignments, security agreements, pledges, subordination or priority agreements, lien priority agreements, undertakings, security instruments, certificates, documents, legal opinions, participation agreements and intercreditor agreements, and all amendments, modifications, renewals, extensions, rearrangements, and substitutions with respect to any of the foregoing.

"Credit File" means all Credit Documents and all other credit, collateral, or insurance documents in the possession or custody of the Assuming Bank, or any of its

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Subsidiaries or Affiliates, relating to an Asset or a Loan included in a Put Notice, or copies of any thereof.

"Data Processing Lease" means any lease or licensing agreement, binding on the Failed Bank as of Bank Closing, the subject of which is data processing equipment or computer hardware or software used in connection with data processing activities. A lease or licensing agreement for computer software used in connection with data processing activities shall constitute a Data Processing Lease regardless of whether such lease or licensing agreement also covers data processing equipment.

"Deposit" means a deposit as defined in 12 U.S.C. Section 1813(l), including without limitation, outstanding cashier's checks and other official checks and all uncollected items included in the depositors' balances and credited on the books and records of the Failed Bank; provided, thatthe term "Deposit" shall not include all or any portion of those deposit balances which, in the discretion of the Receiver or the Corporation, (i) may be required to satisfy it for any liquidated or contingent liability of any depositor arising from an unauthorized or unlawful transaction, or (ii) may be needed to provide payment of any liability of any depositor to the Failed Bank or the Receiver, including the liability of any depositor as a director or officer of the Failed Bank, whether or not the amount of the liability is or can be determined as of Bank Closing.

"Equity Adjustment" means the dollar amount resulting by subtracting the Book Value, as of Bank Closing, of all Liabilities Assumed under this Agreement by the Assuming Bank from the purchase price pursuant to Schedule 3.2 of this Agreement, as of Bank Closing, of all Assets acquired under this Agreement by the Assuming Bank, which may be a positive or a negative number.

"Failed Bank Advances" means the total sums paid by the Failed Bank to (i) protect its lien position, (ii) pay ad valorem taxes and hazard insurance, and (iii) pay credit life insurance, accident and health insurance, and vendor's single interest insurance.

"Fair Market Value" means (i)(a) “Market Value” as defined in the regulation prescribing the standards for real estate appraisals used in federally related transactions, 12

A.§ 323.2(g), and accordingly shall mean the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

(1)Buyer and seller are typically motivated;

(2)Both parties are well informed or well advised, and acting in what they consider their own best interests;

(3) A reasonable time is allowed for exposure in the open market;

(4)Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

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(5) The price represents the normal consideration for the property sold unaffected by

special or creative financing or sales concessions granted by anyone associated with the sale;

as determined as of Bank Closing by an appraiser chosen by the Assuming Bank from a list of appraisers agreed upon and acceptable to the Assuming Bank and the Receiver; any costs and fees associated with such determination shall be shared equally by the Receiver and the Assuming Bank, and (b) which, with respect to Bank Premises (to the extent, if any, that Bank Premises are purchased utilizing this valuation method), shall be determined not later than one hundred twenty (120) days after Bank Closing by an appraiser selected by the Receiver and the Assuming Bank within sixty (60) days after Bank Closing; or (ii) with respect to property other than Bank Premises purchased utilizing this valuation method, the price therefore as established by the Receiver and agreed to by the Assuming Bank, or in the absence of such agreement, as determined in accordance with clause (i)(a) above.

"First Loss Tranche" has the meaning provided in Article VII.

"Fixtures" means those leasehold improvements, additions, alterations and installations constituting all or a part of Bank Premises and which were acquired, added, built, installed or purchased at the expense of the Failed Bank, regardless of the holder of legal title thereto as of Bank Closing.

"Furniture and Equipment" means the furniture and equipment, other than motor vehicles, leased or owned by the Failed Bank and reflected on the books of the Failed Bank as of Bank Closing, including without limitation automated teller machines, carpeting, furniture, office machinery (including personal computers), shelving, office supplies, telephone, surveillance and security systems. Motor vehicles shall be considered other assets and pass at Book Value.

"Indemnitees" means, except as provided in paragraph (11) of Section 12.1(b),

(i)the Assuming Bank, (ii) the Subsidiaries and Affiliates of the Assuming Bank other thanany Subsidiaries or Affiliates of the Failed Bank that are or become Subsidiaries or Affiliates of the Assuming Bank, and (iii) the directors, officers, employees and agents of the Assuming Bank and its Subsidiaries and Affiliates who are notalso present or former directors, officers, employees or agents of the Failed Bank or of any Subsidiary or Affiliate of the Failed Bank.

"Information Package" means the compilation of financial and other data with respect to the Failed Bank dated as of March 31, 2009, provided to the Assuming Bank by the Corporation on the web site used by the Corporation to market the Failed Bank to potential acquirers.

"Legal Balance" means the amount of indebtedness legally owed by an Obligor with respect to a Loan, including principal and accrued and unpaid interest, late fees, attorneys' fees and expenses, taxes, insurance premiums, and similar charges, if any.

"Liabilities Assumed" has the meaning provided in Section 2.1.

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"Lien" means any mortgage, lien, pledge, charge, assignment for security purposes, security interest, or encumbrance of any kind with respect to an Asset or, for purposes of Section 4.15, Section 12.1(a) and the Shared-Loss Agreements, an asset of an Acquired Subsidiary, including any conditional sale agreement or capital lease or other title retention agreement relating to such Asset.

"Loans" means all of the following owed to or held by the Failed Bank or, for purposes of Section 4.15, Section 12.1(a) and the Shared-Loss Agreements, an asset of an Acquired Subsidiary, as of Bank Closing:

(i)loans (including loans which have been charged off the Accounting Records of the Failed Bank in whole or in part prior to March 31, 2009), participation agreements, interests in participations, overdrafts of customers (including but not limited to overdrafts made pursuant to an overdraft protection plan or similar extensions of credit in connection with a deposit account), revolving commercial lines of credit, home equity lines of credit, Commitments, United States and/or State-guaranteed student loans, and lease financing contracts;

(ii)all Liens, rights (including rights of set-off), remedies, powers, privileges, demands, claims, priorities, equities and benefits owned or held by, or accruing or to accrue to or for the benefit of, the holder of the obligations or instruments referred to in clause (i) above, including but not limited to those arising under or based upon Credit Documents or otherwise in respect of collateral, casualty insurance policies and binders, standby letters of credit, mortgagee title insurance policies and binders, other related insurance policies and binders, payment bonds and performance bonds, insurance or guaranty by any department of any governmental unit, federal, state or local and escrow, custodial or similar arrangements at any time and from time to time existing with respect to any of the obligations or instruments referred to in clause (i) above; and

(iii)all amendments, modifications, renewals, extensions, refinancings, and refundings of or for any of the foregoing.

"Obligor" means each Person liable for the full or partial payment or performance of any Loan, whether such Person is obligated directly, indirectly, primarily, secondarily, jointly, or severally.

"Other Real Estate" means all interests in real estate (other than Bank Premises and Fixtures) recorded on the Accounting Records of the Failed Bank, including but not limited to mineral rights, leasehold rights, condominium and cooperative interests, air rights and development rights that are owned by the Failed Bank.

"Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof, excluding the Corporation.

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"Primary Indemnitor" means any Person (other than the Assuming Bank or any of its Affiliates) who is obligated to indemnify or insure, or otherwise make payments (including payments on account of claims made against) to or on behalf of any Person in connection with the Losses covered under Article XII, including without limitation any insurer issuing any directors and officers liability policy or any Person issuing a financial institution bond or banker's blanket bond.

“Pro Forma” means producing a balance sheet that reflects a reasonably accurate financial statement of the Failed bank through the date of closing. The Pro Forma financial statements serve as a basis for the opening entries of both the Assuming Bank and the Receiver.

"Put Date" has the meaning provided in Section 3.4.

"Put Notice" has the meaning provided in Section 3.4.

"Qualified Financial Contract" means a qualified financial contract as defined in 12 U.S.C. Section 1821(e)(8)(D).

"Record" means any document, microfiche, microfilm and computer records (including but not limited to magnetic tape, disc storage, card forms and printed copy) of the Failed Bank generated or maintained by the Failed Bank that is owned by or in the possession of the Receiver at Bank Closing.

"Related Liability" with respect to any Asset means any liability existing and reflected on the Accounting Records of the Failed Bank as of Bank Closing for (i) indebtedness secured by mortgages, deeds of trust, chattel mortgages, security interests or other liens on or affecting such Asset, (ii) ad valorem taxes applicable to such Asset, and (iii) any other obligation determined by the Receiver to be directly related to such Asset.

"Related Liability Amount" with respect to any Related Liability on the books of the Assuming Bank, means the amount of such Related Liability as stated on the Accounting Records of the Assuming Bank (as maintained in accordance with generally accepted accounting principles) as of the date as of which the Related Liability Amount is being determined. With respect to a liability that relates to more than one asset, the amount of such Related Liability shall be allocated among such assets for the purpose of determining the Related Liability Amount with respect to any one of such assets. Such allocation shall be made by specific allocation, where determinable, and otherwise shall be pro rata based upon the dollar amount of such assets stated on the Accounting Records of the entity that owns such asset.

"Repurchase Price" means, with respect to any Loan the Book Value, adjusted to reflect changes to Book Value after Bank Closing, plus (ii) any advances and interest on such Loan after Bank Closing, minus (iii) the total of amounts received by the Assuming Bank for such Loan, regardless of how applied, after Bank Closing, plus (iv) advances made by Assuming Bank, plus (v) total disbursements of principal made by Receiver that are not included in the Book Value.

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"Safe Deposit Boxes" means the safe deposit boxes of the Failed Bank, if any, including the removable safe deposit boxes and safe deposit stacks in the Failed Bank's vault(s), all rights and benefits under rental agreements with respect to such safe deposit boxes, and all keys and combinations thereto.

"Settlement Date" means the first Business Day immediately prior to the day which is one hundred eighty (180) days after Bank Closing, or such other date prior thereto as may be agreed upon by the Receiver and the Assuming Bank. The Receiver, in its discretion, may extend the Settlement Date.

"Settlement Interest Rate" means, for the first calendar quarter or portion thereof during which interest accrues, the rate determined by the Receiver to be equal to the equivalent coupon issue yield on twenty-six (26)-week United States Treasury Bills in effect as of Bank Closing as published in The Wall Street Journal; provided, thatif no such equivalent coupon issue yield is available as of Bank Closing, the equivalent coupon issue yield for such Treasury Bills most recently published in The Wall Street Journalprior to Bank Closing shall be used. Thereafter, the rate shall be adjusted to the rate determined by the Receiver to be equal to the equivalent coupon issue yield on such Treasury Bills in effect as of the first day of each succeeding calendar quarter during which interest accrues as published in The Wall StreetJournal.

"Subsidiary" has the meaning set forth in Section 3(w)(4) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1813(w)(4), as amended.

ARTICLE II

ASSUMPTION OF LIABILITIES

2.1Liabilities Assumed by Assuming Bank. The Assuming Bank expressly assumes at Book Value (subject to adjustment pursuant to Article VIII) and agrees to pay, perform, and discharge all of the following liabilities of the Failed Bank as of Bank Closing, except as otherwise provided in this Agreement (such liabilities referred to as "Liabilities Assumed"):

(a) Assumed Deposits, except those Deposits specifically listed on Schedule 2.1(a); provided, thatas to any Deposits of public money which are Assumed Deposits, the Assuming Bank agrees to properly secure such Deposits with such of the Assets as appropriate which, prior to Bank Closing, were pledged as security therefor by the Failed Bank, or with assets of the Assuming Bank, if such securing Assets, if any, are insufficient to properly secure such Deposits;

(b)liabilities for indebtedness secured by mortgages, deeds of trust, chattel mortgages, security interests or other liens of record as of Bank Closing on or affecting any Assets, if any; provided, thatthe assumption of any liability pursuant to this paragraph shall be limited to the market value of the Assets securing such liability as determined by the Receiver;

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(c) borrowings from Federal Reserve Banks and Federal Home Loan Banks, if any, provided, thatthe assumption of any liability pursuant to this paragraph shall be limited to the market value of the assets securing such liability as determined by the Receiver; and overdrafts, debit balances, service charges, reclamations, and adjustments to accounts with the Federal Reserve Banks as reflected on the books and records of any such Federal Reserve Bank within ninety (90) days after Bank Closing, if any;

(d) ad valorem taxes applicable to any Asset, if any; provided, thatthe assumption of any ad valorem taxes pursuant to this paragraph shall be limited to an amount equal to the market value of the Asset to which such taxes apply as determined by the Receiver;

(e)liabilities, if any, for federal funds purchased, repurchase agreements and overdrafts in accounts maintained with other depository institutions (including any accrued and unpaid interest thereon computed to and including Bank Closing); provided, thatthe assumption of any liability pursuant to this paragraph shall be limited to the market value of the Assets securing such liability as determined by the Receiver;

(f) United States Treasury tax and loan note option accounts, if any;

(g)liabilities for any acceptance or commercial letter of credit (other than "standby letters of credit" as defined in 12 C.F.R. Section 337.2(a)); provided, thatthe assumption of any liability pursuant to this paragraph shall be limited to the market value of the Assets securing such liability as determined by the Receiver;

(h)duties and obligations assumed pursuant to this Agreement including without limitation those relating to the Failed Bank's overdraft protection plans, safe deposit business, and safekeeping business, if any;

(i) liabilities, if any, for Commitments;

(j)liabilities, if any, for amounts owed to any Acquired Subsidiary of the Failed Bank;

(k) liabilities, if any, with respect to Qualified Financial Contracts;

(l)duties and obligations under any contract pursuant to which the Failed Bank provides mortgage servicing for others; and

(m)all asset-related offensive litigation liabilities and all asset-related defensive litigation liabilities, but only to the extent such liabilities relate to assets subject to a shared-loss agreement, and provided that all other defensive litigation and all class actions litigation are retained by the Receiver.

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Schedule 2.1 attached hereto and incorporated herein sets forth certain categories of Liabilities Assumed and the aggregate Book Value of the Liabilities Assumed in such categories. Such schedule is based upon the best information available to the Receiver and may be adjusted as provided in Article VIII. The Assuming Bank does not assume any liabilities or obligations of the Failed Bank or any of its Affiliates or Subsidiaries whether accrued, absolute, contingent or otherwise, asserted or unasserted, known or unknown, other than the Liabilities Assumed.

2.2Interest on Deposit Liabilities. The Assuming Bank agrees that, from and after Bank Closing, it will accrue and pay interest on Deposit liabilities assumed pursuant to Section

2.1 at a rate(s) it shall determine; provided, thatfor non-transaction Deposit liabilities such rate(s) shall not be less than the lowest rate offered by the Assuming Bank to its depositors for non-transaction deposit accounts. The Assuming Bank shall permit each depositor to withdraw, without penalty for early withdrawal, all or any portion of such depositor's Deposit, whether or not the Assuming Bank elects to pay interest in accordance with any deposit agreement formerly existing between the Failed Bank and such depositor; and further provided, thatif such Deposit has been pledged to secure an obligation of the depositor or other party, any withdrawal thereof shall be subject to the terms of the agreement governing such pledge. The Assuming Bank shall give notice to such depositors as provided in Section 5.3 of the rate(s) of interest which it has determined to pay (which notice may be subsequent to the application of such new rate(s)) and of such withdrawal rights.

2.3Unclaimed Deposits. Fifteen (15) months following the Bank Closing Date, the Assuming Bank will provide the Receiver a listing of all deposit accounts, including the type of account, not claimed by the depositor. The Receiver will review the list and authorize the Assuming Bank to act on behalf of the Receiver to send a “Final Legal Notice” to the owner(s) of the unclaimed deposits reminding them of the need to claim or arrange to continue their account(s) with the Assuming Bank. The Assuming Bank will send the “Final Legal Notice” to such depositors within thirty (30) days following notification of the Receiver’s authorization. The Assuming Bank will prepare an Affidavit of Mailing and will forward the Affidavit of Mailing to the Receiver after mailing out the “Final Legal Notice” to the owner(s) of unclaimed deposit accounts.

If, within eighteen (18) months after Bank Closing, any depositor of the Failed Bank does not claim or arrange to continue such depositor’s Deposit assumed pursuant to Section 2.1 at the Assuming Bank, with respect to which a Final Legal Notice was sent, the Assuming Bank shall, within fifteen (15) Business Days after the end of such eighteen (18) month period, (i) refund to the Receiver the full amount of each such deposit (without reduction for service charges), (ii) provide to the Receiver a schedule of all such refunded Deposits in such form as may be prescribed by the Receiver, and (iii) assign, transfer, convey, and deliver to the Receiver, all right, title, and interest of the Assuming Bank in and to the Records previously transferred to the Assuming Bank and other records generated or maintained by the Assuming Bank pertaining to such Deposits. During such eighteen (18) month period, at the request of the Receiver, the Assuming Bank promptly shall provide to the Receiver schedules of unclaimed deposits in such form as may be prescribed by the Receiver.

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2.4Employee Plans. Except as provided in Section 4.12, the Assuming Bank shall have no liabilities, obligations or responsibilities under the Failed Bank's employment agreements, change of control agreements, retention agreements, severance, health care, bonus, vacation, pension, profit sharing, deferred compensation, 401(k), share based awards, equity plans or stock purchase plans or similar plans or agreements, if any, unless the Receiver and the Assuming Bank agree otherwise subsequent to the date of this Agreement.

ARTICLE III

PURCHASE OF ASSETS

3.1Assets Purchased by Assuming Bank. With the exception of certain assets expressly excluded in Sections 3.5 and 3.6, the Assuming Bank hereby purchases from the Receiver, and the Receiver hereby sells, assigns, transfers, conveys, and delivers to the Assuming Bank, all right, title, and interest of the Receiver in and to all of the Assets (real, personal and mixed, wherever located and however acquired) including all subsidiaries, joint ventures, partnerships, and any and all other business combinations or arrangements, whether active, inactive, dissolved or terminated, of the Failed Bank whether or not reflected on the books of the Failed Bank as of Bank Closing. Schedules 3.1 and 3.1a attached hereto and incorporated herein. sets forth certain categories of Assets purchased hereunder. Such schedule is based upon the best information available to the Receiver and may be adjusted as provided in Article VIII. Assets are purchased hereunder by the Assuming Bank subject to all liabilities for indebtedness collateralized by Liens affecting such Assets to the extent provided in Section 2.1. The subsidiaries, joint ventures, partnerships, and any and all other business combinations or arrangements, whether active, inactive, dissolved or terminated being purchased by the Assuming Bank includes, but is not limited to, the entities listed on Schedule 3.1a. Notwithstanding Section 4.8, the Assuming Bank specifically purchases all mortgage servicing rights and obligations of the Failed Bank with respect to loans serviced for others. In addition, the Assuming Bank is entitled to the option to acquire additional assets and assume agreements as set forth in Sections 4.6, 4.7 and 4.8.

3.2 Asset Purchase Price.

(a)All Assets and assets of the Failed Bank subject to an option to purchase by the Assuming Bank shall be purchased for the amount, or the amount resulting from the method specified for determining the amount, as specified on Schedule 3.2, except as otherwise may be provided herein. Any Asset, asset of the Failed Bank subject to an option to purchase or other asset purchased for which no purchase price is specified on Schedule 3.2 or otherwise herein shall be purchased at its Book Value. Loans or other assets charged off the Accounting Records of the Failed Bank prior to March 31, 2009, shall be purchased at a price of zero.

(b)The purchase price for securities (other than the capital stock of any Acquired Subsidiary and Shared-Loss Securities) purchased under Section 3.1 by the Assuming Bank shall be the market value thereof as of Bank Closing, which market value shall be (i) the market price

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for each such security quoted at the close of the trading day effective on Bank Closing as published electronically by Bloomberg, L.P., or alternatively, at the discretion of the Receiver, IDC/Financial Times (FT) Interactive Data; (ii) provided, thatif such market price is not available for any such security, the Assuming Bank will submit a bid for each such security within three days of notification/bid request by the Receiver (unless a different time period is agreed to by the Assuming Bank and the Receiver) and the Receiver, in its sole discretion will accept or reject each such bid; and (iii) further providedin the absence of an acceptable bid from the Assuming Bank, each such security shall not pass to the Assuming Bank and shall be deemed to be an excluded asset hereunder.

(c)Qualified Financial Contracts shall be purchased at market value determined in accordance with the terms of Exhibit 3.2(c). Any costs associated with such valuation shall be shared equally by the Receiver and the Assuming Bank.

(d)The Parties agree that any indemnification payment made pursuant to this Agreement shall be treated as an adjustment to the purchase price for tax purposes, unless otherwise required by applicable law.

3.3Manner of Conveyance; Limited Warranty; Nonrecourse; Etc. THE CONVEYANCE OF ALL ASSETS, INCLUDING REAL AND PERSONAL PROPERTY INTERESTS, PURCHASED BY THE ASSUMING BANK UNDER THIS AGREEMENT SHALL BE MADE, AS NECESSARY, BY RECEIVER'S DEED OR RECEIVER'S BILL OF SALE, "AS IS", "WHERE IS", WITHOUT RECOURSE AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THIS AGREEMENT, WITHOUT ANY WARRANTIES WHATSOEVER WITH RESPECT TO SUCH ASSETS, EXPRESS OR IMPLIED, WITH RESPECT TO TITLE, ENFORCEABILITY, COLLECTIBILITY, DOCUMENTATION OR FREEDOM FROM LIENS OR ENCUMBRANCES (IN WHOLE OR IN PART), OR ANY OTHER MATTERS.

3.4 Puts of Assets to the Receiver.

(a)Puts Prior to the Settlement Date.

(i)During the period from Bank Closing to and including the Business Day immediately preceding the Settlement Date, the Assuming Bank shall be entitled to require the Receiver to purchase any Asset which the Assuming Bank can establish is evidenced by forged or stolen instruments as of Bank Closing.

(ii)At the end of the thirty (30)-day period following Bank Closing and at that time only, in accordance with this Section 3.4, the Assuming Bank shall be entitled to require the Receiver to purchase any remaining overdraft transferred to the Assuming Bank pursuant to 3.1 which both was made after March 31, 2009, and was not made pursuant to an overdraft protection plan or similar extension of credit.

The Assuming Bank shall transfer all such Assets to the Receiver without recourse, and shall indemnify the Receiver against any and all claims of any Person claiming by, through or under the Assuming Bank with respect to any such Asset, as provided in Section 12.4.

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(b)Notices to the Receiver. In the event that the Assuming Bank elects to require the Receiver to purchase one or more Assets, the Assuming Bank shall deliver to the Receiver from time to time a notice (a "Put Notice") which shall include:

(i) a list of all Assets that the Assuming Bank requires the Receiver to purchase;

(ii) a list of all Related Liabilities with respect to the Assets identified pursuant to (i) above; and

(iii) a statement of the estimated Repurchase Price of each Asset identified pursuant to (i) above as of the applicable Put Date.

Such notice shall be in the form prescribed by the Receiver or such other form to which the Receiver shall consent. As provided in Section 9.6, the Assuming Bank shall deliver to the Receiver such documents, Credit Files and such additional information relating to the subject matter of the Put Notice as the Receiver may request and shall provide to the Receiver full access to all other relevant books and records.

(c)Purchase by Receiver. The Receiver shall purchase Assets that are specified in any Put Notice and shall assume Related Liabilities with respect to such Assets, and the transfer of such Assets and Related Liabilities shall be effective as of a date determined by the Receiver which date shall not be later than thirty (30) days after receipt by the Receiver of the applicable Put Notice (the "Put Date").

(d)Purchase Price and Payment Date. Each Asset purchased by the Receiver pursuant to this Section 3.4 shall be purchased at a price equal to the Repurchase Price of such Asset less the Related Liability Amount applicable to such Asset, in each case determined as of the applicable Put Date. If the difference between such Repurchase Price and such Related Liability Amount is positive, then the Receiver shall pay to the Assuming Bank the amount of such difference; if the difference between such amounts is negative, then the Assuming Bank shall pay to the Receiver the amount of such difference. The Assuming Bank or the Receiver, as the case may be, shall pay the purchase price determined pursuant to this Section 3.4(d) not later than the twentieth (20th) Business Day following the applicable Put Date, together with interest on such amount at the Settlement Interest Rate for the period from and including such Put Date to and including the day preceding the date upon which payment is made.

(e)Servicing. The Assuming Bank shall administer and manage any Asset subject to purchase by the Receiver in accordance with usual and prudent banking standards and business practices until such time as such Asset is purchased by the Receiver.

(f)Reversals. In the event that the Receiver purchases an Asset (and assumes the Related Liability) that it is not required to purchase pursuant to this Section 3.4, the Assuming Bank shall repurchase such Asset (and assume such Related Liability) from the Receiver at a

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price computed so as to achieve the same economic result as would apply if the Receiver had never purchased such Asset pursuant to this Section 3.4.

3.5Assets Not Purchased by Assuming Bank. The Assuming Bank does not purchase, acquire or assume, or (except as otherwise expressly provided in this Agreement) obtain an option to purchase, acquire or assume under this Agreement:

(a)any financial institution bonds, banker's blanket bonds, or public liability, fire, or extended coverage insurance policy or any other insurance policy of the Failed Bank, or premium refund, unearned premium derived from cancellation, or any proceeds payable with respect to any of the foregoing;

(b)any interest, right, action, claim, or judgment against (i) any officer, director, employee, accountant, attorney, or any other Person employed or retained by the Failed Bank or any Subsidiary of the Failed Bank on or prior to Bank Closing arising out of any act or omission of such Person in such capacity, (ii) any underwriter of financial institution bonds, banker's blanket bonds or any other insurance policy of the Failed Bank, (iii) any shareholder or holding company of the Failed Bank, or (iv) any other Person whose action or inaction may be related to any loss (exclusive of any loss resulting from such Person's failure to pay on a Loan made by the Failed Bank) incurred by the Failed Bank; provided, thatfor the purposes hereof, the acts, omissions or other events giving rise to any such claim shall have occurred on or before Bank Closing, regardless of when any such claim is discovered and regardless of whether any such claim is made with respect to a financial institution bond, banker's blanket bond, or any other insurance policy of the Failed Bank in force as of Bank Closing;

(c) prepaid regulatory assessments of the Failed Bank, if any;

(d)legal or equitable interests in tax receivables of the Failed Bank, if any, including any claims arising as a result of the Failed Bank having entered into any agreement or otherwise being joined with another Person with respect to the filing of tax returns or the payment of taxes;

(e)amounts reflected on the Accounting Records of the Failed Bank as of Bank Closing for loan premiums, discounts, or any other deferred income, fees or expenses or as a general or specific loss reserve or contingency account, if any;

(f)leased or owned Bank Premises and leased or owned Furniture and Equipment and Fixtures and data processing equipment (including hardware and software) located on leased or owned Bank Premises, if any; provided, thatthe Assuming Bank does obtain an option under Section 4.6, Section 4.7 or Section 4.8, as the case may be, with respect thereto;

(g)owned Bank Premises which the Receiver, in its reasonable discretion, determines may contain environmentally hazardous substances;

(h)any “goodwill,” as such term is defined in the instructions to the report of condition prepared by banks examined by the Corporation in accordance with 12 C.F.R. Section 304.4, and other intangibles (for the avoidance of doubt, other intangible assets does not include any intellectual property (including patents, technology, know-how, copyrights (including software), trade secrets, processes, trademarks, service marks, trade names, domain names, logos, trade

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dress or other indicators of source or origin) or right to use any such intellectual property);

(i) any criminal restitution or forfeiture orders issued in favor of the Failed Bank;

(j)rights, duties and obligations relating to mortgage servicing contracts for loans serviced by others;

(k) assets essential to the Receiver in accordance with Section 3.6; and

(l) all private label asset-backed securities, including, but not limited to, those listed on the attached Schedule 3.5(l).

3.6 Retention or Repurchase of Assets Essential to Receiver.

(a)The Receiver may refuse to sell to the Assuming Bank, or the Assuming Bank agrees, at the request of the Receiver set forth in a written notice to the Assuming Bank, to assign, transfer, convey, and deliver to the Receiver all of the Assuming Bank's right, title and interest in and to, any Asset or asset acquired pursuant to this Agreement essential to the Receiver as determined by the Receiver in its discretion (together with all Credit Documents evidencing or pertaining thereto), which may include any Asset or asset acquired pursuant to this Agreement that the Receiver determines to be:

(i) made to an officer, director, or other Person engaging in the affairs of the Failed Bank, its Subsidiaries or Affiliates or any related entities of any of the foregoing;

(ii) the subject of any investigation relating to any claim with respect to any item described in Section 3.5(a) or (b), or the subject of, or potentially the subject of, any legal proceedings;

(iii) made to a Person who is an Obligor on a loan owned by the Receiver or the Corporation in its corporate capacity or its capacity as receiver of any institution;

(iv) secured by collateral which also secures any asset owned by the Receiver; or

(v) related to any asset of the Failed Bank not purchased by the Assuming Bank under this Article III or any liability of the Failed Bank not assumed by the Assuming Bank under Article II.

(b)Each such Asset or asset purchased by the Receiver shall be purchased at a price equal to the Repurchase Price thereof less the Related Liability Amount with respect to any Related Liabilities related to such Asset or asset, in each case determined as of the date of the

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notice provided by the Receiver pursuant to Section 3.6(a). The Receiver shall pay the Assuming Bank not later than the twentieth (20th) Business Day following receipt of related Credit Documents and Credit Files together with interest on such amount at the Settlement Interest Rate for the period from and including the date of receipt of such documents to and including the day preceding the day on which payment is made. The Assuming Bank agrees to administer and manage each such Asset or asset in accordance with usual and prudent banking standards and business practices until each such Asset or asset is purchased by the Receiver. All transfers with respect to Asset or assets under this Section 3.6 shall be made as provided in Section 9.6. The Assuming Bank shall transfer all such Asset or assets and Related Liabilities to the Receiver without recourse, and shall indemnify the Receiver against any and all claims of any Person claiming by, through or under the Assuming Bank with respect to any such Asset or asset, as provided in Section 12.4.

ARTICLE IV

ASSUMPTION OF CERTAIN DUTIES AND OBLIGATIONS

The Assuming Bank agrees with the Receiver and the Corporation as follows:

4.1Continuation of Banking Business. For the period commencing the first banking business day after Bank Closing and ending no earlier than the first anniversary of Bank Closing, the Assuming Bank agrees to provide full service banking in the trade area of the Failed Bank. Thereafter, the Assuming Bank may cease providing such banking services in the trade area of the Failed Bank, provided the Assuming Bank has received all necessary regulatory approvals. At the option of the Assuming Bank, such banking services may be provided at any or all of the Bank Premises, or at other premises within such trade area. The trade area shall be determined by the Receiver.

4.2Reserved.

4.3Agreement with Respect to Safe Deposit Business. The Assuming Bank assumes and agrees to discharge, from and after Bank Closing, in the usual course of conducting a banking business, the duties and obligations of the Failed Bank with respect to all Safe Deposit Boxes, if any, of the Failed Bank and to maintain all of the necessary facilities for the use of such boxes by the renters thereof during the period for which such boxes have been rented and the rent therefore paid to the Failed Bank, or such earlier time as permitted under the provisions of the rental agreements between the Failed Bank and the respective renters of such boxes or applicable law; provided, that, notwithstanding any provisions of the rental agreements between the Failed Bank and the respective renters of such boxes, the Assuming Bank may immediately relocate the Safe Deposit Boxes of the Failed Bank to any office of the Assuming Bank located in the trade area of the Failed Bank. The Safe Deposit Boxes shall be located and maintained in the trade area of the Failed Bank for a minimum of one year from Bank Closing. Fees related to the safe deposit business earned prior to the Bank Closing Date shall be for the benefit of the Receiver and fees earned after the Bank Closing Date shall be for the benefit of the Assuming Bank.

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4.4Agreement with Respect to Safekeeping Business. The Receiver transfers, conveys and delivers to the Assuming Bank and the Assuming Bank accepts all securities and other items, if any, held by the Failed Bank in safekeeping for its customers as of Bank Closing. The Assuming Bank assumes and agrees to honor and discharge, from and after Bank Closing, the duties and obligations of the Failed Bank with respect to such securities and items held in safekeeping. The Assuming Bank shall be entitled to all rights and benefits heretofore accrued or hereafter accruing with respect thereto. The Assuming Bank shall provide to the Receiver written verification of all assets held by the Failed Bank for safekeeping within sixty (60) days after Bank Closing. The assets held for safekeeping by the Failed Bank shall be held and maintained by the Assuming Bank in the trade area of the Failed Bank for a minimum of one year from Bank Closing. Fees related to the safekeeping business earned prior to the Bank Closing Date shall be for the benefit of the Receiver and fees earned after the Bank Closing Date shall be for the benefit of the Assuming Bank.

4.5 Reserved.

4.6 Agreement with Respect to Bank Premises.

(a)Option to Purchase. Subject to Section 3.5, the Receiver hereby grants to the Assuming Bank an exclusive option for the period of one hundred fifty (150) days commencing the day after Bank Closing to purchase any or all owned Bank Premises, including all Furniture, Fixtures and Equipment located on the Bank Premises. The Assuming Bank shall give written notice to the Receiver within the option period of its election to purchase or not to purchase any of the owned Bank Premises. Any purchase of such premises shall be effective as of the date of Bank Closing and such purchase shall be consummated as soon as practicable thereafter, and in no event later than the Settlement Date.

(b)Option to Lease. The Receiver hereby grants to the Assuming Bank an exclusive option for the period of ninety (90) days commencing the day after Bank Closing to cause the Receiver to assign to the Assuming Bank any or all leases for leased Bank Premises, if any, which have been continuously occupied by the Assuming Bank from Bank Closing to the date it elects to accept an assignment of the leases with respect thereto to the extent such leases can be assigned; provided, thatthe exercise of this option with respect to any lease must be as to all premises or other property subject to the lease. If an assignment cannot be made of any such leases, the Receiver may, in its discretion, enter into subleases with the Assuming Bank containing the same terms and conditions provided under such existing leases for such leased Bank Premises or other property. The Assuming Bank shall give notice to the Receiver within the option period of its election to accept or not to accept an assignment of any or all leases (or enter into subleases or new leases in lieu thereof). The Assuming Bank agrees to assume all leases assigned (or enter into subleases or new leases in lieu thereof) pursuant to this Section 4.6.

(c)Facilitation. The Receiver agrees to facilitate the assumption, assignment or sublease of leases or the negotiation of new leases by the Assuming Bank; provided, thatneither

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the Receiver nor the Corporation shall be obligated to engage in litigation, make payments to the Assuming Bank or to any third party in connection with facilitating any such assumption, assignment, sublease or negotiation or commit to any other obligations to third parties.

(d)Occupancy. The Assuming Bank shall give the Receiver fifteen (15) days' prior written notice of its intention to vacate prior to vacating any leased Bank Premises with respect to which the Assuming Bank has not exercised the option provided in Section 4.6(b). Any such notice shall be deemed to terminate the Assuming Bank's option with respect to such leased Bank Premises.

(e) Occupancy Costs.

(i)The Assuming Bank agrees to pay to the Receiver, or to appropriate third parties at the direction of the Receiver, during and for the period of any occupancy by it of (x) owned Bank Premises the market rental value, as determined by the appraiser selected in accordance with the definition of Fair Market Value, and all operating costs, and (y) leased Bank Premises, all operating costs with respect thereto and to comply with all relevant terms of applicable leases entered into by the Failed Bank, including without limitation the timely payment of all rent. Operating costs include, without limitation all taxes, fees, charges, utilities, insurance and assessments, to the extent not included in the rental value or rent. If the Assuming Bank elects to purchase any owned Bank Premises in accordance with Section 4.6(a), the amount of any rent paid (and taxes paid to the Receiver which have not been paid to the taxing authority and for which the Assuming Bank assumes liability) by the Assuming Bank with respect thereto shall be applied as an offset against the purchase price thereof.

(ii)The Assuming Bank agrees during the period of occupancy by it of owned or leased Bank Premises, to pay to the Receiver rent for the use of all owned or leased Furniture and Equipment and all owned or leased Fixtures located on such Bank Premises for the period of such occupancy. Rent for such property owned by the Failed Bank shall be the market rental value thereof, as determined by the Receiver within sixty (60) days after Bank Closing. Rent for such leased property shall be an amount equal to any and all rent and other amounts which the Receiver incurs or accrues as an obligation or is obligated to pay for such period of occupancy pursuant to all leases and contracts with respect to such property. If the Assuming Bank purchases any owned Furniture and Equipment or owned Fixtures in accordance with Section 4.6(f) or 4.6(h), the amount of any rents paid by the Assuming Bank with respect thereto shall be applied as an offset against the purchase price thereof.

(f)Certain Requirements as to Furniture, Equipment and Fixtures. If the Assuming Bank purchases owned Bank Premises or accepts an assignment of the lease (or enters into a sublease or a new lease in lieu thereof) for leased Bank Premises as provided in Section 4.6(a) or 4.6(b), or if the Assuming Bank does not exercise such option but within twelve (12) months following Bank Closing obtains the right to occupy such premises (whether by assignment, lease, sublease, purchase or otherwise), other than in accordance with Section 4.6(a) or (b), the Assuming Bank shall (i) effective as of the date of Bank Closing, purchase from the Receiver all Furniture and Equipment and Fixtures owned by the Failed Bank at Fair Market Value and located thereon as of Bank Closing, (ii) accept an assignment or a sublease of the

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leases or negotiate new leases for all Furniture and Equipment and Fixtures leased by the Failed Bank and located thereon, and (iii) if applicable, accept an assignment or a sublease of any ground lease or negotiate a new ground lease with respect to any land on which such Bank Premises are located; provided, thatthe Receiver shall not have disposed of such Furniture and Equipment and Fixtures or repudiated the leases specified in clause (ii) or (iii).

(g) Vacating Premises.

(i)If the Assuming Bank elects not to purchase any owned Bank Premises, the notice of such election in accordance with Section 4.6(a) shall specify the date upon which the Assuming Bank's occupancy of such premises shall terminate, which date shall not be later than one hundred eighty (180) days after Bank Closing. The Assuming Bank promptly shall relinquish and release to the Receiver such premises and the Furniture and Equipment and Fixtures located thereon in the same condition as at Bank Closing, normal wear and tear excepted. By occupying any such premises after the expiration of such one hundred eighty (180)- day period, the Assuming Bank shall, at the Receiver's option, (x) be deemed to have agreed to purchase such Bank Premises, and to assume all leases, obligations and liabilities with respect to leased Furniture and Equipment and leased Fixtures located thereon and any ground lease with respect to the land on which such premises are located, and (y) be required to purchase all Furniture and Equipment and Fixtures owned by the Failed Bank and located on such premises as of Bank Closing.

(ii)If the Assuming Bank elects not to accept an assignment of the lease or sublease any leased Bank Premises, the notice of such election in accordance with Section 4.6(b) shall specify the date upon which the Assuming Bank's occupancy of such leased Bank Premises shall terminate, which date shall not be later than the date which is one hundred eighty (180) days after Bank Closing. Upon vacating such premises, the Assuming Bank shall relinquish and release to the Receiver such premises and the Fixtures and the Furniture and Equipment located thereon in the same condition as at Bank Closing, normal wear and tear excepted. By failing to provide notice of its intention to vacate such premises prior to the expiration of the option period specified in Section 4.6(b), or by occupying such premises after the one hundred eighty (180)- day period specified above in this paragraph (ii), the Assuming Bank shall, at the Receiver's option, (x) be deemed to have assumed all leases, obligations and liabilities with respect to such premises (including any ground lease with respect to the land on which premises are located), and leased Furniture and Equipment and leased Fixtures located thereon in accordance with this Section 4.6 (unless the Receiver previously repudiated any such lease), and (y) be required to purchase all Furniture and Equipment and Fixtures owned by the Failed Bank at Fair Market Value and located on such premises as of Bank Closing.

(h)Furniture and Equipment and Certain Other Equipment. The Receiver hereby grants to the Assuming Bank an option to purchase allFurniture and Equipment or any telecommunications, data processing equipment (including hardware and software) and check processing and similar operating equipment owned by the Failed Bank at Fair Market Value and located at any leased Bank Premises that the Assuming Bank elects to vacate or which it could have, but did not occupy, pursuant to this Section 4.6; provided, that, the Assuming Bank shall give the Receiver notice of its election to purchase such property at the time it gives notice of its

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intention to vacate such Bank Premises or within thirty (30) days after Bank Closing for Bank Premises it could have, but did not, occupy.

4.7 Agreement with Respect to Leased Data Processing Equipment

(a)The Receiver hereby grants to the Assuming Bank an exclusive option for the period of one hundred fifty (150) days commencing the day after Bank Closing to accept an assignment from the Receiver of any or all Data Processing Leases to the extent that such Data Processing Leases can be assigned.

(b)The Assuming Bank shall (i) give written notice to the Receiver within the option period specified in Section 4.7(a) of its intent to accept or decline an assignment or sublease of any or all Data Processing Leases and promptly accept an assignment or sublease of such Data Processing Leases, and (ii) give written notice to the appropriate lessor(s) that it has accepted an assignment or sublease of any such Data Processing Leases.

(c)The Receiver agrees to facilitate the assignment or sublease of Data Processing Leases or the negotiation of new leases or license agreements by the Assuming Bank; provided, thatneither the Receiver nor the Corporation shall be obligated to engage in litigation or make payments to the Assuming Bank or to any third party in connection with facilitating any such assumption, assignment, sublease or negotiation.

(d)The Assuming Bank agrees, during its period of use of any property subject to a Data Processing Lease, to pay to the Receiver or to appropriate third parties at the direction of the Receiver all operating costs with respect thereto and to comply with all relevant terms of the applicable Data Processing Leases entered into by the Failed Bank, including without limitation the timely payment of all rent, taxes, fees, charges, utilities, insurance and assessments.

(e)The Assuming Bank shall, not later than one hundred eighty (180) days after Bank Closing, (i) relinquish and release to the Receiver all property subject to the relevant Data Processing Lease, in the same condition as at Bank Closing, normal wear and tear excepted, or

(ii) accept an assignment or a sublease thereof or negotiate a new lease or license agreement under this Section 4.7.

4.8 Agreement with Respect to Certain Existing Agreements.

(a)Subject to the provisions of Section 4.8(b), with respect to agreements existing as of Bank Closing which provide for the rendering of services by or to the Failed Bank, or any other agreement to which the Failed Bank (other than those that are the subject of Section 4.6 or 4.7), within one hundred fifty (150) days after Bank Closing, the Assuming Bank shall give the Receiver written notice specifying whether it elects to assume or not to assume each such agreement. Except as may be otherwise provided in this Article IV, the Assuming Bank agrees to comply with the terms of each such agreement which provide for the rendering of services by or to the Failed Bank for a period commencing on the day after Bank Closing and ending on: (i) in the case of an agreement that provides for the rendering of services by the Failed Bank, the date which is ninety (90) days after Bank Closing, except with respect to agreements relating to loans serviced for others by the Failed Bank in which case and for those agreements, the date which, at

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the Receiver’s option, shall be no more than one hundred fifty (150) days after Bank Closing, and (ii) in the case of an agreement that provides for the rendering of services to the Failed Bank, the date which is thirty (30) days after the Assuming Bank has given notice to the Receiver of its election not to assume such agreement; provided, thatthe Receiver can reasonably make such service agreements available to the Assuming Bank. The Assuming Bank shall be deemed by the Receiver to have assumed agreements for which no notification is timely given. The Receiver agrees to assign, transfer, convey, and deliver to the Assuming Bank all right, title and interest of the Receiver, if any, in and to agreements the Assuming Bank assumes hereunder. In the event the Assuming Bank elects not to accept an assignment of any lease (or sublease) or negotiate a new lease for leased Bank Premises under Section 4.6 and does not otherwise occupy such premises, the provisions of this Section 4.8(a) shall not apply to service agreements or other agreements related to such premises. The Assuming Bank agrees, during the period it has the use or benefit of any such agreement, promptly to pay to the Receiver or to appropriate third parties at the direction of the Receiver all operating costs with respect thereto and to comply with all relevant terms of such agreement.

(b)The provisions of Section 4.8(a) regarding the Assuming Bank’s election to assume or not assume certain agreements shall not apply to (i) agreements pursuant to which the Failed Bank provides mortgage servicing for others, (ii) agreements that are subject to Sections

4.1 through 4.7, (iii) any insurance policy or bond referred to in Section 3.5(a) or other agreement specified in Section 3.5, (other than any insurance included in the definition of Loan) and (iv) consulting, management or employment agreements, if any, between the Failed Bank and its employees or other Persons. Except as otherwise expressly set forth elsewhere in this Agreement, the Assuming Bank does not assume any liabilities or acquire any rights under any of the agreements described in this Section 4.8(b).

4.9Informational Tax Reporting. The Assuming Bank agrees to perform all obligations of the Failed Bank with respect to Federal and State income tax informational reporting related to (i) the Assets and the Liabilities Assumed, (ii) deposit accounts that were closed and loans that were paid off or collateral obtained with respect thereto prior to Bank Closing, (iii) miscellaneous payments made to vendors of the Failed Bank, and (iv) any other asset or liability of the Failed Bank, including, without limitation, loans not purchased and Deposits not assumed by the Assuming Bank, as may be required by the Receiver.

4.10Insurance. The Assuming Bank agrees to obtain insurance coverage effective from and after Bank Closing, including public liability, fire and extended coverage insurance acceptable to the Receiver with respect to owned or leased Bank Premises that it occupies, and all owned or leased Furniture and Equipment and Fixtures and leased data processing equipment (including hardware and software) located thereon, in the event such insurance coverage is not already in force and effect with respect to the Assuming Bank as the insured as of Bank Closing. All such insurance shall, where appropriate (as determined by the Receiver), name the Receiver as an additional insured.

4.11Office Space for Receiver and Corporation. For the period commencing on the

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day following Bank Closing and ending on the one hundred eightieth (180th) day thereafter, the Assuming Bank agrees to provide to the Receiver and the Corporation, without charge, adequate and suitable office space (including parking facilities and vault space), furniture, equipment

(including photocopying and telecopying machines), email accounts, network access and technology resources (such as shared drive) and utilities (including local telephone service and fax machines) at the Bank Premises occupied by the Assuming Bank for their use in the discharge of their respective functions with respect to the Failed Bank. In the event the Receiver and the Corporation determine that the space provided is inadequate or unsuitable, the Receiver and the Corporation may relocate to other quarters having adequate and suitable space and the costs of relocation and any rental and utility costs for the balance of the period of occupancy by the Receiver and the Corporation shall be borne by the Assuming Bank. Additionally, the Assuming Bank agrees to pay such bills and invoices on behalf of the Receiver and Corporation as the Receiver or Corporation may direct for the period beginning on the date of Bank Closing and ending on Settlement Date. Assuming Bank shall submit its requests for reimbursement of such expenditures pursuant to Article VIII of this Agreement.

4.12Agreement with Respect to Continuation of Group Health Plan Coverage for Former Employees of the Failed Bank.

(a)The Assuming Bank agrees to assist the Receiver, as provided in this Section 4.12, in offering individuals who were employees or former employees of the Failed Bank, or any of its Subsidiaries, and who, immediately prior to Bank Closing, were receiving, or were eligible to receive, health insurance coverage or health insurance continuation coverage from the Failed Bank ("Eligible Individuals"), the opportunity to obtain health insurance coverage in the Corporation's FIA Continuation Coverage Plan which provides for health insurance continuation coverage to such Eligible Individuals who are qualified beneficiaries of the Failed Bank as defined in Section 607 of the Employee Retirement Income Security Act of 1974, as amended (respectively, "qualified beneficiaries" and "ERISA"). The Assuming Bank shall consult with the Receiver and not later than five (5) Business Days after Bank Closing shall provide written notice to the Receiver of the number (if available), identity (if available) and addresses (if available) of the Eligible Individuals who are qualified beneficiaries of the Failed Bank and for whom a "qualifying event" (as defined in Section 603 of ERISA) has occurred and with respect to whom the Failed Bank's obligations under Part 6 of Subtitle B of Title I of ERISA have not been satisfied in full, and such other information as the Receiver may reasonably require. The Receiver shall cooperate with the Assuming Bank in order to permit it to prepare such notice and shall provide to the Assuming Bank such data in its possession as may be reasonably required for purposes of preparing such notice.

(b)The Assuming Bank shall take such further action to assist the Receiver in offering the Eligible Individuals who are qualified beneficiaries of the Failed Bank the opportunity to obtain health insurance coverage in the Corporation's FIA Continuation Coverage Plan as the Receiver may direct. All expenses incurred and paid by the Assuming Bank (i) in connection with the obligations of the Assuming Bank under this Section 4.12, and (ii) in providing health insurance continuation coverage to any Eligible Individuals who are hired by the Assuming Bank and such employees' qualified beneficiaries shall be borne by the Assuming Bank.

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(c)This Section 4.12 is for the sole and exclusive benefit of the parties to this Agreement, and for the benefit of no other Person (including any former employee of the Failed Bank or any Subsidiary thereof or qualified beneficiary of such former employee). Nothing in this Section 4.12 is intended by the parties, or shall be construed, to give any Person (including any former employee of the Failed Bank or any Subsidiary thereof or qualified beneficiary of such former employee) other than the Corporation, the Receiver and the Assuming Bank any legal or equitable right, remedy or claim under or with respect to the provisions of this Section.

4.13Agreement with Respect to Interim Asset Servicing. At any time after Bank Closing, the Receiver may establish on its books an asset pool(s) and may transfer to such asset pool(s) (by means of accounting entries on the books of the Receiver) all or any assets and liabilities of the Failed Bank which are not acquired by the Assuming Bank, including, without limitation, wholly unfunded Commitments and assets and liabilities which may be acquired, funded or originated by the Receiver subsequent to Bank Closing. The Receiver may remove assets (and liabilities) from or add assets (and liabilities) to such pool(s) at any time in its discretion. At the option of the Receiver, the Assuming Bank agrees to service, administer, and collect such pool assets in accordance with and for the term set forth in Exhibit 4.13 "Interim Asset Servicing Arrangement".

4.14 Reserved.

4.15Agreement with Respect to Loss Sharing. The Assuming Bank (or any permitted assignee thereof pursuant to the Shared-Loss Agreements) shall be entitled to require reimbursement from the Receiver for loss sharing on certain loans assets in accordance with the Single Family Shared-Loss Agreement attached hereto as Exhibit 4.15A and the Commercial Shared-Loss Agreement attached hereto as Exhibit 4.15B, collectively, the "Shared-Loss Agreements." The Loans that shall be subject to the Single Family Shared-Loss Agreement are identified on the Schedule of Loans 4.15A attached hereto and the Loans and other assets that shall be subject to the Commercial Shared-Loss Agreement are identified on the Schedule of Loans 4.15B, and Schedule 4.15C, Shared-Loss MTM Assets, attached hereto. The Single Family Shared-Loss Agreement and the Commercial Shared-Loss Agreement have their own separate terms and expressly survive the term of this Agreement. For the avoidance of doubt, the Shared-Loss Agreements shall not terminate on the sixth anniversary of Bank Closing and shall remain in full force and effect thereafter.

ARTICLE V

DUTIES WITH RESPECT TO DEPOSITORS OF THE FAILED BANK

5.1Payment of Checks, Drafts and Orders. Subject to Section 9.5, the Assuming Bank agrees to pay all properly drawn checks, drafts and withdrawal orders of depositors of the Failed Bank presented for payment, whether drawn on the check or draft forms provided by the Failed Bank or by the Assuming Bank, to the extent that the Deposit balances to the credit of the respective makers or drawers assumed by the Assuming Bank under this Agreement are sufficient to permit the payment thereof, and in all other respects to discharge, in the usual course

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of conducting a banking business, the duties and obligations of the Failed Bank with respect to the Deposit balances due and owing to the depositors of the Failed Bank assumed by the Assuming Bank under this Agreement.

5.2Certain Agreements Related to Deposits. Subject to Section 2.2, the Assuming Bank agrees to honor the terms and conditions of any written escrow or mortgage servicing agreement or other similar agreement relating to a Deposit liability assumed by the Assuming Bank pursuant to this Agreement.

5.3 Notice to Depositors.

(a)Within thirty (30) days after Bank Closing, the Assuming Bank shall give (i) notice to depositors of the Failed Bank of its assumption of the Deposit liabilities of the Failed Bank, and (ii) any notice required under Section 2.2, by mailing to each such depositor a notice with respect to such assumption and by advertising in a newspaper of general circulation in the county or counties in which the Failed Bank was located. The Assuming Bank agrees that it will obtain prior approval of all such notices and advertisements from counsel for the Receiver (such approval not to be unreasonably withheld or delayed) and that such notices and advertisements shall not be mailed or published until such approval is received.

(b)The Assuming Bank shall give notice by mail to depositors of the Failed Bank concerning the procedures to claim their deposits, which notice shall be provided to the Assuming Bank by the Receiver or the Corporation. Such notice shall be included with the notice to depositors to be mailed by the Assuming Bank pursuant to Section 5.3(a).

(c)If the Assuming Bank proposes to charge fees different from those charged by the Failed Bank before it establishes new deposit account relationships with the depositors of the Failed Bank, the Assuming Bank shall give notice by mail of such changed fees to such depositors (which notice may be made subsequent to the application of such fees).

ARTICLE VI

RECORDS

6.1Transfer of Records.

(a)In accordance with Section 3.1, the Receiver assigns, transfers, conveys and delivers to the Assuming Bank the following Records pertaining to the Deposit liabilities of the Failed Bank assumed by the Assuming Bank under this Agreement, except as provided in Section 6.4:

(i)signature cards, orders, contracts between the Failed Bank and its depositors and Records of similar character;

(ii)passbooks of depositors held by the Failed Bank, deposit slips, cancelled checks and withdrawal orders representing charges to accounts of depositors;

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(iii) and the following Records pertaining to the Assets:

(iv) records of deposit balances carried with other banks, bankers or trust companies;

(v) Loan and collateral records and Credit Files and other documents;

(vi) deeds, mortgages, abstracts, surveys, and other instruments or records of

(vii) title pertaining to real estate or real estate mortgages;

(viii) signature cards, agreements and records pertaining to Safe Deposit Boxes, if any; and

(ix) records pertaining to the safekeeping business of the Failed Bank, if any.

(b)The Receiver, at its option, may assign and transfer to the Assuming Bank by a single blanket assignment or otherwise, as soon as practicable after Bank Closing, any other Records not assigned and transferred to the Assuming Bank as provided in this Agreement, including but not limited to loan disbursement checks, general ledger tickets, official bank checks, proof transactions (including proof tapes) and paid out loan files.

6.2Delivery of Assigned Records. The Receiver shall deliver to the Assuming Bank all Records described in (i) Section 6.1(a) as soon as practicable on or after the date of this Agreement, and (ii) Section 6.1(b) as soon as practicable after making any assignment described therein.

6.3Preservation of Records. The Assuming Bank agrees that it will preserve and maintain for the joint benefit of the Receiver, the Corporation and the Assuming Bank, all Records of which it has custody for such period as either the Receiver or the Corporation in its discretion may require, until directed otherwise, in writing, by the Receiver or Corporation. The Assuming Bank shall have the primary responsibility to respond to subpoenas, discovery requests, and other similar official inquiries with respect to the Records of which it has custody.

6.4Access to Records; Copies. The Assuming Bank agrees to permit the Receiver and the Corporation access to all Records of which the Assuming Bank has custody, and to use, inspect, make extracts from or request copies of any such Records in the manner and to the extent requested, and to duplicate, in the discretion of the Receiver or the Corporation, any Record in the form of microfilm or microfiche pertaining to Deposit account relationships; provided, thatin the event that the Failed Bank maintained one or more duplicate copies of such microfilm or microfiche Records, the Assuming Bank hereby assigns, transfers, and conveys to the Corporation one such duplicate copy of each such Record without cost to the Corporation, and agrees to deliver to the Corporation all Records assigned and transferred to the Corporation

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under this Article VI as soon as practicable on or after the date of this Agreement. The party requesting a copy of any Record shall bear the cost (based on standard accepted industry charges to the extent applicable, as determined by the Receiver) for providing such duplicate Records. A copy of each Record requested shall be provided as soon as practicable by the party having custody thereof.

ARTICLE VII

FIRST LOSS TRANCHE

The “First Loss Tranche” means the dollar amount of Losses that the Assuming Bank must incur prior to the commencement of loss sharing, and is the amount equal to the sum of:

(i)the Assuming Bank’s asset premium (discount) bid, as reflected on the Assuming Bank’s bid form (a discount bid of a negative ($805,000,000)), plus

(ii)the Assuming Bank’s Deposit premium bid, as reflected on the Assuming Bank’s bid form (0.00%), plus

(iii) the Equity Adjustment.

As noted on Schedule 7, the Deposit premium bid is applied to the total of all Assumed Deposits except for brokered, CDARS, and any market place or similar subscription services Deposits.

The First Loss Tranche may be a positive or negative number. If the First Loss Tranche is a positive number, the Assuming Bank must incur losses totaling that amount before loss- sharing commences under the Single Family Shared-Loss Agreement (Exhibit 4.14A) and the Commercial Shared-Loss Agreement (Exhibit 4.15B). If the First Loss Tranche is a negative number, the Corporation shall pay such amount by wire transfer to the Assuming Bank, plus Settlement Interest, by the end of the first business day following Bank Closing and loss sharing shall commence immediately.

ARTICLE VIII

ADJUSTMENTS

8.1Pro Forma Statement. The Receiver, as soon as practicable after Bank Closing, in accordance with the best information then available, shall provide to the Assuming Bank a Pro Forma statement reflecting any adjustments of such liabilities and assets as may be necessary. Such Pro Forma statement shall be prepared in accordance with the Receiver’s customary practice and shall take into account, to the extent possible, (i) liabilities and assets of a nature similar to those contemplated by Section 2.1 or Section 3.1, respectively, which at Bank Closing were carried in the Failed Bank's suspense accounts, (ii) accruals as of Bank Closing for all income related to the assets and business of the Failed Bank acquired by the Assuming Bank hereunder, whether or not such accruals were reflected on the Accounting Records of the Failed Bank in the normal course of its operations, and (iii) adjustments to determine the Book Value of any investment in an Acquired Subsidiary and related accounts on the "bank only" (unconsolidated) balance sheet of the Failed Bank based on the equity method of

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accounting, whether or not the Failed Bank used the equity method of accounting for investments in subsidiaries, except that the resulting amount cannot be less than the Acquired Subsidiary's recorded equity as of Bank Closing as reflected on the Accounting Records of the Acquired Subsidiary. Any Loan purchased by the Assuming Bank pursuant to Section 3.1 which the Failed Bank charged off during the period from March 31, 2009, to Bank Closing shall be deemed not to be charged off for the purposes of the Pro Forma statement, and the purchase price shall be determined pursuant to Section 3.2.

8.2 Correction of Errors and Omissions; Other Liabilities.

(a)In the event any bookkeeping omissions or errors are discovered in preparing any Pro Forma statement or in completing the transfers and assumptions contemplated hereby, the parties hereto agree to correct such errors and omissions, it being understood that, as far as practicable, all adjustments will be made consistent with the judgments, methods, policies or accounting principles utilized by the Failed Bank in preparing and maintaining Accounting Records, except that adjustments made pursuant to this Section 8.2(a) are not intended to bring the Accounting Records of the Failed Bank into accordance with generally accepted accounting principles.

(b)If the Receiver discovers at any time subsequent to the date of this Agreement that any claim exists against the Failed Bank which is of such a nature that it would have been included in the liabilities assumed under Article II had the existence of such claim or the facts giving rise thereto been known as of Bank Closing, the Receiver may, in its discretion, at any time, require that such claim be assumed by the Assuming Bank in a manner consistent with the intent of this Agreement. The Receiver will make appropriate adjustments to the Pro Forma statement provided by the Receiver to the Assuming Bank pursuant to Section 8.1 as may be necessary.

8.3Payments. The Receiver agrees to cause to be paid to the Assuming Bank, or the Assuming Bank agrees to pay to the Receiver, as the case may be, on the Settlement Date (or, the first Business Day following the date on which the final Pro forma statement has been deemed to be accepted in accordance with Section 8.6(a) or delivered in accordance with Section 8.6(b), if later), a payment in an amount which reflects the net adjustments (including any costs, expenses and fees associated with determinations of value as provided in this Agreement) made pursuant to Section 8.1 or Section 8.2, plus interest as provided in Section 8.4. The Receiver and the Assuming Bank agree to effect on the Settlement Date (or, the first Business Day following the date on which the final Pro forma statement has been deemed to be accepted in accordance with Section 8.6(a) or delivered in accordance with Section 8.6(b), if later) any further transfer of assets to or assumption of liabilities or claims by the Assuming Bank as may be necessary in accordance with Section 8.1 or Section 8.2.

8.4Interest. Any amounts paid under Section 8.3 or Section 8.5, shall bear interest for the period from and including the day following Bank Closing to and including the day preceding the payment at the Settlement Interest Rate.

8.5Subsequent Adjustments. In the event that the Assuming Bank or the Receiver discovers any errors or omissions as contemplated by Section 8.2 or any error with respect to the

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payment made under Section 8.3 after the Settlement Date, the Assuming Bank and the Receiver agree to provide written notification of such errors and omissions and any payments as may be necessary to reflect any such correction (a "Subsequent Adjustment Notice") and, subject to Section 8.6, promptly correct any such errors or omissions, make any payments and effect any transfers or assumptions as may be necessary to reflect any such correction plus interest as provided in Section 8.4.

8.6 Disagreements.

(a)Within thirty (30) calendar days following receipt by the Assuming Bank of the Pro forma statement contemplated by Section 8.1, the Assuming Bank shall have the right to dispute all or any portion of such Pro forma statement by giving written notice (a "Notice of Disagreement") to the Receiver setting forth in reasonable detail the basis for any such dispute and the Assuming Bank's calculation of any amounts set forth in the Pro forma statement that are the subject of such dispute (any such dispute, a "Disagreement"). If the Assuming Bank does not deliver a Notice of Disagreement within thirty (30) calendar days after delivery of the Pro forma statement, the Assuming Bank will be deemed to have irrevocably accepted the Pro forma statement.

(b)Promptly following the delivery of a Notice of Disagreement, the parties shall commence good faith negotiations with a view to resolving all such Disagreements. If there are any Disagreements that the parties are unable to resolve within thirty (30) calendar days after the delivery of a Notice of Disagreement, any such Disagreements shall be resolved by determination of a review board (a "Review Board") consisting of three (3) members, one of which shall be selected by the Receiver, one of which shall be selected by the Assuming Bank and the third member of which shall be selected by the other two members. No member of the Review Board may be affiliated with either the Assuming Bank or the Receiver and each member of the Review Board must possess sufficient financial expertise to permit such Member to conduct an informed evaluation of a Disagreement. The parties shall promptly select their members of the Review Board and submit their positions with respect to the Disagreements to the Review Board and shall cooperate with the Review Board and provide the Review Board with access to all documentation and personnel as the Review Board reasonably requests in order to render its determination. The parties shall use their best efforts to cause the Review Board to render its determination as soon as practicable, and in any case no later than thirty (30) calendar days, after the referral to it of the Disagreements. With respect to each Disagreement, the Review Board shall be required to either (i) adopt the position of one of the parties regarding such Disagreement or (ii) adopt a position that is in between the positions of the parties. The Review Board shall issue a written determination setting forth its determination with respect to the Disagreements and provide the same to each party. Such written determination shall be final and binding upon the parties. Promptly following the final determination of all Disputes, the Receiver shall deliver to the Assuming Bank a Pro forma statement reflecting the final determination as determined in accordance with this Section 8.6(b), and any payments required to be made and transfer of assets to or assumptions of liabilities or claims pursuant to Section 8.3 shall be determined based on such Pro forma statement.

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(c)Within thirty (30) calendar days following receipt by a party of a Subsequent Adjustment Notice, the receiving party shall have the right to dispute all or any portion of such

Subsequent Adjustment Notice by giving a Notice of Disagreement to the other party setting forth in reasonable detail the basis for any such Disagreement and such party's calculation of any amounts set forth in the Subsequent Adjustment Notice that are the subject of such Disagreement. If the party receiving the Subsequent Adjustment Notice does not deliver a Notice of Disagreement within thirty (30) calendar days after delivery of the Subsequent Adjustment Notice, such party will be deemed to have irrevocably accepted the matters described in the Subsequent Adjustment Notice. In the event that a Notice of Disagreement is delivered within such thirty (30) calendar day period, the parties agree to follow the procedures set forth in Section 8.2(b) in order to resolve any Disagreement set forth in such Notice of Disagreement. The determination of any such Disagreement made in accordance with the procedures set forth in Section 8.2(b) shall be final and binding upon the parties and any payments required to be made pursuant to Section 8.5 shall be determined based on such determination.

ARTICLE IX

CONTINUING COOPERATION

9.1General Matters. The parties hereto agree that they will, in good faith and with their best efforts, cooperate with each other to carry out the transactions contemplated by this Agreement and to effect the purposes hereof.

9.2Additional Title Documents. The Receiver, the Corporation and the Assuming Bank each agree, at any time, and from time to time, upon the request of any party hereto, to execute and deliver such additional instruments and documents of conveyance and take such other action as shall be reasonably necessary to vest in the appropriate party its full legal or equitable title in and to the property transferred pursuant to this Agreement or to be transferred in accordance herewith. The Assuming Bank shall prepare such instruments and documents of conveyance (in form and substance reasonably satisfactory to the Receiver) as shall be necessary to vest title to the Assets in the Assuming Bank. The Assuming Bank shall be responsible for recording such instruments and documents of conveyance at its own expense. In furtherance of the foregoing, concurrently with the execution of this Agreement, the Receiver shall initiate the process to execute and deliver to the Assuming Bank the Power of Attorney in a form necessary to effectuate the intent of this Section 9.2 to this Agreement.

9.3 Claims and Suits.

(a)The Receiver shall have the right, in its discretion, to (i) defend or settle any claim or suit against the Assuming Bank with respect to which the Receiver has indemnified the Assuming Bank in the same manner and to the same extent as provided in Article XII, and (ii) defend or settle any claim or suit against the Assuming Bank with respect to any Liability Assumed, which claim or suit may result in a loss to the Receiver arising out of or related to this Agreement, or which existed against the Failed Bank on or before Bank Closing; provided that no such settlement shall be made without the prior written consent of the Assuming Bank (such consent not to be unreasonably withheld or delayed) unless any such settlement includes an

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express unconditional release of the Assuming Bank and its Affiliates from any and all liabilities arising out of or relating to such claim or suit without any admission of wrongdoing by the Assuming Bank or any of its Affiliates. The exercise by the Receiver of any rights under this Section 9.3(a) shall not release the Assuming Bank with respect to any of its obligations under this Agreement.

(b)In the event any action at law or in equity shall be instituted by any Person against the Receiver and the Corporation as codefendants with respect to any asset of the Failed Bank retained or acquired pursuant to this Agreement by the Receiver, the Receiver agrees, at the request of the Corporation, to join with the Corporation in a petition to remove the action to the United States District Court for the proper district. The Receiver agrees to institute, with or without joinder of the Corporation as coplaintiff, any action with respect to any such retained or acquired asset or any matter connected therewith whenever notice requiring such action shall be given by the Corporation to the Receiver.

9.4Payment of Deposits. In the event any depositor does not accept the obligation of the Assuming Bank to pay any Deposit liability of the Failed Bank assumed by the Assuming Bank pursuant to this Agreement and asserts a claim against the Receiver for all or any portion of any such Deposit liability, the Assuming Bank agrees on demand to provide to the Receiver funds sufficient to pay such claim in an amount not in excess of the Deposit liability reflected on the books of the Assuming Bank at the time such claim is made. Upon payment by the Assuming Bank to the Receiver of such amount, the Assuming Bank shall be discharged from any further obligation under this Agreement to pay to any such depositor the amount of such Deposit liability paid to the Receiver.

9.5Withheld Payments. At any time, the Receiver or the Corporation may, in its discretion, determine that all or any portion of any deposit balance assumed by the Assuming Bank pursuant to this Agreement does not constitute a "Deposit" (or otherwise, in its discretion, determine that it is the best interest of the Receiver or Corporation to withhold all or any portion of any deposit), and may direct the Assuming Bank to withhold payment of all or any portion of any such deposit balance. Upon such direction, the Assuming Bank agrees to hold such deposit and not to make any payment of such deposit balance to or on behalf of the depositor, or to itself, whether by way of transfer, set-off, or otherwise. The Assuming Bank agrees to maintain the "withheld payment" status of any such deposit balance until directed in writing by the Receiver or the Corporation as to its disposition. At the direction of the Receiver or the Corporation, the Assuming Bank shall return all or any portion of such deposit balance to the Receiver or the Corporation, as appropriate, and thereupon the Assuming Bank shall be discharged from any further liability to such depositor with respect to such returned deposit balance. If such deposit balance has been paid to the depositor prior to a demand for return by the Corporation or the Receiver, and payment of such deposit balance had not been previously withheld pursuant to this Section, the Assuming Bank shall not be obligated to return such deposit balance to the Receiver or the Corporation. The Assuming Bank shall be obligated to reimburse the Corporation or the Receiver, as the case may be, for the amount of any deposit balance or portion thereof paid by the Assuming Bank in contravention of any previous direction to withhold payment of such deposit balance or return such deposit balance the payment of which was withheld pursuant to this Section.

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9.6 Proceedings with Respect to Certain Assets and Liabilities.

(a)In connection with any investigation, proceeding or other matter with respect to any asset or liability of the Failed Bank retained by the Receiver, or any asset of the Failed Bank acquired by the Receiver pursuant to this Agreement, the Assuming Bank shall cooperate to the extent reasonably required by the Receiver.

(b)In addition to its obligations under Section 6.4, the Assuming Bank shall provide representatives of the Receiver access at reasonable times and locations without other limitation or qualification to (i) its directors, officers, employees and agents and those of the Acquired Subsidiaries, and (ii) its books and records, the books and records of such Acquired Subsidiaries and all Credit Files, and copies thereof. Copies of books, records and Credit Files shall be provided by the Assuming Bank as requested by the Receiver and the costs of duplication thereof shall be borne by the Receiver.

(c)Not later than ten (10) days after the Put Notice pursuant to Section 3.4 or the date of the notice of transfer of any Loan by the Assuming Bank to the Receiver pursuant to Section 3.6, the Assuming Bank shall deliver to the Receiver such documents with respect to such Loan as the Receiver may request, including without limitation the following: (i) all related Credit Documents (other than certificates, notices and other ancillary documents), (ii) a certificate setting forth the principal amount on the date of the transfer and the amount of interest, fees and other charges then accrued and unpaid thereon, and any restrictions on transfer to which any such Loan is subject, and (iii) all Credit Files, and all documents, microfiche, microfilm and computer records (including but not limited to magnetic tape, disc storage, card forms and printed copy) maintained by, owned by, or in the possession of the Assuming Bank or any Affiliate of the Assuming Bank relating to the transferred Loan.

9.7Information. The Assuming Bank promptly shall provide to the Corporation such other information, including financial statements and computations, relating to the performance of the provisions of this Agreement as the Corporation or the Receiver may request from time to time, and, at the request of the Receiver, make available employees of the Failed Bank employed or retained by the Assuming Bank to assist in preparation of the Pro Forma statement pursuant to Section 8.1.

ARTICLE X

CONDITION PRECEDENT

The obligations of the parties to this Agreement are subject to the Receiver and the Corporation having received at or before Bank Closing evidence reasonably satisfactory to each of any necessary approval, waiver, or other action by any governmental authority, the board of directors of the Assuming Bank, or other third party, with respect to this Agreement and the transactions contemplated hereby, the closing of the Failed Bank and the appointment of the Receiver, the chartering of the Assuming Bank, and any agreements, documents, matters or proceedings contemplated hereby or thereby.

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ARTICLE XI

REPRESENTATIONS AND WARRANTIES OF THE ASSUMING BANK

The Assuming Bank represents and warrants to the Corporation and the Receiver as follows:

(a)Corporate Existence and Authority. The Assuming Bank (i) is duly organized, validly existing and in good standing under the laws of its Chartering Authority and has full power and authority to own and operate its properties and to conduct its business as now conducted by it, and (ii) has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The Assuming Bank has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the performance of the transactions contemplated hereby.

(b)Third Party Consents. No governmental authority or other third party consents (including but not limited to approvals, licenses, registrations or declarations) are required in connection with the execution, delivery or performance by the Assuming Bank of this Agreement, other than such consents as have been duly obtained and are in full force and effect.

(c)Execution and Enforceability. This Agreement has been duly executed and delivered by the Assuming Bank and when this Agreement has been duly authorized, executed and delivered by the Corporation and the Receiver, this Agreement will constitute the legal, valid and binding obligation of the Assuming Bank, enforceable in accordance with its terms.

(d) Compliance with Law.

(i)Neither the Assuming Bank nor any of its Subsidiaries is in violation of any statute, regulation, order, decision, judgment or decree of, or any restriction imposed by, the United States of America, any State, municipality or other political subdivision or any agency of any of the foregoing, or any court or other tribunal having jurisdiction over the Assuming Bank or any of its Subsidiaries or any assets of any such Person, or any foreign government or agency thereof having such jurisdiction, with respect to the conduct of the business of the Assuming Bank or of any of its Subsidiaries, or the ownership of the properties of the Assuming Bank or any of its Subsidiaries, which, either individually or in the aggregate with all other such violations, would materially and adversely affect the business, operations or condition (financial or otherwise) of the Assuming Bank or the ability of the Assuming Bank to perform, satisfy or observe any obligation or condition under this Agreement.

(ii)Neither the execution and delivery nor the performance by the Assuming Bank of this Agreement will result in any violation by the Assuming Bank of, or be in conflict with, any provision of any applicable law or regulation, or any order, writ or decree of any court or governmental authority.

e)    Representations Remain True. The Assuming Bank represents and warrants that

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it has executed and delivered to the Corporation a Purchaser Eligibility Certification and Confidentiality Agreement and that all information provided and representations made by or on behalf of the Assuming Bank in connection with this Agreement and the transactions contemplated hereby, including, but not limited to, the Purchaser Eligibility Certification and Confidentiality Agreement (which are affirmed and ratified hereby) are and remain true and correct in all material respects and do not fail to state any fact required to make the information contained therein not misleading.

ARTICLE XII

INDEMNIFICATION

12.1Indemnification of Indemnitees. From and after Bank Closing and subject to the limitations set forth in this Section and Section 12.6 and compliance by the Indemnitees with Section 12.2, the Receiver agrees to indemnify and hold harmless the Indemnitees against any and all costs, losses, liabilities, expenses (including attorneys' fees) incurred prior to the assumption of defense by the Receiver pursuant to paragraph (d) of Section 12.2, judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with claims against any Indemnitee based on liabilities of the Failed Bank that are not assumed by the Assuming Bank pursuant to this Agreement or subsequent to the execution hereof by the Assuming Bank or any Subsidiary or Affiliate of the Assuming Bank for which indemnification is provided hereunder in (a) of this Section 12.1, subject to certain exclusions as provided in (b) of this Section 12.1:

(a)

(1)claims based on the rights of any shareholder or former shareholder as such of

(x) the Failed Bank, or (y) any Subsidiary or Affiliate of the Failed Bank;

(2)claims based on the rights of any creditor as such of the Failed Bank, or any creditor as such of any director, officer, employee or agent of the Failed Bank, with respect to any indebtedness or other obligation of the Failed Bank arising prior to Bank Closing;

(3)claims based on the rights of any present or former director, officer, employee or agent as such of the Failed Bank or of any Subsidiary or Affiliate of the Failed Bank;

(4)claims based on any action or inaction prior to Bank Closing of the Failed Bank, its directors, officers, employees or agents as such, or any Subsidiary or Affiliate of the Failed Bank, or the directors, officers, employees or agents as such of such Subsidiary or Affiliate;

(5)claims based on any malfeasance, misfeasance or nonfeasance of the Failed Bank, its directors, officers, employees or agents with respect to the trust business of the Failed Bank, if any;

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(6)claims based on any failure or alleged failure (not in violation of law) by the Assuming Bank to continue to perform any service or activity previously performed by the Failed Bank which the Assuming Bank is not required to perform pursuant to this Agreement or which arise under any contract to which the Failed Bank was a party which the Assuming Bank elected not to assume in accordance with this Agreement and which neither the Assuming Bank nor any Subsidiary or Affiliate of the Assuming Bank has assumed subsequent to the execution hereof;

(7)claims arising from any action or inaction of any Indemnitee, including for purposes of this Section 12.1(a)(7) the former officers or employees of the Failed Bank or of any Subsidiary or Affiliate of the Failed Bank that is taken upon the specific written direction of the Corporation or the Receiver, other thanany action or inaction taken in a manner constituting bad faith, gross negligence or willful misconduct;

(8)claims based on the rights of any depositor of the Failed Bank whose deposit has been accorded "withheld payment" status and/or returned to the Receiver or Corporation in accordance with Section 9.5 and/or has become an "unclaimed deposit" or has been returned to the Corporation or the Receiver in accordance with Section 2.3; and

(9)claims based on or relating to the exchange of preferred stock issued by RWHC, Inc. for preferred stock issued by the Failed Bank; provided that for purposes of this Section 12.1(a)(9), any such claim shall be deemed to be based on liabilities of the Failed Bank and RWHC, Inc. shall be deemed to be an Indemnitee.

(b) provided, that, with respect to this Agreement, except for paragraphs (7) and (8) of Section 12.1(a), no indemnification will be provided under this Agreement for any:

(1)judgment or fine against, or any amount paid in settlement (without the written approval of the Receiver) by, any Indemnitee in connection with any action that seeks damages against any Indemnitee (a "counterclaim") arising with respect to any Asset and based on any action or inaction of either the Failed Bank, its directors, officers, employees or agents as such prior to Bank Closing, unless any such judgment, fine or amount paid in settlement exceeds the greater of (i) the Repurchase Price of such Asset, or (ii) the monetary recovery sought on such Asset by the Assuming Bank in the cause of action from which the counterclaim arises; and in such event the Receiver will provide indemnification only in the amount of such excess; and no indemnification will be provided for any costs or expenses other than any costs or expenses (including attorneys' fees) which, in the determination of the Receiver, have been actually and reasonably incurred by such Indemnitee in connection with the defense of any such counterclaim; and it is expressly agreed that the Receiver reserves the right to intervene, in its discretion, on its behalf and/or on behalf of the Receiver, in the defense of any such counterclaim;

(2)claims with respect to any liability or obligation of the Failed Bank that is expressly assumed by the Assuming Bank pursuant to this Agreement or subsequent to the execution hereof by the Assuming Bank or any Subsidiary or Affiliate of the Assuming Bank;

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(3)claims with respect to any liability of the Failed Bank to any present or former employee as such of the Failed Bank or of any Subsidiary or Affiliate of the Failed Bank, which liability is expressly assumed by the Assuming Bank pursuant to this Agreement or subsequent to the execution hereof by the Assuming Bank or any Subsidiary or Affiliate of the Assuming Bank;

(4)claims based on the failure of any Indemnitee to seek recovery of damages from the Receiver for any claims based upon any action or inaction of the Failed Bank, its directors, officers, employees or agents as fiduciary, agent or custodian prior to Bank Closing;

(5)claims based on any violation or alleged violation by any Indemnitee of the antitrust, branching, banking or bank holding company or securities laws of the United States of America or any State thereof;

(6)claims based on the rights of any present or former creditor, customer, or supplier as such of the Assuming Bank or any Subsidiary or Affiliate of the Assuming Bank;

(7)claims based on the rights of any present or former shareholder as such of the Assuming Bank or any Subsidiary or Affiliate of the Assuming Bank regardless of whether any such present or former shareholder is also a present or former shareholder of the Failed Bank;

(8)claims, if the Receiver determines that the effect of providing such indemnification would be to (i) expand or alter the provisions of any warranty or disclaimer thereof provided in Section 3.3 or any other provision of this Agreement, or (ii) create any warranty not expressly provided under this Agreement;

(9)claims which could have been enforced against any Indemnitee had the Assuming Bank not entered into this Agreement;

(10)claims based on any liability for taxes or fees assessed with respect to the consummation of the transactions contemplated by this Agreement, including without limitation any subsequent transfer of any Assets or Liabilities Assumed to any Subsidiary or Affiliate of the Assuming Bank;

(11)except as expressly provided in this Article XII, claims based on any action or inaction of any Indemnitee, and nothing in this Agreement shall be construed to provide indemnification for (i) the Failed Bank, (ii) any Subsidiary or Affiliate of the Failed Bank, or (iii) any present or former director, officer, employee or agent of the Failed Bank or its Subsidiaries or Affiliates; provided, thatthe Receiver, in its discretion, may provide indemnification hereunder for any present or former director, officer, employee or agent of the Failed Bank or its Subsidiaries or Affiliates who is also or becomes a director, officer, employee or agent of the Assuming Bank or its Subsidiaries or Affiliates;

(12)claims or actions which constitute a breach by the Assuming Bank of the representations and warranties contained in Article XI;

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(13)claims arising out of or relating to the condition of or generated by an Asset arising from or relating to the presence, storage or release of any hazardous or toxic substance, or any pollutant or contaminant, or condition of such Asset which violate any applicable Federal,

State or local law or regulation concerning environmental protection; and

(14)claims based on, related to or arising from any asset, including a loan, acquired or liability assumed by the Assuming Bank, other than pursuant to this Agreement.

12.2Conditions Precedent to Indemnification. It shall be a condition precedent to the obligation of the Receiver to indemnify any Person pursuant to this Article XII that such Person shall, with respect to any claim made or threatened against such Person by a third party for which such Person is or may be entitled to indemnification hereunder:

(a)give written notice to the Regional Counsel (Litigation Branch) of the Corporation in the manner and at the address provided in Section 13.7 of such claim as soon as practicable after such claim is made or threatened; provided, thatnotice must be given on or before the date which is six (6) years from the date of this Agreement;

(b)provide to the Receiver such information and cooperation with respect to such claim as the Receiver may reasonably require;

(c)cooperate and take all steps, as the Receiver may reasonably require, to preserve and protect any defense to such claim;

(d)in the event suit is brought with respect to such claim, upon reasonable prior notice, afford to the Receiver the right, which the Receiver may exercise in its sole discretion, to conduct the investigation, control the defense and effect settlement of such claim, including without limitation the right to designate counsel and to control all negotiations, litigation, arbitration, settlements, compromises and appeals of any such claim, all of which shall be at the expense of the Receiver; provided, thatthe Receiver shall have notified the Person claiming indemnification in writing that such claim is a claim with respect to which the Person claiming indemnification is entitled to indemnification under this Article XII; provided, further that no settlement shall be made without the prior written consent of the Indemnitee (such consent not to be unreasonably withheld or delayed) unless any such settlement includes an express unconditional release of the Indemnitee and its Affiliates from any and all liabilities arising out of or relating to such suit without any admission of wrongdoing by the Indemnitee or any of its Affiliates;

(e)not incur any costs or expenses in connection with any response or suit with respect to such claim, unless such costs or expenses were incurred upon the written direction of the Receiver or unless such Indemnitee incurs such costs or expenses for its own account; provided, thatthe Receiver shall not be obligated to reimburse the amount of any such costs or expenses unless such costs or expenses were incurred upon the written direction of the Receiver;

(f)not release or settle such claim or make any payment or admission with respect thereto, unless the Receiver consents in writing thereto, which consent shall not be unreasonably withheld; provided, thatthe Receiver shall not be obligated to reimburse the amount of any such

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settlement or payment unless such settlement or payment was effected upon the written direction of the Receiver; and

(g)take reasonable action as the Receiver may request in writing as necessary to preserve, protect or enforce the rights of the indemnified Person against any Primary Indemnitor.

12.3No Additional Warranty. Nothing in this Article XII shall be construed or deemed to (i) expand or otherwise alter any warranty or disclaimer thereof provided under Section 3.3 or any other provision of this Agreement with respect to, among other matters, the title, value, collectibility, genuineness, enforceability or condition of any (x) Asset, or (y) asset of the Failed Bank purchased by the Assuming Bank subsequent to the execution of this Agreement by the Assuming Bank or any Subsidiary or Affiliate of the Assuming Bank, or (ii) create any warranty not expressly provided under this Agreement with respect thereto; provided, however, that the absence of any such warranty shall not affect the calculation of any Losses with respect to which any Indemnitee is entitled to indemnification under Section 12.1.

12.4Indemnification of Receiver and Corporation. From and after Bank Closing, the Assuming Bank agrees to indemnify and hold harmless the Corporation and the Receiver and their respective directors, officers, employees and agents from and against any and all Loses actually and reasonably incurred in connection with any of the following:

(a)claims against the Corporation or any such specified Person based on any and all liabilities or obligations of the Failed Bank assumed by the Assuming Bank pursuant to this Agreement or subsequent to the execution hereof by the Assuming Bank or any Subsidiary or Affiliate of the Assuming Bank, whether or not any such liabilities subsequently are sold and/or transferred, other than any claim based upon any action or inaction of any Indemnitee as provided in paragraph (7) or (8) of Section 12.1(a); and

(b)claims against the Corporation or any such specified Person based on any act or omission of any Indemnitee (including but not limited to claims of any Person claiming any right or title by or through the Assuming Bank with respect to Assets transferred to the Receiver pursuant to Section 3.4 or 3.6), other than any action or inaction of any Indemnitee as provided in paragraph (7) or (8) of Section 12.1(a).

12.5Obligations Supplemental. The obligations of the Receiver, and the Corporation as guarantor in accordance with Section 12.7, to provide indemnification under this Article XII are to supplement any amount payable by any Primary Indemnitor to the Person indemnified under this Article XII. Consistent with that intent, the Receiver agrees only to make payments pursuant to such indemnification to the extent not payable by a Primary Indemnitor. If the aggregate amount of payments actually received by the Person being indemnified from the Receiver, or the Corporation as guarantor in accordance with Section 12.7, and all Primary Indemnitors with respect to any item of indemnification under this Article XII exceeds the amount payable with respect to such item, such Person being indemnified shall notify the Receiver thereof and, upon the request of the Receiver, shall promptly pay to the Receiver, or the Corporation as appropriate, the amount of the Receiver's (or Corporation's) payments to the extent of such excess.

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12.6Criminal Claims. Notwithstanding any provision of this Article XII to the contrary, in the event that any Person being indemnified under this Article XII shall become involved in any criminal action, suit or proceeding, whether judicial, administrative or investigative, the Receiver shall have no obligation hereunder to indemnify such Person for liability with respect to any criminal act or to the extent any costs or expenses are attributable to the defense against the allegation of any criminal act, unless (i) the Person is successful on the merits or otherwise in the defense against any such action, suit or proceeding, or (ii) such action, suit or proceeding is terminated without the imposition of liability on such Person.

12.7Limited Guaranty of the Corporation. The Corporation hereby guarantees performance of the Receiver's obligation to indemnify the Assuming Bank as set forth in this Article XII. It is a condition to the Corporation's obligation hereunder that the Assuming Bank shall comply in all respects with the applicable provisions of this Article XII. The Corporation shall be liable hereunder only for such amounts, if any, as the Receiver is obligated to pay under the terms of this Article XII but shall fail to pay. Except as otherwise provided above in this Section 12.7, nothing in this Article XII is intended or shall be construed to create any liability or obligation on the part of the Corporation, the United States of America or any department or agency thereof under or with respect to this Article XII, or any provision hereof, it being the intention of the parties hereto that the obligations undertaken by the Receiver under this Article XII are the sole and exclusive responsibility of the Receiver and no other Person or entity.

12.8Subrogation. Upon payment by the Receiver, or the Corporation as guarantor in accordance with Section 12.7, to any Indemnitee for any claims indemnified by the Receiver under this Article XII, the Receiver, or the Corporation as appropriate, shall become subrogated to all rights of the Indemnitee against any other Person to the extent of such payment.

ARTICLE XIII

MISCELLANEOUS

13.1Entire Agreement. This Agreement (including the Schedules and Exhibits hereto), the Single Family Shared-Loss Agreement, and the Commercial Shared-Loss Agreement, including the Schedules and Exhibits thereto, embodies the entire agreement of the parties hereto in relation to the subject matter herein and supersedes all prior understandings or agreements, oral or written, between the parties.

13.2Headings. The headings and subheadings of the Table of Contents, Articles and Sections contained in this Agreement, except the terms identified for definition in Article I and elsewhere in this Agreement, are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any provision hereof.

13.3Counterparts. This Agreement may be executed in any number of counterparts and by the duly authorized representative of a different party hereto on separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement.

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13.4GOVERNING LAW. THIS AGREEMENT, THE SINGLE FAMILY SHARED- LOSS AGREEMENT, AND THE COMMERCIAL SHARED-LOSS AGREEMENT AND THE RIGHTS AND OBLIGATIONS HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE FEDERAL LAW OF THE UNITED STATES OF AMERICA, AND IN THE ABSENCE OF CONTROLLING FEDERAL LAW, IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THE MAIN OFFICE OF THE FAILED BANK IS LOCATED.

13.5Successors. All terms and conditions of this Agreement shall be binding on the successors and assigns of the Receiver, the Corporation and the Assuming Bank. Except as otherwise specifically provided in this Agreement, nothing expressed or referred to in this Agreement is intended or shall be construed to give any Person other than the Receiver, the Corporation and the Assuming Bank any legal or equitable right, remedy or claim under or with respect to this Agreement or any provisions contained herein, it being the intention of the parties hereto that this Agreement, the obligations and statements of responsibilities hereunder, and all other conditions and provisions hereof are for the sole and exclusive benefit of the Receiver, the Corporation and the Assuming Bank and for the benefit of no other Person.

13.6Modification; Assignment. No amendment or other modification, rescission, release, or assignment of any part of this Agreement, the Single Family Shared-Loss Agreement, and the Commercial Shared-Loss Agreement shall be effective except pursuant to a written agreement subscribed by the duly authorized representatives of the parties hereto. Notwithstanding the foregoing, the Assuming Bank shall be entitled to assign any of its rights or obligations under this Agreement to any Subsidiary of the Assuming Bank that is also a financial institution, except to the extent that any such assignment is not permitted under applicable law.

13.7Notice. Any notice, request, demand, consent, approval or other communication to any party hereto shall be effective when received and shall be given in writing, and delivered in person against receipt therefore, or sent by certified mail, postage prepaid, courier service, telex, facsimile transmission or email to such party (with copies as indicated below) at its address set forth below or at such other address as it shall hereafter furnish in writing to the other parties. All such notices and other communications shall be deemed given on the date received by the addressee.

Assuming Bank

Compass Bank

15 South 20th Street, Suite 1802

Birmingham, Alabama 35233 Attention: Jerry W. Powell

with a copy to: John C. Murphy
	Cleary Gottlieb Steen & Hamilton LLP

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Receiver and Corporation

Federal Deposit Insurance Corporation, Receiver of Guaranty Bank

1601 Bryan Street, Suite 1700

Dallas, Texas 75201 Attention: Settlement Manager

with copy to: Regional Counsel (Litigation Branch)

and with respect to notice under Article XII:

Federal Deposit Insurance Corporation Receiver of Guaranty Bank

1601 Bryan Street, Suite 1700

Dallas, Texas 75201

Attention: Regional Counsel (Litigation Branch)

13.8Manner of Payment. All payments due under this Agreement shall be in lawful money of the United States of America in immediately available funds as each party hereto may specify to the other parties; provided, thatin the event the Receiver or the Corporation is obligated to make any payment hereunder in the amount of $25,000.00 or less, such payment may be made by check.

13.9Costs, Fees and Expenses. Except as otherwise specifically provided herein, each party hereto agrees to pay all costs, fees and expenses which it has incurred in connection with or incidental to the matters contained in this Agreement, including without limitation any fees and disbursements to its accountants and counsel; provided, thatthe Assuming Bank shall pay all fees, costs and expenses (other than attorneys' fees incurred by the Receiver) incurred in connection with the transfer to it of any Assets or Liabilities Assumed hereunder or in accordance herewith.

13.10Waiver. Each of the Receiver, the Corporation and the Assuming Bank may waive its respective rights, powers or privileges under this Agreement; provided, thatsuch waiver shall be in writing; and further provided, thatno failure or delay on the part of the Receiver, the Corporation or the Assuming Bank to exercise any right, power or privilege under this Agreement shall operate as a waiver thereof, nor will any single or partial exercise of any right, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, power or privilege by the Receiver, the Corporation, or the Assuming Bank under this Agreement, nor will any such waiver operate or be construed as a future waiver of such right, power or privilege under this Agreement.

13.11Severability. If any provision of this Agreement is declared invalid or unenforceable, then, to the extent possible, all of the remaining provisions of this Agreement shall remain in full force

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and effect and shall be binding upon the parties hereto.

13.12Term of Agreement. This Agreement shall continue in full force and effect until the tenth (10th) anniversary of Bank Closing; provided, thatthe provisions of Section 6.3 and 6.4 shall survive the expiration of the term of this Agreement. The receivership of the Failed Bank may be terminated prior to the expiration of the term of this Agreement; in such event, the guaranty of the Corporation, as provided in and in accordance with the provisions of Section

12.7 shall be in effect for the remainder of the term (or such longer period as necessary to satisfy the terms of the immediately succeeding sentence). Expiration of the term of this Agreement shall not affect any claim or liability of any party with respect to any (i) amount which is owing at the time of such expiration, regardless of when such amount becomes payable, (ii) breach of this Agreement occurring prior to such expiration, regardless of when such breach is discovered and (iii) any matter for which a request for indemnification has been timely submitted.

13.13Survival of Covenants, Etc. The covenants, representations, and warranties in this Agreement shall survive the execution of this Agreement and the consummation of the transactions contemplated hereunder.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first above written.

FEDERAL DEPOSIT INSURANCE CORPORATION,

RECEIVER OF GUARANTY BANK

AUSTIN, TEXAS

BY: /s/ Andrew F. Basel

NAME: Andrew F. Basel

TITLE: Receiver-in-Charge

FEDERAL DEPOSIT INSURANCE CORPORATION

BY: /s/ Andrew F. Basel

NAME: Andrew F. Basel

TITLE: Attorney-in-Fact

COMPASS BANK

BY: /s/ Jerry W. Powell

NAME: Jerry W. Powell

TITLE: General Counsel and Secretary

Attest:

/s/ B. Shane Clanton

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SCHEDULE 2.1 - Certain Liabilities Assumed by the Assuming Bank

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SCHEDULE 2.1(a) - Excluded Deposit Liability Accounts

This schedule will be updated post closing with data as of Bank Closing date.

[Omitted from this disclosure]

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SCHEDULE 3.1 - Certain Assets Purchased

SEE ATTACHED LIST

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SCHEDULE 3.1a - Subsidiary and Other Business Combination Entities Acquired SEE ATTACHED LIST

THE LIST(S) ATTACHED TO THIS SCHEDULE (OR SUBSCHEDULE(S)) AND THE INFORMATION THEREIN, IS AS OF BANK CLOSING.

Name TIN Active/Inactive/Dissolved/Terminated

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SCHEDULE 3.2 - Purchase Price of Assets or assets

(a)	cash and receivables from depository institutions, including cash items in the process of collection, plus interest thereon:	Book Value
(b)	securities (exclusive of the capital stock of Acquired Subsidiaries and Shared-Loss Securities), plus interest thereon:	As provided in Section 3.2(b)
(c)	federal funds sold and repurchase agreements, if any, including interest thereon:	Book Value
(d)	Loans:	Book Value
(e)	reserved:
(f)	Safe Deposit Boxes and related business, safekeeping business, if any:	Book Value
(g)	Records and other documents:	Book Value
(h)	capital stock of any Acquired Subsidiaries:	Book Value
(i)	amounts owed to the Failed Bank by any Acquired Subsidiary:	Book Value
(j)	assets securing Deposits of public money, to the extent not otherwise purchased hereunder:	Book Value
(k)	Overdrafts of customers:	Book Value
(l)	rights, if any, with respect to Qualified Financial Contracts.	As provided in Section 3.2(c)
(m)	rights of the Failed Bank to provide mortgage servicing for others and related contracts.	Book Value

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assets subject to an option to purchase:

(a)	Bank Premises:	Fair Market Value
(b)	Furniture and Equipment:	Fair Market Value
(c)	Fixtures:	Fair Market Value
(d)	Other Equipment:	Fair Market Value

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SCHEDULE 3.5(1)- Excluded Private Label Asset-Backed

Securities This list is as of 6/30/09 and shall be updated post-closing

as needed.

[Omitted from this disclosure]

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[Omitted from this disclosure]

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SCHEDULE 4.15A

LOANS SUBJECT TO LOSS SHARING UNDER THE

SINGLE FAMILY SHARED-LOSS AGREEMENT

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SCHEDULE 4.15B

LOANS SUBJECT TO LOSS SHARING UNDER THE

COMMERCIAL SHARED-LOSS AGREEMENT

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SCHEDULE 4.15C

SHARED-LOSS SECURITIES

NONE

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SCHEDULE 7 -Accounts Excluded from Calculation of Deposit Franchise Bid Premium

The accounts identified below will pass to the Assuming Bank (unless otherwise noted). When calculating the premium to be paid on Assumed Deposits in a P&A transaction, the FDIC will exclude the following categories of deposit accounts:

Category	Description	Amount
I	Non- DO Brokered Deposits	$	676,160.147
II	CDARS	$	48,460,265
III	Market Place Deposits	$	0.00
	Total deposits excluded from Calculation of premium	$	724,620,412

Category Description

I Brokered Deposits

Brokered deposit accounts are accounts for which the “depositor of record” is an agent, nominee, or custodian who deposits funds for a principal or principals to whom “pass-through” deposit insurance coverage may be extended. The FDIC separates brokered deposit accounts into 2 categories: 1) Depository Organization (DO) Brokered Deposits and

2) Non-Depository Organization (Non-DO) Brokered Deposits. This distinction is made by the FDIC to facilitate our role as Receiver and Insurer. These terms will not appear on other “brokered deposit” reports generated by the institution.

Non-DO Brokered Deposits pass to the Assuming Bank, but are excluded from Assumed Deposits when the deposit premium is calculated. Please see the attached “Schedule 7 Non-DO Broker Deposit Detail Report” for a listing of these accounts. This list will be updated post closing with balances as of Bank Closing date.

If this institution had any DO Brokered Deposits (Cede & Co as Nominee for DTC), they are excluded from Assumed Deposits in the P&A transaction. A list of these accounts is provided on “Schedule 2.1 DO Brokered Deposit Detail Report”.

II CDARS

CDARS deposits pass to the Assuming Bank, but are excluded from Assumed Deposits when the deposit premium is calculated.

Guaranty Bank did participate in the CDARS program at the time an initial request was made of the bank to identify such deposits. If the numbers and amounts of CDARS deposits change between the date of the attached listing of such deposits and the Bank Closing Date, Schedule 7 to the P&A Agreement and related attachments will be adjusted accordingly.

III Market Place Deposits

“Market Place Deposits” is a description given to deposits that may have been solicited via a money desk, internet subscription service (for example, Qwickrate), or similar programs.

Guaranty Bank represented it did not solicit Market Place Deposits as identified above. This schedule will be updated (if necessary) post closing with balances as of Bank Closing date and a list of such deposits will be provided at that time.

The deposit franchise bid premium will be calculated using account categories and balances as of Bank Closing Date that are reflected in the general ledger or subsystem as described above. The final numbers for Schedule 7 will be provided post closing.

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EXHIBIT 3.2(c) -- VALUATION OF CERTAIN

QUALIFIED FINANCIAL CONTRACTS

A. Scope

Interest Rate Contracts - All interest rate swaps, forward rate agreements, interest rate futures, caps, collars and floors, whether purchased or written.

Option Contracts - All put and call option contracts, whether purchased or written, on marketable securities, financial futures, foreign currencies, foreign exchange or foreign exchange futures contracts.

Foreign Exchange Contracts - All contracts for future purchase or sale of foreign currencies, foreign currency or cross currency swap contracts, or foreign exchange futures contracts.

B. Exclusions

All financial contracts used to hedge assets and liabilities that are acquired by the Assuming Bank but are not subject to adjustment from Book Value.

C. Adjustment

The difference between the Book Value and market value as of Bank Closing.

D. Methodology

1. The price at which the Assuming Bank sells or disposes of Qualified Financial Contracts will be deemed to be the fair market value of such contracts, if such sale or disposition occurs at prevailing market rates within a predefined timetable as agreed upon by the Assuming Bank and the Receiver.

2. In valuing all other Qualified Financial Contracts, the following principles will apply:

(i) All known cash flows under swaps or forward exchange contracts shall be present valued to the swap zero coupon interest rate curve.

(ii) All valuations shall employ prices and interest rates based on the actual frequency of rate reset or payment.

(iii) Each tranche of amortizing contracts shall be separately valued. The total value of such amortizing contract shall be the sum of the values of its

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component tranches.

(iv) For regularly traded contracts, valuations shall be at the midpoint of the bid and ask prices quoted by customary sources (e.g., The Wall Street Journal, Telerate, Reuters or other similar source) or regularly traded exchanges.

(v) For all other Qualified Financial Contracts where published market quotes are unavailable, the adjusted price shall be the average of the bid and ask price quotes from three (3) securities dealers acceptable to the Receiver and Assuming Bank as of Bank Closing. If quotes from securities dealers cannot be obtained, an appraiser acceptable to the Receiver and the Assuming Bank will perform a valuation based on modeling, correlation analysis, interpolation or other techniques, as appropriate.

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EXHIBIT 4.13

INTERIM ASSET SERVICING ARRANGEMENT

(a)With respect to each asset (or liability) designated from time to time by the Receiver to be serviced by the Assuming Bank pursuant to this Arrangement (such being designated as "Pool Assets"), during the term of this Arrangement, the Assuming Bank shall:

(i)Promptly apply payments received with respect to any Pool Assets;

(ii) Reverse and return insufficient funds checks;

(iii)Pay (A) participation payments to participants in Loans, as and when received; and (B) tax and insurance bills on Pool Assets as they come due, out of escrow funds maintained for purposes;

(iv)Maintain accurate records reflecting (A) the payment history of Pool Assets, with updated information received concerning changes in the address or identity of the obligors and (B) usage of data processing equipment and employee services with respect to servicing duties;

(v)Send billing statements to obligors on Pool Assets to the extent that such statements were sent by the Failed Bank;

(vi)Send notices to obligors who are in default on Loans (in the same manner as the Failed Bank);

(vii)Send to the Receiver, Attn: Managing Liquidator, at the address provided in Section 13.7 of the Agreement, via overnight delivery: (A) on a weekly basis, weekly reports for the Pool Assets, including, without limitation, reports reflecting collections and the trial balances, transaction journals and loan histories for Pool Assets having activity, together with copies of (1) checks received, (2) insufficient funds checks returned, (3) checks for payment to participants or for taxes and insurance, (4) pay-off requests, (5) notices to defaulted obligors, and

(6) data processing and employee logs and (B) any other reports, copies or information as may be periodically or from time to time requested;

(viii)Remit on a weekly basis to the Receiver, Attn: Division of Finance, Cashier Unit, Operations, at the address in (vii), via wire transferto the account designated by the Receiver, all payments received on Pool Assets managed by the Assuming Bank or at such time and place and in such manner as may be directed by the Receiver;

(ix)prepare and timely file all information reports with appropriate tax authorities, and, if required by the Receiver, prepare and file tax returns and pay taxes due on or before the due date, relating to the Pool Assets; and

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(x)provide and furnish such other services, operations or functions as may be required with regard to Pool Assets, including, without limitation, as may be required with

regard to any business, enterprise or agreement which is a Pool Asset, all as may be required by the Receiver.

Notwithstanding anything to the contrary in this Section, the Assuming Bank shall not be required to initiate litigation or other collection proceedings against any obligor or any collateral with respect to any defaulted Loan. The Assuming Bank shall promptly notify the Receiver, at the address provided above in subparagraph (a)(vii), of any claims or legal actions regarding any Pool Asset.

(b)The Receiver agrees to reimburse the Assuming Bank for actual, reasonable and necessary expenses incurred in connection with the performance of duties pursuant to this Arrangement, including expenses of photocopying, postage and express mail, and data processing and employee services (based upon the number of hours spent performing servicing duties).

(c)The Assuming Bank shall provide the services described herein for an initial period of ninety (90) days after Bank Closing. At the option of the Receiver, exercisable by notice given not later than ten (10) days prior to the end of such initial period or a renewal period, the Assuming Bank shall continue to provide such services for such renewal period(s) as designated by the Receiver, up to the Settlement Date.

(d)At any time during the term of this Arrangement, the Receiver may, upon written notice to the Assuming Bank, remove one or more Pool Assets from the Pool, at which time the Assuming Bank's responsibility with respect thereto shall terminate.

(e)At the expiration of this Agreement or upon the termination of the Assuming Bank's responsibility with respect to any Pool Asset pursuant to paragraph (d) hereof, the Assuming Bank shall:

(i)deliver to the Receiver (or its designee) all of the Credit Documents and Pool Records relating to the Pool Assets; and

(ii)cooperate with the Receiver to facilitate the orderly transition of managing the Pool Assets to the Receiver (or its designee).

(f)At the request of the Receiver, the Assuming Bank shall perform such transitional services with regard to the Pool Assets as the Receiver may request. Transitional services may include, without limitation, assisting in any due diligence process deemed necessary by the Receiver and providing to the Receiver or its designee(s) (x) information and data regarding the Pool Assets, including, without limitation, system reports and data downloads sufficient to transfer the Pool Assets to another system or systems, and (y) access to employees of the Assuming Bank involved in the management of, or otherwise familiar with, the Pool Assets.

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EXHIBIT 4.15A

SINGLE FAMILY SHARED-LOSS AGREEMENT

This agreement for the reimbursement of loss sharing on certain single family residential mortgage loans (the “Single Family Shared-Loss Agreement”) shall apply when the Assuming Bank purchases Single Family Shared-Loss Loans as that term is defined herein. The terms hereof shall modify and supplement, as necessary, the terms of the Purchase and Assumption Agreement to which this Single Family Shared-Loss Agreement is attached as Exhibit 4.15A and incorporated therein. To the extent any inconsistencies may arise between the terms of the Purchase and Assumption Agreement and this Single Family Shared-Loss Agreement with respect to the subject matter of this Single Family Shared-Loss Agreement, the terms of this Single Family Shared-Loss Agreement shall control. References in this Single Family Shared- Loss Agreement to a particular Section shall be deemed to refer to a Section in this Single Family Shared-Loss Agreement, unless the context indicates that it is intended to be a reference to a Section of the Purchase and Assumption Agreement.

ARTICLE I -- DEFINITIONS

The capitalized terms used in this Single Family Shared-Loss Agreement that are not defined in this Single Family Shared-Loss Agreement are defined in the Purchase and Assumption Agreement. In addition to the terms defined above, defined below are certain additional terms relating to loss-sharing, as used in this Single Family Shared-Loss Agreement.

“Accounting Records” means the subsidiary system of record on which the loan history and balance of each Single Family Shared-Loss Loan is maintained; individual loan files containing either an original or copies of documents that are customary and reasonable with respect to loan servicing, including management and disposition of Other Real Estate; the records documenting alternatives considered with respect to loans in default or for which a default is reasonably foreseeable; records of loss calculations and supporting documentation with respect to line items on the loss calculations; and, monthly delinquency reports and other performance reports customarily utilized by the Assuming Bank in management of loan portfolios.

“Accrued Interest” means, with respect to Single Family Shared-Loss Loans, the amount of earned and unpaid interest at the note rate specified in the applicable loan documents, limited to 90 days.

“Affiliate” shall have the meaning set forth in the Purchase and Assumption Agreement; provided, that, for purposes of this Single Family Shared-Loss Agreement, no Third Party Servicer shall be deemed to be an Affiliate of the Assuming Bank.

“Commencement Date” means the first calendar day following the Bank Closing.

“Commercial Shared-Loss Agreement” means the Commercial Shared-Loss

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Agreement attached to the Purchase and Assumption Agreement as Exhibit 4.15B.

“Cumulative Loss Amount” means the sum of the Monthly Loss Amounts less the sum of all Recovery Amounts.

“Cumulative Shared-Loss Amount” means the excess, if any, of the Cumulative Loss Amount over the First Loss Tranche.

“Customary Servicing Procedures” means procedures (including collection procedures) that the Assuming Bank (or, to the extent a Third Party Servicer is engaged, the Third Party Servicer) customarily employs and exercises in servicing and administering mortgage loans for its own accounts and the servicing procedures established by FNMA or FHLMC (as in effect from time to time), which are in accordance with accepted mortgage servicing practices of prudent lending institutions.

“Deficiency Loss” means the determination by a court in a bankruptcy proceeding that the value of the collateral is less than the amount of the loan in which case the loss will be the difference between the then unpaid principal balance (or the NPV of a modified loan that defaults) and the value of the collateral so established.

“Examination Criteria” means the loan classification criteria employed by, or any applicable regulations of, the Assuming Bank’s Chartering Authority at the time such action is taken, as such criteria may be amended from time to time.

“Final Shared-Loss Month” means the calendar month in which the tenth anniversary of the Commencement Date occurs.

“Foreclosure Loss” means the loss realized when the Assuming Bank has completed the foreclosure on a Single Family Shared-Loss Loan and realized final recovery on the collateral through liquidation and recovery of all insurance proceeds. Each Foreclosure Loss shall be calculated in accordance with the form and methodology specified in Exhibit 2a or Exhibit 2a(1).

“Holding Company” means any holding company, not publicly traded on a national exchange, owning Shares of the Assuming Bank.

“Home Equity Loan” means a loan or funded portions of a line of credit secured by a mortgage on a one-to four-family residence or stock of cooperative housing association, where the Failed Bank did not have a first lien on the same property as collateral.

“Investor-Owned Residential Loan” means a Loan, excluding advances made pursuant to a Home Equity Loan, that is secured by a mortgage on a one- to four family residence or stock of cooperative housing associations that is not owner-occupied.

“Loss” means a Foreclosure Loss, Restructuring Loss, Short Sale Loss, Portfolio Loss, Modification Default Loss or Deficiency Loss.

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“Loss Amount” means the dollar amount of loss incurred and reported on the Monthly Certificate for a Shared-Loss Loan.

“Modification Default Loss” means the loss calculated in Exhibits 2a(1) and 2c(1) for single family loans previously modified pursuant to this Single Family Shared-Loss Agreement that subsequently default and result in a foreclosure, short sale or Deficiency Loss.

“Modification Guidelines” has the meaning provided in Section 2.1(a) of this Single Family Shared-Loss Agreement.

“Monthly Certificate” has the meaning provided in Section 2.1(b) of this Single Family Shared-Loss Agreement.

“Monthly Loss Amount” means the sum of all Foreclosure Losses, Restructuring Losses, Short Sale Losses, Portfolio Losses, Modification Default Losses and losses in connection with Deficiency Loss realized by the Assuming Bank for any Shared Loss Month.

“Monthly Shared-Loss Amount” means the change in the Cumulative Shared- Loss Amount from the beginning of each month to the end of each month.

“Neutral Member” has the meaning provided in Section 2. 1(f)(ii) of this Single Family Shared-Loss Agreement.

“Portfolio Loss” means the loss realized on either (i) a portfolio sale of Single Family Shared-Loss Loans in accordance with the terms of Article IV or (ii) the sale of a loan with the consent of the Receiver as provided in Section 2.7.

“Recovery Amount” means, with respect to any period prior to the Termination Date, the amount of collected funds received by the Assuming Bank that (i) are applicable against a Foreclosure Loss which has previously been paid to the Assuming Bank by the Receiver or (ii) gains realized from a Section 4.1 sale of Single Family Shared-Loss Loans for which the Assuming Bank has previously received a Restructuring Loss payment from the Receiver (iii) or any incentive payments from national programs paid to an investor or borrower on loans that have been modified or otherwise treated (short sale or foreclosure) in accordance with Exhibit 5.

“Related Loans” has the meaning set forth in Section 3.1. “Restructuring Loss” means the loss on a modified or restructured loan

measured by the difference between (a) the principal, Accrued Interest, tax and insurance advances, third party or other fees due on a loan prior to the modification or restructuring, and

(b) the net present value of estimated cash flows on the modified or restructured loan, discounted at the Then-Current Interest Rate. Each Restructuring Loss shall be calculated in accordance with the form and methodology attached as Exhibit 2b, as applicable.

“Restructured Loan” means a Single Family Shared-Loss Loan for which the Assuming Bank has received a Restructuring Loss payment from the Receiver. This applies to owner occupied and investor owned residences.

“Servicing Officer” has the meaning provided in Section 2.1(b) of this Single Family Shared-Loss Agreement.

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“Shared Loss Loan” means a Single Family Shared-Loss Loan, Investor-Owned Residential Loan, Restructured Loan or Home Equity Loan.

“Shared-Loss Month” means each calendar month between the Commencement Date and the last day of the month in which the tenth anniversary of the Commencement Date occurs, provided that, the first Shared-Loss Month shall begin on the Commencement Date and end on the last day of that month.

“Shared Loss Payment Trigger” means when the sum of the Cumulative Loss Amount under this Single Family Shared-Loss Agreement and the Shared-Loss Amount under the Commercial Shared-Loss Agreement, exceeds the First Loss Tranche. If the First Loss Tranche is zero or a negative number, the Shared Loss Payment Trigger shall be deemed to have been reached upon Bank Closing.

“Shares” means common stock and any instrument which by its terms is currently convertible into common stock, or which may become convertible into common stock.

“Short-Sale Loss” means the loss resulting from the Assuming Bank’s agreement with the mortgagor to accept a payoff in an amount less than the balance due on the loan (including the costs of any cash incentives to borrower to agree to such sale or to maintain the property pending such sale), further provided, thateach Short-Sale Loss shall be calculated in accordance with the form and methodology specified in Exhibit 2c or Exhibit 2c(1).

“Single Family Shared-Loss Loan” means a single family one-to-four owner- occupied residential mortgage loans, excluding advances made pursuant to Home Equity Loans, that is secured by a mortgage on a one- to four family residences or stock of cooperative housing associations (whether owned by the Assuming Bank or any Subsidiary) or is otherwise identified as a Single Family Shared-Loss Loan on the data files provided by the Receiver.

“Stated Threshold” means total losses under the shared loss agreements in the amount of $2,285,000,000.

“Termination Date” means the last day of the Final Shared-Loss Month.

“Then-Current Interest Rate” means the most recently published Freddie Mac survey rate for 30-year fixed-rate loans.

“Third Party Servicer” means any servicer appointed from time to time by the Assuming Bank or any Affiliate of the Assuming Bank to service the Shared-Loss Loans on behalf of the Assuming Bank, the identity of which shall be given to the Receiver prior to or concurrent with the appointment thereof.

ARTICLE II -- SHARED-LOSS ARRANGEMENT

2.1Shared-Loss Arrangement.

(a)Loss Mitigation and Consideration of Alternatives.

(i)For each Single Family Shared-Loss Loan in default or for which a default is reasonably foreseeable, the Assuming Bank shall undertake reasonable and customary loss

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mitigation efforts, in accordance with any of the following programs selected by Assuming Bank in its sole discretion, Exhibit 5 (FDIC Mortgage Loan Modification Program), the United States Treasury's Home Affordable Modification Program Guidelines or any other modification program approved by the United States Treasury Department, the Corporation, the Board of Governors of the Federal Reserve System or any other governmental agency (it being understood that the Assuming Bank can select different programs for the various Single Family Shared-Loss Loans) (such program chosen, the “Modification Guidelines”). After selecting the applicable Modification Guideline for each such Single Family Shared-Loss Loan, the Assuming Bank shall document its consideration of foreclosure, loan restructuring under the applicable Modification Guideline chosen, and short-sale (if short-sale is a viable option) alternatives and shall select the alternative the Assuming Bank believes, based on its estimated calculations, will result in the least Loss.

(ii)Losses on Home Equity Loans shall be shared under the charge-off policies of the Assuming Bank’s Examination Criteria as if they were Single Family Shared-Loss Loans.

(iii)Losses on Investor-Owned Residential Loans shall be treated as the appropriate category of Loss as if they were Single Family Shared-Loss Loans, on a commercially reasonable basis under the charge-off policies of the Assuming Bank’s Examination Criteria, and can be restructured under terms separate from the Exhibit 5 standards. Please refer to the relevant exhibit for guidance in the calculation of loss on Investor-Owned Residential Loans. Losses on Investor-Owned Residential Loans will be treated as if they were Single Family Shared-Loss Loans with respect to the calculation of the Stated Threshold.

(iv)The Assuming Bank shall retain its loss calculations for the Shared Loss Loans and such calculations shall be provided to the Receiver upon request. For the avoidance of doubt and notwithstanding anything herein to the contrary, (x) the Assuming Bank is not required to modify or restructure any Shared-Loss Loan on more than one occasion and (y) the Assuming Bank is not required to consider any alternatives with respect to any Shared-Loss Loan in the process of foreclosure as of the Bank Closing and shall be entitled to continue such foreclosure measures and recover the Foreclosure Loss as provided herein, and (z) the Assuming Bank shall have a transition period of up to 90 days after Bank Closing to implement the Modification Guidelines, during which time, the Assuming Bank may submit claims under such guidelines as may be in place at the Failed Bank.

(b) Monthly Certificates.

Not later than fifteen (15) days after the end of each Shared-Loss Month, beginning with the month in which the Commencement Date occurs and ending in the Final Shared-Loss Month, the Assuming Bank shall deliver to the Receiver a certificate, signed by an officer of the Assuming Bank involved in, or responsible for, the administration and servicing of the Shared-Loss Loans whose name appears on a list of servicing officers furnished by the Assuming Bank to the Receiver, (a “Servicing Officer”) setting forth in such form and detail as the Receiver may reasonably specify (a “Monthly Certificate”):

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(i) (A)    a schedule substantially in the form of Exhibit 1 listing:

(i)each Shared-Loss Loan for which a Loss Amount (calculated in accordance with the applicable Exhibit) is being claimed, the related Loss Amount for each Shared-Loss Loan, and the total Monthly Loss Amount for all Shared-Loss Loans;

(ii)each Shared-Loss Loan for which a Recovery Amount was received, the Recovery Amount for each Shared-Loss Loan, and the total Recovery Amount for all Shared-Loss Loans;

(iii)the total Monthly Loss Amount for all Shared-Loss Loans minus the total monthly Recovery Amount for all Shared-Loss Loans;

(iv)the Cumulative Shared-Loss Amount as of the beginning and end of the month;

(v) the Monthly Shared Loss Amount;

(vi)the result obtained in (v) times 80%, or times 95% if the Stated Threshold has been reached, which in either case is the amount to be paid under Section 2.1(d) of this Single Family Shared-Loss Agreement by the Receiver to the Assuming Bank if the amount is a positive number, or by the Assuming Bank to the Receiver if the amount is a negative number;

(ii) for each of the Shared-Loss Loans for which a Loss is claimed for that Shared-Loss Month, a schedule showing the calculation of the Loss Amount using the form and methodology shown in Exhibits 2a(1)-(3), Exhibit 2b, or Exhibits 2c(1)-(2), as applicable.

(iii) For each of the Restructured Loans where a gain or loss is realized in a sale under Section 4.1 or 4.2, a schedule showing the calculation using the form and methodology shown in Exhibit 2d.

(iv) a portfolio performance and summary schedule substantially in the form shown in Exhibit 3.

(c)Monthly Data Download. Not later than fifteen (15) days after the end of each month, beginning with the month in which the Commencement Date occurs and ending with the Final Shared-Loss Month, Assuming Bank shall provide Receiver:

(v) (i)    the servicing file in machine-readable format including but not limited to the following fields for each outstanding Single Family Shared-Loss Loan, as applicable:

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(A) Loan number

(B) FICO score

(C) Origination date

(D) Original principal amount

(E) Maturity date

(F) Paid-to date

(G) Last payment date

(H) Loan status (bankruptcy, in foreclosure, etc.)

(I) Delinquency counters

(J) Current principal balance

(K) Current escrow account balance

(L) Current Appraisal/BPO value

(M) Current Appraisal/BPO date

(N) Interest rate

(O) Monthly principal and interest payment amount

(P) Monthly escrow payment for taxes and insurance

(Q) Interest rate type (fixed or adjustable)

(R) If adjustable: index, margin, next interest rate reset date

(S) Payment/Interest rate cap and/or floor

(T) Underwriting type (Full doc, Alt Doc, No Doc)

(U) Lien type (1st, 2nd)

(V) Amortization type (amortizing or I/O)

(W) Property address, including city, state, zip code

(X) A code indicating whether the Mortgaged Property is owner occupied

(Y) Property type (single-family detached, condominium, duplex, etc.)

(vi) (ii)    An Excel file for ORE held as a result of foreclosure on a Single Family Shared-Loss Loan listing:

(A) Foreclosure date

(B) Unpaid loan principal balance

(C) Appraised value or BPO value, as applicable

(D) Projected liquidation date

Notwithstanding the foregoing, the Assuming Bank shall not be required to provide any of the foregoing information to the extent it is unable to do so as a result of the Failed Bank’s or Receiver’s failure to provide information required to produce the information set forth in this Section 2.1(c); provided, that the Assuming Bank shall, consistent with Customary Servicing Procedures seek to produce any such missing information or improve any inaccurate information previously provided to it.

(d) Payments with Respect to Shared-Loss Assets.

(i)Losses Under the Stated Threshold. After the Shared Loss Payment Trigger is reached, not later than fifteen (15) days after the date on which the Receiver receives

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the Monthly Certificate, the Receiver shall pay to the Assuming Bank, in immediately available funds, an amount equal to eighty percent (80%) of the Monthly Shared-Loss Amount reported on the Monthly Certificate. If the total Monthly Shared-Loss Amount reported on the Monthly Certificate is a negative number, the Assuming Bank shall pay to the Receiver in immediately available funds eighty percent (80%) of that amount.

(ii)Losses in Excess of the Stated Threshold. In the event that the sum of the Cumulative Loss Amount under this Single Family Shared-Loss Agreement and the Stated Loss Amount under the Commercial Shared-Loss Agreement equals or exceeds the Stated Threshold, the loss/recovery sharing percentages set forth herein shall change from 80/20 to 95/5 and thereafter the Receiver shall pay to the Assuming Bank, in immediately available funds, an amount equal to ninety-five percent (95%) of the Monthly Shared-Loss Amount reported on the Monthly Certificate. If the Monthly Shared-Loss Amount reported on the Monthly Certificate is a negative number, the Assuming Bank shall pay to the Receiver in immediately available funds ninety-five percent (95%) of that amount.

(e)Limitations on Shared-Loss Payment. The Receiver shall not be required to make any payments pursuant to Section 2.1(d) with respect to any Foreclosure Loss, Restructuring Loss, Short Sale Loss, Deficiency Loss, or Portfolio Loss that the Receiver determines, based upon the criteria set forth in this Single Family Shared-Loss Agreement (including the analysis and documentation requirements of Section 2.1(a)) or Customary Servicing Procedures, should not have been effected by the Assuming Bank; provided, however,

(x) the Receiver must provide notice to the Assuming Bank detailing the grounds for not making such payment, (y) the Receiver must provide the Assuming Bank with a reasonable opportunity to cure any such deficiency and (z) (1) to the extent curable, if cured, the Receiver shall make payment with respect to the properly effected Loss, and (2) to the extent not curable, shall not constitute grounds for the Receiver to withhold payment as to all other Losses (or portion of Losses) that are properly payable pursuant to the terms of this Single Family Shared-Loss Agreement. In the event that the Receiver does not make any payment with respect to Losses claimed pursuant to Section 2.1(d), the Receiver and Assuming Bank shall, upon final resolution, make the necessary adjustments to the Monthly Shared-Loss Amount for that Monthly Certificate and the payment pursuant to Section 2.1(d) above shall be adjusted accordingly.

(f)Payments by Wire-Transfer. All payments under this Single Family Shared-Loss Agreement shall be made by wire-transfer in accordance with the wire-transfer instructions on Exhibit 4.

(g)Receivership Payments. Payments from the Receiver with respect to this Single Family Shared-Loss Agreement are administrative expenses of the Receiver. To the extent the Receiver needs funds for shared-loss payments respect to this Single Family Shared- Loss Agreement, the Receiver shall request funds under the Master Loan and Security Agreement, as amended (“MLSA”), from FDIC in its corporate capacity. The Receiver will not agree to any amendment of the MLSA that would prevent the Receiver from drawing on the MLSA to fund shared-loss payments.

2.2 Auditor Report; Right to Audit

a.Within ninety (90) days after the end of each fiscal year during which the

Receiver makes any payment to the Assuming Bank under this Single Family Shared-Loss

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Agreement, the Assuming Bank shall deliver to the Receiver a report signed by its independent public accountants stating that they have reviewed the terms of this Single Family Shared-Loss Agreement and that, in the course of their annual audit of the Assuming Bank’s books and records, nothing has come to their attention suggesting that any computations required to be made by the Assuming Bank during such fiscal year pursuant to this Article II were not made by the Assuming Bank in accordance herewith. In the event that the Assuming Bank cannot comply with the preceding sentence, it shall promptly submit to the Receiver corrected computations together with a report signed by its independent public accountants stating that, after giving effect to such corrected computations, nothing has come to their attention suggesting that any computations required to be made by the Assuming Bank during such year pursuant to this Article II were not made by the Assuming Bank in accordance herewith. In such event, the Assuming Bank and the Receiver shall make all such accounting adjustments and payments as may be necessary to give effect to each correction reflected in such corrected computations, retroactive to the date on which the corresponding incorrect computation was made.

b.The Receiver or the FDIC in its corporate capacity (“Corporation”) may perform an audit or audits to determine the Assuming Bank’s compliance with the provisions of this Single Family Shared-Loss Agreement, including this Article II, by providing not less than ten (10) Business Days’ prior written notice. Assuming Bank shall provide access to pertinent records and proximate working space in Assuming Bank’s facilities. The scope and duration of any such audit shall be within the reasonable discretion of the Receiver or the Corporation, but shall in no event be administered in a manner that unreasonably interferes with the operation of the Assuming Bank’s business. The Receiver or the Corporation, as the case may be, shall bear the expense of any such audit. In the event that any corrections are necessary as a result of such an audit or audits, the Assuming Bank and the Receiver shall make such accounting adjustments and payments as may be necessary to give retroactive effect to such corrections.

2.3Withholdings. Notwithstanding any other provision in this Article II, the Receiver, upon the direction of the Director (or designee) of the Federal Deposit Insurance Corporation’s Division of Resolutions and Receiverships, may withhold payment for any amounts included in a Monthly Certificate delivered pursuant to Section 2.1, if in its good faith and reasonable judgment there is a reasonable basis under the requirements of this Single Family Shared-Loss Agreement for denying the eligibility of an item for which reimbursement or payment is sought under such Section. In such event, the Receiver shall provide a written notice to the Assuming Bank detailing the grounds for withholding such payment. At such time as the Assuming Bank demonstrates to the satisfaction of the Receiver, in its reasonable judgment, that the grounds for such withholding of payment, or portion of payment, no longer exist or have been cured, then the Receiver shall pay the Assuming Bank the amount withheld which the Receiver determines is eligible for payment, within fifteen (15) Business Days.

2.4Books and Records. The Assuming Bank shall at all times during the term of this Single Family Shared-Loss Agreement keep books and records sufficient to ensure and document compliance with the terms of this Single Family Shared-Loss Agreement, including but not limited to (a) documentation of alternatives considered with respect to defaulted loans or

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loans for which default is reasonably foreseeable, (b) documentation showing the calculation of loss for claims submitted to the Receiver, (c) retention of documents that support each line item on the loss claim forms, and (d) documentation with respect to the Recovery Amount on loans for which the Receiver has made a loss-share payment

2.5Information. The Assuming Bank shall promptly provide to the Receiver such other information, including but not limited to, financial statements, computations, and bank policies and procedures, relating to the performance of the provisions of this Single Family Shared-Loss Agreement, as the Receiver may reasonably request from time to time.

2.6Tax Ruling. The Assuming Bank shall not at any time, without the Receiver’s prior written consent, seek a private letter ruling or other determination from the Internal Revenue Service or otherwise seek to qualify for any special tax treatment or benefits associated with any payments made by the Receiver pursuant to this Single Family Shared-Loss Agreement.

2.7Loss of Shared-Loss Coverage on Shared-Loss Loans. The Receiver shall be relieved of its obligations with respect to a Shared-Loss Loan upon payment of a Foreclosure Loss amount or a Short Sale Loss amount with respect to such Single Family Shared-Loss Loan or upon the sale without FDIC consent of a Single Family Shared-Loss Loan by Assuming Bank to a person or entity that is not an Affiliate. The Assuming Bank shall provide the Receiver with timely notice of any such sale. Notwithstanding the foregoing, a sale of the Single Family Shared-Loss Loan, for purposes of this Section 2.7, shall not be deemed to have occurred as the result of (i) any change in the ownership or control of Assuming Bank or the transfer of any or all of the Single Family Shared-Loss Loan(s) to any Affiliate of Assuming Bank, (ii) a merger by

Assuming Bank with or into any other entity, (iii) a sale by Assuming Bank of all or substantially all of its assets.

ARTICLE III - RULES REGARDING THE

ADMINISTRATION OF SHARED-LOSS LOANS

3.1Agreement with Respect to Administration. The Assuming Bank shall (and shall cause any of its Affiliates to which the Assuming Bank transfers any Shared-Loss Loans to) manage, administer, and collect the Shared-Loss Loans while owned by the Assuming Bank or any Affiliate thereof during the term of this Single Family Shared-Loss Agreement in accordance with the rules set forth in this Article III. The Assuming Bank shall be responsible to the Receiver in the performance of its duties hereunder and shall provide to the Receiver such reports as the Receiver reasonably deems advisable, including but not limited to the reports required by Sections 2.1, 2.2 and 3.3 hereof, and shall permit the Receiver to monitor the Assuming Bank’s performance of its duties hereunder.

3.2 Duties of the Assuming Bank.

(a)In performance of its duties under this Article III, the Assuming Bank shall:

(i)manage and administer each Shared-Loss Loan in accordance with Assuming Bank’s usual and prudent business and banking practices and Customary Servicing Procedures;

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(ii)exercise its best business judgment in managing, administering and collecting amounts owed on the Shared-Loss Loans;

(iii)use commercially reasonable efforts to maximize Recoveries with respect to Losses on Shared-Loss Loans without regard to the effect of maximizing collections on assets held by the Assuming Bank or any of its Affiliates that are not Shared-Loss Loans;

(iv)retain sufficient staff (in Assuming Bank’s discretion) to perform its duties hereunder; and

(v)other than as provided in Section 2.1(a), comply with the terms of the Modification Guidelines for any Single Family Shared-Loss Loans meeting the requirements set forth therein. For the avoidance of doubt, the Assuming Bank may propose exceptions to Exhibit 5 (the FDIC Loan Modification Program) for a group of Loans with similar characteristics, with the objectives of (1) minimizing the loss to the Assuming Bank and the FDIC and (2) maximizing the opportunity for qualified homeowners to remain in their homes with affordable mortgage payments.

(b)Any transaction with or between any Affiliate of the Assuming Bank with respect to any Shared-Loss Loan including, without limitation, the execution of any contract pursuant to which any Affiliate of the Assuming Bank will manage, administer or collect any of the Shared-Loss Loans will be provided to FDIC for informational purposes and if such transaction is not entered into on an arm’s length basis on commercially reasonable terms such transaction shall be subject to the prior written approval of the Receiver.

3.3Shared-Loss Asset Records and Reports. The Assuming Bank shall establish and maintain such records as may be appropriate to account for the Single Family Shared-Loss Loans in such form and detail as the Receiver may reasonably require, and to enable the Assuming Bank to prepare and deliver to the Receiver such reports as the Receiver may from time to time request regarding the Single Family Shared-Loss Loans and the Monthly Certificates required by Section 2.1 of this Single Family Shared-Loss Agreement.

3.4 Related Loans.

(a)Assuming Bank shall use its best efforts to determine which loans are “Related Loans”, as hereinafter defined. The Assuming Bank shall not manage, administer or collect any “Related Loan” in any manner that would have the effect of increasing the amount of any collections with respect to the Related Loan to the detriment of the Shared-Loss Loan to which such loan is related. A “Related Loan” means any loan or extension of credit held by the Assuming Bank at any time on or prior to the end of the Final Shared-Loss Month that is made to an Obligor of a Shared-Loss Loan.

(b)The Assuming Bank shall prepare and deliver to the Receiver with the Monthly Certificates for the calendar months ending June 30 and December 31, a schedule of all Related Loans on the Accounting Records of the Assuming Bank as of the end of each such semi-annual period.

3.5 Legal Action; Utilization of Special Receivership Powers. The Assuming Bank

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shall notify the Receiver in writing (such notice to be given in accordance with Article V below and to include all relevant details) prior to utilizing in any legal action any special legal power or right which the Assuming Bank derives as a result of having acquired an asset from the Receiver, and the Assuming Bank shall not utilize any such power unless the Receiver shall have consented in writing to the proposed usage. The Receiver shall have the right to direct such proposed usage by the Assuming Bank and the Assuming Bank shall comply in all respects with such direction. Upon request of the Receiver, the Assuming Bank will advise the Receiver as to the status of any such legal action. The Assuming Bank shall immediately notify the Receiver of any judgment in litigation involving any of the aforesaid special powers or rights.

3.6Third Party Servicer. The Assuming Bank may perform any of its obligations and/or exercise any of its rights under this Single Family Shared-Loss Agreement through or by one or more Third Party Servicers, who may take actions and make expenditures as if any such Third Party Servicer was the Assuming Bank hereunder (and, for the avoidance of doubt, such expenses incurred by any such Third Party Servicer on behalf of the Assuming Bank shall be included in calculating Losses to the extent such expenses would be included in such calculation if the expenses were incurred by Assuming Bank); provided, however, that the use thereof by the Assuming Bank shall not release the Assuming Bank of any obligation or liability hereunder.

ARTICLE IV - PORTFOLIO SALE

4.1Assuming Bank Portfolio Sales of Remaining Shared-Loss Loans. The Assuming Bank shall have the right, with the consent of the Receiver, to liquidate for cash consideration, from time to time in one or more transactions, all or a portion of Shared-Loss Loans held by the Assuming Bank at any time prior to the Termination Date (“Portfolio Sales”). If the Assuming Bank exercises its option under this Section 4.1, it must give sixty (60) days notice in writing to the Receiver setting forth the details and schedule for the Portfolio Sale, which shall be conducted by means of sealed bid sales to third parties, not including any of the Assuming Bank’s affiliates, contractors, or any affiliates of the Assuming Bank’s contractors. Sales of Restructured Loans shall be sold in a separate pool from Shared-Loss Loans that have not been restructured. Other proposals for the sale of a Shared-Loss Loan or Shared-Loss Loans submitted by the Assuming Bank will be considered by the Receiver on a case-by-case basis.

4.2Assuming Bank’s Liquidation of Remaining Shared-Loss Loans. In the event that the Assuming Bank does not conduct a Portfolio Sale pursuant to Section 4.1, the Receiver shall have the right, exercisable in its sole and absolute discretion, to require the Assuming Bank to liquidate for cash consideration, any Shared-Loss Loans held by the Assuming Bank at any time after the date that is six months prior to the Termination Date. If the Receiver exercises its option under this Section 4.2, it must give notice in writing to the Assuming Bank, setting forth the time period within which the Assuming Bank shall be required to liquidate the Shared-Loss Loans. The Assuming Bank will comply with the Receiver’s notice and must liquidate the Shared-Loss Loans as soon as reasonably practicable by means of sealed bid sales to third parties, not including any of the Assuming Bank’s affiliates, contractors, or any affiliates of the Assuming Bank’s contractors. The selection of any financial advisor or other third party broker or sales agent retained for the liquidation of the remaining Shared-Loss Loans pursuant to this Section shall be subject to the prior approval of the Receiver, such approval not to be unreasonably withheld, delayed or conditioned.

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4.3Calculation of Sale Gain or Loss. For Shared-Loss Loans that are not Restructured Loans, gain or loss on the sales under Section 4.1 or Section 4.2 will be calculated as the sale price received by the Assuming Bank less the unpaid principal balance of the remaining Shared-Loss Loans. For any Restructured Loan included in the sale gain or loss on sale will be calculated as (a) the sale price received by the Assuming Bank less (b) the net present value of estimated cash flows on the Restructured Loan that was used in the calculation of the related Restructuring Loss plus (c) Loan principal payments collected by the Assuming Bank from the date the Loan was restructured to the date of sale. (See Exhibit 2d for example calculation). Any gain or loss on Portfolio Sale shall be shared 80% to the Receiver and 20% to the Assuming Bank (or 95% to the Receiver and 5% to the Assuming Bank if applicable) in the next Monthly Certificate, provided that, if the sale occurs in the Final Shared-Loss Month, an additional Monthly Certificate shall be submitted by the Assuming Bank within one month of the Portfolio Sale.

ARTICLE V -- LOSS-SHARING NOTICES GIVEN TO RECEIVER AND PURCHASER

All notices, demands and other communications hereunder shall be in writing and shall be delivered by hand, or overnight courier, receipt requested, addressed to the parties as follows:

If to Receiver, to:	Federal Deposit Insurance Corporation as Receiver
	for Guaranty Bank
	Division of Resolutions and Receiverships
	550 17th Street, N.W.
	Washington, D.C. 20429
	Attention: Ralph Malami, Manager, Capital Markets
with a copy to:	Federal Deposit Insurance Corporation
	as Receiver for Guaranty bank
	Room E7056
	3501 Fairfax Drive, Arlington, VA 2226 Attn:
	Attn: Special Issues Unit

With respect to a notice under Section 3.5 of this Single Family Shared-Loss Agreement, copies of such notice shall be sent to:

	Federal Deposit Insurance Corporation
	Legal Division 1601 Bryan St.
	Dallas, Texas 75201
	Attention: Regional Counsel
If to Assuming Bank, to:
Compass Bank
15 South 20th Street, Suite 1802
Birmingham, Alabama 35233
Attention: Jerry W. Powell
with a copy to: John C. Murphy
Cleary Gottlieb Steen & Hamilton LLP

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Such Persons and addresses may be changed from time to time by notice given pursuant to the provisions of this Article V. Any notice, demand or other communication delivered pursuant to the provisions of this Article IV shall be deemed to have been given on the date actually received.

ARTICLE VI -- MISCELLANEOUS

6.1.Expenses. Except as otherwise expressly provided herein, all costs and expenses incurred by or on behalf of a party hereto in connection with this Single Family Shared-Loss Agreement shall be borne by such party whether or not the transactions contemplated herein shall be consummated.

6.2Successors and Assigns; Specific Performance. All terms and provisions of this Single Family Shared-Loss Agreement shall be binding upon and shall inure to the benefit of the parties hereto only; provided, however, that, Receiver may assign or otherwise transfer this Single Family Shared-Loss Agreement (in whole or in part) to the Federal Deposit Insurance Corporation in its corporate capacity without the consent of Assuming Bank. Notwithstanding anything to the contrary contained in this Single Family Shared-Loss Agreement, except as is expressly permitted in this Section 6.2, Assuming Bank may not assign or otherwise transfer this Single Family Shared-Loss Agreement (in whole or in part) without the prior written consent of the Receiver, which consent may be granted or withheld by the Receiver in its sole discretion, and any attempted assignment or transfer in violation of this provision shall be void ab initio.

For the avoidance of doubt, a merger or consolidation of the Assuming Bank with and into another financial institution, the sale of all or substantially all of the assets of the Assuming Bank to another financial institution constitutes the transfer of this Single Family Shared-Loss Agreement which requires the consent of the Receiver; and for a period of thirty-six (36) months after Bank Closing, a merger or consolidation shall also include the sale by any one or more shareholders of more than nine percent (9%) of the outstanding Shares of the Assuming Bank, or of its Holding Company, or of any subsidiary holding Shared Loss Loans, or the sale of Shares by the Assuming Bank or its Holding Company or any subsidiary holding Shared-Loss Loans, in a public or private offering, that increases the number of Shares outstanding by more than 9% and after issuance results in a change of shareholder interest of more than 9%, constitutes the transfer of this Single Family Shared-Loss Agreement which requires the consent of the Receiver. No Loss shall be recognized as a result of any accounting adjustments that are made due to any such merger, consolidation or sale consented to by the FDIC.

6.3WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF OR RELATING TO OR IN CONNECTION WITH THIS SINGLE FAMILY SHARED-LOSS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

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6.4No Third Party Beneficiary. This Single Family Shared-Loss Agreement and the Exhibits hereto are for the sole and exclusive benefit of the parties hereto and their respective permitted successors and permitted assigns and there shall be no other third party beneficiaries, and nothing in this Single Family Shared-Loss Agreement or the Exhibits shall be construed to grant to any other Person any right, remedy or Claim under or in respect of this Single Family Shared-Loss Agreement or any provision hereof.

6.5Consent. Except as otherwise provided herein, when the consent of a party is required herein, such consent shall not be unreasonably withheld or delayed.

6.6Rights Cumulative. Except as otherwise expressly provided herein, the rights of each of the parties under this Single Family Shared-Loss Agreement are cumulative, may be exercised as often as any party considers appropriate and are in addition to each such party’s rights under the Purchase and Sale Agreement and any of the related agreements or under law. Except as otherwise expressly provided herein, any failure to exercise or any delay in exercising any of such rights, or any partial or defective exercise of such rights, shall not operate as a waiver or variation of that or any other such right.

ARTICLE VII

DISPUTE RESOLUTION

Section 7.1Dispute Resolution Procedures.

(a)In the event a dispute arises about the interpretation, application, calculation of Loss, or calculation of payments or otherwise with respect to this Single Family Shared-Loss Agreement (“SF Shared-Loss Dispute Item”), then the Receiver and the Assuming Bank shall make every attempt in good faith to resolve such items within sixty (60) days following the receipt of a written description of the SF Shared-Loss Dispute Item, with notification of the possibility of taking the matter to arbitration (the date on which such 60-day period expires, or any extension of such period as the parties hereto may mutually agree to in writing, herein called the “Resolution Deadline Date”). If the Receiver and the Assuming Bank resolve all such items to their mutual satisfaction by the Resolution Deadline Date, then within thirty (30) days following such resolution, any payment due as a result of such resolution shall be made arising from the settlement of the SF Shared-Loss Dispute.

(b)If the Receiver and the Assuming Bank fail to resolve any outstanding SF Shared- Loss Dispute Items by the Resolution Deadline Date, then either party may notify the other of its intent to submit the SF Shared-Loss Dispute Item to arbitration pursuant to the provisions of this Article VII. Failure of either party to submit pursuant to paragraph (c) hereof any unresolved SF Shared-Loss Dispute Item to arbitration within thirty (30) days following the Resolution Deadline Date (the date on which such thirty (30) day period expires is herein called the “Arbitration Deadline Date”) shall extinguish that party’s right to submit the non-submitted SF Shared-Loss Dispute Item to arbitration, and constitute a waiver of the submitting party’s right to dispute such non-submitted SF Shared-Loss Dispute Item (but not a waiver of any similar claim

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which may arise in the future).

(c)If a SF Shared-Loss Dispute Item is submitted to arbitration, it shall be governed by the rules of the American Arbitration Association (the “AAA”), except as otherwise provided herein. Either party may submit a matter for arbitration by delivering a notice, prior to the Arbitration Deadline Date, to the other party in writing setting forth:

(i)A brief description of each SF Shared-Loss Dispute Item submitted for arbitration;

(ii)A statement of the moving party’s position with respect to each SF Shared-Loss Dispute Item submitted for arbitration;

(iii)The value sought by the moving party, or other relief requested regarding each SF Shared-Loss Dispute Item submitted for arbitration, to the extent reasonably calculable; and

(iv)The name and address of the arbiter selected by the moving party (the “Moving Arbiter”), who shall be a neutral, as determined by the AAA.

Failure to adequately include any information above shall not be deemed to be a waiver of the parties right to arbitrate so long as after notification of such failure the moving party cures such failure as promptly as reasonably practicable.

(d)The non-moving party shall, within thirty (30) days following receipt of a notice of arbitration pursuant to this Section 6.1, deliver a notice to the moving party setting forth:

(i)The name and address of the arbiter selected by the non-moving party (the “Respondent Arbiter”), who shall be a neutral, as determined by the AAA;

(ii)A statement of the position of the respondent with respect to each Dispute Item; and

(iii)The ultimate resolution sought by the respondent or other relief, if any, the respondent deems is due the moving party with respect to each SF Shared-Loss Dispute Item.

Failure to adequately include any information above shall not be deemed to be a waiver of the non-moving party’s right to defend such arbitration so long as after notification of such failure the non-moving party cures such failure as promptly as reasonably practicable

(e)The Moving Arbiter and Respondent Arbiter shall select a third arbiter from a list furnished by the American Arbitration Association (the “AAA”). In accordance with the rules of the AAA, the three (3) arbiters shall constitute the arbitration panel for resolution of each SF

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Loss-Share Dispute Item. The concurrence of any two (2) arbiters shall be deemed to be the decision of the arbiters for all purposes hereunder. The arbitration shall proceed on such time schedule and in accordance with the Rules of Commercial Arbitration of the AAA then in effect, as modified by this Section 7.1. The arbitration proceedings shall take place at such location as the parties thereto may mutually agree, but if they cannot agree, then they will take place at the offices of the Corporation in Washington, DC, or Arlington, Virginia.

(f) The Receiver and Assuming Bank shall facilitate the resolution of each

outstanding SF Shared-Loss Dispute Item by making available in a prompt and timely manner to one another and to the arbiters for examination and copying, as appropriate, all documents, books, and records under their respective control and that would be discoverable under the Federal Rules of Civil Procedure.

(g)The arbiters designated pursuant to subsections (c), (d) and (e) hereof shall select, with respect to each Dispute Item submitted to arbitration pursuant to this Section 7.1, either (i) the position and relief submitted by the Assuming Bank with respect to each SF Shared-Loss Dispute Item, or (ii) the position and relief submitted by the Receiver with respect to each SF Shared-Loss Dispute Item, in either case as set forth in its respective notice of arbitration. The arbiters shall have no authority to select a value for each Dispute Item other than the determination set forth in Section 7.1(c) and Section 7.1(d). The arbitration shall be final, binding and conclusive on the parties.

(h)Any amounts ultimately determined to be payable pursuant to such award shall bear interest at the Settlement Interest Rate from and including the date specified for the arbiters decisions specified in this Section 7.1, without regard to any extension of the finality of such award, to but not including the date paid. All payments required to be made under this Section 7.1 shall be made by wire transfer.

(i)For the avoidance of doubt, to the extent any notice of a SF Shared-Loss Dispute Item(s) is provided prior to the Termination Date, the terms of this Single Family Shared-Loss Agreement shall remain in effect with respect to the Single Family Shared-Loss Loans that are the subject of such SF Shared-Loss Dispute Item(s) until such time as any such dispute is finally resolved.

Section 7.2Fees and Expenses of Arbiters. The aggregate fees and expenses of the arbiters shall be shall be borne equally by the parties. The parties shall the aggregate fees and expenses within thirty (30) days after receipt of the written decision of the arbiters (unless the arbiters agree in writing on some other payment schedule).

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Exhibit 1

Monthly Certificate

SEE FOLLOWING PAGE

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Exhibit 2a

This exhibit contains three versions of the loss share calculation for foreclosure, plus explanatory notes.

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Notes to Exhibit 2a (foreclosure)

1. The data shown are for illustrative purpose. The figures will vary for actual restructurings.

2. The covered loss is the difference between the gross balance recoverable by Purchaser and the total cash recovery. There are three methods of calculation for covered losses from foreclosures, depending upon the circumstances. They are shown below:

a. If foreclosure occurred prior to the beginning of the Loss Share agreement, use Exhibit 2a(1). This version uses the book value of the REO as the starting point for the covered loss.

b. If foreclosure occurred after the Loss Share agreement was in place, and if the loan was not restructured when the Loss Share agreement was in place, use Exhibit 2a(2). This version uses the unpaid balance of the loan as of the last payment as the starting point for the covered loss.

c. If the loan was restructured when the Loss Share agreement was in place, and then foreclosure occurred, use Exhibit 2a(3). This version uses the Net Present Value (NPV) of the modified loan as the starting point for the covered loss.

3. For Exhibit 2a(1), the gross balance recoverable by the purchaser is calculated as the sum of lines 9 - 18; it is shown in line 19. For Exhibit 2a(2), the gross balance recoverable by the purchaser is calculated as the sum of lines 16 - 24; it is shown in line 25. For Exhibit 2a(3), the gross balance recoverable by the purchaser is calculated as line 11 minus line 12 plus lines 13 - 21; it is shown in line 22.

4. For Exhibit 2a(1), the total cash recovery is calculated as the sum of lines 20 - 24; it is shown in line 25. For Exhibit 2a(2), the total cash recovery is calculated as the sum of lines 26 - 30; it is shown in line 31. For Exhibit 2a(3), the total cash recovery is calculated as the sum of lines 23 - 27; it is shown in line 28.

5. Reasonable and customary third party attorney’s fees and expenses incurred by or on behalf of Assuming Bank in connection with any enforcement procedures, or otherwise with respect to such loan, are reported under Attorney’s fees.

6. Assuming Bank’s (or Third Party Servicer’s) reasonable and customary out-of-pocket costs paid to either a third party or an affiliate (if affiliate is pre-approved by the FDIC) for foreclosure, property protection and maintenance costs, repairs, assessments, taxes, insurance and similar items are treated as part of the gross recoverable balance, to the extent they are not paid from funds in the borrower’s escrow account. Allowable costs are limited to amounts per Freddie Mac and Fannie Mae guidelines (as in effect from time to time), where applicable, provided that this limitation shall not apply to costs or expenses relating to environmental conditions.

7. Do not include late fees, prepayment penalties, or any similar lender fees or charges by the Failed Bank or Assuming Bank to the loan account, any allocation of Assuming Bank’s servicing costs, or any allocations of Assuming Bank’s general and administrative (G&A) or other operating costs.

8. If Exhibit 2a(3) is used, then no accrued interest may be included as a covered loss.

Otherwise, the amount of accrued interest that may be included as a covered loss is limited to the minimum of:

a. 90 days

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b. The number of days that the loan is delinquent when the property was sold

c. The number of days between the resolution date and the date when the property was sold

To calculate accrued interest, apply the note interest rate that would have been in effect if the loan were performing to the principal balance after application of the last payment made by the borrower.

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Exhibit 2b

This exhibit contains the loss share calculation for restructuring (loan mod), plus explanatory

notes

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Notes to Exhibit 2b (restructuring)

1. The data shown are for illustrative purpose. The figures will vary for actual restructurings.

2. For purposes of loss sharing, losses on restructured loans are calculated as the difference between:

a. The principal, accrued interest, advances due on the loan, and allowable 3rd party fees prior to restructuring (lines 36-39), and

b. The Net Present Value (NPV) of the estimated cash flows (line 43). The cash flows should assume no default or prepayment for 10 years, followed by prepayment in full at the end of 10 years (120 months).

3. For owner-occupied residential loans, the NPV is calculated using the most recently published Freddie Mac survey rate on 30-year fixed rate loans as of the restructure date.

4. For investor owned or non-owner occupied residential loans, the NPV is calculated using commercially reasonable rate on 30-year fixed rate loans as of the restructure date.

5. If the new loan is an adjustable-rate loan, interest rate resets and related cash flows should be projected based on the index rate in effect at the date of the loan restructuring. If the restructured loan otherwise provides for specific charges in monthly P&I payments over the term of the loan, those changes should be reflected in the projected cash flows. Assuming Bank must retain supporting schedule of projected cash flows as required by Section 2.1 of the Single Family Shared-Loss Agreement and provide it to the FDIC if requested for a sample audit.

6. Do not include late fees, prepayment penalties, or any similar lender fees or charges by the Failed Bank or Assuming Bank to the loan account, any allocation of Assuming Bank’s servicing costs, or any allocations of Assuming Bank’s general and administrative (G&A) or other operating costs.

7. The amount of accrued interest that may be added to the balance of the loan is limited to

the minimum of:

a. 90 days

b. The number of days that the loan is delinquent at the time of restructuring

c. The number of days between the resolution date and the restructuring

To calculate accrued interest, apply the note interest rate that would have been in effect if the loan were performing to the principal balance after application of the last payment made by the borrower.

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Exhibit 2c

This exhibit contains two versions of the loss share calculation for short sales, plus explanatory notes.

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Notes to Exhibit 2c (short sale)

1. The data shown are for illustrative purpose. The figures will vary for actual short sales.

2. The covered loss is the difference between the gross balance recoverable by Purchaser and the total cash recovery. There are two methods of calculation for covered losses from short sales, depending upon the circumstances. They are shown below:

a. If the loan was restructured when the Loss Share agreement was in place, and then the short sale occurred, use Exhibit 2c(2). This version uses the Net Present Value (NPV) of the modified loan as the starting point for the covered loss.

b. Otherwise, use Exhibit 2c(1). This version uses the unpaid balance of the loan as of the last payment as the starting point for the covered loss.

3. For Exhibit 2c(1), the gross balance recoverable by the purchaser is calculated as the sum of lines 12 - 17; it is shown in line 18. For Exhibit 2a(2), the gross balance recoverable by the purchaser is calculated as line 11 minus line 12 plus lines 13 - 16; it is shown in line 17.

4. For Exhibit 2c(1), the total cash recovery is calculated as the sum of lines 19 - 21; it is shown in line 22. For Exhibit 2c(2), the total cash recovery is calculated as the sum of lines 18 - 20; it is shown in line 21.

5. Reasonable and customary third party attorney’s fees and expenses incurred by or on behalf of Assuming Bank in connection with any enforcement procedures, or otherwise with respect to such loan, are reported under Attorney’s fees.

6. Do not include late fees, prepayment penalties, or any similar lender fees or charges by the Failed Bank or Assuming Bank to the loan account, any allocation of Assuming Bank’s servicing costs, or any allocations of Assuming Bank’s general and administrative (G&A) or other operating costs.

7. If Exhibit 2c(2) is used, then no accrued interest may be included as a covered loss.

Otherwise, the amount of accrued interest that may be included as a covered loss is limited to the minimum of:

d. 90 days

e. The number of days that the loan is delinquent when the property was sold

f. The number of days between the resolution date and the date when the property was sold

To calculate accrued interest, apply the note interest rate that would have been in effect if the loan were performing to the principal balance after application of the last payment made by the borrower.

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(1) This example assumes that the FDIC loan modification program as shown in Exhibit 5 is applied and the loan restructuring does not result in a reduction in the loan principal balance due from the borrower.

(2) This proof calculation is provided to illustrate the concept and the Assuming Bank is not required to provide this with its Recovery calculations.

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Exhibit 3

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EXHIBIT 5

FDIC MORTGAGE LOAN MODIFICATION PROGRAM

Objective

The objective of this FDIC Mortgage Loan Modification Program (“Program”) is to modify the terms of certain residential mortgage loans so as to improve affordability, increase the probability of performance, allow borrowers to remain in their homes and increase the value of the loans to the FDIC and assignees. The Program provides for the modification of Qualifying Loans (as defined below) by reducing the borrower’s monthly housing debt to income ratio (“DTI Ratio”) to no more than 31% at the time of the modification and eliminating adjustable interest rate and negative amortization features.

Qualifying Mortgage Loans

In order for a mortgage loan to be a Qualifying Loan it must meet all of the following criteria, which must be confirmed by the lender:

• The collateral securing the mortgage loan is owner-occupied and the owner’s primary residence; and

• The mortgagor has a first priority lien on the collateral; and

•Either the borrower is at least 60 days delinquent or a default is reasonably foreseeable. Modification Process

The lender shall undertake a review of its mortgage loan portfolio to identify Qualifying Loans. For each Qualifying Loan, the lender shall determine the net present value of the modified loan and, if it will exceed the net present value of the foreclosed collateral upon disposition, then the Qualifying Loan shall be modified so as to reduce the borrower’s monthly DTI Ratio to no more than 31% at the time of the modification. To achieve this, the lender shall use a combination of interest rate reduction, term extension and principal forbearance, as necessary.

The borrower’s monthly DTI Ratio shall be a percentage calculated by dividing the borrower’s monthly income by the borrower’s monthly housing payment (including principal, interest, taxes and insurance). For these purposes, (1) the borrower’s monthly income shall be the amount of the borrower’s (along with any co-borrowers’) documented and verified gross monthly income, and (2) the borrower’s monthly housing payment shall be the amount required to pay monthly principal and interest plus one-twelfth of the then current annual amount required to pay real property taxes and homeowner’s insurance with respect to the collateral.

In order to calculate the monthly principal payment, the lender shall capitalize to the outstanding principal balance of the Qualifying Loan the amount of all delinquent interest, delinquent taxes, past due insurance premiums, third party fees and (without duplication) escrow advances (such amount, the “Capitalized Balance”).

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In order to achieve the goal of reducing the DTI Ratio to 31%, the lender shall take the following steps in the following order of priority with respect to each Qualifying Loan:

1. Reduce the interest rate to the then current Freddie Mac Survey Rate for 30-year fixed rate mortgage loans, and adjust the term to 30 years.

2. If the DTI Ratio is still in excess of 31%, reduce the interest rate further, but no lower than 3%, until the DTI ratio of 31% is achieved.

3. If the DTI Ratio is still in excess of 31% after adjusting the interest rate to 3%, extend the remaining term of the loan by 10 years.

4. If the DTI Ratio is still in excess of 31%, calculate a new monthly payment (the “Adjusted Payment Amount”) that will result in the borrower’s monthly DTI Ratio not exceeding 31%. After calculating the Adjusted Payment Amount, the lender shall bifurcate the Capitalized Balance into two portions - the amortizing portion and the non-amortizing portion. The amortizing portion of the Capitalized Balance shall be the mortgage amount that will fully amortize over a 40-year term at an annual interest rate of 3% and monthly payments equal to the Adjusted Payment Amount. The non- amortizing portion of the Capitalized Balance shall be the difference between the Capitalized Balance and the amortizing portion of the Capitalized Balance. If the amortizing portion of the Capitalized Balance is less than 75% of the current estimated value of the collateral, then the lender may choose not to restructure the loan. If the lender chooses to restructure the loan, then the lender shall forbear on collecting the non-amortizing portion of the Capitalized Balance, and such amount shall be due and payable only upon the earlier of (i) maturity of the modified loan, (ii) a sale of the property or (iii) a pay-off or refinancing of the loan. No interest shall be charged on the non-amortizing portion of the Capitalized Balance, but repayment shall be secured by a first lien on the collateral.

Special Note:

The net present value calculation used to determine whether a loan should be modified based on the modification process above is distinct and different from the net present value calculation used to determine the covered loss if the loan is modified. Please refer only to the net present value calculation described in this exhibit for the modification process, with its separate assumptions, when determining whether to provide a modification to a borrower. Separate assumptions may include, without limitation, Assuming Bank’s determination of a probability of default without modification, a probability of default with modification, home price forecasts, prepayment speeds, and event timing. These assumptions are applied to different projected cash flows over the term of the loan, such as the projected cash flow of the loan performing or defaulting without modification and the projected cash flow of the loan performing or defaulting with modification.

By contrast, the net present value for determining the covered loss is based on a 10 year period. While the assumptions in the net present value calculation used in the modification process may

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change, the net present value calculation for determining the covered loss remains constant.

Related Junior Lien Mortgage Loans

In cases where the lender holds a junior lien mortgage loan that is collateralized by the same property that collateralizes a Qualifying Loan that is modified as described above, the junior lien mortgage loan shall also be modified to enhance overall affordability to the borrower. At a minimum, the lender shall reduce the interest rate on the junior lien mortgage loan to no more than 2% per annum. Further modifications may be made at the lender’s discretion as needed to support affordability and performance of the modified first lien Qualifying Loan.

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EXHIBIT 4.15B

COMMERCIAL SHARED-LOSS AGREEMENT

This agreement for reimbursement of loss sharing expenses on certain loans and other assets (the “Commercial Shared-Loss Agreement”) shall apply when the Assuming Bank purchases Shared-Loss Assets as that term is defined herein. The terms hereof shall modify and supplement, as necessary, the terms of the Purchase and Assumption Agreement to which this Commercial Shared-Loss Agreement is attached as Exhibit 4.15B and incorporated therein. To the extent any inconsistencies may arise between the terms of the Purchase and Assumption Agreement and this Commercial Shared-Loss Agreement with respect to the subject matter of this Commercial Shared-Loss Agreement, the terms of this Commercial Shared-Loss Agreement shall control. References in this Commercial Shared-Loss Agreement to a particular Section shall be deemed to refer to a Section in this Commercial Shared-Loss Agreement unless the context indicates that a Section of the Purchase and Assumption Agreement is intended.

ARTICLE I -- DEFINITIONS

Capitalized terms used in this Commercial Shared-Loss Agreement that are not defined in this Commercial Shared-Loss Agreement are defined in the Purchase and Assumption Agreement In addition to the terms defined above, defined below are certain additional terms relating to loss-sharing, as used in this Commercial Shared-Loss Agreement.

“AAA” means the American Arbitration Association as provided in Section 2.1(f)(iii) of this Commercial Shared-Loss Agreement.

“Accrued Interest” means, with respect to any Shared-Loss Loan, Permitted Advance or Shared-Loss Loan Commitment Advance at any time, the amount of earned and unpaid interest, taxes, credit life and/or disability insurance premiums (if any) payable by the Obligor accrued on or with respect to such Shared-Loss Loan, Permitted Advance or Shared- Loss Loan Commitment Advance, all as reflected on the Accounting Records of the Failed Bank or the Assuming Bank (as applicable); provided, thatAccrued Interest shall not include any amount that accrues on or with respect to any Shared-Loss Loan, Permitted Advance or Shared- Loss Loan Commitment Advance after that Asset has been placed on non-accrual or nonperforming status by either the Failed Bank or the Assuming Bank (as applicable).

“Additional ORE” means Shared-Loss Loans that become Other Real Estate after Bank Closing Date.

“Affiliate” shall have the meaning set forth in the Purchase and Assumption Agreement; provided, that, for purposes of this Commercial Shared-Loss Agreement, no Third Party Servicer shall be deemed to be an Affiliate of the Assuming Bank.

“Applicable Anniversary of the Commencement Date” means the fifth (5th) anniversary of the Commencement Date.

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“Calendar Quarter” means a quarterly period (a) for the first such period, beginning on the Commencement Date and ending on the last calendar day of either March, June, September or December, whichever is the first to occur after the Commencement Date, and (b) for quarterly periods thereafter, beginning on the first calendar day of the calendar month immediately after the month that ended the prior period and ending on the last calendar day of each successive three-calendar-month period thereafter (i.e., each March, June, September and December, starting in the applicable order depending on the ending date of first such period) of any year.

“Capitalized Expenditures” means those expenditures that (i) would be capitalized under generally accepted accounting principles, and (ii) are incurred with respect to Shared-Loss Loans, Other Real Estate, Additional ORE or Subsidiary ORE. Capitalized Expenditures shall not include expenses related to environmental conditions including, but not limited to, remediation, storage or disposal of any hazardous or toxic substances or any pollutant or contaminant.

“Charge-Offs” means, with respect to any Shared-Loss Assets for any period, an amount equal to the aggregate amount of loans or portions of loans classified as “Loss” under the Examination Criteria, including

(a)charge-offs of

(i)the principal amount of such assets net of unearned interest (including write-downs associated with Other Real Estate, Additional ORE, Subsidiary ORE or loan modification(s)); and

(ii) Accrued Interest; and

(iii) Capitalized Expenditures; plus

(b)Pre-Charge-Off Expenses incurred on the respective Shared-Loss Loans, all as effected by the Assuming Bank during such period and reflected on the Accounting Records of the Assuming Bank; provided, that:

(i)the aggregate amount of Accrued Interest (including any reversals thereof) for the period after Bank Closing that shall be included in determining the amount of Charge-Offs for any Shared-Loss Loan shall not exceed ninety (90) days’ Accrued Interest; and

(ii)no Charge-Off shall be taken with respect to any anticipated expenditure by the Assuming Bank until such expenditure is actually incurred; and

(iii)any financial statement adjustments made in connection with the purchase of any Assets pursuant to this Purchase and Assumption Agreement or any future purchase, merger, consolidation or other acquisition of the Assuming Bank shall not constitute

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“Charge-Offs”; and

(iv)except for Portfolio Sales, the sale or other disposition of Other Real Estate, Additional ORE or Subsidiary ORE to a Person other than an Affiliate of the Assuming Bank conducted in a commercially reasonable and prudent manner, or any other sales or dispositions consented to by the Receiver, losses incurred on the sale or other disposition of Shared-Loss Assets or Shared-Loss Securities to any Person shall not constitute Charge-Offs.

“Commencement Date” means the first calendar day following Bank Closing.

“Consumer Loans” means Loans to individuals for household, family and other personal expenditures (including United States and/or State-guaranteed student loans and extensions of credit pursuant to a credit card plan or debit card plan).

“Environmental Assessment” means an assessment of the presence, storage or release of any hazardous or toxic substance, pollutant or contaminant with respect to the collateral securing a Shared-Loss Loan that has been fully or partially charged off.

“Examination Criteria” means the loan classification criteria employed by, or any applicable regulations of, the Assuming Bank’s Chartering Authority at the time such action is taken, as such criteria may be amended from time to time.

“Failed Bank Charge-Offs/Write-Downs” means, with respect to any Shared- Loss Asset, an amount equal to the aggregate amount of reversals or charge-offs of Accrued Interest and charge-offs and write-downs of principal effected by the Failed Bank with respect to that Shared-Loss Asset as reflected on the Accounting Records of the Failed Bank.

“FDIC Party” has the meaning provided in Section 2.1(f)(ii) of this Commercial Shared-Loss Agreement.

“Holding Company” means any holding company, not publicly traded on a national exchange, owning Shares of the Assuming Bank.

“Net Charge-Offs” means, with respect to any period, an amount equal to the aggregate amount of Charge-Offs for such period less the amount of Recoveries for such period.

“Neutral Member” has the meaning provided in Section 2.1(f)(ii) of this Commercial Shared-Loss Agreement.

“New Shared-Loss Loans” means loans that would otherwise be subject to loss sharing under this Commercial Shared-Loss Agreement that were originated after the Information Package Date and before Bank Closing.

“Notice of Dispute” has the meaning provided in Section 2.1(f)(iii) of this Commercial Shared-Loss Agreement.

“ORE Subsidiary” means any Subsidiary of the Assuming Bank that engages

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solely in holding, servicing, managing or liquidating interests of a type described in clause (A) of

the definition of “Other Real Estate,” which interests have arisen from the collection or settlement of a Shared-Loss Loan.

“Other Real Estate” means all of the following (including any of the following fully or partially charged off the books and records of the Failed Bank or the Assuming Bank) that (i) are owned by the Failed Bank as of Bank Closing and are purchased pursuant to the Purchase and Assumption Agreement or (ii) have arisen subsequent to Bank Closing from the collection or settlement by the Assuming Bank of a Shared-Loss Loan:

(A)all interests in real estate (other than Bank Premises and Fixtures), including but not limited to mineral rights, leasehold rights, condominium and cooperative interests, air rights and development rights; and

(B)all other assets (whether real or personal property) acquired by foreclosure or in full or partial satisfaction of judgments or indebtedness.

“OTTI Adjustment” means any other than temporary impairment of the Shared- Loss Securities, determined pursuant to FAS 115, expressed as a positive number, or reversals of other than temporary impairment, expressed as a negative number (for the avoidance of doubt, normal and customary unrealized mark-to-market changes by reason of the application of fair value accounting do not qualify for loss sharing payments).

“OTTI Loss” means any other than temporary impairment of the Shared-Loss Securities, determined pursuant to FAS 115, expressed as a positive number (for the avoidance of doubt, normal and customary unrealized mark-to-market changes by reason of the application of fair value accounting do not qualify for loss sharing payments).

“Permitted Advance” means an advance of funds by the Assuming Bank with respect to a Shared-Loss Loan, or the making of a legally binding commitment by the Assuming Bank to advance funds with respect to a Shared-Loss Loan, that

(i)in the case of such an advance, is actually made, and, in the case of such a commitment, is made and all of the proceeds thereof actually advanced, within one (1) year after the Commencement Date; and

(ii) does not cause the sum of

(A)the book value of such Shared-Loss Loan as reflected on the Accounting Records of the Assuming Bank after any such advance has been made by the Assuming Bank; plus

(B)the unfunded amount of any such commitment made by the Assuming Bank related thereto, to exceed 110% of the Book Value of such Shared-Loss Loan,; and

(iii) is not made with respect to a Shared-Loss Loan with respect to which

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(A) there exists a related Shared-Loss Loan Commitment; or

(B) the Assuming Bank has taken a Charge-Off; and

(iv)is made in good faith, is supported at the time it is made by documentation in the Credit Files and conforms to and is in accordance with the applicable requirements set forth in Article III of this Commercial Shared-Loss Agreement and with the then effective written internal credit policy guidelines of the Assuming Bank; provided, thatthe limitations in subparagraphs (i), (ii) and (iii) of this definition shall not apply to any such action (other than to an advance or commitment related to the remediation, storage or final disposal of any hazardous or toxic substance, pollutant or contaminant) that is taken by Assuming Bank in its reasonable discretion to preserve or secure the value of the collateral for such Shared-Loss Loan.

“Permitted Amendment” means, with respect to any Shared-Loss Loan Commitment or Shared-Loss Loan, any amendment, modification, renewal or extension thereof, or any waiver of any term, right, or remedy thereunder, made by the Assuming Bank in good faith and otherwise in accordance with the applicable requirements set forth in Article III of this Commercial Shared-Loss Agreement and the then effective written internal credit policy guidelines of the Assuming Bank; provided, that:

(i)with respect to a Shared-Loss Loan Commitment or a Shared-Loss Loan that is not a revolving line of credit, no such amendment, modification, renewal, extension, or waiver, except as allowed under the definition of Permitted Advance, shall operate to increase the amount of principal (A) then remaining available to be advanced by the Assuming Bank under the Shared-Loss Loan Commitment or (B) then outstanding under the Shared-Loss Loan;

(ii)with respect to a Shared-Loss Loan Commitment or a Shared-Loss Loan that is a revolving line of credit, no such amendment, modification, renewal, extension, or waiver, except as allowed under the definition of Permitted Advance, shall operate to increase the maximum amount of principal authorized as of Bank Closing to be outstanding at any one time under the underlying revolving line of credit relationship with the debtor (regardless of the extent to which such revolving line of credit may have been funded as of Bank Closing or may subsequently have been funded and/or repaid); and

(iii)no such amendment, modification, renewal, extension or waiver shall extend the term of such Shared-Loss Loan Commitment or Shared-Loss Loan beyond the end of the final Shared-Loss Quarter unless the term of such Shared-Loss Loan Commitment or Shared- Loss Loan as existed on Bank Closing was beyond the end of the final Shared-Loss Quarter, in which event no such amendment, modification, renewal, extension or waiver shall extend such term beyond the term as existed as of Bank Closing.

“Pre-Charge-Off Expenses” means those expenses incurred in the usual and prudent management of a Shared-Loss Loan that would qualify as a Reimbursable Expense or Recovery Expense if incurred after a Charge-Off of the related Shared-Loss Asset had occurred.

“Quarterly Certificate” has the meaning provided in Section 2.1(a)(i) of this Commercial Shared-Loss Agreement.

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“Recoveries” shall mean the following:

(i) Generally.

(A) In addition to any sums to be applied as Recoveries pursuant to subparagraph

(ii) below, “Recoveries” means, with respect to any period, the sum of (without duplication):

(1)the amount of collections during such period by the Assuming Bank on Charge-Offs of Shared-Loss Assets effected by the Assuming Bank prior to the end of the final Shared-Loss Quarter; plus

(2)the amount of collections during such period by the Assuming Bank on Failed Bank Charge-Offs/Write-Downs; plus

(3)the amount of gain on any sale or other disposition during such period by the Assuming Bank of Shared Loss Loans, Other Real Estate, Additional ORE or Subsidiary ORE (provided, thatthe amount of any such gain included in Recoveries shall not exceed the aggregate amount of the related Failed Bank Charge-Offs/Write-Downs and Charge-Offs taken and any related Reimbursable Expenses and Recovery Expenses); plus

(4)the amount of collections during such period by the Assuming Bank of any Reimbursable Expenses or Recovery Expenses; plus

(5)the amount of any fee or other consideration received by the Assuming Bank during or prior to such period in connection with any amendment, modification, renewal, extension, refinance, restructure, commitment or other similar action taken by the Assuming Bank with respect to a Shared-Loss Asset with respect to which there exists a Failed Bank Charge-Off/Write-Down or a Shared-Loss Loan as to which a Charge-Off has been effected by the Assuming Bank during or prior to such period (provided, thatthe amount of any such fee or other consideration included in Recoveries shall not exceed the aggregate amount of the related Failed Bank Charge-Offs/Write-Downs and Charge-Offs taken and any related Reimbursable Expenses and Recovery Expenses).

(B) Order of Application. For the purpose of determining the amounts to be applied as Recoveries pursuant to subparagraph (A) above, the Assuming Bank shall apply amounts received on the Assets that are not otherwise applied to reduce the book value of principal of a Shared-Loss Loan (or, in the case of Other Real Estate, Additional ORE, Subsidiary ORE and Capitalized Expenditures, that are not otherwise applied to reduce the book value thereof) in the following order: first to Charge-Offs and Failed Bank Charge-Offs/Write Downs; then to Reimbursable Expenses and Recovery Expenses; then to interest income; and then to other expenses incurred by the Assuming Bank.

(ii) Interest Income as Recoveries. If there occurs an amendment, modification, renewal, extension, refinance, restructure, commitment, sale or other similar action with respect to a Shared-Loss Loan as to which there exists a Failed Bank Charge-Off/Write Down or as to

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which a Charge-Off has been effected by the Assuming Bank during or prior to such period, andif, as a result of such occurrence, the Assuming Bank recognizes any interest income for financial accounting purposes on that Shared-Loss Loan, then“Recoveries” shall also include the portion of the total amount of any such interest income recognized by the Assuming Bank which is derived by multiplying:

(A)the total amount of any such interest income recognized by the Assuming Bank during such period with respect to that Shared-Loss Loan as described above, by

(B)a fraction, the numeratorof which is the aggregate principal amount (excluding reversals or charge-offs of Accrued Interest) of all such Failed Bank Charge-Offs/Write- Downs and Charge-Offs effected by the Assuming Bank with respect to that Shared-Loss Loan plus the principal amount of that Shared-Loss Loan that has not yet been charged- off but has been placed on nonaccrual status, all of which occurred at any time prior to or during the period in which the interest income referred to in subparagraph (II)(A) immediately above was recognized, and the denominatorof which is the total amount of principal indebtedness (including all such prior Failed Bank Charge-Offs/Write-Downs and Charge-Offs as described above) due from the Obligor on that Shared-Loss Loan as of the end of such period;

provided, however, thatthe amount of any interest income included as Recoveries for a particular Shared-Loss Loan shall not exceed the aggregate amount of (x) Failed Bank Charge- Offs/Write-Downs, (y) Charge-Offs effected by the Assuming Bank during or prior to the period in which the amount of Recoveries is being determined, plus (z) any Reimbursable Expenses and Recovery Expenses paid to the Assuming Bank pursuant to this Commercial Shared-Loss Agreement during or prior to the period in which the amount of Recoveries is being determined, all with respect to that particular Shared-Loss Loan; and, provided, further, thatany collections on any such Shared-Loss Loan that are notapplied to reduce book value of principal or recognized as interest income shall be applied pursuant to subparagraph (i) above.

(iii) Exceptions to Recoveries. Notwithstanding subparagraphs (i) and (ii) above, the term “Recoveries” shall not include:

(A)any amounts paid to the Assuming Bank by the Receiver pursuant to Section 2.1 of this Commercial Shared-Loss Agreement;

(B)amounts received with respect to Charge-Offs effected by the Assuming Bank after the final Shared-Loss Quarter;

(C)after the final Shared-Loss Quarter, income received by the Assuming Bank from the operation of, and any gains recognized by the Assuming Bank on the disposition of, Other Real Estate, Additional ORE or Subsidiary ORE (such income and gains being hereinafter together referred to as “ORE Income”), exceptto the extent that aggregate ORE Income exceeds the aggregate expenses paid to third parties by or on behalf of the Assuming Bank after the final

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Shared-Loss Quarter to manage, operate and maintain Other Real Estate, Additional ORE or Subsidiary ORE (such expenses being hereinafter referred to as “ORE Expenses”). In

determining the extent aggregate ORE Income exceeds aggregate ORE Expenses for any Recovery Quarter, the Assuming Bank will subtract

(1)ORE Expenses paid to third parties during such Recovery Quarter (provided, that, in the case of the final Recovery Quarter only, the Assuming Bank will subtract ORE Expenses paid to third parties from the beginning of the final Recovery Quarter up to the date the Assuming Bank is required to deliver the final Quarterly Certificate pursuant to this Commercial Shared-Loss Agreement), from

(2)ORE Income received during such Recovery Quarter, to calculate net ORE income (“Net ORE Income”) for that Recovery Quarter. If the amount of Net ORE Income so calculated for a Recovery Quarter is positive, such amount shall be reported as Recoveries on the Quarterly Certificate for such Recovery Quarter.

If the amount of Net ORE Income so calculated for a Recovery Quarter is negative (“Net ORE Loss Carryforward”), such amount shall be added to any ORE Expenses paid to third parties in the next succeeding Recovery Quarter, which sum shall then be subtracted from ORE Income for that next succeeding Recovery Quarter, for the purpose of determining the amount of Net ORE Income (or, if applicable, Net ORE Loss Carryforward) for that next succeeding Recovery Quarter. If, as of the end of the final Recovery Quarter, a Net ORE Loss Carryforward exists, then the amount of the Net ORE Loss Carryforward that does notexceed the aggregate amount of Net ORE Income reported as Recoveries on Quarterly Certificates for allRecovery Quarters may be included as a Recovery Expense on the Quarterly Certificate for the final Recovery Quarter.

“Recovery Amount” has the meaning provided in Section 2.1(b)(ii) of this Commercial Shared-Loss Agreement.

“Recovery Expenses” means, for any Recovery Quarter, the amount of actual, reasonable and necessary out-of-pocket expenses (other than Capitalized Expenditures) paid to third parties (other than Affiliates of the Assuming Bank) by or on behalf of the Assuming Bank, as limited by Sections 3.2(c) and (d) of Article III to this Commercial Shared-Loss Agreement, to recover amounts owed with respect to:

(i)any Shared-Loss Asset as to which a Charge-Off was effected prior to the end of the final Shared-Loss Quarter (provided that such amounts were incurred no earlier than the date the first Charge-Off on such Shared-Loss Asset could have been reflected on the Accounting Records of the Assuming Bank); and

(ii)Failed Bank Charge-Offs/Write-Downs (including, in each case, all costs and expenses related to an Environmental Assessment and any other costs or expenses related to any environmental conditions with respect to the Shared-Loss Assets (it being understood that any remediation expenses for any such pollutant or contaminant are not recoverable if in excess of $200,000 per Shared-Loss Asset, without the Assuming Bank having obtained the prior consent of the Receiver for such expenses).

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Provided, that, so long as income with respect to a Shared-Loss Loan is being prorated pursuant

to the arithmetical formula in subsection (ii) of the definition of “Recoveries”, the term “Recovery Expenses” shall notinclude that portion of any such expenses paid during such Recovery Quarter to recover any amounts owed on that Shared-Loss Loan that is derived by:

subtracting(1) the product derived by multiplying:

(A)the total amount of any such expenses paid by or on behalf of the Assuming Bank during such Recovery Quarter with respect to that Shared-Loss Loan, by

(B)a fraction, the numeratorof which is the aggregate principal amount (excluding reversals or charge-offs of Accrued Interest) of all such Failed Bank Charge-Offs/Write-Downs and Charge-Offs effected by the Assuming Bank with respect to that Shared-Loss Loan plus the principal amount of that Shared-Loss Loan that has not yet been charged-off but has been placed on nonaccrual status, all of which occurred at any time prior to or during the period in which the interest income referred to in subparagraph (ii)(A) of the definition of “Recoveries” was recognized, and the denominatorof which is the total amount of principal indebtedness (including all such prior Failed Bank Charge- Offs/Write-Downs and Charge-Offs as described above) due from the Obligor on that Shared-Loss Loan as of the end of such period;

from(2) the total amount of any such expenses paid during that Recovery Quarter with respect to that Shared-Loss Loan.

“Recovery Quarter” has the meaning provided in Section 2.1(a)(ii) of this Commercial Shared-Loss Agreement.

“Reimbursable Expenses” means, for any Shared-Loss Quarter, the amount of actual, reasonable and necessary out-of-pocket expenses (other than Capitalized Expenditures), paid to third parties (other than Affiliates of the Assuming Bank) by or on behalf of the Assuming Bank, as limited by Sections 3.2(c) and (d) of Article III of this Commercial Shared- Loss Agreement, to:

(i)recover amounts owed with respect to any Shared-Loss Asset as to which a Charge-Off has been effected prior to the end of the final Shared-Loss Quarter (provided that such amounts were incurred no earlier than the date the first Charge-Off on such Shared-Loss Asset could have been reflected on the Accounting Records of the Assuming Bank) and recover amounts owed with respect to Failed Bank Charge-Offs/Write-Downs (including, in each case, all costs and expenses related to an Environmental Assessment and any other costs or expenses related to any environmental conditions with respect to the Shared-Loss Assets (it being understood that any such remediation expenses for any such pollutant or contaminant are not recoverable if in excess of $200,000 per Shared-Loss Asset, without the Assuming Bank having obtained the prior consent of the Receiver for such expenses); provided, that, so long as income

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with respect to a Shared-Loss Loan is being pro-rated pursuant to the arithmetical formula in subsection (II) of the definition of “Recoveries”, the term “Reimbursable Expenses” shall not include that portion of any such expenses paid during such Shared-Loss Quarter to recover any

amounts owed on that Shared-Loss Loan that is derived by:

subtracting(1) the product derived by multiplying:

(A)the total amount of any such expenses paid by or on behalf of the Assuming Bank during such Shared-Loss Quarter with respect to that Shared-Loss Loan, by

(B)a fraction, the numeratorof which is the aggregate principal amount (excluding reversals or charge-offs of Accrued Interest) of all such Failed Bank Charge-Offs/Write-Downs and Charge-Offs effected by the Assuming Bank with respect to that Shared-Loss Loan plus the principal amount of that Shared-Loss Loan that has not yet been charged-off but has been placed on nonaccrual status, all of which occurred at any time prior to or during the period in which the interest income referred to in subparagraph (II)(A) of the definition of “Recoveries” was recognized, and the denominatorof which is the total amount of principal indebtedness (including all such prior Failed Bank Charge- Offs/Write-Downs and Charge-Offs as described above) due from the Obligor on that Shared-Loss Loan as of the end of such period;

from(2) the total amount of any such expenses paid during that Shared-Loss Quarter with respect to that Shared-Loss Loan;

(ii)manage, operate or maintain Other Real Estate, Additional ORE or Subsidiary ORE lessthe amount of any income received by the Assuming Bank during such Shared-Loss Quarter with respect to such Other Real Estate, Additional ORE or Subsidiary ORE (which resulting amount under this clause (ii) may be negative).

“Review Board” has the meaning provided in Section 2.1(f)(i) of this Commercial Shared-Loss Agreement.

“Shared-Loss Amount” has the meaning provided in Section 2.1(b)(i) of this Commercial Shared-Loss Agreement.

“Shared-Loss Asset Repurchase Price” means, with respect to any Shared-Loss Asset, the principal amount thereof plus any other fees or penalties due from an Obligor (including, subject to the limitations discussed below, the amount of any Accrued Interest) stated on the Accounting Records of the Assuming Bank, as of the date as of which the Shared-Loss Asset Repurchase Price is being determined (regardless, in the case of a Shared-Loss Loan, of the Legal Balance thereof) plus all Reimbursable Expenses and Recovery Expenses incurred up to and through the date of consummation of purchase of such Shared-Loss Asset; provided, that

(i)in the case of a Shared-Loss Loan there shall be excluded from such amount the amount of any Accrued Interest accrued on or with respect to such Shared-Loss Loan prior to the

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ninety (90)-day period ending on the day prior to the purchase date determined pursuant to Sections 2.1(e)(i) or 2.1(e)(iii) of this Commercial Shared-Loss Agreement, except to the extent such Accrued Interest was included in the Book Value of such Shared-Loss Loan, and (ii) any collections on a Shared-Loss Loan received by the Assuming Bank after the purchase date

applicable to such Shared-Loss Loan shall be applied (without duplication) to reduce the Shared- Loss Asset Repurchase Price of such Shared-Loss Loan on a dollar-for-dollar basis. For purposes of determining the amount of unpaid interest which accrued during a given period with respect to a variable-rate Shared-Loss Loan, all collections of interest shall be deemed to be applied to unpaid interest in the chronological order in which such interest accrued.

“Shared-Loss Assets” means Shared-Loss Loans, Other Real Estate purchased by the Assuming Bank, Additional ORE, Subsidiary ORE and Capitalized Expenditures, but does not include Shared-Loss Securities.

“Shared-Loss Loan Commitment” means:

(i)any Commitment to make a further extension of credit or to make a further advance with respect to an existing Shared-Loss Loan; and

(ii)any Shared-Loss Loan Commitment (described in subparagraph (i) immediately preceding) with respect to which the Assuming Bank has made a Permitted Amendment.

“Shared-Loss Loan Commitment Advance” means an advance pursuant to a Shared-Loss Loan Commitment with respect to which the Assuming Bank has notmade a Permitted Advance.

“Shared-Loss Loans” means:

(i)(A) Loans purchased by the Assuming Bank pursuant to the Purchase and Assumption Agreement set forth on Exhibit 4.15(b) to the Purchase and Assumption Agreement,

(B) New Shared-Loss Loans purchased by the Assuming Bank pursuant to the Purchase and Assumption Agreement, (C) Permitted Advances and (D) Shared-Loss Loan Commitment Advances, if any; provided, thatShared-Loss Loans shall not include Loans, New Shared-Loss Loans, Permitted Advances and Shared-Loss Loan Commitment Advances with respect to which an Acquired Subsidiary, or a constituent Subsidiary thereof, is an Obligor; (E) Loans owned by any Acquired Subsidiary which are not Shared-Loss Loans under the Single Family Shared-Loss Agreement; (F) Consumer Loans; or is otherwise identified as a Shared-Loss Loan on the data files provided by the Receiver; and

(ii) any Shared-Loss Loans (described in subparagraph (i) immediately preceding) with respect to which the Assuming Bank has made a Permitted Amendment.

“Shared-Loss Payment Trigger” means when the sum of the Cumulative Loss

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Amount under the Single Family Shared-Loss Agreement and the cumulative Net Charge-Offs under this Commercial Shared-Loss Agreement, exceeds the First Loss Tranche. If the First Loss Tranche is zero or a negative number, the Shared-Loss Payment Trigger shall be deemed to have been reached upon Bank Closing.

“Shared-Loss Quarter” has the meaning provided in Section 2.1(a)(i) of this Commercial Shared-Loss Agreement.

“Shares” means common stock and any instrument which by its terms is currently convertible into common stock, or which may become convertible into common stock.

“Stated Threshold” means total losses under the shared loss agreements in the amount of $2,285,000,000.

“SLS Net Realized Gain” means the net realized gain on the sale of a Shared Loss Security determined pursuant to FAS 115, expressed as a negative number on the Quarterly Certificate.

“SLS Net Realized Loss” means the net realized loss on the sale of a Shared Loss Security determinted pursuant to FAS 115, expressed as a positive number on the Quarterly Certificate.

“Subsidiary ORE” means all assets owned by ORE Subsidiaries that would constitute Additional ORE if such assets were on the books of the Assuming Bank.

“Termination Date” means the eighth (8th) anniversary of the Commencement Date.

“Third Party Servicer” means any servicer appointed from time to time by the Assuming Bank or any Affiliate of the Assuming Bank to service the Shared-Loss Assets on behalf of the Assuming bank, the identity of which shall be given to the Receiver prior to or concurrent with the appointment thereof.

ARTICLE II -- SHARED-LOSS ARRANGEMENT

2.1Shared-Loss Arrangement.

(a)Quarterly Certificates. (i) Not later than thirty (30) days after the end of each Calendar Quarter from and including the initial Calendar Quarter to and including the Calendar Quarter in which the Applicable Anniversary of the Commencement Date falls (each of such Calendar Quarters being referred to herein as a “Shared-Loss Quarter”), the Assuming Bank shall deliver to the Receiver a certificate, signed by the Assuming Bank’s chief executive officer and its chief financial officer, setting forth in such form and detail as the Receiver may specify (a “Quarterly Certificate”)(an example of a Quarterly Certificate is attached as Exhibit 1):

(A)the amount of Charge-Offs, the amount of Recoveries and the amount of Net Charge-Offs (which amount may be negative) during such Shared-

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Loss Quarter with respect to the Shared-Loss Assets (and for Recoveries, with respect to the Assets for which a charge-off was effected by the Failed Bank prior to Bank Closing); and

(B)the aggregate amount of Reimbursable Expenses (which amount may be negative) during such Shared-Loss Quarter; and

(C) SLS Net Realized Loss and SLS Net Realized Gain, if any; and

(D) any OTTI Adjustment.

(ii)    Not later than thirty (30) days after the end of each Calendar Quarter from and including the first Calendar Quarter following the final Shared-Loss Quarter to and including the Calendar Quarter in which the Termination Date falls (each of such Calendar Quarters being referred to herein as a “Recovery Quarter”), the Assuming Bank shall deliver to the Receiver a Quarterly Certificate setting forth, in such form and detail as the Receiver may specify

(A)the amount of Recoveries and Recovery Expenses during such Recovery Quarter. On the Quarterly Certificate for the first Recovery Quarteronly, the Assuming Bank may report as a separate item, in such form and detail as the Receiver may specify, the aggregate amount of any Reimbursable Expenses that: (a) were incurred prior to or during the final Shared-Loss Quarter, and(b) had notbeen included in any Quarterly Certificate for any Shared-Loss Quarter because they had not been actually paid by or on behalf of the Assuming Bank (in accordance with the terms of this Commercial Shared-Loss Agreement) during any Shared-Loss Quarter and(c) were actually paid by or on behalf of the Assuming Bank (in accordance with the terms of this Commercial Shared-Loss Agreement) during the first Recovery Quarter; and

(B) SLS Net Realized Gain, and any reversals of OTTI Loss.

(b) Payments With Respect to Shared-Loss Assets.

(i)For purposes of this Section 2.1(b), the Assuming Bank shall initially record the Shared-Loss Assets on its Accounting Records at Book Value, and initially record the Shared-Loss Securities on its Accounting Records at Book Value, and adjust such amounts as such values may change after the Bank Closing. If the amount of all Net Charge-Offs during any Shared-Loss Quarter plusReimbursable Expenses, plusSLS Net Realized Gain and SLS Net Realized Loss, plusthe OTTI Adjustment during such Shared-Loss Quarter (the “Shared-Loss Amount”) is positive, then, except as provided in Sections 2.1(c) and (e) below, and subject to the provisions of Section 2.1(b)(vi) below, not later than fifteen (15) days after the date on which the Receiver receives the Quarterly Certificate with respect to such Shared-Loss Quarter, the Receiver shall pay to the Assuming Bank an amount equal to eighty percent (80%) of the

Shared-Loss Amount for such Shared-Loss Quarter. If the Shared-Loss Amount during any

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Shared-Loss Quarter is negative, the Assuming Bank shall pay to the Receiver an amount equal to eighty percent (80%) of the Shared-Loss Amount for such Shared-Loss Quarter, which payment shall be delivered to the Receiver together with the Quarterly Certificate for such Shared-Loss Quarter. When the cumulative Shared-Loss Amounts for all Shared-Loss Quarters plus the Cumulative Loss Amount under the Single Family Shared-Loss Agreement equals or exceeds the Stated Threshold, the Receiver shall pay to the Assuming Bank an amount equal to ninety-five percent ((95%) of the Shared-Loss Amount for each Shared-Loss Quarter, until such

time as the cumulative Shared-Loss Amount for all Shared-Loss Quarters is less than the Stated Threshold, when the percentage shall revert back to eighty percent (80%).

(ii)If the amount of gross Recoveries during any Recovery Quarter less Recovery Expenses during such Recovery Quarter plus SLS Net Realized Gains and reversals of OTTI Loss on Shared-Loss Securities (the “Recovery Amount”) is positive, then, simultaneously with its delivery of the Quarterly Certificate with respect to such Recovery Quarter, the Assuming Bank shall pay to the Receiver an amount equal to eighty percent (80%) of the Recovery Amount for such Recovery Quarter. If the Recovery Amount is negative, then such negative amount shall be subtracted from the amount of gross Recoveries during the next succeeding Recovery Quarter in determining the Recovery Amount in such next succeeding Recovery Quarter; provided, thatthis Section 2.1(b)(ii) shall operate successively in the event that the Recovery Amount (after giving effect to this Section 2.1(b)(ii)) in such next succeeding Recovery Quarter is negative. The Assuming Bank shall specify, in the Quarterly Certificate for the final Recovery Quarter, the aggregate amount for all Recovery Quarters only, as of the end of, and including, the final Recovery Quarter of (A) Recoveries plus SLS Net Realized Gains and reversals of OTTI Loss on Shared-Loss Securities (“Aggregate Recovery Period Recoveries”), (B) Recovery Expenses (“Aggregate Recovery Expenses”), and (C) onlythose Recovery Expenses that have been actually “offset” against Aggregate Recovery Period Recoveries (including those so “offset” in that final Recovery Quarter) (“Aggregate Offset Recovery Expenses”); as used in this sentence, the term “offset” means the amount that has been applied to reduce gross Recoveries in any Recovery Quarter pursuant to the methodology set forth in this Section 2.1(b)(ii). If, at the end of the final Recovery Quarter the amount of Aggregate Recovery Expenses exceeds the amount of Aggregate Recovery Period Recoveries, the Receiver shall have no obligation to pay to the Assuming Bank all or any portion of such excess. Subsequent to the Assuming Bank’s calculation of the Recovery Amount (if any) for the final Recovery Quarter, the Assuming Bank shall also show on the Quarterly Certificate for the final Recovery Quarter the results of the following three mathematical calculations: (i) Aggregate Recovery Period Recoveries minusAggregate Offset Recovery Expenses; (ii) Aggregate Recovery Expenses minusAggregate Offset Recovery Expenses; and (iii) the lesser of the two amounts calculated in (i) and (ii) immediately above (“Additional Recovery Expenses”) multiplied by80% (the amount so calculated in (iii) being defined as the “Additional Recovery Expense Amount”). If the Additional Recovery Expense Amount is greater than zero, then the Assuming Bank may request in the Quarterly Certificate for the final Recovery Quarter that the Receiver reimburse the Assuming Bank the amount of the Additional Recovery Expense Amount and the Receiver shall pay to the Assuming Bank the Additional Recovery Expense Amount within fifteen (15) days after the date on which the Receiver receives that Quarterly Certificate. On the Quarterly Certificate for the final Recovery Quarter only, the Assuming Bank

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may include, in addition to any Recovery Expenses for that Recovery Quarter that were paid by or on behalf of the Assuming Bank in that Recovery Quarter, those Recovery Expenses that: (a) were incurred prior to or during the final Recovery Quarter, and(b) had notbeen included in any Quarterly Certificate for any Recovery Quarter because they had not been actually paid by or on behalf of the Assuming Bank (in accordance with the terms of this Commercial Shared-Loss Agreement) during any Recovery Quarter, and(c) were actually paid by or on behalf of the Assuming Bank (in accordance with the terms of this Commercial Shared-Loss Agreement) prior to the date the Assuming Bank is required to deliver that final Quarterly Certificate to the

Receiver under the terms of Section 2.1(a)(ii).

(iii)With respect to each Shared-Loss Quarter and Recovery Quarter, collections by or on behalf of the Assuming Bank on any charge-off effected by the Failed Bank prior to Bank Closing on an Asset other than a Shared-Loss Asset or Shared-Loss Securities shall be reported as Recoveries under this Section 2.1 only to the extent such collections exceed the Book Value of such Asset, if any. For any Shared-Loss Quarter or Recovery Quarter in which collections by or on behalf of the Assuming Bank on such Asset are applied to both Book Value and to a charge-off effected by the Failed Bank prior to Bank Closing, the amount of expenditures incurred by or on behalf of the Assuming Bank attributable to the collection of any such Asset, that shall be considered a Reimbursable Expense or a Recovery Expense under this Section 2.1 will be limited to a proportion of such expenditures which is equal to the proportion derived by dividing (A) the amount of collections on such Asset applied to a charge-off effected by the Failed Bank prior to Bank Closing, by (B) the total collections on such Assets.

(iv)If the Assuming Bank has duly specified an amount of Reimbursable Expenses on the Quarterly Certificate for the first Recovery Quarter as described above in the last sentence of Section 2.1(a)(ii), then, not later than fifteen (15) days after the date on which the Receiver receives that Quarterly Certificate, the Receiver shall pay to the Assuming Bank an amount equal to eighty percent (80%) (or, if the Cumulative Loss Amount under the Single Family Shared-Loss Agreement plus the cumulative Shared-Loss Amount for all Shared-Loss Quarters equals or exceeds the Stated Threshold, ninety-five percent (95%)) of the amount of such Reimbursable Expenses.

(v)If the First Loss Tranche as determined under the Purchase and Assumption Agreement is a positive number, Receiver has no obligation to make payment for any Shared Loss Quarters until the Shared Loss Payment Trigger is satisfied.

(vi)Payments from the Receiver with respect to this Commercial Shared-Loss Agreement are administrative expenses of the Receiver. To the extent the Receiver needs funds for shared-loss payments respect to this Commercial Shared-Loss Agreement, the Receiver shall request funds under the Master Loan and Security Agreement, as amended (“MLSA”), from FDIC in its corporate capacity. The Receiver will not agree to any amendment of the MLSA that would prevent the Receiver from drawing on the MLSA to fund shared-loss payments.

(c)Limitation on Shared-Loss Payment. The Receiver shall not be required to make any payments pursuant to this Section 2.1 with respect to any Charge-Off of a Shared- Loss Asset that the Receiver or the Corporation determines, based upon the Examination Criteria, should not have been effected by the Assuming Bank; provided, (x) the Receiver must provide notice to the Assuming Bank detailing the grounds for not making such payment, (y) the Receiver

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must provide the Assuming Bank with a reasonable opportunity to cure any such deficiency and (z) (1) to the extent curable, if cured, the Receiver shall make payment with respect to any properly effected Charge-Off and (2) to the extent not curable, the Receiver shall make a payment as to all Charge-Offs (or portion of Charge-Offs) that were effected which would have been payable as a Charge-Off if the Assuming Bank had properly effected such Charge-Off. In the event that the Receiver does not make any payments with respect to any

Charge-Off of a Shared-Loss Asset pursuant to this Section 2.1 or determines that a payment was improperly made, the Assuming Bank and the Receiver shall, upon final resolution, make such accounting adjustments and payments as may be necessary to give retroactive effect to such corrections.

(d)Sale of, or Additional Advances or Amendments with Respect to, Shared-Loss Loans and Administration of Related Loans. No Shared-Loss Loan shall be treated as a Shared-Loss Asset pursuant to this Section 2.1 (i) if the Assuming Bank sells or otherwise transfers such Shared-Loss Loan or any interest therein (whether with or without recourse) to any Person, (ii) after the Assuming Bank makes any additional advance, commitment or increase in the amount of a commitment with respect to such Shared-Loss Loan that does not constitute a Permitted Advance or a Shared-Loss Loan Commitment Advance, (iii) after the Assuming Bank makes any amendment, modification, renewal or extension to such Shared-Loss Loan that does not constitute a Permitted Amendment, or (iv) after the Assuming Bank has managed, administered or collected any “Related Loan” (as such term is defined in Section 3.4 of Article III of this Commercial Shared-Loss Agreement) in any manner which would have the effect of increasing the amount of any collections with respect to the Related Loan to the detriment of such Shared-Loss Asset to which such loan is related; provided, that any such Shared-Loss Loan that has been the subject of Charge-Offs prior to the taking of any action described in clause (i), (ii), or (iii) or (iv) of this Section 2.1(d) by the Assuming Bank shall be treated as a Shared-Loss Asset pursuant to this Section 2.1 solely for the purpose of treatment of Recoveries on such Charge-Offs until such time as the amount of Recoveries with respect to such Shared-Loss Asset equals such Charge-Offs.

(e) Option to Purchase.

(i)In the event that the Assuming Bank determines that there is a substantial likelihood that continued efforts to collect a Shared-Loss Asset or an Asset for which a charge- off was effected by the Failed Bank with, in either case, a Legal Balance of $1,000,000 or more on the Accounting Records of the Assuming Bank will result in an expenditure, after Bank Closing, of funds by on behalf of the Assuming Bank to a third party for a specified purpose (the expenditure of which, in its best judgment, will maximize collections), which do not constitute Reimbursable Expenses or Recovery Expenses, and such expenses will exceed ten percent (10%) of the then book value thereof as reflected on the Accounting Records of the Assuming Bank, the Assuming Bank shall (i) promptly so notify the Receiver and (ii) request that such expenditure be treated as a Reimbursable Expense or Recovery Expense for purposes of this Section 2.1. (Where the Assuming Bank determines that there is a substantial likelihood that the previously mentioned situation exists with respect to continued efforts to collect a Shared-Loss Asset or an Asset for which a charge-off was effected by the Failed Bank with, in either case, a Legal Balance of less than $1,000,000 on the Accounting Records of the Assuming Bank, the Assuming Bank may so

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notify the Receiver and request that such expenditure be treated as a Reimbursable Expense or Recovery Expense.) Within thirty (30) days after its receipt of such a notice, the Receiver will advise the Assuming Bank of its consent or denial, that such expenditures shall be treated as a Reimbursable Expense or Recovery Expense, as the case may be. Notwithstanding the failure of the Receiver to give its consent with respect to such expenditures, the Assuming Bank shall continue to administer such Shared-Loss Asset in accordance with Section 2.2, except that the Assuming Bank shall not be required to make such expenditures. At any time after its receipt of such a notice and on or prior to the Termination Date the Receiver shall have the right to purchase such Shared-Loss Asset or Asset as provided in Section 2.1(e)(iii), notwithstanding any consent by the Receiver with respect to such expenditure.

(ii)During the period prior to the Termination Date, the Assuming Bank shall notify the Receiver within fifteen (15) days after any of the following becomes fully or partially charged-off:

(A)a Shared-Loss Loan having a Legal Balance (or, in the case of more than one (1) Shared-Loss Loan made to the same Obligor, a combined Legal Balance) of $1,000,000 or more in circumstances in which the legal claim against the relevant Obligor survives; or

(B)a Shared-Loss Loan to a director, an “executive officer” as defined in 12 C.F.R. ¨ 215.2(d), a “principal shareholder” as defined in 12 C.F.R. ¨ 215.2(l), or an Affiliate of the Assuming Bank.

(iii)If the Receiver determines in its discretion that the Assuming Bank is not diligently pursuing collection efforts with respect to any Shared-Loss Asset which has been fully or partially charged-off or written-down (including any Shared-Loss Asset which is identified or required to be identified in a notice pursuant to Section 2.1(e)(ii)) or any Asset for which there exists a Failed Bank Charge-Off/Write-Down, the Receiver may at its option, exercisable at any time on or prior to the Termination Date, require the Assuming Bank to assign, transfer and convey such Shared-Loss Asset or Asset to and for the sole benefit of the Receiver for a price equal to the Shared-Loss Asset Repurchase Price thereof less the Related Liability Amount with respect to any Related Liabilities related to such Shared-Loss Asset or Asset.

(iv)Not later than ten (10) days after the date upon which the Assuming Bank receives notice of the Receiver’s intention to purchase or require the assignment of any Shared- Loss Asset or Asset pursuant to Section 2.1(e)(i) or (iii), the Assuming Bank shall transfer to the Receiver such Shared-Loss Asset or Asset and any Credit Files relating thereto and shall take all such other actions as may be necessary and appropriate to adequately effect the transfer of such Shared-Loss Asset or Asset from the Assuming Bank to the Receiver. Not later than fifteen (15) days after the date upon which the Receiver receives such Shared-Loss Asset or Asset and any Credit Files relating thereto, the Receiver shall pay to the Assuming Bank an amount equal to the Shared-Loss Asset Repurchase Price of such Shared-Loss Asset or Asset less the Related Liability Amount.

(v)The Receiver shall assume all Related Liabilities with respect to any Shared-Loss Asset or Asset set forth in the notice described in Section 2.1(e)(iv).

(f) Dispute Resolution.

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(i)(A) Any dispute as to whether a Charge-Off of a Shared-Loss Asset was made

in accordance with Examination Criteria shall be resolved by the Assuming Bank’s Chartering Authority. (B) With respect to any other dispute arising under the terms of this Commercial Shared-Loss Agreement which the parties hereto cannot resolve after having negotiated such matter, in good faith, for a thirty (30) day period, other than a dispute the Corporation is not permitted to submit to arbitration under the Administrative Dispute Resolution Act of 1996 (“ADRA”), as amended, such other dispute shall be resolved by determination of a review board (a “Review Board”) established pursuant to Section 2.1(f). Any Review Board under this Section 2.1(f) shall follow the provisions of the Federal Arbitration Act and shall follow the provisions of the ADRA. (C) Any determination by the Assuming Bank’s Chartering Authority or by a Review Board shall be conclusive and binding on the parties hereto and not subject to further dispute, and judgment may be entered on said determination in accordance with applicable arbitration law in any court having jurisdiction thereof.

(ii)A Review Board shall consist of three (3) members, each of whom shall have such expertise as the Corporation and the Assuming Bank agree is relevant. As appropriate, the Receiver or the Corporation (the “FDIC Party”) will select one member, one member will be selected by the Assuming Bank and the third member (the “Neutral Member”) will be selected by the other two members. The member of the Review Board selected by a party may be removed at any time by such party upon two (2) days’ written notice to the other party of the selection of a replacement member. The Neutral Member may be removed by unanimous action of the members appointed by the FDIC Party and the Assuming Bank after two (2) days’ prior written notice to the FDIC Party and the Assuming Bank of the selection of a replacement Neutral Member. In addition, if a Neutral Member fails for any reason to serve or continue to serve on the Review Board, the other remaining members shall so notify the parties to the dispute and the Neutral Member in writing that such Neutral Member will be replaced, and the Neutral Member shall thereafter be replaced by the unanimous action of the other remaining members within twenty (20) business days of that notification.

(iii)No dispute may be submitted to a Review Board by any of the parties to this Commercial Shared-Loss Agreement unless such party has provided to the other party a written notice of dispute (“Notice of Dispute”). During the forty-five (45)-day period following the providing of a Notice of Dispute, the parties to the dispute will make every effort in good faith to resolve the dispute by mutual agreement. As part of these good faith efforts, the parties should consider the use of less formal dispute resolution techniques, as judged appropriate by each party in its sole discretion. Such techniques may include, but are not limited to, mediation, settlement conference, and early neutral evaluation. If the parties have not agreed to a resolution of the dispute by the end of such forty-five (45)-day period, then, subject to the discretion of the Corporation and the written consent of the Assuming Bank as set forth in Section 2.1(f)(i)(B) above, on the first day following the end of such period, the FDIC Party and the Assuming Bank shall notify each other of its selection of its member of the Review Board and such members shall be instructed to promptly select the Neutral Member of the Review Board. If the members appointed by the FDIC Party and the Assuming Bank are unable to promptly agree upon the initial selection of the Neutral Member, or a timely replacement Neutral Member as set forth in Section 2.1(f)(ii) above, the two appointed members shall apply to the American Arbitration Association (“AAA”), and such Neutral Member shall be appointed in accordance with the

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Commercial Arbitration Rules of the AAA.

(iv)The resolution of a dispute pursuant to this Section 2.1(f) shall be governed by the Commercial Arbitration Rules of the AAA to the extent that such rules are not inconsistent with this Section 2.1(f). The Review Board may modify the procedures set forth in such rules from time to time with the prior approval of the FDIC Party and the Assuming Bank.

(v)Within fifteen (15) days after the last to occur of the final written submissions of both parties, the presentation of witnesses, if any, and oral presentations, if any, the Review Board shall adopt the position of one of the parties and shall present to the parties a written award regarding the dispute. The determination of any two (2) members of a Review Board will constitute the determination of such Review Board.

(vi)The FDIC Party and the Assuming Bank will each pay the fees and expenses of the member of the Review Board selected by it. The FDIC Party and Assuming Bank will share equally the fees and expenses of the Neutral Member. No such fees or expenses incurred by or on behalf of the Assuming Bank shall be subject to reimbursement by the FDIC Party under this Commercial Shared-Loss Agreement or otherwise.

(vii)Each party will bear all costs and expenses incurred by it in connection with the submission of any dispute to a Review Board. No such costs or expenses incurred by or on behalf of the Assuming Bank shall be subject to reimbursement by the FDIC Party under this Commercial Shared-Loss Agreement or otherwise. The Review Board shall have no authority to award costs or expenses incurred by either party to these proceedings.

(viii)Any dispute resolution proceeding held pursuant to this Section 2.1(f) shall not be public. In addition, each party and each member of any Review Board shall strictly maintain the confidentiality of all issues, disputes, arguments, positions and interpretations of any such proceeding, as well as all information, attachments, enclosures, exhibits, summaries, compilations, studies, analyses, notes, documents, statements, schedules and other similar items associated therewith, except as the parties agree in writing or such disclosure is required pursuant to law, rule or regulation. Pursuant to ADRA, dispute resolution communications may not be disclosed either by the parties or by any member of the Review board unless:

(1) all parties to the dispute resolution proceeding agree in writing;

(2) the communication has already been made public;

(3) the communication is required by statute, rule or regulation to be made public; or

(4)a court determines that such testimony or disclosure is necessary to prevent a manifest injustice, help establish a violation of the law or prevent harm to the public health or safety, or of sufficient magnitude in the particular case to outweigh the integrity of dispute resolution proceedings in general by reducing the confidence of parties in future cases that their communications will remain confidential.

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(ix)Any dispute resolution proceeding pursuant to this Section 2.1(f) (whether as a matter of good faith negotiations, by resort to a Review Board, or otherwise) is a

compromise negotiation for purposes of the Federal Rules of Evidence and state rules of evidence. The parties agree that all proceedings, including any statement made or document prepared by any party, attorney or other participants are privileged and shall not be disclosed in any subsequent proceeding or document or construed for any purpose as an admission against interest. Any document submitted and any statements made during any dispute resolution proceeding are for settlement purposes only. The parties further agree not to subpoena any of the members of the Review Board or any documents submitted to the Review Board. In no event will the Neutral Member voluntarily testify on behalf of any party.

(x)No decision, interpretation, determination, analysis, statement, award or other pronouncement of any Review Board shall constitute precedent as regards any subsequent proceeding (whether or not such proceeding involves dispute resolution under this Commercial Shared-Loss Agreement) nor shall any Review Board be bound to follow any decision, interpretation, determination, analysis, statement, award or other pronouncement rendered by any previous Review Board or any other previous dispute resolution panel which may have convened in connection with a transaction involving other failed financial institutions or Federal assistance transactions.

(xi)The parties may extend any period of time in this Section 2.1(f) by mutual agreement. Notwithstanding anything above to the contrary, no dispute shall be submitted to a Review Board until each member of the Review Board, and any substitute member, if applicable, agrees to be bound by the provisions of this Section 2.1(f) as applicable to members of a Review Board. Prior to the commencement of the Review Board proceedings, or, in the case of a substitute Neutral Member, prior to the re-commencement of such proceedings subsequent to that substitution, the Neutral Member shall provide a written oath of impartiality.

(xii)For the avoidance of doubt, and notwithstanding anything herein to the contrary, in the event any notice of dispute is provided to a party under this Section 2.1(g) prior to the Termination Date, the terms of this Commercial Shared-Loss Agreement shall remain in effect with respect to any such items set forth in such notice until such time as any such dispute with respect to such item is finally resolved.

2.2Administration of Shared-Loss Assets.The Assuming Bank shall at all times prior to the Termination Date comply with the Rules Regarding the Administration of Shared- Loss Assets as set forth in Article III of this Commercial Shared-Loss Agreement.

2.3 Auditor Report; Right to Audit.

(a)Within ninety (90) days after the end of each fiscal year from and including the fiscal year during which Bank Closing falls to and including the calendar year during which the Termination Date falls, the Assuming Bank shall deliver to the Corporation and to the

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Receiver a report signed by its independent public accountants stating that they have reviewed the terms of this Commercial Shared-Loss Agreement and that, in the course of their annual audit of the Assuming Bank’s books and records, nothing has come to their attention suggesting that any computations required to be made by the Assuming Bank during such calendar year by this Article II were not made by the Assuming Bank in accordance herewith. In

the event that the Assuming Bank cannot comply with the preceding sentence, it shall promptly submit to the Receiver corrected computations together with a report signed by its independent public accountants stating that, after giving effect to such corrected computations, nothing has come to their attention suggesting that any computations required to be made by the Assuming Bank during such year by this Article II were not made by the Assuming Bank in accordance herewith. In such event, the Assuming Bank and the Receiver shall make all such accounting adjustments and payments as may be necessary to give effect to each correction reflected in such corrected computations, retroactive to the date on which the corresponding incorrect computation was made.

(b)The Assuming Bank shall perform on an annual basis an internal audit of its compliance with the provisions of this Article II and shall provide the Receiver and the Corporation with copies of the internal audit reports and access to internal audit workpapers related to such internal audit.

(c)The Receiver or the Corporation may perform an audit to determine the Assuming Bank’s compliance with the provisions of this Commercial Shared-Loss Agreement, including this Article II, at any time by providing not less than ten (10) Business Days prior written notice. The scope and duration of any such audit shall be within the discretion of the Receiver or the Corporation, as the case may be, but shall in no event be administered in a manner that unreasonably interferes with the operation of the Assuming Bank’s business. The Receiver or the Corporation, as the case may be, shall bear the expense of any such audit. In the event that any corrections are necessary as a result of such an audit, the Assuming Bank and the Receiver shall make such accounting adjustments and payments as may be necessary to give retroactive effect to such corrections.

2.4Withholdings. Notwithstanding any other provision in this Article II, the Receiver, upon the direction of the Director (or designee) of the Corporation’s Division of Resolutions and Receiverships, may withhold payment for any amounts included in a Quarterly Certificate delivered pursuant to Section 2.1, if, in its judgment, there is a reasonable basis under the terms of this Commercial Shared-Loss Agreement for denying the eligibility of an item for which reimbursement or payment is sought under such Section. In such event, the Receiver shall provide a written notice to the Assuming Bank detailing the grounds for withholding such payment. At such time as the Assuming Bank demonstrates to the satisfaction of the Receiver that the grounds for such withholding of payment, or portion of payment, no longer exist or have been cured, then the Receiver shall pay the Assuming Bank the amount withheld which the Receiver determines is eligible for payment, within fifteen (15) Business Days. In the event the Receiver or the Assuming Bank elects to submit the issue of the eligibility of the item for reimbursement or payment for determination under the dispute resolution procedures of Section 2.1(f), then (i) if the

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dispute is settled by the mutual agreement of the parties in accordance with Section 2.1(f)(iii), the Receiver shall pay the amount withheld (to the extent so agreed) within fifteen (15) Business Days from the date upon which the dispute is determined by the parties to be resolved by mutual agreement, and (ii) if the dispute is resolved by the determination of a Review Board, the Receiver shall pay the amount withheld (to the extent so determined) within fifteen (15) Business Days from the date upon which the Receiver is notified of the determination by the Review Board of its obligation to make such payment. Any payment by the Receiver pursuant to this Section 2.4 shall be made together with interest on the amount thereof from the date the payment was agreed or determined otherwise to be due, at the interest rate per annum determined by the Receiver to be equal to the coupon equivalent of the three (3)-month U.S.Treasury Bill Rate in effect as of the first Business Day of each Calendar Quarter during which such interest accrues as reported in the Federal Reserve Board’s Statistical Release for Selected Interest Rates H.15 opposite the caption “Auction Average - 3-Month” or, if not so reported for such day, for the next preceding Business Day for which such rate was so reported.

2.5Books and Records. The Assuming Bank shall at all times during the term of this Commercial Shared-Loss Agreement keep books and records which fairly present all dealings and transactions carried out in connection with its business and affairs. Except as otherwise provided for in the Purchase and Assumption Agreement or this Commercial Shared- Loss Agreement, all financial books and records shall be kept in accordance with generally accepted accounting principles, consistently applied for the periods involved and in a manner such that information necessary to determine compliance with any requirement of the Purchase and Assumption Agreement or this Commercial Shared-Loss Agreement will be readily obtainable, and in a manner such that the purposes of the Purchase and Assumption Agreement or this Commercial Shared-Loss Agreement may be effectively accomplished. Without the prior written approval of the Corporation, the Assuming Bank shall not make any change in its accounting principles adversely affecting the value of the Shared-Loss Assets except as required by a change in generally accepted accounting principles. The Assuming Bank shall notify the Corporation of any change in its accounting principles affecting the Shared-Loss Assets which it believes are required by a change in generally accepted accounting principles.

2.6Information. The Assuming Bank shall promptly provide to the Corporation such other information, including financial statements and computations, relating to the performance of the provisions of the Purchase and Assumption Agreement or otherwise relating to its business and affairs or this Commercial Shared-Loss Agreement, as the Corporation or the Receiver may request from time to time.

2.7Tax Ruling. The Assuming Bank shall not at any time, without the Corporation’s prior written consent, seek a private letter ruling or other determination from the Internal Revenue Service or otherwise seek to qualify for any special tax treatment or benefits associated with any payments made by the Corporation pursuant to the Purchase and Assumption Agreement or this Commercial Shared-Loss Agreement.

ARTICLE III - RULES REGARDING THE ADMINISTRATION OF SHARED-LOSS ASSETS AND SHARED-LOSS SECURITIES

3.1Agreement with Respect to Administration. The Assuming Bank shall (and shall

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cause any of its Affiliates to which the Assuming Bank transfers any Shared-Loss Assets or Shared-Loss Securities) to, or a Third Party Servicer to, manage, administer, and collect the Shared-Loss Assets and Shared-Loss Securities while owned by the Assuming Bank or any Affiliate thereof during the term of this Commercial Shared-Loss Agreement in accordance with the rules set forth in this Article III (“Rules”). The Assuming Bank shall be responsible to the

Receiver and the Corporation in the performance of its duties hereunder and shall provide to the Receiver and the Corporation such reports as the Receiver or the Corporation reasonably deems advisable, including but not limited to the reports required by Section 3.3 hereof, and shall permit the Receiver and the Corporation at all times to monitor the Assuming Bank’s performance of its duties hereunder.

3.2 Duties of the Assuming Bank with Respect to Shared-Loss Assets.

(a)In performance of its duties under these Rules, the Assuming Bank shall:

(i)manage, administer, collect and effect Charge-Offs and Recoveries with respect to each Shared-Loss Asset in a manner consistent with (A) usual and prudent business and banking practices; (B) the Assuming Bank’s (or, in the case a Third Party Servicer is engaged, the Third Party Servicer’s) practices and procedures including, without limitation, the then-effective written internal credit policy guidelines of the Assuming Bank, with respect to the management, administration and collection of and taking of charge-offs and write-downs with respect to loans, other real estate and repossessed collateral that do not constitute Shared Loss Assets;

(ii)exercise its best business judgment in managing, administering, collecting and effecting Charge-Offs with respect to Shared-Loss Assets;

(iii)use its best efforts to maximize collections with respect to Shared- Loss Assets and, if applicable for a particular Shared-Loss Asset, without regard to the effect of maximizing collections on assets held by the Assuming Bank or any of its Affiliates that are not Shared-Loss Assets;

(iv)adopt and implement accounting, reporting, record-keeping and similar systems with respect to the Shared-Loss Assets, as provided in Section 3.4 hereof;

(v) retain sufficient staff to perform its duties hereunder;

(vi)provide written notification in accordance with Article IV of this Commercial Shared-Loss Agreement immediately after the execution of any contract pursuant to which any third party (other than an Affiliate of the Assuming Bank) will manage, administer or collect any of the Shared-Loss Assets, together with a copy of that contract.

(b)Any transaction with or between any Affiliate of the Assuming Bank with respect to any Shared-Loss Asset including, without limitation, the execution of any contract

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pursuant to which any Affiliate of the Assuming Bank will manage, administer or collect any of the Shared-Loss Assets, or any other action involving self-dealing, shall be subject to the prior written approval of the Receiver or the Corporation.

(c)The following categories of expenses shall not be deemed to be Reimbursable Expenses or Recovery Expenses:

(i)Federal, State, or local income taxes and expenses related thereto;

(ii)salaries or other compensation and related benefits of Assuming Bank employees and the employees of its Affiliates including, without limitation, any bonus, commission or severance arrangements, training, payroll taxes, dues, or travel- or relocation- related expenses,;

(iii)the cost of space occupied by the Assuming Bank, any Affiliate thereof and their staff, the rental of and maintenance of furniture and equipment, and expenses for data processing including the purchase or enhancement of data processing systems;

(iv)except as otherwise provided herein, fees for accounting and other independent professional consultants (other than consultants retained to assess the presence, storage or release of any hazardous or toxic substance, or any pollutant or contaminant with respect to the collateral securing a Shared-Loss Loan that has been fully or partially charged-off); provided, thatfor purposes of this Section 3.2(c)(iv), fees of attorneys and appraisers engaged as necessary to assist in collections with respect to Shared-Loss Assets shall not be deemed to be fees of other independent consultants;

(v)allocated portions of any other overhead or general and administrative expense other than any fees relating to specific assets, such as appraisal fees or environmental audit fees, for services of a type the Assuming Bank does not normally perform internally;

(vi)any expense not incurred in good faith and with the same degree of care that the Assuming Bank normally would exercise in the collection of troubled assets in which it alone had an interest; and

(vii)any expense incurred for a product, service or activity that is of an extravagant nature or design.

(d)Subject to Section 3.7, the Assuming Bank shall not contract with third parties to provide services the cost of which would be a Reimbursable Expense or Recovery Expense if the Assuming Bank would have provided such services itself if the relevant Shared- Loss Assets were not subject to the loss-sharing provisions of Section 2.1 of this Commercial Shared-Loss Agreement.

3.3 Duties of the Assuming Bank with Respect to Shared-Loss Securities.

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(a)In performance of its duties under these Rules, the Assuming Bank shall:

(i)manage, administer, collect and each Shared Loss Security in a manner consistent with (A) usual and prudent business and banking practices; (B) the Assuming Bank’s practices and procedures including, without limitation, the then-effective written internal credit policy guidelines of the Assuming Bank, with respect to the management, administration and collection of similar assets that are not Shared-Loss Securities;

(ii)exercise its best business judgment in managing, administering, collecting and effecting Charge-Offs with respect to Shared-Loss Securities;

(iii)use its best efforts to maximize collections with respect to Shared- Loss Securities and, if applicable for a particular Shared Loss Security, without regard to the effect of maximizing collections on assets held by the Assuming Bank or any of its Affiliates that are not Shared-Loss Securities, provided that, any sale of a Shared Loss Security shall only be made with the prior approval of the Receiver or the Corporation;

(iv)adopt and implement accounting, reporting, record-keeping and similar systems with respect to the Shared-Loss Securities, as provided in Section 3.4 hereof;

(v) retain sufficient staff to perform its duties hereunder;

(vi)provide written notification in accordance with Article IV of this Commercial Shared-Loss Agreement immediately after the execution of any contract pursuant to which any third party (other than an Affiliate of the Assuming Bank) will manage, administer or collect any of the Shared-Loss Securities, together with a copy of that contract.

(b)Any transaction with or between any Affiliate of the Assuming Bank with respect to any Shared Loss Security including, without limitation, the execution of any contract pursuant to which any Affiliate of the Assuming Bank will manage, administer or collect any of the Shared-Loss Assets, or any other action involving self-dealing, shall be subject to the prior written approval of the Receiver or the Corporation.

(c)The Assuming Bank shall not contract with third parties to provide services the cost of which would be a Reimbursable Expense or Recovery Expense if the Assuming Bank would have provided such services itself if the relevant Shared-Loss Assets were not subject to the loss-sharing provisions of Section 2.1 of this Commercial Shared-Loss Agreement.

3.4Records and Reports. The Assuming Bank shall establish and maintain records on a separate general ledger, and on such subsidiary ledgers as may be appropriate to account for the Shared-Loss Assets and the Shared-Loss Securities, in such form and detail as the Receiver or the Corporation may require, to enable the Assuming Bank to prepare and deliver to the Receiver or the Corporation such reports as the Receiver or the Corporation may from time to time request regarding the Shared-Loss Assets, the Shared-Loss Securities and the Quarterly Certificates required by Section 2.1 of this Commercial Shared-Loss Agreement.

3.5 Related Loans.

(a)The Assuming Bank shall not manage, administer or collect any “Related Loan” in any manner which would have the effect of increasing the amount of any collections with respect to the Related Loan to the detriment of the Shared-Loss Asset to which such loan is related. A “Related Loan” means any loan or extension of credit held by the Assuming Bank at any

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time on or prior to the end of the final Recovery Quarter that is: (i) made to the same Obligor with respect to a Loan that is a Shared-Loss Asset or with respect to a Loan from which Other

Real Estate, Additional ORE or Subsidiary ORE derived, or (ii) attributable to the same primary Obligor with respect to any Loan described in clause (i) under the rules of the Assuming Bank’s Chartering Authority concerning the legal lending limits of financial institutions organized under its jurisdiction as in effect on the Commencement Date, as applied to the Assuming Bank.

(b)The Assuming Bank shall prepare and deliver to the Receiver with the Quarterly Certificates for the Calendar Quarters ending June 30 and December 31 for all Shared- Loss Quarters and Recovery Quarters, a schedule of all Related Loans which are commercial loans or commercial real estate loans with Legal Balances of $500,000 or more on the Accounting Records of the Assuming Bank as of the end of each such semi-annual period, and all other commercial loans or commercial real estate loans attributable to the same Obligor on such loans of $500,000 or more.

3.6Legal Action; Utilization of Special Receivership Powers. The Assuming Bank shall notify the Receiver in writing (such notice to be given in accordance with Article IV below and to include all relevant details) prior to utilizing in any legal action any special legal power or right which the Assuming Bank derives as a result of having acquired a Shared-Loss Asset from the Receiver, and the Assuming Bank shall not utilize any such power unless the Receiver shall have consented in writing to the proposed usage. The Receiver shall have the right to direct such proposed usage by the Assuming Bank and the Assuming Bank shall comply in all respects with such direction. Upon request of the Receiver, the Assuming Bank will advise the Receiver as to the status of any such legal action. The Assuming Bank shall immediately notify the Receiver of any judgment in litigation involving any of the aforesaid special powers or rights.

3.7Third Party Servicer. The Assuming Bank may perform any of its obligations and/or exercise any of its rights under this Commercial Shared-Loss Agreement through or by one or more Third Party Servicers, who may take actions and make expenditures as if any such Third Party Servicer was the Assuming Bank hereunder (and, for the avoidance of doubt, such expenses incurred by any such Third Party Servicer on behalf of the Assuming Bank shall be Reimbursable Expenses or Recovery Expenses, as the case may be, to the same extent such expenses would so qualify if incurred by the Assuming Bank); provided, however, that the use thereof by the Assuming Bank shall not release the Assuming Bank of any obligation or liability hereunder.

ARTICLE IV -- PORTFOLIO SALE

4.1Assuming Bank Portfolio Sales of Remaining Shared-Loss Assets. The Assuming Bank shall have the right with the concurrence of the Receiver, commencing as of the first day of the third to last Shared-Loss Quarter, to liquidate for cash consideration, in one or more transactions, all or a portion of Shared-Loss Assets held by the Assuming Bank (“Portfolio Sales”). If the Assuming Bank exercises its option under this Section 4.1, it must give thirty (30) days notice in writing to the Receiver setting forth the details and schedule for the Portfolio Sale which shall be conducted by means of sealed bid sales to third parties, not including any of the

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Assuming Bank’s affiliates, contractors, or any affiliates of the Assuming Bank’s contractors.

4.2Calculation of Sale Gain or Loss. For Shared-Loss Assets gain or loss on the sales under Section 4.1 will be calculated as the sale price received by the Assuming Bank less

the book value of the remaining Shared-Loss Assets.

ARTICLE V -- LOSS-SHARING NOTICES GIVEN TO CORPORATION AND/OR RECEIVER

As a supplement to the notice provisions contained in Section 13.7 of the Purchase and Assumption Agreement, any notice, request, demand, consent, approval, or other communication (a “Notice”) given to the Corporation and/or the Receiver in the loss-sharing context shall be given as follows:

5.1With respect to a Notice under Section 2 and Sections 3.1-3.5 of this Commercial Shared-Loss Agreement:

Federal Deposit Insurance Corporation

Division of Resolutions and Receiverships

550 17th Street, N.W.

Washington, D.C. 20429

Attention: Assistant Director, Franchise and Asset Marketing

5.2With respect to a Notice under Section 3.6 of this Commercial Shared-Loss Agreement:

Federal Deposit Insurance Corporation Legal Division

1601 Bryan Street

Dallas, Texas 75201

Attention: Regional Counsel

with a copy to:

Federal Deposit Insurance Corporation Legal Division 550

17th Street, N.W.

Washington, D.C. 20429

Attention: Senior Counsel (Special Issues Group)

ARTICLE VI - MISCELLANEOUS

6.1Expenses. Except as otherwise expressly provided herein, all costs and expenses incurred by a party hereto in connection with this Commercial Shared-Loss Agreement shall be

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borne by such party whether or not the transactions contemplated herein shall be consummated.

6.2 Successors and Assigns; Specific Performance. All terms and provisions of this

Commercial Shared-Loss Agreement shall be binding upon and shall inure to the benefit of the parties hereto only; provided, however, that, Receiver may assign or otherwise transfer this Commercial Shared-Loss Agreement (in whole or in part) to the Federal Deposit Insurance Corporation in its corporate capacity without the consent of Assuming Bank. Notwithstanding anything to the contrary contained in this Commercial Shared-Loss Agreement, except as is expressly permitted in this Section 6.2, Assuming Bank may not assign or otherwise transfer this Commercial Shared-Loss Agreement (in whole or in part) without the prior written consent of the Receiver, which consent may be granted or withheld by the Receiver in its sole discretion, and any attempted assignment or transfer in violation of this provision shall be void ab initio. For the avoidance of doubt, a merger or consolidation of the Assuming Bank with and into another financial institution, the sale of all or substantially all of the assets of the Assuming Bank to another financial institution constitutes the transfer of this Commercial Shared-Loss Agreement which requires the consent of the Receiver; and for a period of thirty-six (36) months after Bank Closing, a merger or consolidation shall also include the sale by any one or more shareholders of more than nine percent (9%) of the outstanding Shares of the Assuming Bank, or of its Holding Company, or of any subsidiary holding Shared-Loss Assets or Shared-Loss Securities, or the sale of Shares by the Assuming Bank or its Holding Company or any subsidiary holding Shared-Loss Assets or Shared-Loss Loans, in a public or private offering, that increases the number of Shares outstanding by more than 9% and after issuance results in a change of shareholder interest of more than 9%, constitutes the transfer of this Commercial Shared-Loss Agreement which requires the consent of the Receiver. No Loss shall be recognized as a result of any accounting adjustments that are made due to any such merger, consolidation or sale consented to by the FDIC.

6.3WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF OR RELATING TO OR IN CONNECTION WITH THIS COMMERCIAL SHARED-LOSS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

6.4No Third Party Beneficiary. This Commercial Shared-Loss Agreement and the Exhibits hereto are for the sole and exclusive benefit of the parties hereto and their respective permitted successors and permitted assigns and there shall be no other third party beneficiaries, and nothing in Commercial Shared-Loss Agreement or the Exhibits shall be construed to grant to any other Person any right, remedy or claim under or in respect of this Commercial Shared-Loss Agreement or any provision hereof.

6.5Consent. Except as otherwise provided herein, when the consent of a party is required herein, such consent shall not be unreasonably withheld or delayed.

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6.6Rights Cumulative. Except as otherwise expressly provided herein, the rights of each of the parties under this Commercial Shared-Loss Agreement are cumulative, may be exercised as often as any party considers appropriate and are in addition to each such party’s rights under the Purchase and Sale Agreement and any of the related agreements or under law. Except as otherwise expressly provided herein, any failure to exercise or any delay in exercising

any of such rights, or any partial or defective exercise of such rights, shall not operate as a waiver or variation of that or any other such right.

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Exhibit 1

For the commercial and other pool, the FDIC reporting requirement includes the following: o A quarterly loan level download for all loans in the asset pool

◦ A quarterly asset level download of commercial ORE

◦ A quarterly certificate report that includes 3 sections:

◦ 1: A summary report of total covered losses for the quarter and the derivation of the FDIC portion of the covered loss

◦ 2: A summary report on the commercial and other portfolio and covered losses

and recoveries

◦ 3: A performance report on the outstanding commercial and other pool assets under loss share

◦ A quarterly listing of assets with covered losses

The loan level download exactly follows the format of loan downloads used for examinations, which can be found at:

A blank version of the quarterly certificate report is shown below.

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ADDENDUM TO PURCHASE AND ASSUMPTION AGREEMENT

This Addendum to the Purchase and Assumption Agreement (this "Addendum"), made and entered into as of the 21st day of August, 2009, by and among the FEDERAL DEPOSIT INSURANCE CORPORATION, RECEIVER of Guaranty Bank, Austin, Texas (the "Receiver"), Compass Bank, Birmingham, Alabama, organized under the laws of the State of Alabama, and having its principal place of business in Birmingham, Alabama (the "Assuming Bank"), and the FEDERAL DEPOSIT INSURANCE CORPORATION, organized under the laws of the United States of America and having its principal office in Washington, D.C., acting in its corporate capacity (the "Corporation" and together with the Receiver and the Assuming Bank, the "Parties"). Concurrently herewith, the Parties are entering into a Purchase and Assumption (Whole Bank) with Loss Share Agreement (which includes as exhibits thereto the Single Family Shared-Loss Agreement and the Commercial Shared-Loss Agreement) (the "Agreement"), pursuant to which the Assuming Bank will acquire certain assets and assume deposits and certain other liabilities of Guaranty Bank from the Receiver. The parties desire to modify the terms of the Agreement as set forth herein, In consideration of the mutual promises herein set forth and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, the Parties hereby agree as follows:

Section 1.Interpretation. Unless otherwise specifically defined herein, each capitalized term used herein shall have the meaning assigned to such term in the Agreement. Each reference in the Agreement to "hereof," "herein," "hereunder," "hereby," "this Agreement" and like references shall refer to the Agreement as modified by this Addendum. Except as set forth herein, the Agreement will remain in full force and effect and shall be otherwise unaffected hereby. In the event of any conflict or inconsistency between the provisions of this Addendum and the Agreement with respect to the matters set forth herein, the provisions of this Addendum shall govern. Capitalized terms used herein that are not defined herein are defined in the Agreement.

Section 2.Payment in the Event Losses Fail to Reach Expected Level. On the date that is 45 days following the last day (such day, the "True-Up Measurement Date") of the calendar month in which the tenth anniversary of the calendar day following the Bank Closing occurs, the Assuming Bank shall pay to the Receiver sixty percent (60%) of the excess, if any, of

(i)twenty percent (20%) of the Stated Threshold less (ii) the sum of (A) twenty- five percent 25%) of the Cumulative Shared-Loss Payments plus (B) twenty percent (20%) of the Cumulative Servicing Payments. The Assuming Bank shall deliver to the Receiver not later than 30 days following the True-Up Measurement Date, a schedule, signed by an officer of the Assuming Bank, setting forth in reasonable detail the calculation of the Cumulative Shared-Loss Payments and the Cumulative Servicing Payments.

The Stated Threshold, as provided in the Agreement, is $2,285,000,000.00.

"Cumulative Shared-Loss Payments" means (i) the aggregate of all of the payments made or payable to the Assuming Bank under the Shared-Loss Agreements minus (ii) the aggregate of all of the payments made or payable to the Receiver under the Shared-Loss Agreements.

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"Cumulative Servicing Payments" means the sum of the Period Servicing Amounts for every consecutive twelve-month period prior to and ending on the True-Up Measurement Date in respect of each of the Shared-Loss Agreements during which the applicable Shared-Loss Agreement is in effect.

"Period Servicing Amount" means, for any twelve month period with respect to each of the Shared­ Loss Agreements during which such Shared-Loss Agreement is in effect, the product of(i) the simple average of the principal amount of Shared-Loss Loans and Shared-Loss Assets (in each case as defined in the Shared-Loss Agreements), as the case may be, at the beginning of such period and at the end of such period times (ii) two percent (2%).

Section 3.Counterparts. This Addendum may be executed in any number of counterparts and by the duly authorized representative of a different Party on separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be executed by their duly authorized representatives as of the date first above written.

FEDERAL DEPOSIT INSURANCE CORPORATION, RECEIVER

GUARANTY BANK, AUSTIN, TEXAS

BY: /s/ Andrew F. Basel

NAME: Andrew F. Basel

TITLE: Receiver-in-Charge

FEDERAL DEPOSIT INSURANCE CORPORATION

BY: /s/ Andrew F. Basel

NAME: Andrew F. Basel

TITLE: Receiver-in-Charge

COMPASS BANK, BIRMINGHAM, ALABAMA

BY: /s/ Jerry W. Powell

NAME: Jerry W. Powell

TITLE: General Counsel and Secretary

Attest:

/s/ B. Shane Clanton

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EX-3.1

Exhibit 3.1

CERTIFICATE OF FORMATION

OF

BBVA COMPASS BANCSHARES, INC.

(as amended to date, effective May 14, 2013, and restated for SEC filing purposes)

ARTICLE 1

The filing entity being formed is a for-profit corporation. The name of the entity is BBVA Compass Bancshares, Inc.

ARTICLE 2

Registered Agent and Registered Office

The initial registered agent is an organization by the name of CT Corporation System.

The business address of the registered agent and the registered office address is 350 N. St. Paul Street, Dallas, TX 75201.

ARTICLE 3

Directors

The number of directors constituting the initial board of directors and the names and addresses of the person or persons who are to serve as directors until the first annual meeting of shareholders or until their successors are elected and qualified are as follows:

Peter Paulson

BBVA USA

Waterway Plaza Two, Suite 610

1001 Woodloch Forest Drive

The Woodlands, Texas 77308

ARTICLE 4

Authorized Shares

The total number of shares the corporation is authorized to issue is 300,000,000. The par value of each of the authorized shares is $0.01.

ARTICLE 5

Purpose

The purpose for which the corporation is formed is for the transaction of any and all lawful business for which a for-profit corporation may be organized under the Texas Business Organizations Code.

ORGANIZER

The name and address of the organizer:

Alexander Gillette

CGSH, LLP

One Liberty Plaza

New York, New York 10006

EFFECTIVENESS OF FILING

This document becomes effective when the document is filed by the secretary of state.

EXECUTION

The undersigned signs this document subject to the penalties imposed by law for the submission of a materially false or fraudulent instrument.

Date: February 15, 2007

/s/ Alexander Gillette

Signature of Organizer

EX-3.2

Exhibit 3.2

BYLAWS
ofBBVA COMPASS BANCSHARES, INC.

ARTICLE I

Offices

Section 1.Registered Office. The registered office of BBVA Compass Bancshares, Inc. (hereinafter called the “Corporation”), until changed by action of the Board of Directors of the Corporation (hereinafter called the “Board”), shall be c/o CT Corporation System, 350 N. St. Paul Street, Dallas, Texas 75201.

Section 2.Other Offices. The Corporation may also have an office or offices and keep the books and records of the Corporation, except as may otherwise be required by the laws of the State of Texas, at such other place or places either within or without the State of Texas as the Board may from time to time determine or the business may require.

ARTICLE II
Meetings of the Sole Stockholder

Section 1.    Place of Meetings. All meetings of the sole stockholder of the Corporation shall be held at such place within or without the State of Texas as the Board may from time to time designate, as stated in the notice of such meeting or a duly executed waiver of notice thereof.

Section 2.    Annual Meetings. The annual meeting of the sole stockholder of the Corporation for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held at such time and date as the Board shall designate.

Section 3.    Special Meetings. Special meetings of the sole stockholder of the Corporation, for any purpose or purposes, may be called by the Chairman of the Board, the Chief Executive Officer (the “CEO”), the President, the Board, or the sole stockholder. If not otherwise fixed in accordance with these Bylaws, the record date for determining stockholders entitled to call a special meeting is the date the sole stockholder signs the notice of such meeting.

Section 4.    Notices of Meetings. Except as may otherwise be required by law, notice of each meeting of the sole stockholder of the Corporation, annual or special, shall be in writing and shall state the place where it is to be held, the date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes thereof, and a copy thereof shall be served either personally or by mail upon such sole stockholder , not less than ten (10) nor more than sixty (60) days before the meeting either personally or by mail, or by any other method permitted by applicable law, (including, without limitation, on consent of a stockholder in accordance with applicable law, by electronic transmission which may be by facsimile, electronic mail, electronic network or any other electronic transmission consented to by the stockholder) by or at the direction of the President, the Secretary, or the officer or person calling the meeting, to such sole stockholder. Notices of any meeting of the sole stockholder shall not be required to be given to such sole stockholder if such sole stockholder attends such meeting in person or by proxy except when the sole stockholder attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Notice of any adjourned meeting of the sole stockholder need not be given except as otherwise provided in this Article II. In the case of a special meeting the business transacted thereat shall be confined to the purposes stated in the notice thereof.

¹The name of the corporation was changed from BBVA USA Bancshares, Inc. to BBVA Compass Bancshares, Inc. effective May 14, 2013.

1

Exhibit 3.2

Section 5.    Quorum. Except as otherwise provided by the laws of Texas, at each meeting of the sole stockholder of the Corporation the holder of shares sufficient to cast a majority of the votes represented by all voting shares of stock of the Corporation issued and outstanding and entitled to vote at such meeting, present in person or by proxy, shall constitute a quorum.

Section 6.    Adjournments. At any annual or special meeting of the sole stockholder of the Corporation, such sole stockholder may adjourn the meeting from time to time to another time or place, at which time, if a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. Notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, unless the adjournment is for more than thirty days or a new record date is fixed for the adjourned meeting, in which event a notice of the adjourned meeting shall be given to the sole stockholder of the Corporation.

Section 7.    Organization. Each meeting of the sole stockholder shall be presided over by the Chairman of the Board, or in his absence by the CEO, or in his absence the President, or in the absence of the Chairman, the CEO, and the President by a Vice Chairman, or if neither the Chairman nor the President nor any Vice Chairman is present, by an Executive Vice President. The Secretary, or in his absence an Assistant Secretary, shall act as secretary of each meeting of the sole stockholder. In the absence of the Secretary and all the Assistant Secretaries the chairman of the meeting may appoint any person present to act as secretary of the meeting.

Section 8.    Order of Business. The order of business at all meetings of the sole stockholder shall be as determined by the chairman of the meeting.

Section 9.    Voting. With respect to each meeting of the sole stockholder of the Corporation, the sole stockholder shall be entitled to vote the common or other shares of voting stock standing in its name on the books of the Corporation and entitled to be voted at such meeting at the close of business on the day next preceding the day on which such meeting is held., provided that such sole stockholder attends the meeting, waives notice of the meeting or acts by written consent in lieu of a meeting

Each share of common stock shall be entitled to one vote per share. Each share of other voting stock of the Corporation shall be entitled to such number of votes as may be provided in the Certificate of Formation or resolutions of the Board of the Corporation establishing such stock. Except as permitted by law, shares of its own stock belonging to the Corporation shall not be voted directly or indirectly. The sole stockholder of the Corporation may cast such vote in person or by proxy appointed by an instrument in writing, signed by such sole stockholder or its duly authorized attorney and delivered to the secretary of the meeting; provided, however, that no proxy shall be voted after three (3) years from its date, unless the proxy provides for a longer duration.

Section 10.    Action by Written Consent Without a Meeting. Any action required or permitted to be taken at any annual or special meeting of the sole stockholder of the Corporation may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, is signed by such sole stockholder. An electronic transmission by the sole stockholder, or a facsimile or similar reproduction of a writing signed by the sole stockholder, shall be regarded as signed by the sole stockholder for purposes of this section.

ARTICLE III
Directors

Section 1.    General Powers. The Board shall oversee the management of the business and affairs of the Corporation and may exercise all such authority and powers of the Corporation and do all such lawful acts and things as are not by law, the Certificate of Formation, as amended, or these Bylaws directed or required to be exercised or done by the sole stockholder of the Corporation.

Section 2.    Number; Vacancies. The number of directors of the Corporation shall be determined as provided in the Certificate of Formation; thereafter, the number of directors shall be determined by resolution of the Board, but no decrease in the number of directors shall have the effect of shortening the term of any incumbent director.

2

Exhibit 3.2

When any vacancy occurs among the directors, a majority of the remaining members of the Board, according to the Texas Business Organizations Code, may appoint a director to fill such vacancy at any regular meeting of the board, or at a special meeting called for that purpose at which a quorum is present, or if the directors remaining in office constitute fewer than a quorum of the board, by the affirmative vote of a majority of all the directors remaining in office, or by the sole stockholder of the Corporation at a special meeting called for that purpose, in conformance with Section 3 of Article II.

A vacancy that will occur at a specific later date (by reason of a resignation effective at a later date) may be filled before the vacancy occurs but the new director may not take office until the vacancy occurs.

Any directorship to be filled by reason of an increase in the number of directors may be filled in the manner specified above for filling a vacancy among the directors; provided that the Board may not fill more than two such directorships during the period between any two successive annual meetings of stockholders.

Section 3.    Quorum of Directors. A majority of the director positions on the board shall constitute a quorum at any meeting, except when otherwise provided by law, or the bylaws, provided that a quorum may not be reduced to below one third of the number of director positions, but a lesser number may adjourn any meeting, from time to time, and the meeting may be held, as adjourned, without further notice. If the number of directors is reduced below the number that would constitute a quorum, no business may be transacted, except selecting directors to fill vacancies in conformance with Section 2 of this Article III.

Section 4.    Act of Directors’ Meeting. If a quorum is present when a vote is taken, the affirmative vote of a majority of directors present is the act of the Board.

Section 5.    Place of Meeting. The Board may hold its meetings at such places within or without the State of Texas as the Board from time to time may determine or as shall be specified or fixed in the respective notices or waivers of notice thereof.

Section 6.    Annual Meeting. The Board shall meet for the purpose of organization, the election of officers and the transaction of other business, as soon as practicable after each annual election of directors, on the same day and at the same place at which such election is held or at such other time or place as shall be specified in a notice given as hereinafter provided for special meetings of the Board or in a consent and waiver of notice thereof signed by all the directors.

Section 7.    Regular Meetings. Regular meetings of the Board shall be held at such times and places as the Board by resolution may determine. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which would otherwise be held on that day shall be held at said place at the same hour on the next succeeding business day not a legal holiday. Notice of regular meetings need not be given.

Section 8.    Special Meetings; Notice. Special meetings of the Board shall be held whenever called by the Chairman of the Board or by the Board. Notice of each such meeting shall be mailed to each director, addressed to him at his residence or usual place of business, at least three (3) days before the day on which the meeting is to be held, or shall be delivered, at least one (1) day before the day on which the meeting is to be held, personally or by any other method permitted under applicable law (including, without limitation, on consent of a director in accordance with applicable law, by electronic transmission which may be by facsimile, electronic mail, electronic network or any other electronic transmission consented to by the director). If mailed, such notice shall be deemed to be delivered at the time when the same shall be deposited in the United States mail with sufficient postage thereon prepaid. If sent by electronic transmission, such notice shall be deemed to be provided when transmitted to the number or address provided by the director or otherwise communicated to the director by means consented to by the director, in each case in accordance with applicable law.

Section 9.    Organization. At each meeting of the Board, the Chairman of the Board or in his absence the CEO or in his absence the President or in his absence the Vice Chairman, or in his absence a director chosen by a

3

Exhibit 3.2

majority of the directors prevent, shall act as chairman of such meeting and preside thereat. The Secretary, or in his absence an Assistant Secretary, or in the absence of the Secretary and the Assistant Secretaries, any person appointed by the chairman shall act as secretary of the meeting and keep the minutes thereof.

Section 10.    Order of Business. At all meetings of the Board business shall be transacted in the order determined by the chairman of the meeting, subject to the approval of the Board.

Section 11.    Resignations. Any director may resign at any time by giving written notice to the Chairman or to the Secretary of the Corporation. Such resignation shall take effect upon receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

Section 12.    Removal of Directors. At any meeting of the sole stockholder called expressly for the purpose of removing a director or directors, any director or the entire Board may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of directors.

Section 13.    Compensation. Each director, in consideration of his serving as such, shall be entitled to receive from the Corporation such amount per annum or such fees for attendance at directors’ meetings, or both, as the Board shall from time to time determine, together with reimbursement for the reasonable expenses incurred by him in connection with the performance of his duties. Each director who shall serve as a member of any committee of the Board, in consideration of his serving as such, shall be entitled to such additional amount per annum or such fees for attendance at committee meetings, or both, as the Board shall from time to time determine, together with reimbursement for the reasonable expenses incurred by him in connection with the performance of his duties. Nothing herein contained shall preclude any director from serving the Corporation in any other capacity and receiving proper compensation therefor.

Section 14.    Action by Written Consent Without a Meeting. Any action required or permitted to be taken at a meeting of the Board or any committee thereof may be taken without a meeting if a consent in writing, setting forth the action so taken, is signed by all members of the Board or committee, as the case may be. Such consent shall be filed with the minutes of the proceedings of the Board or committee, as the case may be. Such consent shall have the same force and effect as a unanimous vote at a meeting.

ARTICLE IV
Executive And Other Committees

Section 1.    Executive Committee. The Board may designate an Executive Committee to consist of three or more members of the Board, one of whom shall be the Chairman of the Board who shall also serve as Chairman of the Executive Committee.

Section 2.    Vacancies. The Board shall have the power to change the membership of the Executive Committee at any time, to fill vacancies therein and to discharge the Executive Committee or to remove any member thereof, either with or without cause, at any time.

Section 3.    Executive Committee to Report. All completed action by the Executive Committee shall be reported to the Board at its meeting next succeeding such action or at its meeting held in the month following the taking of such action, and shall be subject to revision or alteration by the Board.

Section 4.    Procedure. Meetings of the Executive Committee shall be held at such times and places as the Chairman of the Executive Committee may determine. The Executive Committee, by a vote of a majority of its members, may fix its rules of procedure, determine its manner of acting and specify what notice, if any, of meetings shall be given, except as the Board shall by resolution otherwise provide. A majority of the members on the Executive Committee shall constitute a quorum at any meeting of the Executive Committee. If a quorum is present when a vote is taken, the affirmative vote of a majority of directors present is the act of the Executive Committee.

4

Exhibit 3.2

Section 5.    Powers. Except as otherwise provided by law or the Certificate of Formation, the Executive Committee shall have and may exercise the powers of the Board in the management of the business and affairs of the Corporation in the intervals between meetings of the Board in all cases in which specific directions shall not have been given by the Board, and shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it.

Section 6.    Other Committees. The Board may designate members of the Board to constitute other committees which shall in each case consist of such number of directors, and shall have and may execute such powers as may be determined and specified in the respective resolutions appointing them. A majority of all the members of any such committee may fix its rules of procedure, determine its manner of acting and fix the time and place, whether within or without the State of Texas, of its meetings and specify what notice thereof, if any, shall be given, unless the Board shall otherwise by resolution provide. The Board shall have the power to change the membership of any such committee at any time, to fill vacancies therein and to discharge any such committee or to remove any member thereof, either with or without cause, at any time.

ARTICLE V
Officers of the Corporation and Chairman of the Board

Section 1.    Titles. The principal officers of the Corporation shall be a President, a CEO, one or more Executive Vice Presidents or Vice Presidents, a Secretary and a Treasurer. Other officers may be appointed in accordance with the provisions of this Article V. One person may hold the office and perform the duties of any two or more of said officers.

Section 2.    Election, Term of Office and Qualifications. The principal officers shall be elected annually by the Board. Each officer, except as may be appointed in accordance with the provisions of this Article V, shall hold office until his successor shall have been chosen and shall qualify or until his death or until he shall have resigned or until he shall have been removed in the manner hereinafter provided.

Section 3.    Appointive Officers. The Board may from time to time appoint or delegate the appointment of such other officers as it may deem necessary, including one or more Assistant Secretaries and one or more Assistant Treasurers. Such officers shall hold office for such period, have such authority and perform such duties, subject to the control of the Board, as are in these Bylaws provided or as the CEO, the President or the Board may from time to time prescribe. The CEO and the President shall have authority to appoint and remove agents and employees and to prescribe their powers and duties and may authorize any other officer or officers to do so.

Section 4.    Removal. Any officer elected by the Board may be removed either with or without cause, at any time by the Board at any meeting of the Board called for the purpose.

Section 5.    Resignation. Any officer may resign at any time by giving written notice to the CEO or to the President or to the Secretary. Such resignation shall take effect upon receipt of such notice or at any later time specified therein; and unless otherwise specified therein the acceptance of such resignation shall not be necessary to make it effective.

Section 6.    Vacancies. A vacancy in any office because of death, resignation, removal or other causes shall be filled for the unexpired portion of the term in the manner prescribed by these Bylaws for regular election or appointment to such office.

Section 7.    The Chief Executive Officer. The Chief Executive Officer of the Corporation shall serve as the chief executive of the Corporation and have general and active supervision over the business and, affairs of the Corporation, subject to the control of the Board. In the absence or inability to act of the Chairman of the Board, the CEO shall, when present, preside at all meetings of the Board and of the sole stockholder of the Corporation. He shall have such powers and perform such duties as may from time to time be assigned to him by the Board or as may be prescribed by these Bylaws.

5

Exhibit 3.2

Section 8.    The President. The President shall have such powers and perform such duties as may from time to time be assigned to him by the CEO or the Board or as may be prescribed by these Bylaws.

Section 9.    Executive Vice Presidents. Each Executive Vice President shall have such powers and perform such duties as may from time to time be assigned to him by the CEO or the Board or as may be prescribed in these Bylaws.

Section 10.    Vice Presidents. Each Vice President shall have such powers and perform such duties as may from time to time be assigned to him by the CEO or the Board or as may be prescribed in these Bylaws.

Section 11.    The Secretary. The Secretary, if present, shall act as secretary at all meetings of the Board and of the sole stockholder of the Corporation and keep the minutes thereof in a book or books to be provided for that purpose; shall see that all notices required to be given by the Corporation are duly given and served; shall be custodian of the seal of the Corporation and shall affix the seal or cause it or a facsimile thereof to be affixed to all certificates of stock of the Corporation and to all documents the execution of which on behalf of the Corporation under its seal shall be duly authorized in accordance with the provisions of these Bylaws; shall have charge of the stock records of the Corporation; shall see that all reports, statements and other documents required by law are properly kept and filed; may sign, with any other proper officer of the Corporation thereunto authorized, certificates for stock of the Corporation; and, in general, shall perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the CEO or the Board.

Section 12.    Assistant Secretaries. The Assistant Secretaries shall perform such duties as from time to time may be assigned to them by the CEO, the Secretary or the Board. At the request of the Secretary, or in case of his absence or inability to act, any Assistant Secretary may act in his place.

Section 13.    The Treasurer. The Treasurer shall have charge and custody of, and be responsible for, all funds and securities of the Corporation, and shall deposit all such funds in the name of the Corporation in such banks or other depositories as shall be selected or authorized to be selected by the Board; shall render or cause to be rendered a statement of the condition of the finances of the Corporation at all regular meetings of the Board, and a full financial report at the annual meeting of the sole stockholder of the Corporation, if called upon so to do; shall receive and give receipt for moneys due and payable to the Corporation from any source whatsoever and, in general, shall perform or cause to be performed all the dudes incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the CEO or the Board.

Section 14.    Assistant Treasurers. The Assistant Treasurers shall perform such duties as from time to time may be assigned to them by the CEO, the Treasurer or the Board. At the request of the Treasurer, or in case of his absence or inability to act, any Assistant Treasurer may act in his place.

Section 15.    The Chairman of the Board. The Corporation shall also have a non-executive Chairman of the Board who shall, when present, preside at all meetings of the Board, the Executive Committee and the sole stockholder of the Corporation. He shall be ex officio a member of all committees of the Board unless otherwise provided in the Board resolution providing for a particular committee. In general, he shall perform all the duties incident to the office of non-executive Chairman of the Board and such other duties as the Board may from time to time determine. or as may be prescribed in these Bylaws.

Section 16.    Vice Chairman. One or more Vice Chairman may also be elected by the Board and, if elected, each Vice Chairman shall have such powers and perform such duties as may from time to time be assigned to him by the Chairman of the Board or the Board or as may be prescribed in these Bylaws.

Section 17.    Indemnification of Directors and Officers. Without limitation, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director, officer, employee, or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against

6

Exhibit 3.2

expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding to the full extent permitted by the Texas Business Organizations Code, upon such determination having been made as to his good faith and conduct to the extent required bythe Texas Business Organizations Code. Expenses incurred in defending a civil or criminal action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding to the extent, if any, authorized by the Board in accordance with the provisions of the Texas Business Organizations Code, upon receipt of any written affirmation and/or undertakingrequired by the Texas Business Organizations Code.

ARTICLE VIContracts, Checks, Bank Accounts, Etc.

Section 1.    Contracts, etc., How Executed. The Board may authorize any officer or officers or agent or agents to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances and if the Board so provides may be delegated by the person so authorized; and, unless so authorized by the Board or these Bylaws, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable pecuniarily for any purpose or to any amount.

Section 2.    Loans. No loan shall be contracted on behalf of the Corporation, and no negotiable paper shall be issued in its name, unless authorized by the Board. When so authorized, the CEO, the President or an Executive Vice President may effect loans and advances at any time for the Corporation from any bank, trust company or other institution or from any firm, corporation or individual, and for such loans and advances the CEO, the President or an Executive Vice President or a Vice President or the Treasurer may make, execute and deliver, with the counter-signature, unless otherwise authorized by the Board, of the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, bonds, debentures, promissory notes or other evidences of indebtedness of the Corporation and, when authorized as aforesaid, as security for the payment of any and all loans, advances, indebtedness and liabilities of the Corporation, may mortgage, pledge, hypothecate or transfer any real or personal property at any time held by the Corporation and to that end execute and deliver instruments of mortgage or pledge or otherwise transfer such property. Any authority so granted by the Board may be general or confined to specific instances and if the Board so provides may be delegated by the person so authorized.

Section 3.    Checks, Drafts, etc. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, or agent or agents, as shall from time to time be determined by resolution of the Board.

Section 4.    Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation or otherwise as the CEO, the President or any other officer or officers authorized by the Board shall direct in such banks, trust companies or other depositaries as may be selected by the CEO, the President or any other officer or officers or agent or agents to whom power in that respect shall have been delegated by the Board. For the purpose of deposit and for the purpose of collection for the account of the Corporation, checks, drafts and other orders for the payment of money which are payable to the order of the Corporation may be endorsed, assigned and delivered by such officer or officers or agent or agents as shall be determined by the CEO, the President or any other officer or officers designated by the Board.

Section 5.    General and Special Bank Accounts. The Board or the CEO, the President or any other officer or officers designated by the Board may from time to time authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositaries as may be selected by the CEO, the President or any other officer or officers or agent or agents to whom power in that respect shall have been delegated by the Board. The Board may make such special rules and regulations with respect to such bank accounts, not inconsistent with the provisions of these Bylaws, as it may deem expedient.

7

Exhibit 3.2

ARTICLE VII
Waiver of Notice

Whenever any notice whatever is required to be given by these Bylaws or by statute, the person entitled thereto may in person, or in the case of a stockholder by his attorney thereunto duly authorized, waive such notice in writing (including telegraph, cable, radio or wireless), whether before or after the meeting, or other matter in respect of which such notice is to be given, and in such event such notice need not be given to such person and such waiver shall be equivalent to such notice, and any action to be taken after such notice or after the lapse of a prescribed period of time may be taken without such notice and without the lapse of any period of time.

ARTICLE VIII
Seal

The seal of the Corporation shall be in the form of a circle and shall bear the name of the Corporation and the year of its incorporation.

ARTICLE IX
Fiscal Year

The fiscal year of the Corporation shall begin on the first day of January and end on the last day of December in each year.

ARTICLE X
Amendments

These Bylaws may be amended, altered or repealed, at any regular meeting of the Board, by a vote of a majority of the total number of the directors except as provided below. The Corporation's sole stockholder may amend or repeal these Bylaws even though these Bylaws also may be amended or repealed by its Board.

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EX-21

Exhibit 21

Subsidiaries

Name	State or other jurisdiction of incorporation or organization
American Finance Group, Inc.	Delaware
Arizona Financial Products, Inc.	Arizona
BBVA Compass Financial Corporation	Alabama
BBVA Compass Insurance Agency, Inc.	Texas
BBVA Securities Inc.	Delaware
BBVA Wealth Solutions, Inc.	Texas
Bellasera Holdings, LLC	Alabama
Capital Investment Counsel, Inc.	Colorado
CB FNB, LLC	Texas
CB Transport, Inc.	Alabama
Chelsea Commercial Holdings, LLC	Alabama
Compass Asset Acceptance Company, LLC	Delaware
Compass Auto Receivables Corporation	Delaware
Compass Bank	Alabama
Compass Capital Markets, Inc.	Alabama
Compass Custodial Services, Inc.	Nevada
Compass GP, Inc.	Delaware
Compass Insurance Trust	Delaware
Compass Investments, Inc.	Alabama
Compass Limited Partner, Inc.	Delaware
Compass Loan Holdings TRS, Inc.	Alabama
Compass Mortgage Corporation	Alabama
Compass Mortgage Financing, Inc.	Delaware
Compass Multistate Services Corporation	Alabama
Compass Southwest, L.P.	Delaware
Compass Texas Acquisition Corp.	Delaware
Compass Texas Mortgage Financing, Inc.	Delaware
Compass Trust II	Delaware
Compass Wealth Managers Company	Texas
FL-ORE P.I. Holdings 3, LLC	Florida
Guaranty Business Credit Corporation	Delaware
Guaranty Plus Holding Company	Nevada
Guaranty Plus Properties Inc. - 1	Delaware
Guaranty Plus Properties LLC - 2	Texas
Guaranty Plus Properties LLC - 3	Texas
Guaranty Plus Properties LLC - 4	Texas
Guaranty Plus Properties LLC - 5	Texas
Guaranty Plus Properties LLC - 6	Texas
Guaranty Plus Properties LLC - 7	Texas
Guaranty Plus Properties LLC - 8	Texas
Guaranty Plus Properties LLC - 9	Texas
Homeowners Loan Corporation	Delaware

Name	State or other jurisdiction of incorporation or organization
Human Resources Provider, Inc.	Alabama
Human Resources Support, Inc.	Delaware
Lee Branch Holdings, LLC	Alabama
Liquidity Advisors, L.P.	Delaware
Micro Spinal, LLC	Florida
Phoenix Loan Holdings, Inc.	Delaware
P.I. Holdings GPP, Inc.	Delaware
P.I. Holdings No. 1, Inc.	Texas
P.I. Holdings No. 3, Inc.	Texas
P.I. Holdings No. 4, Inc.	Texas
Pinnacle Lee Branch Holdings, LLC	Alabama
Port Arthur Abstract & Title Company	Texas
River Oaks Bank Building, Inc.	Texas
River Oaks Trust Corporation	Texas
Southeast Texas Title Company	Texas
State National Capital Trust I	Delaware
State National Statutory Trust II	Connecticut
Texas Loan Services, L.P.	Delaware
Texas Mezzanine Fund, Inc.	Texas
Texas Regional Statutory Trust I	Connecticut
TexasBanc Capital Trust I	Delaware
TMF Holding, Inc.	Delaware
Tucson Loan Holdings, Inc.	Delaware
TWOENC, Inc.	Texas
Velocity Residential, LLC	Tennessee
Velocity Residential II, LLC	Tennessee