10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2009.

OR

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

Commission file number 0-13089

Hancock Holding Company

(Exact name of registrant as specified in its charter)

Mississippi	64-0693170
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

One Hancock Plaza, Gulfport, Mississippi	39501	(228) 868-4727
(Address of principal executive offices)	(Zip Code)	Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

COMMON STOCK, $3.33 PAR VALUE	The NASDAQ Stock Market, LLC
(Title of Class)	(Name of Exchange on Which Registered)

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    Yes  ¨    No  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨

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

The aggregate market value of the voting stock held by nonaffiliates of the registrant as of June 30, 2009 was $983,015,361 based upon the closing market price on NASDAQ as of such date. For purposes of this calculation only, shares held by nonaffiliates are deemed to consist of (a) shares held by all shareholders other than directors and executive officers of the registrant plus (b) shares held by directors and officers as to which beneficial ownership has been disclaimed.

On February 1, 2010, the registrant had outstanding 36,851,700 shares of common stock for financial statement purposes.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Annual Report to Stockholders for the year ended December 31, 2009 are incorporated by reference into Part I and Part II of this report.

Portions of the definitive Proxy Statement used in connection with the Registrant’s Annual Meeting of Shareholders to be held on March 17, 2010 are incorporated by reference into Part III of this report.

Hancock Holding Company

Form 10-K

Index

PART I
ITEM 1.	BUSINESS	1
ITEM 1A.	RISK FACTORS	12
ITEM 1B.	UNRESOLVED STAFF COMMENTS	19
ITEM 2.	PROPERTIES	19
ITEM 3.	LEGAL PROCEEDINGS	20
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	20
PART II
ITEM 5.	MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	20
ITEM 6.	SELECTED FINANCIAL DATA	23
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	26
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	54
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	55
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	106
ITEM 9A.	CONTROLS AND PROCEDURES	107
ITEM 9B.	OTHER INFORMATION	107
PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	108
ITEM 11.	EXECUTIVE COMPENSATION	108
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	108
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	108
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	108
PART IV
ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	108

PART I

ITEM 1: BUSINESS

ORGANIZATION AND RECENT DEVELOPMENTS

Hancock Holding Company (the Company), organized in 1984 as a bank holding company registered under the Bank Holding Company Act of 1956, as amended, is headquartered in Gulfport, Mississippi. In 2002, the Company qualified as a financial holding company giving it broader powers. The Company operates through four wholly-owned bank subsidiaries, Hancock Bank, Gulfport, Mississippi (Hancock Bank MS), Hancock Bank of Louisiana, Baton Rouge, Louisiana (Hancock Bank LA), Hancock Bank of Florida, Tallahassee, Florida (Hancock Bank FL) and Hancock Bank of Alabama, Mobile, Alabama (Hancock Bank AL). Effective January 1, 2010, Hancock Bank of Florida will be merged into Hancock Bank. Hancock Bank MS, Hancock Bank LA, Hancock Bank FL and Hancock Bank AL are referred to collectively as the “Banks”.

On October 26, 2009, the company closed a very successful common stock offering. In connection with the offering, the company issued 4,945,000 shares of common stock at a price of $35.50. Gross proceeds were $175.5 million with net proceeds of $167.3 million after expenses. The proceeds of the offering are intended to be used for general corporate purposes, which may include financing acquisition opportunities and other expansion efforts.

On December 18, 2009, the Company acquired the assets and assumed the liabilities of Panama City, FL, based Peoples First Community Bank (Peoples First) through a purchase and assumption agreement containing a loss-sharing clause with the Federal Deposit Insurance Corporation (FDIC). The loss-sharing clause lessens the significant credit risk that usually accompanies a more traditional merger or acquisition. As a result of the loss-sharing clause, FDIC will cover all acquired loans with reimbursement of 80 percent of losses up to $385 million and 95 percent of losses beyond $385 million. The Company recorded an FDIC loss share receivable of $325.6 million. Hancock Bank acquired approximately $1.71 billion in assets and assumed $1.69 billion in liabilities. These values are preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information relative to closing date may become available. Other real estate owned was retained by the FDIC. The acquisition resulted in a pretax bargain purchase gain of $33.6 million and pretax merger related expenses of $3.7 million. Peoples First has 29 branches in the Florida Panhandle and Central Florida.

The Banks are community oriented and focus primarily on offering commercial, consumer and mortgage loans and deposit services to individuals and small to middle market businesses in their respective market areas. The Company’s operating strategy is to provide its customers with the financial sophistication and breadth of products of a regional bank, while successfully retaining the local appeal and level of service of a community bank. At December 31, 2009, the Company had total assets of $8.7 billion and 2,240 employees on a full-time equivalent basis.

Hancock Bank MS was originally chartered as Hancock County Bank in 1899. Since its organization, the strategy of Hancock Bank MS has been to achieve a dominant market share on the Mississippi Gulf Coast. Prior to a series of acquisitions begun in 1985, growth was primarily internal and was accomplished by branch expansions in areas of population growth where no dominant financial institution previously served the market area. Economic expansion on the Mississippi Gulf Coast has resulted primarily from growth of military and government-related facilities, tourism, port facility activities, industrial complexes and the gaming industry. Based on the most current available published data, Hancock Bank MS has the largest deposit market share in each of the following five counties: Harrison, Hancock, Jackson, Lamar and Pearl River. In addition, Hancock Bank MS has a presence in the following counties: Forrest and Jefferson Davis. At December 31, 2009, Hancock Bank MS had total assets of $5.3 billion and 1,583 employees on a full-time equivalent basis.

In August 1990, the Company formed Hancock Bank LA to assume the deposit liabilities and acquire the consumer loan portfolio, corporate credit card portfolio and non-adversely classified securities portfolio of American Bank and Trust, Baton Rouge, Louisiana, (AmBank), from the Federal Deposit Insurance Corporation (FDIC). Economic expansion in East Baton Rouge Parish has resulted from growth in state government and related service industries, educational and medical complexes, petrochemical industries, port facility activities and transportation and related industries. With the purchase of two Dryades Savings Bank, F.S.B. branches in 2003 and the 2007 opening of a new financial center in New Orleans’ Central Business District, Hancock Bank LA established a long-awaited presence in the Greater New Orleans area. At December 31, 2009, Hancock Bank LA had total assets of $2.9 billion and 561 employees on a full-time equivalent basis.

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Hancock Bank FL was formed in March 2004 with the acquisition of Tallahassee’s Guaranty National Bank. In addition to the five branches acquired in the Tallahassee area in 2004, Hancock Bank FL has since opened two more branches in the Pensacola market. Effective January 1, 2010, Hancock Bank of Florida will be merged into Hancock Bank. Hancock Bank FL had total assets of $351.7 million and 54 employees on a full-time equivalent basis at December 31, 2009.

In February 2007, Hancock Bank AL was incorporated in Mobile, AL. During 2007 and 2008, five branches have been opened to serve the Mobile area and Alabama’s Eastern Shore. At December 31, 2009, Hancock Bank AL had total assets of $179.7 million and 42 employees on a full-time equivalent basis.

CURRENT OPERATIONS

Loan Production and Credit Review

The Banks’ primary lending focus is to provide commercial, consumer, commercial leasing and real estate loans to consumers and to small and middle market businesses in their respective market areas. The Banks have no significant concentrations of loans to particular borrowers or industries or loans to any foreign entities. Each loan officer has Board approved loan limits on the principal amount of secured and unsecured loans that can be approved for a single borrower without prior approval of one or more Regional Credit Officers. All loans, however, must meet the credit underwriting standards and loan policies of the Banks.

All loans over an individual loan officer’s Board approved lending authority must be approved by one of the Bank’s centralized loan underwriting units, by a senior lender or one or more Regional Credit Officers. Each loan file is reviewed by the Bank’s loan operations quality assurance function, a component of its loan review system, to ensure proper documentation and asset quality.

Loan Review and Asset Quality

Each Bank’s portfolio of loan relationships aggregating $500,000 or more is reviewed every 12 to 18 months by the Bank’s Loan Review staff to identify any deficiencies and report them to management to take corrective actions as necessary. Periodically, selected loan relationships aggregating less than $500,000 are also reviewed. As a result of such reviews, each Bank places on its Watch list loans requiring close or frequent review. All loans over $100,000 classified by a regulatory auditor are also placed on the Watch list. All Watch list and past due loans are reviewed monthly by the Banks’ senior lending officers. All Watch list loans are reviewed monthly by the Bank’s Asset Quality Committee and quarterly by the Banks’ Board of Directors’ Loan Oversight Committee.

In addition, in the approval process, all loans to a particular borrower are considered, regardless of classification, each time such borrower requests a renewal or extension of any loan or requests a new loan. All lines of credit are reviewed before renewal. The Banks currently have mechanisms in place that require borrowers to submit annual financial statements, except borrowers with secured installment and residential mortgage loans.

Consumer loans which become 30 days delinquent are reviewed regularly by management. As a matter of policy, loans are placed on a non-accrual status when (1) payment in full, of principal or interest is not expected or (2) the principal or interest has been in default for a period of 90 days, unless the loan is well secured and in the process of collection.

The Banks follow the standard FDIC loan classification system. This system provides management with (1) a general view of the quality of the overall loan portfolio (each Bank’s loan portfolio and each commercial loan officer’s loan portfolio) and (2) information on specific loans that may need individual attention.

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The Bank’s nonperforming assets, consisting of real property, vehicles and other items held for resale, were acquired generally through the process of foreclosure. At December 31, 2009, the book value of those assets held for resale was approximately $14.3 million.

Securities Portfolio

The Banks maintain portfolios of securities consisting primarily of U.S. Treasury securities, U.S. government agency issues, agency mortgage-backed securities, agency CMOs and tax-exempt obligations of states and political subdivisions. The portfolios are designed to provide liquidity to fund loan growth and deposit outflows while maximizing interest income within pre-defined risk parameters. Therefore, the Banks invest only in high quality securities of investment grade quality and with a target effective duration, for the overall portfolio, generally between two to five years.

The Banks’ policies limit investments to securities having a rating of no less than “Baa”, or its equivalent by a Nationally Recognized Statistical Rating Agency, except for certain obligations of Mississippi, Louisiana, Florida or Alabama counties, parishes and municipalities.

Deposits

The Banks have several programs designed to attract depository accounts offered to consumers and to small and middle market businesses at interest rates generally consistent with market conditions. Additionally, the Banks operate more than 160 ATMs at the Company’s banking offices as well as free-standing ATMs at other locations. As members of regional and international ATM networks such as “STAR”, “PLUS” and “CIRRUS”, the Banks offer customers access to their depository accounts from regional, national and international ATM facilities. Deposit flows are controlled by the Banks primarily through pricing, and to a certain extent, through promotional activities. Management believes that the rates it offers, which are posted weekly on deposit accounts, are generally competitive with other financial institutions in the Banks’ respective market areas.

Trust Services

The Banks, through their respective Trust Departments, offer a full range of trust services on a fee basis. The Banks act as executor, administrator or guardian in administering estates. Also provided are investment custodial services for individuals, businesses and charitable and religious organizations. In their trust capacities, the Banks provide investment management services on an agency basis and act as trustee for pension plans, profit sharing plans, corporate and municipal bond issues, living trusts, life insurance trusts and various other types of trusts created by or for individuals, businesses and charitable and religious organizations. As of December 31, 2009, the Trust Departments of the Banks had approximately $7.5 billion of assets under administration compared to $7.7 billion as of December 31, 2008. As of December 31, 2009, $4.3 billion of administered assets were corporate trust accounts and the remaining balances were personal, employee benefit, estate and other trust accounts.

Operating Efficiency Strategy

The primary focus of the Company’s operating strategy is to increase operating income and to reduce operating expense. A Company’s operating efficiency ratio indicates the percentage of each dollar of net revenue that is used to fund operating expenses. Net revenue for a financial institution is the total of net interest income plus non-interest income, excluding securities transactions gains or losses. Operating expenses exclude the amortization of intangibles.

Other Activities

Hancock Bank MS has 6 subsidiaries through which it engages in the following activities: providing consumer financing services; owning, managing and maintaining certain real property; providing general insurance agency services; holding investment securities; marketing credit life insurance; and providing discount investment brokerage services. The income of these subsidiaries generally accounts for less than 10% of the Company’s total net earnings.

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During 2001, the Company began servicing mortgage loans for the Federal National Mortgage Association. At that time the loans serviced were originated and closed by the Company’s mortgage subsidiary. The servicing activity was also performed by this same subsidiary. In the middle of 2003, however, the Company modified its strategy and reverted to selling the majority of its conforming loans with servicing released. In December 2004, the Company’s mortgage subsidiary merged with Hancock Bank MS, its parent. Currently all mortgage activity is being reported by Hancock Bank MS, Hancock Bank of Louisiana, Hancock Bank of Florida and Hancock Bank of Alabama.

Hancock Bank MS also owns approximately 3,700 acres of timberland in Hancock County, Mississippi, most of which was acquired through foreclosure in the 1930’s. Timber sales and oil and gas leases on this acreage generate less than 1% of the Company’s annual net income.

Competition

The deregulation of the financial services industry, the elimination of many previous distinctions between commercial banks and other financial institutions as well as legislation enacted in Mississippi, Louisiana and other states allowing state-wide branching, multi-bank holding companies and regional interstate banking have all served to foster a highly competitive environment for commercial banking in our market area. The principal competitive factors in the markets for deposits and loans are interest rates and fee structures associated with the various products offered. We also compete through the efficiency, quality, range of services and products we provide, as well as the convenience provided by an extensive network of customer access channels including local branch offices, ATM’s, online banking, and telebanking centers. Access to the bank’s extensive network of customer access points is further enhanced by convenient hours including Saturday banking at selected branch locations and through the bank’s telebanking service center.

In attracting deposits and in our lending activities, we generally compete with other commercial banks, savings associations, credit unions, mortgage banking firms, consumer finance companies, securities brokerage firms, mutual funds and insurance companies and other financial institutions.

Available Information

We maintain an internet website at www.hancockbank.com. We make available free of charge on the website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed with the Securities and Exchange Commission. Our Annual Report to Stockholders is also available on our website. These reports are made available on our website as soon as reasonably practical after the reports are filed with the Commission. Information on our website is not incorporated into this Form 10-K or our other securities filings and is not part of them.

SUPERVISION AND REGULATION

Bank Holding Company Regulation

General

The Company is subject to extensive regulation by the Board of Governors of the Federal Reserve System (the Federal Reserve) pursuant to the Bank Holding Company Act of 1956, as amended (the Bank Holding Company Act). On January 26, 2002 the Company qualified as a financial holding company, giving it broader powers as discussed below. To date, the Company has exercised its powers as a financial holding company to acquire a non-controlling interest in a third party service provider for insurance companies and, in December 2003, acquired Magna Insurance Company. The Company also is required to file certain reports with, and otherwise complies with the rules and regulations of, the Securities and Exchange Commission (the Commission) under federal securities laws.

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Federal Regulation

The Bank Holding Company Act generally prohibits a corporation owning a bank from engaging in activities other than banking, managing or controlling banks or other permissible subsidiaries. Acquiring or obtaining control of more than 5% of the voting shares of any company engaged in activities other than those activities determined by the Federal Reserve to be so closely related to banking, managing or controlling banks as to be proper incident thereto is also prohibited. In determining whether a particular activity is permissible, the Federal Reserve considers whether the performance of the activity can reasonably be expected to produce benefits to the public that outweigh possible adverse effects. For example: making, acquiring or servicing loans; leasing personal property; providing certain investment or financial advice; performing certain data processing services; acting as agent or broker in selling credit life insurance, and performing certain insurance underwriting activities have all been determined by regulations of the Federal Reserve to be permissible activities. The Bank Holding Company Act does not place territorial limitations on permissible bank-related activities of bank holding companies. Despite prior approval, however, the Federal Reserve has the power to order a holding company or its subsidiaries to terminate any activity or its control of any subsidiary when it has reasonable cause to believe that continuation of such activity or control of such subsidiary constitutes a serious risk to the financial safety, soundness or stability of any bank subsidiary of that holding company.

The Bank Holding Company Act requires every bank holding company to obtain the prior approval of the Federal Reserve: (1) before it may acquire ownership or control of any voting shares of any bank if, after such acquisition, such bank holding company will own or control more than 5% of the voting shares of such bank, (2) before it or any of its subsidiaries other than a bank may acquire all of the assets of a bank, (3) before it may merge with any other bank holding company, or (4) before it may engage in permissible non-banking activities. In reviewing a proposed acquisition, the Federal Reserve considers financial, managerial and competitive aspects. The future prospects of the companies and banks concerned and the convenience and needs of the community to be served must also be considered. The Federal Reserve also reviews the indebtedness to be incurred by a bank holding company in connection with the proposed acquisition to ensure that the holding company can service such indebtedness without adversely affecting the capital requirements of the holding company or its subsidiaries. The Bank Holding Company Act further requires that consummation of approved bank holding company or bank acquisitions or mergers must be delayed for a period of not less than 15 or more than 30 days following the date of approval. During such 15 to 30-day period, complaining parties may obtain a review of the Federal Reserve’s order granting its approval by filing a petition in the appropriate United States Court of Appeals petitioning that the order be set aside.

On November 12, 1999, President Clinton signed into law the Gramm-Leach-Bliley Act of 1999 (the “Financial Services Modernization Act”). The Financial Services Modernization Act repeals the two affiliation provisions of the Glass-Steagall Act: Section 20, which restricted the affiliation of Federal Reserve Member Banks with firms “engaged principally” in specified securities activities; and Section 32, which restricts officer, director, or employee interlocks between a member bank and any company or person “primarily engaged” in specified securities activities. In addition, the Financial Services Modernization Act also contains provisions that expressly preempt any state law restricting the establishment of financial affiliations, primarily related to insurance. The general effect of the law is to establish a comprehensive framework to permit affiliations among qualified bank holding companies, commercial banks, insurance companies, securities firms, and other financial service providers by revising and expanding the Bank Holding Company Act framework to permit a holding company system to engage in a full range of financial activities through a new entity known as a Financial Holding Company. “Financial activities” is broadly defined to include not only banking, insurance, and securities activities, but also merchant banking and additional activities that the Federal Reserve, in consultation with the Secretary of the Treasury, determines to be financial in nature, incidental to such financial activities, or complementary activities that do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally.

Generally, the Financial Services Modernization Act:

• Repeals historical restrictions on, and eliminates many federal and state law barriers to, affiliations among banks, securities firms, insurance companies, and other financial service providers;

• Provides a uniform framework for the functional regulation of the activities of banks, savings institutions, and their holding companies;

• Broadens the activities that may be conducted by national banks, banking subsidiaries of bank holding companies, and their financial subsidiaries;

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• Provides an enhanced framework for protecting the privacy of consumer information;

• Adopts a number of provisions related to the capitalization, membership, corporate governance, and other measures designed to modernize the Federal Home Loan Bank system;

• Modifies the laws governing the implementation of the Community Reinvestment Act (“CRA”); and

• Addresses a variety of other legal and regulatory issues affecting both day-to-day operations and long-term activities of financial institutions.

The Financial Services Modernization Act requires that each bank subsidiary of a financial holding company be well capitalized and well managed as determined by the subsidiary bank’s principal regulator. To be considered well managed, the bank must have received at least a satisfactory composite rating and a satisfactory management rating at its last examination. To be well capitalized, the bank must have a leverage capital ratio of 5%, a Tier 1 Risk-based capital ratio of 6% and a total risk-based capital ratio of 10%. These ratios are discussed further below. In the event a financial holding company becomes aware that a subsidiary bank ceases to be well capitalized or well managed, it must notify the Federal Reserve and enter into an agreement to cure such condition. The consequences of a failure to cure such condition are that the Federal Reserve Board may order divestiture of the bank. Alternatively, a financial holding company may comply with such order by ceasing to engage in the financial holding company activities that are unrelated to banking or otherwise impermissible for a bank holding company.

The Federal Reserve has adopted capital adequacy guidelines for use in its examination and regulation of bank holding companies and financial holding companies. The regulatory capital of a bank holding company or financial holding company under applicable federal capital adequacy guidelines is particularly important in the Federal Reserve’s evaluation of a holding company and any applications by the bank holding company to the Federal Reserve. If regulatory capital falls below minimum guideline levels, a financial holding company may lose its status as a financial holding company and a bank holding company or bank may be denied approval to acquire or establish additional banks or non-bank businesses or to open additional facilities. In addition, a financial institution’s failure to meet minimum regulatory capital standards can lead to other penalties, including termination of deposit insurance or appointment of a conservator or receiver for the financial institution. There are two measures of regulatory capital presently applicable to bank holding companies: (1) risk-based capital and (2) leverage capital ratios.

The Federal Reserve rates bank holding companies by a component and composite 1-5 rating system. This system is designed to help identify institutions, which require special attention. Financial institutions are assigned ratings based on evaluation and rating of their financial condition and operations. Components reviewed include capital adequacy, asset quality, management capability, the quality and level of earnings, the adequacy of liquidity and sensitivity to interest rate fluctuations.

The leverage ratios adopted by the Federal Reserve require all but the most highly rated bank holding companies to maintain Tier 1 Capital at 4% of total assets. Certain bank holding companies having a composite 1 rating and not experiencing or anticipating significant growth may satisfy the Federal Reserve guidelines by maintaining Tier 1 Capital of at least 3% of total assets. Tier 1 Capital for bank holding companies includes: stockholders’ equity, non-controlling interest in equity accounts of consolidated subsidiaries and qualifying perpetual preferred stock. In addition, Tier 1 Capital excludes goodwill and other disallowed intangibles. The Company’s leverage capital ratio at December 31, 2009 was 10.60% and 8.06% at December 31, 2008.

The risk-based capital guidelines are designed to make regulatory capital requirements more sensitive to differences in risk profiles among banks and bank holding companies, to account for off-balance sheet exposure and to minimize disincentives for holding liquid assets. Under the risk-based capital guidelines, assets are assigned to one of four risk categories: 0%, 20% 50% and 100%. As an example, U.S. Treasury securities are assigned to the 0% risk category while most categories of loans are assigned to the 100% risk category. A two-step process determines the risk weight of off-balance sheet items such as standby letters of credit. First, the amount of the off-balance sheet item is multiplied by a credit conversion factor of either 0%, 20%, 50% or 100%. The result is then assigned to one of the four risk categories. At December 31, 2009, the Company’s off-balance sheet items aggregated $1.1 billion; however, after the credit conversion these items represented $409.7 million of balance sheet equivalents.

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The primary component of risk-based capital is Tier 1 Capital, which for the Company is essentially equal to common stockholders’ equity, less goodwill and other intangibles. Tier 2 Capital, which consists primarily of the excess of any perpetual preferred stock, mandatory convertible securities, subordinated debt and general allowances for loan losses, is a secondary component of risk-based capital. The risk-weighted asset base is equal to the sum of the aggregate dollar values of assets and off-balance sheet items in each risk category, multiplied by the weight assigned to that category. A ratio of Tier 1 Capital to risk-weighted assets of at least 4% and a ratio of Total Capital (Tier 1 and Tier 2) to risk-weighted assets of at least 8% must be maintained by bank holding companies. At December 31, 2009, the Company’s Tier 1 and Total Capital ratios were 11.99% and 13.04%, respectively. At December 31, 2008, the Company’s Tier 1 and Total Capital ratios were 10.66% and 11.86%, respectively.

The prior approval of the Federal Reserve must be obtained before the Company may acquire substantially all the assets of any bank, or ownership or control of any voting shares of any bank, if, after such acquisition, it would own or control, directly or indirectly, more than 5% of the voting shares of such bank. In no case, however, may the Federal Reserve approve an acquisition of any bank located outside Mississippi unless such acquisition is specifically authorized by the laws of the state in which the bank to be acquired is located. The banking laws of Mississippi presently permit out-of-state banking organizations to acquire Mississippi banking organizations, provided the Mississippi banking organization has been operating for at least five years. In addition, Mississippi banking organizations were granted similar powers to acquire certain out-of-state financial institutions pursuant to the Interstate Bank Branching Act, which was adopted in 1994.

With the passage of The Interstate Banking and Branching Efficiency Act of 1994, adequately capitalized and managed bank holding companies are permitted to acquire control of banks in any state, subject to federal regulatory approval, without regard to whether such a transaction is prohibited by the laws of any state. Beginning June 1, 1997, federal banking regulators may approve merger transactions involving banks located in different states, without regard to laws of any state prohibiting such transactions; except that, mergers may not be approved with respect to banks located in states that, before June 1, 1997, enacted legislation prohibiting mergers by banks located in such state with out-of-state institutions. Federal banking regulators may permit an out-of-state bank to open new branches in another state if such state has enacted legislation permitting interstate branching. The legislation further provides that a bank holding company may not, following an interstate acquisition, control more than 10% of nationwide insured deposits or 30% of deposits in the relevant state. States have the right to adopt legislation to lower the 30% limit. Additional provisions require that interstate activities conform to the Community Reinvestment Act.

The Company is required to give the Federal Reserve prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the Company’s consolidated net worth. The Federal Reserve may disapprove such a transaction if it determines that the proposal constitutes an unsafe or unsound practice, would violate any law, regulation, Federal Reserve order or directive or any condition imposed by, or written agreement with, the Federal Reserve.

In November 1985, the Federal Reserve adopted its Policy Statement on Cash Dividends Not Fully Covered by Earnings (the Policy Statement). The Policy Statement sets forth various guidelines that the Federal Reserve believes that a bank holding company should follow in establishing its dividend policy. In general, the Federal Reserve stated that bank holding companies should pay dividends only out of current earnings. It also stated that dividends should not be paid unless the prospective rate of earnings retention by the holding company appears consistent with its capital needs, asset quality and overall financial condition.

The Company is a legal entity separate and distinct from the Banks. There are various restrictions that limit the ability of the Banks to finance, pay dividends or otherwise supply funds to the Company or other affiliates. In addition, subsidiary banks of holding companies are subject to certain restrictions on any extension of credit to the bank holding company or any of its subsidiaries, on investments in the stock or other securities thereof and on the taking of such stock or securities as collateral for loans to any borrower. Further, a bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with extensions of credit, or leases or sales of property or furnishing of services.

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Bank Regulation

The operations of the Banks are subject to state and federal statutes applicable to state banks and the regulations of the Federal Reserve and the FDIC. The operation of the Banks may also be subject to applicable OCC regulation, to the extent states banks are granted parity with national banks. Such statutes and regulations relate to, among other things, required reserves, investments, loans, mergers and consolidations, issuance of securities, payment of dividends, establishment of branches and other aspects of the Banks’ operations.

Hancock Bank MS is subject to regulation and periodic examinations by the FDIC and the State of Mississippi Department of Banking and Consumer Finance. Hancock Bank LA is subject to regulation and periodic examinations by the FDIC and the Office of Financial Institutions, State of Louisiana. Hancock Bank FL is subject to regulation and periodic examinations by the FDIC and the Florida Department of Financial Services. Hancock Bank AL is subject to regulation and periodic examinations by the FDIC and the Alabama State Banking Department. These regulatory authorities examine such areas as reserves, loan and investment quality, management policies, procedures and practices and other aspects of operations. These examinations are designed for the protection of the Banks’ depositors, rather than their stockholders. In addition to these regular examinations, the Company and the Banks must furnish periodic reports to their respective regulatory authorities containing a full and accurate statement of their affairs.

As a result of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), a financial institution insured by the FDIC can be held liable for any losses incurred by, or reasonably expected to be incurred by, the FDIC in connection with (1) the default of a commonly controlled FDIC-insured financial institution or (2) any assistance provided by the FDIC to a commonly controlled financial institution in danger of default.

The Banks are members of the FDIC, and their deposits are insured as provided by law by the Deposit Insurance Fund (DIF). On December 19, 1991, the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) was enacted. The Federal Deposit Insurance Act, as amended by Section 302 of FDICIA, calls for risk-related deposit insurance assessment rates. The risk classification of an institution will determine its deposit insurance premium. The Federal Deposit Insurance Reform act of 2005 created a new risk differentiation system and established a new base assessment rate schedule, effective January 1, 2007. The final rule consolidates the existing nine risk categories into four and names them Risk Categories I, II, III, and IV. Risk Category I replaces the 1A risk category. The annual rates (in basis points) are now from 7 cents to 77.5 cents per hundred dollars of insured deposits, with category I rates having a range of 7 cents to 24 cents per hundred dollars of insured deposits. In 2007, the Banks received a risk classification of I for assessment purposes. Total FICO assessments paid to the FDIC amounted to $0.6 million in 2009 and $0.6 million in 2008.

FDIC insurance expense totaled $11.3 million in 2009, which included a special assessment on June 30, 2009, of $3.4 million, and the Transaction Account Guarantee Program assessments of $0.2 million. Under the provisions of the Federal Deposit Insurance Reform Act of 2005, Hancock Bank MS and Hancock Bank LA received a one-time FDIC assessment credit of $1.9 million and $1.3 million, respectively, to be used against deposit insurance assessments beginning January 1, 2007. $1.8 million of this credit offset the entire FDIC assessment for 2007 and the remaining $1.4 million offset the 2008 assessment. FDIC insurance expense totaled $1.2 million in 2008.

In December of 2008, the FDIC adopted the proposal to raise the current assessment rates uniformly by 7 basis points for the first quarter of 2009, resulting in annualized assessment rates for Risk Category I institutions ranging from 12 to 14 basis points.

In February of 2009, the FDIC adopted a modification to the risk-based assessment system and set the initial base assessment rates beginning April 1, 2009, at 12 to 45 basis points. The initial assessment rates are subject to adjustments which may increase or decrease the total base assessment rates. These adjustments are as follows: (1) a decrease for long-term unsecured debt, including most senior and subordinated debt and, for small institutions, a portion of Tier 1 capital; (2) an increase for secured liabilities above a threshold amount; and (3) for non-Risk Category I institutions, an increase for brokered deposits above a threshold amount. These adjustments result in a total base assessment rate between 7 and 77.5 basis points.

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In May of 2009, the FDIC adopted a final rule imposing a 5 basis point special assessment based on each insured depository institution’s assets minus Tier 1 capital as of June 30, 2009.

In general, FDICIA subjects banks and bank holding companies to significantly increased regulation and supervision. FDICIA increased the borrowing authority of the FDIC in order to recapitalize the DIF, and the future borrowings are to be repaid by increased assessments on FDIC member banks. Other significant provisions of FDICIA require a new regulatory emphasis linking supervision to bank capital levels. Also, federal banking regulators are required to take prompt regulatory action with respect to depository institutions that fall below specified capital levels and to draft non-capital regulatory measures to assure bank safety.

FDICIA contains a “prompt corrective action” section intended to resolve problem institutions at the least possible long-term cost to the deposit insurance funds. Pursuant to this section, the federal banking agencies are required to prescribe a leverage limit and a risk-based capital requirement indicating levels at which institutions will be deemed to be “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” In the case of a depository institution that is “critically undercapitalized” (a term defined to include institutions which still have positive net worth); the federal banking regulators are generally required to appoint a conservator or receiver.

FDICIA further requires regulators to perform annual on-site bank examinations, places limits on real estate lending and tightens audit requirements. The new legislation eliminated the “too big to fail” doctrine, which protects uninsured deposits of large banks, and restricts the ability of undercapitalized banks to obtain extended loans from the Federal Reserve Board discount window. FDICIA also imposes new disclosure requirements relating to fees charged and interest paid on checking and deposit accounts. Most of the significant changes brought about by FDICIA required new regulations.

In addition to regulating capital, the FDIC has broad authority to prevent the development or continuance of unsafe or unsound banking practices. Pursuant to this authority, the FDIC has adopted regulations that restrict preferential loans and loan amounts to “affiliates” and “insiders” of banks, require banks to keep information on loans to major stockholders and executive officers and bar certain director and officer interlocks between financial institutions. The FDIC is also authorized to approve mergers, consolidations and assumption of deposit liability transactions between insured banks and between insured banks and uninsured banks or institutions to prevent capital or surplus diminution in such transactions where the resulting, continuing or assumed bank is an insured nonmember state bank, like Hancock Bank (MS), Hancock Bank of LA, Hancock Bank of FL and Hancock Bank of AL.

Although Hancock Bank (MS), Hancock Bank of LA, Hancock Bank of FL and Hancock Bank of AL are not members of the Federal Reserve System, they are subject to Federal Reserve regulations that require the Banks to maintain reserves against transaction accounts (primarily checking accounts). Because reserves generally must be maintained in cash or in noninterest-bearing accounts, the effect of the reserve requirements is to increase the cost of funds for the Banks. The Federal Reserve regulations currently require that reserves be maintained against net transaction accounts in the amount of 3% of the aggregate of such accounts up to $44.5 million, or, if the aggregate of such accounts exceeds $44.5 million, $1.335 million plus 10% of the total in excess of $44.5 million. This regulation is subject to an exemption from reserve requirements on a limited amount of an institution’s transaction accounts.

The Financial Services Modernization Act also permits national banks, and through state parity statutes, state banks, to engage in expanded activities through the formation of financial subsidiaries. A state bank may have a subsidiary engaged in any activity authorized for state banks directly or any financial activity, except for insurance underwriting, insurance investments, real estate investment or development, or merchant banking, which may only be conducted through a subsidiary of a Financial Holding Company. Financial activities include all activities permitted under new sections of the Bank Holding Company Act or permitted by regulation.

A state bank seeking to have a financial subsidiary, and each of its depository institution affiliates, must be “well-capitalized” and “well-managed.” The total assets of all financial subsidiaries may not exceed the lesser of 45% of a bank’s total assets, or $50 billion. A state bank must exclude from its assets and equity all equity investments, including retained earnings, in a financial subsidiary. The assets of the subsidiary may not be consolidated with the bank’s assets. The bank must also have policies and procedures to assess financial subsidiary risk and protect the bank from such risks and potential liabilities.

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The Financial Services Modernization Act also includes a new section of the Federal Deposit Insurance Act governing subsidiaries of state banks that engage in “activities as principal that would only be permissible” for a national bank to conduct in a financial subsidiary. It expressly preserves the ability of a state bank to retain all existing subsidiaries. Because Mississippi permits commercial banks chartered by the state to engage in any activity permissible for national banks, the Bank will be permitted to form subsidiaries to engage in the activities authorized by the Financial Services Modernization Act. In order to form a financial subsidiary, a state bank must be well-capitalized, and the state bank would be subject to the same capital deduction, risk management and affiliate transaction rules as applicable to national banks.

In 2001, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA Patriot Act) was signed into law. The USA Patriot Act broadened the application of anti-money laundering regulations to apply to additional types of financial institutions, such as broker-dealers, and strengthened the ability of the U.S. Government to detect and prosecute international money laundering and the financing of terrorism. The principal provisions of Title III of the USA Patriot Act require that regulated financial institutions, including state member banks: (i) establish an anti-money laundering program that includes training and audit components; (ii) comply with regulations regarding the verification of the identity of any person seeking to open an account; (iii) take additional required precautions with non-U.S. owned accounts; and (iv) perform certain verification and certification of money laundering risk for their foreign correspondent banking relationships. The USA Patriot Act also expanded the conditions under which funds in a U.S. interbank account may be subject to forfeiture and increased the penalties for violation of anti-money laundering regulations. Failure of a financial institution to comply with the USA Patriot Act’s requirements could have serious legal and reputational consequences for the institution. The Bank has adopted policies, procedures and controls to address compliance with the requirements of the USA Patriot Act under the existing regulations and will continue to revise and update its policies, procedures and controls to reflect changes required by the USA Patriot Act and implementing regulations.

In July 2002, Congress enacted the Sarbanes-Oxley Act of 2002, which addresses, among other issues, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate information. Section 404 of the Sarbanes-Oxley Act requires the Company to include in its Annual Report, a report stating management’s responsibility to establish and maintain adequate internal control over financial reporting and management’s conclusion on the effectiveness of the internal controls at year end. Additionally, the Company’s independent registered public accounting firm is required to attest to and report on management’s evaluation of internal control over financial reporting.

Recent Developments

The Congress, Treasury Department and the federal banking regulators, including the FDIC, have taken broad action since early September, 2008 to address volatility in the U.S. banking system.

In October 2008, the Emergency Economic Stabilization Act of 2008 (“EESA”) was enacted. The EESA authorized the Treasury Department to purchase from financial institutions and their holding companies up to $700 billion in mortgage loans, mortgage-related securities and certain other financial instruments, including debt and equity securities issued by financial institutions and their holding companies in a troubled asset relief program (“TARP”). The purpose of TARP is to restore confidence and stability to the U.S. banking system and to encourage financial institutions to increase their lending to customers and to each other. The Treasury Department has allocated $250 billion towards the TARP Capital Purchase Program (“CPP”). Under the CPP, Treasury purchases debt or equity securities from participating institutions. The TARP also may include direct purchases or guarantees of troubled assets of financial institutions. Participants in the CPP are subject to executive compensation limits and are encouraged to expand their lending and mortgage loan modifications. On November 13, 2008, following a thorough evaluation and analysis, the Company announced it would decline the Treasury’s invitation to participate in the CPP.

EESA also temporarily increased FDIC deposit insurance on most accounts from $100,000 to $250,000. This increase has been extended until December 31, 2013.

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Following a systemic risk determination, the FDIC established a Temporary Liquidity Guarantee Program (“TLGP”) on October 14, 2008. The TLGP includes the Transaction Account Guarantee Program (“TAGP”), which provides unlimited deposit insurance coverage through June 30, 2010 for noninterest-bearing transaction accounts (typically checking accounts) and certain funds swept into noninterest-bearing savings accounts. Institutions participating in the TAGP pay a 10 basis points fee (annualized) on the balance of each covered account in excess of $250,000, while the extra deposit insurance is in place. The Company is participating in the TAGP.

It is not clear at this time what impact the EESA, the TARP Capital Purchase Program, the Temporary Liquidity Guarantee Program, other liquidity and funding initiatives of the Federal Reserve and other agencies that have been previously announced, and any additional programs that may be initiated in the future, will have on the Company or the U.S. and global financial markets.

Summary

The foregoing is a brief summary of certain statutes, rules and regulations affecting the Company and the Banks. It is not intended to be an exhaustive discussion of all the statutes and regulations having an impact on the operations of such entities.

We do not believe that the Financial Services Modernization Act will have a material adverse effect on our operations in the near-term. However, to the extent that it permits holding companies, banks, securities firms, and insurance companies to affiliate, the financial services industry may experience further consolidation. The Financial Services Modernization Act is intended to grant to community banks certain powers as a matter of right that larger institutions have accumulated on an ad hoc basis. Nevertheless, this act may have the result of increasing the amount of competition that the Company and the Banks face from larger institutions and other types of companies offering financial products, some of which may have substantially more financial resources than us.

It is not known whether EESA will have any effect on the Company’s operations.

Finally, additional bills may be introduced in the future in the United States Congress and state legislatures to alter the structure, regulation and competitive relationships of financial institutions. It cannot be predicted whether and what form any of these proposals will be adopted or the extent to which the business of the Company and the Banks may be affected thereby.

Effect of Governmental Policies

The difference between the interest rate paid on deposits and other borrowings and the interest rate received on loans and securities comprise most of a bank’s earnings. In order to mitigate the interest rate risk inherent in the industry, the banking business is becoming increasingly dependent on the generation of fee and service charge revenue.

The earnings and growth of a bank will be affected by both general economic conditions and the monetary and fiscal policy of the United States Government and its agencies, particularly the Federal Reserve. The Federal Reserve sets national monetary policy such as seeking to curb inflation and combat recession. This is accomplished by its open-market operations in United States government securities, adjustments in the amount of reserves that financial institutions are required to maintain and adjustments to the discount rates on borrowings and target rates for federal funds transactions. The actions of the Federal Reserve in these areas influence the growth of bank loans, investments and deposits and also affect interest rates on loans and deposits. The nature and timing of any future changes in monetary policies and their potential impact on the Company cannot be predicted.

Impact of Inflation

Our noninterest income and expenses can be affected by increasing rates of inflation; however, unlike most industrial companies, the assets and liabilities of financial institutions such as the Banks are primarily monetary in nature. Interest rates, therefore, have a more significant impact on the Banks’ performance than the effect of general levels of inflation on the price of goods and services.

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ITEM 1A. RISK FACTORS

Making or continuing an investment in securities issued by us, including our common stock, involves certain risks that you should carefully consider. The risks and uncertainties described below are not the only risks that may have a material adverse effect on us. Additional risks and uncertainties also could adversely affect our business and results of operations. If any of the following risks actually occur, our business, financial condition or results of operations could be negatively affected, the market price for your securities could decline, and you could lose all or a part of your investment. Further, to the extent that any of the information contained in this Annual Report on Form 10-K constitutes forward-looking statements, the risk factors set forth below also are cautionary statements identifying important factors that could cause our actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of us.

We may be vulnerable to certain sectors of the economy.

A portion of our loan portfolio is secured by real estate. If the economy deteriorated and depressed real estate values beyond a certain point, that collateral value of the portfolio and the revenue stream from those loans could come under stress and possibly require additional provision to the allowance for loan losses. Our ability to dispose of foreclosed real estate at prices above the respective carrying values could also be impinged, causing additional losses.

Difficult market conditions have adversely affected the industry in which we operate.

The capital and credit markets have been experiencing volatility and disruption for more than twelve months. Dramatic declines in the housing market over the past year, with falling home prices and increasing foreclosures, unemployment and under-employment, have negatively impacted the credit performance of mortgage loans and resulted in significant write-downs of asset values by financial institutions, including government-sponsored entities as well as major commercial and investment banks. These write-downs have caused many financial institutions to seek additional capital, to merge with larger and stronger institutions and, in some cases, to fail. Reflecting concern about the stability of the financial markets generally and the strength of counterparties, many lenders and institutional investors have reduced or ceased providing funding to borrowers, including to other financial institutions. This market turmoil and tightening of credit have led to an increased level of commercial and consumer delinquencies, lack of consumer confidence, increased market volatility and widespread reduction of business activity generally. We do not expect that the difficult conditions in the financial markets are likely to improve in the near future. A worsening of these conditions would likely exacerbate the adverse effects of these difficult market conditions on us and others in the financial institution industry. In particular, we may face the following risks in connection with these events:

• We may expect to face increased regulation of our industry, including as a result of the Emergency Economic Stabilization Act of 2008 (EESA). Compliance with such regulation may increase our costs and limit our ability to pursue business opportunities.

• Market developments and the resulting economic pressure on consumers may affect consumer confidence levels and may cause increases in delinquencies and default rates, which, among other effects, could affect our charge-offs and provision for loan losses.

• Competition in the industry could intensify as a result of the increasing consolidation of financial services companies in connection with current market conditions.

• The current market disruptions make valuation even more difficult and subjective, and our ability to measure the fair value of our assets could be adversely affected. If we determine that a significant portion of our assets have values that are significantly below their recorded carrying value, we could recognize a material charge to earnings in the quarter during which such determination was made, our capital ratios would be adversely affected and a rating agency might downgrade our credit rating or put us on credit watch.

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There can be no assurance that the Emergency Economic Stabilization Act of 2008 will help stabilize the U.S. Financial System.

On Oct. 3, 2008, the Emergency Economic Stabilization Act of 2008 (EESA) was signed into law in response to the current crisis in the financial sector. The U.S. Department of the Treasury and banking regulators implemented a number of programs under this legislation to address capital and liquidity issues in the banking system. There can be no assurance, however, as to the actual impact that the EESA will have on the financial markets, including the extreme levels of volatility and limited credit availability currently being experienced. The failure of the EESA to help stabilize the financial markets and a continuation or worsening of current financial market conditions could materially and adversely affect our business, financial condition, results of operations, access to credit or the trading price of our common stock.

We are subject to a risk of rapid and significant changes in market interest rates.

Our assets and liabilities are primarily monetary in nature, and as a result, we are subject to significant risks tied to changes in interest rates. Our ability to operate profitably is largely dependent upon net interest income. In 2009, net interest income made up 59% of our revenue. Unexpected movement in interest rates markedly changing the slope of the current yield curve could cause our net interest margins to decrease, subsequently decreasing net interest income. In addition, such changes could adversely affect the valuation of our assets and liabilities.

At present our one-year interest rate sensitivity position is liability sensitive, such that a gradual increase in interest rates during the next twelve months should have a significant impact on net interest income during that period. However, as with most financial institutions, our results of operations are affected by changes in interest rates and our ability to manage this risk. The difference between interest rates charged on interest-earning assets and interest rates paid on interest-bearing liabilities may be affected by changes in market interest rates, changes in relationships between interest rate indices, and/or changes in the relationships between long-term and short-term market interest rates. A change in this difference might result in an increase in interest expense relative to interest income, or a decrease in our interest rate spread.

Certain changes in interest rates, inflation, deflation, or the financial markets could affect demand for our products and our ability to deliver products efficiently.

Loan originations, and potentially loan revenues, could be adversely impacted by sharply rising interest rates. Conversely, sharply falling rates could increase prepayments within our securities portfolio lowering interest earnings from those investments. An underperforming stock market could reduce brokerage transactions, therefore reducing investment brokerage revenues; in addition, wealth management fees associated with managed securities portfolios could also be adversely affected. An unanticipated increase in inflation could cause our operating costs related to salaries & benefits, technology, and supplies to increase at a faster pace than revenues.

The fair market value of our securities portfolio and the investment income from these securities also fluctuate depending on general economic and market conditions. In addition, actual net investment income and/or cash flows from investments that carry prepayment risk, such as mortgage-backed and other asset-backed securities, may differ from those anticipated at the time of investment as a result of interest rate fluctuations.

Changes in the policies of monetary authorities and other government action could adversely affect our profitability.

The results of operations are affected by credit policies of monetary authorities, particularly the Federal Reserve Board. The instruments of monetary policy employed by the Federal Reserve Board include open market operations in U.S. government securities, changes in the discount rate or the federal funds rate on bank borrowings and changes in reserve requirements against bank deposits. In view of changing conditions in the national economy and in the money markets, particularly in light of the continuing threat of terrorist attacks and the current military operations in the Middle East, we cannot predict possible future changes in interest rates, deposit levels, loan demand or our business and earnings. Furthermore, the actions of the United States government and other governments in responding to such terrorist attacks or the military operations in the Middle East may result in currency fluctuations, exchange controls, market disruption and other adverse effects.

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Natural disasters could affect our ability to operate.

Our market areas are susceptible to hurricanes. Natural disasters, such as hurricanes, can disrupt our operations, result in damage to properties and negatively affect the local economies in which we operate.

We cannot predict whether or to what extent damage caused by future hurricanes will affect our operations or the economies in our market areas, but such weather events could cause a decline in loan originations, a decline in the value or destruction of properties securing the loans and an increase in the risk of delinquencies, foreclosures or loan losses.

Insurance.

The insurance market for financial institution coverage was significantly impacted by the economic turmoil of 2008 and 2009. Many financial institutions saw higher than usual premium increases and restrictions in limits and coverage. Because of Hancock Bank’s performance and its solid capital base, the renewal terms and conditions of the Financial Institution Insurance Program were as favorable as in prior years, with only a minimum increase in overall premiums. The long term relationship Hancock Bank has with its insurance carriers provides stability and security and should serve the bank well over the coming years.

Greater loan losses than expected may adversely affect our earnings.

We, as lenders, are exposed to the risk that our customers will be unable to repay their loans in accordance with their terms and that any collateral securing the payment of their loans may not be sufficient to assure repayment. Credit losses are inherent in the business of making loans and could have a material adverse effect on our operating results. Our credit risk with respect to our real estate and construction loan portfolio will relate principally to the creditworthiness of corporations and the value of the real estate serving as security for the repayment of loans. Our credit risk with respect to our commercial and consumer loan portfolio will relate principally to the general creditworthiness of businesses and individuals within our local markets.

We make various assumptions and judgments about the collectibility of our loan portfolio and provide an allowance for estimated loan losses based on a number of factors. We believe that our current allowance for loan losses is adequate. However, if our assumptions or judgments prove to be incorrect, the allowance for loan losses may not be sufficient to cover actual loan losses. We may have to increase our allowance in the future in response to the request of one of our primary banking regulators, to adjust for changing conditions and assumptions, or as a result of any deterioration in the quality of our loan portfolio. The actual amount of future provisions for loan losses cannot be determined at this time and may vary from the amounts of past provisions.

The projected benefit obligations of our pension plan exceed the fair value of the Plan’s assets.

Investments in the portfolio of our pension plan may not provide adequate returns to fully fund benefits as they come due, thus causing higher annual plan expenses and requiring additional contributions by us.

We may need to rely on the financial markets to provide needed capital.

Our stock is listed and traded on the NASDAQ Global Select. Although we anticipate that our capital resources will be adequate for the foreseeable future to meet our capital requirements, at times we may depend on the liquidity of the NASDAQ market to raise equity capital. If the market should fail to operate, or if conditions in the capital markets are adverse, we may be constrained in raising capital. We maintain a consistent analyst following; therefore, downgrades in our prospects by an analyst(s) may cause our stock price to fall and significantly limit our ability to access the markets for additional capital requirements. Should these risks materialize, our ability to further expand our operations through internal growth may be limited.

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Sales of a significant number of shares of our Common Stock in the public markets, or the perception of such sales, could depress the market price of our Common Stock.

Sales of a substantial number of shares of our Common Stock in the public markets and the availability of those shares for sale could adversely affect the market price of our Common Stock. In addition, future issuances of equity securities, including pursuant to outstanding options, could dilute the interests of our existing stockholders, including you, and could cause the market price of our Common Stock to decline. We may issue such additional equity or convertible securities to raise additional capital. The issuance of any additional shares of common or preferred stock could be substantially dilutive to shareholders of our Common Stock. Moreover, to the extent that we issue restricted stock units, phantom shares, stock appreciation rights, options or warrants to purchase our Common Stock in the future and those stock appreciation rights, options or warrants are exercised or as the restricted stock units vest, our shareholders may experience further dilution. Holders of our shares of Common Stock have no preemptive rights that entitle holders to purchase their pro rata share of any offering of shares of any class or series and, therefore, such sales or offerings could result in increased dilution to our shareholders. We cannot predict the effect that future sales of our Common Stock would have on the market price of our Common Stock.

We may invest or spend the proceeds in stock offerings in ways with which you may not agree and in ways that may not earn a profit.

We intend to use the proceeds of offerings for general corporate purposes, including for possible acquisition opportunities that may become available or to establish de novo branches as discussed under “Use of Proceeds.” There can be no assurances that suitable acquisition opportunities may become available, or that we will be able to successfully complete any such acquisitions. We may use the proceeds only to focus on sustaining our organic, or internal, growth, or for other purposes. In addition, we may choose to use all or a portion of the proceeds to support our capital. We retain broad discretion over the use of the proceeds from this offering and may use them for purposes other than those contemplated at the time of this offering. You may not agree with the ways we decide to use these proceeds, and our use of the proceeds may not yield any profits.

We engage in acquisitions of other businesses from time to time, including FDIC-assisted acquisitions. These acquisitions may not produce revenue or earnings enhancements or cost savings at levels or within timeframes originally anticipated and may result in unforeseen integration difficulties.

On occasion, we will engage in acquisitions of other businesses. Difficulty in integrating an acquired business or company may cause us not to realize expected revenue increases, cost savings, increases in geographic or product presence, or other anticipated benefits from any acquisition. The integration could result in higher than expected deposit attrition (run-off), loss of key employees, disruption of our business or the business of the acquired company, or otherwise adversely affect our ability to maintain relationships with customers and employees or achieve the anticipated benefits of the acquisition. We are likely to need to make additional investment in equipment and personnel to manage higher asset levels and loan balances as a result of any significant acquisition, which may adversely impact our earnings. Also, the negative effect of any divestitures required by regulatory authorities in acquisitions or business combinations may be greater than expected.

In evaluating potential acquisition opportunities we may seek to acquire failed banks through FDIC-assisted transactions. While the FDIC may, in such transactions, provide assistance to mitigate certain risks, such as sharing in exposure to loan losses, and providing indemnification against certain liabilities, of the failed institution, we may not be able to accurately estimate our potential exposure to loan losses and other potential liabilities, or the difficulty of integration, in acquiring such institution.

Depending on the condition of any institution that we may acquire, any acquisition may, at least in the near term, adversely affect our capital earnings and, if not successfully integrated following the acquisition, may continue to have such effects.

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Our growth and financial performance may be negatively impacted if we are unable to successfully execute our growth plans.

There can be no assurances that we will be successful in continuing our organic, or internal, growth, which depends upon economic conditions, our ability to identify appropriate markets for expansion, our ability to recruit and retain qualified personnel, our ability to fund growth at a reasonable cost, sufficient capital to support our growth initiatives, competitive factors, banking laws, and other factors.

We may seek to supplement our internal growth through acquisitions. We cannot predict the number, size or timing of acquisitions, or whether any such acquisition will occur at all. Our acquisition efforts have traditionally focused on targeted banking or insurance entities in markets in which we currently operate and markets in which we believe we can compete effectively. However, as consolidation of the financial services industry continues, the competition for suitable acquisition candidates may increase. We may compete with other financial services companies for acquisition opportunities, and many of these competitors have greater financial resources than we do and may be able to pay more for an acquisition than we are able or willing to pay. We also may need additional debt or equity financing in the future to fund acquisitions. We may not be able to obtain additional financing or, if available, it may not be in amounts and on terms acceptable to us. If we are unable to locate suitable acquisition candidates willing to sell on terms acceptable to us, or we are otherwise unable to obtain additional debt or equity financing necessary for us to continue making acquisitions, we would be required to find other methods to grow our business and we may not grow at the same rate we have in the past, or at all.

We must generally receive federal regulatory approval before we can acquire a bank or bank holding company. In determining whether to approve a proposed bank acquisition, federal bank regulators will consider, among other factors, the effect of the acquisition on the competition, financial condition, and future prospects. The regulators also review current and projected capital ratios and levels, the competence, experience, and integrity of management and its record of compliance with laws and regulations, the convenience and needs of the communities to be served (including the acquiring institution’s record of compliance under the Community Reinvestment Act) and the effectiveness of the acquiring institution in combating money laundering activities. We cannot be certain when or if, or on what terms and conditions, any required regulatory approvals will be granted. We may also be required to sell banks or branches as a condition to receiving regulatory approval, which condition may not be acceptable to us or, if acceptable to us, may reduce the benefit of any acquisition.

In addition to the acquisition of existing financial institutions, as opportunities arise we plan to continue de novo branching as a part of our internal growth strategy and possibly entry into new markets through de novo branching. De novo branching and any acquisition carries with it numerous risks, including the following:

• the inability to obtain all required regulatory approvals;

• significant costs and anticipated operating losses associated with establishing a de novo branch or a new bank;

• the inability to secure the services of qualified senior management;

• the local market may not accept the services of a new bank owned and managed by a bank holding company headquartered outside of the market area of the new bank;

• economic downturns in the new market;

• the inability to obtain attractive locations within a new market at a reasonable cost; and

• the additional strain on management resources and internal systems and controls.

We have experienced to some extent many of these risks with our de novo branching to date.

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We are subject to regulation by various Federal and State entities.

We are subject to the regulations of the Securities and Exchange Commission (“SEC”), the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Mississippi Department of Banking and Consumer Finance, the Louisiana Office of Financial Institutions, the Florida Office of Financial Regulation, the Alabama Banking Department and the Mississippi Department of Insurance. New regulations issued by these agencies may adversely affect our ability to carry on our business activities. We are subject to various Federal and State laws and certain changes in these laws and regulations may adversely affect our operations. Noncompliance with certain of these regulations may impact our business plans, including ability to branch, offer certain products, or execute existing or planned business strategies.

We are also subject to the accounting rules and regulations of the SEC and the Financial Accounting Standards Board. Changes in accounting rules could adversely affect the reported financial statements or our results of operations and may also require extraordinary efforts or additional costs to implement. Any of these laws or regulations may be modified or changed from time to time, and we cannot be assured that such modifications or changes will not adversely affect us.

We are subject to industry competition which may have an impact upon our success.

Our profitability depends on our ability to compete successfully. We operate in a highly competitive financial services environment. Certain competitors are larger and may have more resources than we do. We face competition in our regional market areas from other commercial banks, savings and loan associations, credit unions, internet banks, finance companies, mutual funds, insurance companies, brokerage and investment banking firms, and other financial intermediaries that offer similar services. Some of our nonbank competitors are not subject to the same extensive regulations that govern us or the Bank and may have greater flexibility in competing for business.

Another competitive factor is that the financial services market, including banking services, is undergoing rapid changes with frequent introductions of new technology-driven products and services. Our future success may depend, in part, on our ability to use technology competitively to provide products and services that provide convenience to customers and create additional efficiencies in our operations.

The price of our Common Stock is volatile and may decline.

The trading price of our Common Stock may fluctuate widely as a result of a number of factors, many of which are outside our control. In addition, the stock market is subject to fluctuations in the share prices and trading volumes that affect the market prices of the shares of many companies. These broad market fluctuations have adversely affected and may continue to adversely affect the market price of our Common Stock. Among the factors that could affect our stock price are:

• actual or anticipated quarterly fluctuations in our operating results and financial condition;

• changes in revenue or earnings estimates or publication of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to our securities or those of other financial institutions;

• failure to meet analysts’ revenue or earnings estimates;

• speculation in the press or investment community;

• strategic actions by us or our competitors, such as acquisitions or restructurings;

• actions by institutional shareholders;

• fluctuations in the stock price and operating results of our competitors;

17

• general market conditions and, in particular, developments related to market conditions for the financial services industry;

• proposed or adopted regulatory changes or developments;

• anticipated or pending investigations, proceedings or litigation that involve or affect us; or

• domestic and international economic factors unrelated to our performance.

A significant decline in our stock price could result in substantial losses for individual shareholders and could lead to costly and disruptive securities litigation.

We may issue debt and equity securities or securities convertible into equity securities, any of which may be senior to our Common Stock as to distributions and in liquidation, which could negatively affect the value of our Common Stock.

In the future, we may attempt to increase our capital resources by entering into debt or debt-like financing that is unsecured or secured by all or up to all of our assets, or by issuing additional debt or equity securities, which could include issuances of secured or unsecured commercial paper, medium-term notes, senior notes, subordinated notes, preferred stock or securities convertible into or exchangeable for equity securities. In the event of our liquidation, our lenders and holders of our debt and preferred securities would receive a distribution of our available assets before distributions to the holders of our Common Stock. Because our decision to incur debt and issue securities in our future offerings will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings and debt financings. Further, market conditions could require us to accept less favorable terms for the issuance of our securities in the future.

Our results of operations depend upon the results of operations of our subsidiaries.

We are a bank holding company that conducts substantially all of our operations through our subsidiary Banks. As a result, our ability to make dividend payments on our Common Stock will depend primarily upon the receipt of dividends and other distributions from our subsidiaries.

The ability of the Banks to pay dividends or make other payments to us is limited by their obligations to maintain sufficient capital and by other general regulatory restrictions on their dividends. If these requirements are not satisfied, we will be unable to pay dividends on our Common Stock.

At June 30, 2009, the aggregate amount of dividends, which legally could be paid without prior approval of various regulatory agencies, totaled approximately $11 million by Hancock Bank MS, and $37.9 million by Hancock Bank LA. No dividends were payable by Hancock Bank AL or Hancock Bank FL.

We and/or the holders of our securities could be adversely affected by unfavorable rating actions from rating agencies.

Our ability to access the capital markets is important to our overall funding profile. This access is affected by the ratings assigned by rating agencies to us, certain of our affiliates and particular classes of securities that we and our affiliates issue. The interest rates that we pay on our securities are also influenced by, among other things, the credit ratings that we, our affiliates and/or our securities receive from recognized rating agencies. A downgrade to us, our affiliates or our securities could create obligations or liabilities to us under the terms of our outstanding securities that could increase our costs or otherwise have a negative effect on our results of operations or financial condition. Additionally, a downgrade of the credit rating of any particular security issued by us or our affiliates 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.

18

Anti-takeover provisions in our amended articles of incorporation and bylaws, Mississippi law, and our Shareholder Rights Plan could make a third party acquisition of us difficult and may adversely affect share value.

Our amended articles of incorporation and bylaws contain provisions that make it more difficult for a third party to acquire us (even if doing so might be beneficial to our stockholders) and for holders of our securities to receive any related takeover premium for their securities. In addition, under our Shareholder Rights Plan, “rights” are issued to all Hancock common shareholders which, if activated upon an attempted unfriendly acquisition, would allow our shareholders to buy our common stock at a reduced price, thereby minimizing the risk of any potential hostile takeover.

We are also subject to certain provisions of state and federal law and our articles of incorporation may make it more difficult for someone to acquire control of us. Under federal law, subject to certain exemptions, a person, entity, or group must notify the federal banking agencies before acquiring 10% or more of the outstanding voting stock of a bank holding company, including our shares. Banking agencies review the acquisition to determine if it will result in a change of control. The banking agencies have 60 days to act on the notice, and take into account several factors, including the resources of the acquirer and the antitrust effects of the acquisition. There also are Mississippi statutory provisions and provisions in our articles of incorporation that may be used to delay or block a takeover attempt. As a result, these statutory provisions and provisions in our articles of incorporation could result in our being less attractive to a potential acquirer and limit the price that investors might be willing to pay in the future for shares of our Common Stock.

You may not receive dividends on the Common Stock.

Holders of our Common Stock are only entitled to receive such dividends as our board of directors may declare out of funds legally available for such payments. Although we have historically and routinely declared cash dividends on our Common Stock, we are not required to do so and may reduce or eliminate our Common Stock dividend in the future.

Securities issued by us, including our common stock, are not FDIC insured.

Securities issued by us, including our common stock, are not savings or deposit accounts or other obligations of any bank and are not insured by the FDIC, the Bank Insurance Fund, or any other governmental agency or instrumentality, or any private insurer, and are subject to investment risk, including the possible loss of principal.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our main office is located at One Hancock Plaza, in Gulfport, Mississippi.

We operate 185 banking and financial services offices and 166 automated teller machines across south Mississippi, Louisiana, south Alabama and Florida. We lease 98 of the 185 locations with the remainder being owned. With the acquisition of Peoples First on December 18, 2009, we leased all locations from the FDIC with the option to continue leasing the 11 locations Peoples First was leasing and the option to purchase the remaining 21 locations. In addition, Hancock Bank MS owns land and other properties acquired through foreclosures of loan collateral. The major item is approximately 3,700 acres of timber land in Hancock County, Mississippi, which Hancock Bank MS acquired by foreclosure in the 1930’s.

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ITEM 3. LEGAL PROCEEDINGS

We are party to various legal proceedings arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, each matter is adequately covered by insurance and indemnification, or, if not so covered, is not expected to have a material adverse effect on our financial statements.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the quarter ended December 31, 2009.

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock trades on the NASDAQ Stock Market under the symbol “HBHC” and is quoted in publications under “HancHd.” The following table sets forth the high and low sale prices of our common stock as reported on the NASDAQ Stock Market. These prices do not reflect retail mark-ups, mark-downs or commissions.

		High Sale		Low Sale		Cash Dividends Paid
2009
	4th quarter	$	44.89	$	35.26	$	0.24
	3rd quarter		42.38		29.90		0.24
	2nd quarter		41.19		30.12		0.24
	1st quarter		45.56		22.51		0.24
2008
	4th quarter	$	56.45	$	34.20	$	0.24
	3rd quarter		68.42		33.34		0.24
	2nd quarter		45.68		38.38		0.24
	1st quarter		44.29		33.45		0.24

There were 5,837 registered holders and approximately 16,643 unregistered holders of common stock of the Company at February 1, 2010 and 36,851,700 shares issued. On February 1, 2010, the high and low sale prices of the Company’s common stock as reported on the NASDAQ Stock Market were $41.18 and $40.48, respectively. The principal source of funds to the Company to pay cash dividends is the dividends received from Hancock Bank, Gulfport, Mississippi, Hancock Bank of Louisiana, Baton Rouge, Louisiana, Hancock Bank of Alabama, Mobile, Alabama, and Hancock Bank of Florida, Tallahassee, Florida. Consequently, dividends are dependent upon earnings, capital needs, regulatory policies and statutory limitations affecting the banks. Federal and state banking laws and regulations restrict the amount of dividends and loans a bank may make to its parent company. Dividends paid to the Company by Hancock Bank are subject to approval by the Commissioner of Banking and Consumer Finance of the State of Mississippi and those paid by Hancock Bank of Louisiana are subject to approval by the Commissioner for Financial Institutions of the State of Louisiana. Dividends paid by Hancock Bank of Florida are subject to approval by the Florida Department of Financial Services. The Company’s management does not expect regulatory restrictions to affect its policy of paying cash dividends. Although no assurance can be given that Hancock Holding Company will continue to declare and pay regular quarterly cash dividends on its common stock, the Company has paid regular cash dividends since 1937.

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Stock Performance Graph

Following is a line graph presentation comparing cumulative, five-year shareholder returns on an indexed basis with a performance indicator of the overall stock market and an index of peer companies selected by us. The broad market index used in the graph is the NASDAQ Market Index. The peer group index is a group of financial institutions in the southeast that are similar in asset size and business strategy; a list of the Companies included in the index follows the graph.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN

AMONG HANCOCK HOLDING COMPANY,

NASDAQ COMPOSITE INDEX

AND PEER GROUP INDEX

ASSUMES $100 INVESTED ON DEC.31, 2004

ASSUMES REINVESTMENT OF DIVIDENDS

FISCAL YEAR ENDING DEC. 31, 2009

BANK OF THE OZARKS INC	IBERIABANK CORP	STERLING BANCSHARES
BANKATLANTIC BANCORP	PINNACLE FINANCIAL PARTNERS	SUPERIOR BANCORP
FNB CORPORATION FL	RENASANT CORP	TRUSTMARK CORP
GREEN BANKSHARES INC	REPUBLIC BANCORP INC CLA	UNITED COMMUNITY BANKS

21

Issuer Purchases of Equity Securities

The following table provides information with respect to purchases made by the issuer or any affiliated purchaser of the issuer’s equity securities.

	(a)	(b)		(c)	(d)
	Total number of shares or units purchased	Average price paid per share		Total number of shares purchased as a part of publicly announced plans or programs (1)	Maximum number of shares that may yet be purchased under plans or programs
Oct. 1, 2009 - Oct. 31, 2009	—	$	—	—	2,982,700
Nov. 1, 2009 - Nov. 30, 2009	—		—	—	2,982,700
Dec.1, 2009 - Dec. 31, 2009	—		—	—	2,982,700
Total	—	$	—	—

(1) The Company publicly announced its stock buy-back program on November 13, 2007.

Equity Compensation Plan Information

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	$	1,281,074	$	27.44	$	4,361,722
Equity compensation plans not approved by security holders		—		—		—
Total	$	1,281,074	$	27.44	$	4,361,722

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ITEM 6. SELECTED FINANCIAL DATA

The following tables set forth certain selected historical consolidated financial data and should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated Financial Statements and Notes thereto included elsewhere herein. The following information may not be deemed indicative of our future operating results.

	At and For the Years Ended December 31,
	2009		2008		2007		2006		2005
	(Unaudited, in thousands)
Period-End Balance Sheet Data:
Securities	$	1,612,962	$	1,681,957	$	1,670,208	$	1,895,157	$	1,953,245
Short-term investments		797,262		549,416		126,281		222,439		410,226
Loans held for sale		36,112		22,290		18,957		16,946		24,219
Loans, net of unearned income		5,114,175		4,249,290		3,596,557		3,249,638		2,964,967
Total earning assets		7,560,511		6,502,953		5,412,003		5,384,180		5,352,657
Allowance for loan losses		66,050		61,725		47,123		46,772		74,558
Total assets		8,697,083		7,167,254		6,055,979		5,964,565		5,950,187
Total deposits		7,195,812		5,930,937		5,009,534		5,030,991		4,989,820
Total common stockholders’ equity		837,663		609,499		554,187		558,410		477,415
Average Balance Sheet Data:
Securities	$	1,561,140	$	1,743,998	$	1,726,714	$	2,222,114	$	1,426,461
Short-term investments		497,048		175,891		117,158		211,511		137,821
Loans, net of unearned income		4,310,120		3,873,908		3,428,009		3,062,222		2,883,020
Total earning assets		6,368,308		5,793,797		5,271,881		5,495,847		4,447,302
Allowance for loan losses		63,450		53,354		46,443		64,285		50,107
Total assets		7,099,767		6,426,389		5,851,889		6,031,800		4,931,030
Total deposits		5,697,599		5,182,407		4,929,176		5,069,427		4,001,426
Total common stockholders’ equity		674,375		584,805		562,383		513,656		475,701

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	At and For the Years Ended December 31,
	2009			2008			2007			2006			2005
	(Unaudited, in thousands)
Key Ratios:
Return on average assets		1.05	%		1.02	%		1.26	%		1.69	%		1.10	%
Return on average common equity		11.09	%		11.18	%		13.14	%		19.82	%		11.36	%
Net interest margin (te)*		3.78	%		3.80	%		4.08	%		4.23	%		4.40	%
Average loans to average deposits		75.65	%		74.75	%		69.55	%		60.41	%		72.05	%
Noninterest income excluding securities transactions, as a percent of total revenue (te)		39.54	%		35.86	%		35.89	%		31.44	%		32.38	%
Noninterest expense as a percent of total revenue (te) before amortization of purchased intangibles and securities transactions		58.34	%		61.84	%		64.13	%		59.28	%		59.08	%
Allowance for loan losses to period-end loans		1.29	%		1.45	%		1.31	%		1.44	%		2.51	%
Non-performing assets to loans plus other real estate		1.97	%		0.83	%		0.43	%		0.13	%		0.42	%
Allowance for loan losses to non-performing loans and accruing loans 90 days past due		58.69	%		133.16	%		241.43	%		694.67	%		195.50	%
Net charge-offs to average loans		1.17	%		0.57	%		0.21	%		0.23	%		0.30	%
FTE employees (period-end)		2,240			1,952			1,888			1,848			1,735
Common stockholders’ equity to total assets		9.63	%		8.50	%		9.15	%		9.36	%		8.02	%
Tangible common equity to total assets		8.81	%		7.62	%		8.08	%		8.24	%		6.89	%
Tier 1 leverage		10.60	%		8.06	%		8.51	%		8.63	%		7.85	%
Tier 1 risk-based		11.99	%		10.66	%		11.03	%		12.46	%		11.47	%
Total risk-based		13.04	%		11.86	%		12.07	%		13.60	%		12.73	%
Income Data:
Interest income	$	323,727		$	335,437		$	345,697		$	344,063		$	263,378
Interest expense		95,300			126,002			140,236			119,863			74,819
Net interest income		228,427			209,435			205,461			224,200			188,559
Net interest income (te)		240,487			219,889			215,000			232,463			195,936
Provision for (reversal of) loan losses		54,590			36,785			7,593			(20,762	)		42,635
Noninterest income excluding storm-related insurance gain and securities transactions		157,258			122,953			120,378			106,585			93,840
Net storm-related items		—			—			—			5,084			6,584
Gains/(losses) on sales of securities, net		69			4,825			308			(5,169	)		(53	)
Noninterest expense excluding amortization of intangibles		232,053			212,011			215,092			200,991			171,197
Amortization of intangibles		1,417			1,432			1,651			2,125			2,194
Net income before income taxes		97,694			86,985			101,811			148,346			72,903
Net income		74,775			65,366			73,892			101,802			54,032
Net income available to common stockholders		74,775			65,366			73,892			101,802			54,032

* Tax Equivalent (te) amounts are calculated using a marginal federal income tax rate of 35%.

24

	At and For the Years Ended December 31,
	2009			2008			2007			2006			2005
Per Common Share Data:
Basic earnings per share	$	2.28		$	2.07		$	2.30		$	3.12		$	1.67
Diluted earnings per share	$	2.26		$	2.04		$	2.26		$	3.05		$	1.64
Cash dividends paid	$	0.960		$	0.960		$	0.960		$	0.895		$	0.720
Book value	$	22.74		$	19.18		$	17.71		$	17.09		$	14.78
Dividend payout ratio		42.11	%		46.38	%		41.74	%		28.69	%		43.11	%
Weighted average number of shares outstanding
Basic		32,747			31,491			32,000			32,534			32,365
Diluted		32,934			31,883			32,545			33,304			32,966
Number of shares outstanding (period end)		36,840			31,877			31,295			32,666			32,301
Market data:
High sales price	$	45.56		$	68.42		$	54.09		$	57.19		$	39.90
Low sales price	$	22.51		$	33.34		$	32.78		$	37.75		$	28.25
Period-end closing price	$	43.81		$	45.46		$	38.20		$	52.84		$	37.81
Trading volume		66,346			73,843			48,169			27,275			22,404

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The purpose of this discussion and analysis is to focus on significant changes and events in the financial condition and results of operations of Hancock Holding Company and our subsidiaries (Hancock) during 2009 and selected prior periods. This discussion and analysis is intended to highlight and supplement data and information presented elsewhere in this report, including the consolidated financial statements and related notes. Certain information relating to prior years has been reclassified to conform to the current year’s presentation.

FORWARD-LOOKING STATEMENTS

Congress passed the Private Securities Litigation Act of 1995 in an effort to encourage corporations to provide information about a company’s anticipated future financial performance. This act provides a safe harbor for such disclosure, which protects us from unwarranted litigation, if actual results are different from management expectations. This discussion and analysis contains forward-looking statements and reflects management’s current views and estimates of future economic circumstances, industry conditions, company performance and financial results. The words “may,” “should,” “expect,” “anticipate,” “intend,” “plan,” “continue,” “believe,” “seek,” “estimate” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to a number of factors and uncertainties, which could cause our actual results and experience to differ from the anticipated results and expectations, expressed in such forward-looking statements.

EXECUTIVE OVERVIEW

Net income for the year ended December 31, 2009 was $74.8 million, an increase of $9.4 million, or 14.4 percent, from 2008’s net income of $65.4 million. Diluted earnings per share for 2009 were $2.26, an increase of $0.22 from 2008’s diluted earnings per share of $2.04. Our return on average assets for 2009 was 1.05 percent compared to 1.02 percent for 2008. These results include the impact of two significant events that occurred in the fourth quarter: our common stock offering and the acquisition of Peoples First Community Bank which are both more fully described below.

• On October 26, 2009, we closed a very successful common stock offering. In connection with the offering, we issued 4,945,000 shares of common stock at a price of $35.50. Gross proceeds were $175.5 million with net proceeds of $167.3 million after expenses. The proceeds of the offering are intended to be used for general corporate purposes, which may include financing acquisition opportunities and other expansion efforts.

• On December 18, 2009, we acquired the assets and assumed the liabilities of Panama City, FL, based Peoples First Community Bank (Peoples First) through a purchase and assumption agreement containing a loss-sharing clause with the Federal Deposit Insurance Corporation (FDIC). There was no consideration paid for the acquisition. The loss-sharing clause lessens the significant credit risk that usually accompanies a more traditional merger or acquisition. As a result of the loss-sharing clause, FDIC will cover all acquired loans with reimbursement of 80 percent of losses up to $385 million and 95 percent of losses beyond $385 million. The Company recorded an FDIC loss share receivable of $325.6 million which represents the fair value of the FDIC’s portion of the losses that are expected to be incurred and reimbursed to the Company. We acquired approximately $1.71 billion in assets and assumed $1.69 billion in liabilities. These values are subject to refinement for up to one year after the closing date of the acquisition as additional information relative to the closing may become available. All of the other real estate owned (including foreclosed real estate) was retained by the FDIC. The acquisition resulted in a pretax acquisition gain of $33.6 million and pretax merger related expenses of $3.7 million. Peoples First had 29 branches in the Florida Panhandle and Central Florida. With this transaction, we increased the company’s total banking and financial services offices to more than 180 locations in Florida, Alabama, Mississippi, and Louisiana.

Our year-end results were impacted by the continuing national economic recession. Weaknesses in residential development and rising unemployment levels in our market areas which resulted in higher charge-offs and a higher allowance for loan losses in 2009 also impacted earnings. As a result of these difficult national and regional issues, we recorded a provision for loan losses of $54.6 million, which represents an increase of $17.8 million compared to 2008. Net charge-offs for 2009 were $50.3 million, or 1.17% of average loans and were up $28.1 million compared to 2008’s net charge-offs of $22.2 million, or 0.57% of average loans. Of the $50.3 million in net charge-offs in 2008, $24.4 million was related to the commercial/real estate loans due to the ongoing recession. The weak economy also impacted our allowance for loan losses, which increased to $66.1 million at December 31, 2008 from $61.7 recorded at December 31, 2008.

26

Our balance sheet showed growth during 2009. At year end, our total asset level reached $8.7 billion, an increase of $1.53 billion, or 21.3%, from December 31, 2008. The overall increase in total assets was due to the acquisition of Peoples First discussed above. Period-end loans were up $864.9 million, or 20.4%, from December 31, 2008. Loan growth increased primarily in the loan categories of commercial/ real estate (up $477.7 million), mortgage loans (up $312.2 million), and direct consumer loans (up $146.7 million.) We also experienced strong growth in deposits over the past year. Period-end deposits at December 31, 2009 were $7.2 billion, up $1.3 billion, or 21.3%, from December 31, 2008, primarily due to the acquisition of Peoples First. Deposit growth increased primarily in time deposits (up $869.1 million) and interest bearing transaction deposits (up $443.6 million.) We continue to remain very well capitalized with total equity of $837.7 million at December 31, 2009, up $228.2 million, or 37.43%, from December 31, 2008.

RESULTS OF OPERATIONS

Net Interest Income

Net interest income (te) is the primary component of our earnings and represents the difference, or spread, between revenue generated from interest-earning assets and the interest expense related to funding those assets. For internal analytical purposes, management adjusts net interest income to a “taxable equivalent” basis using a 35% federal tax rate on tax exempt items (primarily interest on municipal securities and loans). Fluctuations in interest rates, as well as volume and mix changes in earning assets and interest-bearing liabilities can materially impact net interest income (te).

Another significant statistic in the analysis of net interest income is the effective interest differential (also referred to as the net interest margin), which is the ratio of net interest income (te) to our average earning assets. The difference between the average yield on earning assets and the effective rate paid for all deposits and borrowed funds, non-interest-bearing as well as interest-bearing is the net interest spread. Since a portion of the Bank’s deposits does not bear interest, such as demand accounts, the rate paid for all funds is lower than the rate on interest-bearing liabilities alone. The net interest margin (te) for the years 2009, 2008, and 2007 was 3.78%, 3.80%, and 4.08%, respectively.

Net interest income (te) of $240.5 million was recorded for the year 2009, an increase of $20.6 million, or 9.4%, from 2008. We experienced an increase of $4.9 million, or 2.3%, from 2008 to 2007. The factors contributing to the changes in net interest income (te) for 2009, 2008 and 2007 are presented in Tables 1 and 2. Table 1 is an analysis of the components of average balance sheets, levels of interest income and expense and the resulting earning asset yields and liability rates. Table 2 details the overall changes in the level of net interest income into rate and volume.

The increase of $20.6 million in net interest income (te) in 2009 from 2008 was caused by an increase in average earnings assets of $574.5 million, or 9.9%. In 2009, our average loan growth increased $436.2 million, or 11.3%, average short-term investments increased $321.2 million, or 182.7%, and average securities decreased $182.9 million, or 10.5% from 2008. With short-term interest rates down significantly from last year, our loan yield fell 68 basis points, pushing the yield on average earnings assets down 70 basis points. However, total funding costs over last year were down 68 basis points.

When comparing 2008 to 2007, the primary driver of the $4.9 million, or 2.3% increase, in net interest income (te) was a $521.9 million, or 9.9%, increase in average earning assets. In 2008, our average loan growth increased $445.9 million, or 13%, from 2007 along with a slight increase in average securities of $17.3 million. There was also an unfavorable change in 2008 in our average funding mix with most new deposits more heavily weighted to mostly time deposits of $304.2 million and lower levels of non-interest bearing transaction deposits of $51 million.

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Recognizing the importance of interest differential to total earnings, management places great emphasis on managing interest rate spreads. Although interest differential is affected by national, regional, and area economics our loan and investment policies are designed to maximize interest differential while maintaining sufficient liquidity and availability of funds for purposes of meeting existing commitments and for investment in loans and other investment opportunities that may arise.

The following table is a summary of average balance sheets that reflects average interest earned, average interest paid, average yield and average rate:

TABLE 1. Summary of Average Balance Sheets (w/ Net Interest Income (te) & Interest Rates)

	Years Ended December 31,
	2009								2008								2007
	Average Balance			Interest			Rate		Average Balance			Interest			Rate		Average Balance			Interest			Rate
	(In thousands)
Assets
Interest-Earnings Assets:
Loans* (te)	$	4,310,120		$	253,732		5.89	%	$	3,873,908		$	254,347		6.57	%	$	3,428,009		$	261,944		7.64	%
U.S. Treasury securities		10,986			175		1.59	%		11,366			296		2.60	%		29,095			1,379		4.74	%
U.S. agency securities		165,725			6,778		4.09	%		349,931			16,000		4.57	%		810,299			41,111		5.07	%
CMOs		162,811			8,251		5.07	%		150,692			7,465		4.95	%		94,731			3,997		4.22	%
Mortgage-backed securities		1,029,860			51,553		5.01	%		1,012,274			52,564		5.19	%		534,893			27,190		5.08	%
Obligations of states and political subdivisions:
taxable		56,414			2,493		4.42	%		52,070			1,661		3.19	%		50,944			1,189		2.33	%
nontaxable (te)		110,517			7,008		6.34	%		120,237			7,659		6.37	%		146,060			9,590		6.57	%
Other corporate securities		24,827			1,323		5.33	%		47,428			2,061		4.34	%		60,692			3,223		5.31	%
Total investment in securities		1,561,140			77,581		4.97	%		1,743,998			87,706		5.03	%		1,726,714			87,679		5.08	%
Federal funds sold and short-term investments		497,048			4,475		0.90	%		175,891			3,838		2.18	%		117,158			5,613		4.79	%
Total interest-earning assets (te)		6,368,308			335,788		5.27	%		5,793,797			345,891		5.97	%		5,271,881			355,236		6.74	%
Non-earning assets:
Other assets		794,909								685,946								626,451
Allowance for loan losses		(63,450	)							(53,354	)							(46,443	)
Total assets	$	7,099,767							$	6,426,389							$	5,851,889
Liabilities and Stockholder’s Equity
Interest-bearing Liabilities:
Interest-bearing transaction deposits	$	1,486,438			7,264		0.49	%	$	1,415,288			13,751		0.97	%	$	1,419,077			18,135		1.28	%
Time deposits		1,987,059			58,252		2.93	%		1,843,966			70,659		3.83	%		1,778,854			81,223		4.57	%
Public funds		1,288,117			18,797		1.46	%		1,046,484			26,642		2.55	%		803,589			33,561		4.18	%
Total interest-bearing deposits		4,761,614			84,313		1.77	%		4,305,738			111,052		2.58	%		4,001,520			132,919		3.32	%
Customer repurchase agreements		523,351			10,802		2.06	%		524,712			14,491		2.76	%		216,730			8,023		3.70	%
Other interest-bearing liabilities		90,172			206		0.23	%		30,186			536		1.78	%		11,280			289		2.56	%
Capitalized Interest		—			(20	)	0.00	%		—			(77	)	0.00	%		—			(995	)	0.00	%
Total interest-bearing liabilities		5,375,137			95,301		1.77	%		4,860,636			126,002		2.59	%		4,229,530			140,236		3.32	%
Non-interest bearing:
Demand deposits		935,985								876,669								927,656
Other liabilities		114,270								104,279								132,320
Stockholders’ equity		674,375								584,805								562,383
Total liabilities & stockholders’ equity	$	7,099,767					1.50	%	$	6,426,389					2.17	%	$	5,851,889					2.66	%
Net interest income and margin (te)				$	240,487		3.78	%				$	219,889		3.80	%				$	215,000		4.08	%
Net earning assets and spread	$	993,171					3.50	%	$	933,161					3.38	%	$	1,042,349					3.42	%

* Loan interest income includes loan fees of $0.8 million, $0.5 million and $1.3 million for each of the three years ended December 31, 2009, 2008 and 2007. Non-accrual loans in average balances and income on such loans, if recognized, is recorded on a cash basis. Tax equivalent (te) amounts are calculated using a marginal federal income tax rate of 35%.

28

The following table presents the change in interest income and the change in interest expense:

TABLE 2. Summary of Changes in Net Interest Income (te)

	2009 Compared to 2008									2008 Compared to 2007
	Due to Change in						Total Increase			Due to Change in						Total Increase
	Volume			Rate			(Decrease)			Volume			Rate			(Decrease)
	(In thousands)
Interest Income (te)
Loans	$	23,974		$	(24,589	)	$	(615	)	$	31,558		$	(39,155	)	$	(7,597	)
U.S. Treasury securities		(10	)		(111	)		(121	)		(622	)		(461	)		(1,083	)
U.S. agency securities		(7,680	)		(1,542	)		(9,222	)		(21,386	)		(3,725	)		(25,111	)
CMOs		614			172			786			2,678			790			3,468
Mortgage-backed securities		(227	)		(784	)		(1,011	)		24,777			597			25,374
Obligations of states and political subdivisions:
Taxable		154			678			832			25			447			472
Nontaxable (te)		(615	)		(36	)		(651	)		(1,365	)		(566	)		(1,931	)
FHLB stock and other corporate securities		(1,132	)		394			(738	)		(634	)		(528	)		(1,162	)
Total investment in securities		(8,896	)		(1,229	)		(10,125	)		3,473			(3,446	)		27
Federal funds and short-term investments		3,893			(3,256	)		637			2,080			(3,855	)		(1,775	)
Total interest income (te)		18,971			(29,074	)		(10,103	)		37,111			(46,456	)		(9,345	)
Interest-bearing transaction deposits		659			(7,146	)		(6,487	)		48			4,336			4,384
Time deposits		5,163			(17,570	)		(12,407	)		(2,884	)		13,448			10,564
Public funds		5,230			(13,075	)		(7,845	)		(8,416	)		15,335			6,919
Total interest-bearing deposits		11,052			(37,791	)		(26,739	)		(11,252	)		33,119			21,867
Securities sold under repurchase agreements		(38	)		(3,651	)		(3,689	)		(8,945	)		2,477			(6,468	)
Other interest-bearing liabilities		4			(277	)		(273	)		(22	)		(1,143	)		(1,165	)
Total interest expense		11,018			(41,719	)		(30,701	)		(20,219	)		34,453			14,234
Change in net interest income (te)	$	7,953		$	12,645		$	20,598		$	16,892		$	(12,003	)	$	4,889

Provision for Loan Losses

Continued weakness in residential real estate and commercial real estate, and elevated unemployment levels in our market areas had a significant impact on our net charge-off levels and resulted in a higher allowance for loan losses in 2009 compared to 2008. Net charge-offs were $50.3 million, an increase of $28.1 million, or 126.6%, from 2008 to 2009. The increase was primarily reflected in our construction and land development loan segment. The construction and land development loan segment represents approximately 11.5% of Hancock’s total loan portfolio, or about $585.7 million at December 31, 2009. The provision for loan losses was $54.6 million in 2009, an increase of $17.8 million, or 48.4% from 2008. Major drivers of the overall higher level of the provision for loan losses were continued weakness in the local and national economies, and increases in nonperforming loans and higher past dues. The provision does not include loans acquired in the Peoples First acquisition. Purchased impaired loans are recorded at fair value at the acquisition date. The provision for loan losses reflects management’s assessment of the adequacy of the allowance for loan losses to absorb inherent losses in the loan portfolio. The amount of provision for each period is dependent on many factors, including loan growth, net charge-offs, changes in the composition of the loan portfolio, delinquencies, identified loan impairment, management’s assessment of the loan portfolio quality, the value of collateral, as well as, overall economic factors. Our allowance for loan losses as a percent of period-end loans was 1.29% at December 31, 2009 compared to 1.45% at December 31, 2008.

Net charge-offs were $22.2 million for 2008, an increase of $14.9 million, or 206.3%, from 2007 to 2008. The provision for loan losses in 2008 was $36.8 million. The allowance for loan losses as a percent of period-end loans was 1.45% in 2008, an increase of 14 basis points from 1.31% at December 31, 2007. Reported net charge-offs exclude write-downs on purchased impaired loans because the fair value already considers the estimated credit losses.

29

Noninterest Income

Table 3 presents a three-year analysis of the components of noninterest income along with the percentage changes between years for each component. Overall, noninterest income of $157.3 million was reported in 2009, as compared to $127.8 million for 2008 and $120.7 million for 2007. This represents an increase of $29.5 million, or 23%, from 2008 to 2009 and an increase of $7.1 million, or 6%, from 2007 to 2008.

TABLE 3. Noninterest Income

	2009			% Change		2008		% Change		2007
	(In thousands)
Service charges on deposit accounts	$	45,354		3	%	$	44,243	6	%	$	41,929
Trust fees		15,127		-10	%		16,858	6	%		15,902
Income from insurance operations		14,355		-13	%		16,554	-14	%		19,229
Investment and annuity fees		8,220		-24	%		10,807	24	%		8,746
Debit card and merchant fees		11,252		2	%		11,082	9	%		10,126
ATM fees		7,374		8	%		6,856	15	%		5,983
Secondary mortgage market operations		5,906		98	%		2,977	-20	%		3,723
Income from bank owned life insurance		5,527		-6	%		5,906	20	%		4,912
Outsourced check income (fees)		(94	)	-133	%		285	-88	%		2,287
Letter of credit fees		1,309		15	%		1,140	16	%		983
Gain on sale of property and equipment		1,180		96	%		602	-488	%		(155	)
Acquisition bargain purchase		33,623		N/M	*		—	N/M	*		—
Other income		8,125		44	%		5,643	-16	%		6,713
Securities transactions gains, net		69		N/M	*		4,825	N/M	*		308
Total noninterest income	$	157,327		23	%	$	127,778	6	%	$	120,686
*  Not meaningful

The primary factor impacting the increase in noninterest income compared to a year ago was the $33.6 million gain on acquisition of Peoples First.

Income from service charges on deposit accounts increased $1.1 million, or 3% in 2009 because of increased overdrafts. When comparing 2008 to 2007, service charges on deposit accounts increased $2.3 million, or 6% due to a $1.3 million increase in overdraft fees as a result of an increase in rate per item, effective January 1, 2008, in addition to the increase in period-end deposits of $921 million in 2008. Service charges include periodic account maintenance fees for both commercial and personal customers, charges for specific transactions or services, such as processing return items or wire transfers, and other revenue associated with deposit accounts, such as commissions on check sales.

Fee income generated by our secondary mortgage market operations increased $2.9 million, or 98% between 2009 and 2008 after decreasing $0.1 million, or 20% between 2008 and 2007. The increase in 2009 was due to a higher volume of secondary market loans. Because of the historically low rate environment, the refinancing of current loans increased during 2009. Other income increased $2.4 million, or 43.9%, between 2009 and 2008 due to gains on sales of land of $1.4 million and a $1.0 million increase in other investment income.

The increases in noninterest income were partially offset by decreases in trust fees, investment and annuity fees, and income from insurance operations. Trust fees decreased $1.7 million, or 10% in 2009 compared to 2008 mainly because of reduced market values of accounts due to poor financial market conditions. In 2008, trust fees increased $1.0 million, or 6%, when compared to 2007 due primarily to an increase in personal trust income.

Investment and annuity fees decreased $2.6 million, or 24%, in 2009 mainly due to difficult financial market conditions. Investment and annuity fees increased $2.1 million, or 24%, from 2007 to 2008 due to an increase in annuity sales to customers from our subsidiary, Hancock Investment Services. Investment and annuity fees include stock brokerage and annuity sales as well as fixed-income securities transactions for correspondent banks and other commercial and personal customers.

30

Income from insurance operations decreased 2.2 million, or 13% in 2009 primarily due to a decrease in our subsidiary, Magna Insurance Company’s earned premiums. In 2008, insurance commissions and fees decreased $2.7 million or 14%, mainly due Magna’s reduction of the annuity business which was accelerated with the 1035 exchange program promoted in the fourth quarter of 2007.

Noninterest Expense

Table 4 presents an analysis of the components of noninterest expense for the years 2009, 2008 and 2007. The level of operating expenses increased $20.0 million, or 9%, from 2008 to 2009 and decreased $3.3 million, or 2%, from 2007 to 2008.

TABLE 4. Noninterest Expense

	2009		% Change		2008		% Change		2007
	(In thousands)
Employee compensation	$	95,674	8	%	$	88,670	5	%	$	84,654
Employee benefits		25,775	22	%		21,103	-5	%		22,305
Total personnel expense		121,449	11	%		109,773	3	%		106,959
Equipment and data processing expense		28,892	-2	%		29,424	5	%		28,050
Net occupancy expense		20,340	4	%		19,538	1	%		19,435
Postage and communications		8,474	-10	%		9,454	-10	%		10,453
Ad valorem and franchise taxes		3,621	3	%		3,532	1	%		3,514
Legal and professional services		12,321	-3	%		12,718	-17	%		15,234
Printing and supplies		1,911	4	%		1,833	-19	%		2,252
Amortization of intangible assets		1,417	-1	%		1,432	-13	%		1,651
Advertising		5,597	-19	%		6,917	-2	%		7,032
Deposit insurance and regulatory fees		12,589	342	%		2,851	174	%		1,039
Training expenses		432	-34	%		655	0	%		656
Other real estate owned expense, net		1,357	48	%		917	-285	%		(497	)
Insurance expense		1,905	-4	%		1,975	-20	%		2,477
Other fees		3,802	-7	%		4,084	20	%		3,393
Non loan carge-offs		1,494	151	%		595	-31	%		868
Other expense		7,869	2	%		7,745	-46	%		14,227
Total noninterest expense	$	233,470	9	%	$	213,443	-2	%	$	216,743

Total personnel expense increased $11.7 million, or 11% in 2009 when compared to the prior year and increased $2.8 million, or 3% from 2007 to 2008. Total personnel expense consists of employee compensation and employee benefits. Employee compensation includes base salaries and contract labor costs, compensation earned under sales-based and other employee incentive programs, and compensation expense under management incentive plans. Employee benefits, in addition to payroll taxes, are the cost of providing health benefits for active and retired employees and the cost of providing pension benefits through both the defined-benefit plans and a 401(k) employee savings plan.

Employee compensation increased $7.0 million, or 8%, in 2009, primarily due to lower deferrals of salary loan origination costs, increased bonus expense, and an increase in the average full-time equivalent staff level and accruals due to the Peoples First acquisition. Employee compensation was up $4.0 million, or 5%, from 2007 to 2008 due primarily to increased incentive expense. Employee benefits expense increased $4.7 million, or 22% in 2009 over the prior year primarily due to increased pension expense, and was $1.2 million, or 5% lower in 2008 compared to 2007 due to decreased health insurance expense.

31

Deposit insurance and regulatory fees increased $9.7 million, or 342% due to a $3.4 million FDIC special assessment in the second quarter of 2009 and increased fees due to insurance on noninterest bearing transaction accounts. Deposit insurance and regulatory fees were up $1.8 million, or 174% in 2008 due to changes in FDIC insurance assessment rates that became effective in 2007, where the 2007 assessment was offset by a one-time credit from the FDIC.

Net occupancy expense increased $1.0 million, or 4%, in 2009, following a 1%, or $0.1 million, increase in 2008 compared to 2007. Higher insurance rates, property taxes and an increase in general service contracts were the main reasons for the increase over 2008.

Advertising expense decreased $1.3 million, or 19% from 2008 to 2009 and was relatively stable from 2007 to 2008. Decreases in direct mailing and newspaper advertising were the main reasons for the drop in advertising expense for 2009.

Income Taxes

Income tax expense was $22.9 million in 2009, $21.6 million in 2008 and $27.9 million in 2007. Our effective income tax rate continues to be less than the statutory rate of 35%, due primarily to tax-exempt interest income and tax credits. The effective tax rates for 2009, 2008 and 2007 were 23%, 25% and 28%, respectively. The 2% decrease in our effective tax rate was due primarily to the increase in the percentage of tax-exempt income as it relates to pre-tax book income and the addition of new market tax credits in 2009.

SEGMENT REPORTING

See Note 17 to our Consolidated Financial Statements included elsewhere in this report.

BALANCE SHEET ANALYSIS

Securities Available for Sale

Our investment in securities was $1.61 billion at December 31, 2009, compared to $1.68 billion at December 31, 2008. At December 31, 2009, 99.90% of the portfolio was comprised of securities classified as available for sale, 0.10% of the securities were classified as trading while none were classified as held to maturity. At December 31, 2008, 99.87% of the portfolio was comprised of securities classified as available for sale, 0.13% of the securities were classified as trading while none were classified as held to maturity. Average investment securities were $1.56 billion for 2009 as compared to $1.74 billion for 2008.

The vast majority of securities in our portfolio are fixed rate and there were no investments in securities of a single issuer, other than U.S. Treasury and U.S. government agency securities and mortgage-backed securities issued or guaranteed by U.S. government agencies that exceeded 10% of stockholders’ equity. We do not invest in subprime or “Alt A” home mortgage loans. We also hold short-term investments that represent U.S. government agency discount notes that all mature in less than 1 year. The investments are classified as available for sale and are carried at fair value. Unrealized holding gains are excluded from net income and are recognized, net of tax, in other comprehensive income and in accumulated other comprehensive income, a separate component of stockholders’ equity, until realized. At December 31, 2009, the average maturity of the portfolio was 4.88 years with an effective duration of 3.17 and an average yield of 4.97%.

Our securities portfolio is an important source of liquidity and earnings for us. A stated objective in managing the securities portfolio is to provide consistent liquidity to support balance sheet growth but also to provide a safe and consistent stream of earnings. To that end, management is open to opportunities that present themselves which enables us to improve the structure and earnings potential of the securities portfolio.

32

The amortized costs of securities classified as available for sale and trading at December 31, 2009, 2008 and 2007, were as follows (in thousands):

TABLE 5. Securities by Type

	Years Ended December 31,
Available for sale securities	2009		2008		2007
U.S. Treasury	$	11,869	$	11,250	$	11,353
U.S. government agencies		131,858		224,803		431,772
Municipal obligations		188,656		151,706		197,596
Mortgage-backed securities		1,076,708		1,041,805		637,578
CMOs		140,663		195,771		143,639
Other debt securities		15,578		25,117		49,653
Equity securities		1,071		1,047		959
	$	1,566,403	$	1,651,499	$	1,472,550
	Years Ended December 31,
Trading securities	2009		2008		2007
U.S. government agencies	$	—	$	—	$	69,793
Mortgage-backed securities		—		—		125,387
Equity securities		1,635		2,201		2,245
	$	1,635	$	2,201	$	197,425

The amortized cost, yield and fair value of debt securities at December 31, 2009, by contractual maturity, were as follows (amounts in thousands):

TABLE 6. Securities Maturities by Type

Available for sale	One Year or Less			Over One Year Through Five Years			Over Five Years Through Ten Years			Over Ten Years			Total			Fair Value		Weighted Average Yield
U.S. Treasury	$	11,052		$	658		$	159		$	—		$	11,869		$	11,930	0.66	%
U.S. government agencies		25,350			31,455			25,053			50,000			131,858			131,825	4.21	%
Municipal obligations		17,432			44,855			85,682			40,687			188,656			191,668	5.27	%
Other debt securities		1,297			9,418			3,377			1,486			15,578			16,326	5.82	%
	$	55,131		$	86,386		$	114,271		$	92,173		$	347,961		$	351,749	4.74	%
Fair Value	$	55,626		$	90,704		$	114,365		$	91,054		$	351,749
Weighted Average Yield		3.68	%		4.34	%		5.01	%		5.11	%		4.74	%
Other Equity Securities													$	1,071		$	1,862	N/A
Mortgage-backed securities & CMOs														1,217,371			1,257,716	4.89	%
Total available for sale securities													$	1,566,403		$	1,611,327	4.86	%
Trading securities													$	1,635		$	1,635	N/A

33

Federal Funds Sold and Short-term Investments

We held $0.4 million in federal funds sold in 2009, a decrease of $174.8 million from 2008. We held $214.8 million at December 31, 2009 and $362.9 million at December 31, 2008 in U.S. government agency discount notes as securities available for sale at amortized cost. The short-term investments all mature in less than 1 year. As the amortized cost is a reasonable estimate for fair value of these short-term investments, there were no gross unrealized losses to evaluate for impairment in the years ended December 31, 2009 and December 31, 2008. The Company did this primarily for liquidity and to use these investments as collateral for public fund deposit and customer repos.

Loan Portfolio

We experienced an increase in loan growth during 2009 as our efforts to generate loan volume continue. Average loans were $4.3 billion in 2009, an increase of $436.2 million, or 11.3%, over 2008. As indicated by Table 7, commercial and real estate loans increased $332.0 million, or 13.9%, from 2008. Included in this category are commercial real estate loans, which are secured by properties, used in commercial or industrial operations. We originate commercial and real estate loans to a wide variety of customers in many different industries and, as such, no single industry concentrations existed at December 31, 2009.

Mortgage loans of $451.8 million were $33.7 million, or 8.1%, higher than in 2008. We originate both fixed-rate and adjustable-rate mortgage loans. Certain types of mortgage loans are sold in the secondary mortgage market, while Hancock retains other types. We also originate home equity loans. This product offers customers the opportunity to leverage rising home values and equity, when the market allows, to obtain tax-advantaged consumer financing. We do not offer subprime or “Alt A” home mortgage loans.

Direct consumer loans, which include loans and revolving lines of credit made directly to consumers, were up $68.2 million, or 12.6%, from 2008.

We originate indirect consumer loans, which consist primarily of consumer loans originated through third parties such as automobile dealers or other point-of-sale channels. Indirect consumer loans of $411.8 million for 2009 were up $5.8 million, or 1.4%, from 2008.

We own a finance company subsidiary, which originates both direct and indirect consumer loans. Finance company loans decreased $3.6 million, or 3.1%, at December 31, 2009, compared to the subsidiary’s outstanding loans on December 31, 2008.

The acquisition of Peoples First on December 18, 2009, increased period-end loans by $1.0 billion, impacting our loan mix in 2009 and will impact our average loan mix for 2010. The majority of these loans are commercial real estate ($478.0 million) and mortgage loans ($344.0 million)

The following table shows average loan growth for the three-year period ended December 31, 2009:

TABLE 7. Average Loans

	2009						2008						2007
	Balance		TE Yield		Mix		Balance		TE Yield		Mix		Balance		TE Yield		Mix
	(In thousands)
Commercial & R.E. Loans	$	2,725,894	5.36	%	63.2	%	$	2,393,856	6.00	%	61.8	%	$	2,076,429	7.37	%	60.6	%
Mortgage loans		451,823	5.75	%	10.5	%		418,133	5.93	%	10.8	%		385,568	5.90	%	11.2	%
Direct consumer loans		609,131	5.59	%	14.1	%		540,885	6.73	%	13.9	%		492,298	8.03	%	14.4	%
Indirect consumer loans		411,772	6.65	%	9.6	%		405,964	6.81	%	10.5	%		369,147	6.68	%	10.8	%
Finance company loans		111,500	17.38	%	2.6	%		115,070	18.53	%	3.0	%		104,567	19.89	%	3.0	%
Total average loans (net of unearned)	$	4,310,120	5.89	%	100.0	%	$	3,873,908	6.57	%	100.0	%	$	3,428,009	7.64	%	100.0	%

34

The following table sets forth, for the periods indicated, the composition of our loan portfolio:

TABLE 8. Loans Outstanding by Type

	Loan Portfolio Years Ended December 31,
	2009		2008		2007		2006		2005
	(In thousands)
Real estate:
Residential mortgages 1-4 family	$	1,099,068	$	771,995	$	705,566	$	702,772	$	685,681
Residential mortgages multifamily		102,503		65,979		53,442		69,296		40,678
Home equity lines/loans		459,712		312,598		214,528		133,540		133,823
Construction and development		585,714		586,830		628,037		534,460		391,194
Nonresidential		1,423,167		943,105		731,318		666,593		609,647
Commercial, industrial and other		820,246		884,102		627,015		551,484		546,635
Consumer		543,740		611,036		564,869		525,164		506,418
Lease financing and depository institutions		68,451		72,571		72,717		69,487		48,007
Credit cards and other revolving credit		24,738		15,933		15,391		14,262		14,316
		5,127,339		4,264,149		3,612,883		3,267,058		2,976,399
Less, unearned income		13,164		14,859		16,326		17,420		11,432
Net loans	$	5,114,175	$	4,249,290	$	3,596,557	$	3,249,638	$	2,964,967

The following table sets forth, for the periods indicated, the approximate contractual maturity by type of the loan portfolio:

TABLE 9. Loans Maturities by Type

	December 31, 2009 Maturity Range
	Within One Year		After One Through Five Years		After Five Years		Total
	(In thousands)
Commercial, industrial and other	$	259,014	$	317,004	$	244,228	$	820,246
Real estate - construction		157,900		379,735		48,079		585,714
All other loans		135,676		1,516,771		2,055,768		3,708,215
Total loans	$	552,590	$	2,213,510	$	2,348,075	$	5,114,175

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The sensitivity to interest rate changes of that portion of our loan portfolio that matures after one year is shown below:

TABLE 10. Loans Sensitivity to Changes in Interest Rates

	December 31, 2009
	(In thousands)
Commercial, industrial, and real estate construction maturing after one year:
Fixed rate	$	827,384
Floating rate		161,662
Other loans maturing after one year:
Fixed rate		2,759,706
Floating rate		812,833
Total	$	4,561,585

Non-performing Assets

The following table sets forth non-performing assets by type for the periods indicated, consisting of non-accrual loans, restructured loans and real estate owned. Loans past due 90 days or more and still accruing are also disclosed:

TABLE 11. Non-performing Assets

	December 31,
	2009			2008			2007			2006			2005
	(In thousands)
Loans accounted for on a non-accrual basis	$	86,555		$	29,976		$	13,067		$	3,500		$	10,617
Foreclosed assets		14,336			5,360			2,297			681			1,898
Total non-performing assets	$	100,891		$	35,336		$	15,364		$	4,181		$	12,515
Loans 90 days past due still accruing	$	11,647		$	11,005		$	4,154		$	2,552		$	25,622
Ratios
Non-performing assets to loans plus other real estate		1.97	%		0.83	%		0.43	%		0.13	%		0.42	%
Allowance for loan losses to non-performing loans and accruing loans 90 days past due		58.69	%		133.16	%		241.43	%		694.67	%		195.50	%
Loans 90 days past due still accruing to loans		0.23	%		0.26	%		0.11	%		0.08	%		0.86	%

The amount of interest that would have been recorded on non-accrual loans had the loans not been classified as “non-accrual” was $2.0 million, $1.1 million, $0.05 million, $0.8 million and $0.7 million for the years ended December 31, 2009, 2008, 2007, 2006 and 2005, respectively. Interest actually received on non-accrual loans at December 31, 2009 was $0.3 million and for the years ended December 31, 2008, 2007, 2006 and 2005 was not material.

Non-performing assets consist of loans accounted for on a non-accrual basis, restructured loans and foreclosed assets. Table 11 presents information related to non-performing assets for the five years ended December 31, 2009. Total non-performing assets at December 31, 2009 were $100.9 million, an increase of $65.6 million, or 186%, from December 31, 2008. The majority, or $55.6 million, of the total non-performing assets were from the acquisition of Peoples First in December 2009. Loans that are over 90 days past due but still accruing were $11.6 million at December 31, 2009. This compares to $11.0 million at December 31, 2008. The increase in loans past due can be attributed to the effects of the on-going national recession, weakness in residential development, and higher unemployment levels across all of our markets. The loans contributing to the increase have been identified, and appropriate write-downs or allowances have been made based on underlying collateral values and those relationships have been placed in the hands of special asset personnel for handling. Management believes that the loans included in the non-performing assets total are being handled appropriately.

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Allowance for Loan and Lease Losses

Management and the Audit Committee are responsible for maintaining an effective loan review system, and internal controls, which include an effective risk rating system that identifies, monitors, and addresses asset quality problems in an accurate and timely manner. The allowance is evaluated for adequacy on at least a quarterly basis.

The Company’s loan loss reserve methodology is established and maintained at an amount sufficient to cover the estimated credit loss associated with the loan and lease portfolios of the Bank as of the date of determination. Credit losses arise not only from credit risk, but also from other risks inherent in the lending process including, but not limited to, collateral risk, operational risk, concentration risk, and economic risk. As such, all related risks of lending are considered when assessing the adequacy of the Allowance for Loan and Lease Losses (ALLL).

The methodology for determining the allowance for loan and lease losses involves significant judgment. Therefore, the Company has established a methodology for measuring the adequacy of the ALLL, which is systematic and consistently applied each quarter. The analysis and methodology include three primary segments: (1) a specific reserve analysis for those loans considered impaired under FASB guidance; (2) a pool analysis of groups of loans within the portfolio that have similar characteristics; and (3) qualitative risk factors and general economic conditions.

The guidance requires that a reserve analysis is to be completed on all loans that have been determined to be impaired by Management. When a loan is determined to be impaired, the amount of that impairment must be measured by either the loan’s observable market price, the fair value of the collateral of the loan, less liquidation costs, if it is collateral dependent, or by calculating the present value of expected future cash flows discounted at the loan’s effective interest rate. If the value of the impaired loan is less than the current balance of the loan, the Company must recognize the impairment by creating a specific reserve allowance for the shortfall.

The second reserve segment, the pool analysis methodology is governed by authoritative guidance regarding accounting for contingencies. A historical loss rate is calculated for each loan type over the 12 prior quarters to determine the 3 year average loss rate. As circumstances dictate, Management will make adjustments to the loss history to reflect significant changes in the Company’s loss history.

The third segment relates to risks not captured elsewhere. Adjustments are made to historical loss rates to cover risks associated with trends in delinquencies, non-accruals, current economic conditions, credit administration/ underwriting practices, and borrower concentrations.

At December 31, 2009, the allowance for loan losses was $66.1 million, or 1.29%, of year-end loans, compared to $61.7 million, or 1.45%, of year-end loans for 2008. Net charge-offs increased significantly to $50.3 million in 2009, as compared to $22.2 million in 2008. Overall, the allowance for loan losses was 58.7% of non-performing loans and accruing loans 90 days past due at year-end 2009 compared to 133.2% at year-end 2008. Not including Peoples First, the allowance for loan losses was 116.8% of non-performing loans and accruing loans 90 days past due at year-end 2009. There was no allowance for loan losses associated with the acquisition of Peoples First. Purchased loans are recorded at fair value at the acquisition date. In addition, reported net charge-offs exclude write-downs on purchased impaired loans as the fair value already considers the estimated credit losses.

We utilize quantitative methodologies and modeling to determine the adequacy of the allowance for loan and lease losses and are of the opinion that the allowance at December 31, 2009 is adequate.

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The following table sets forth, for the periods indicated, average net loans outstanding, allowance for loan losses, amounts charged-off and recoveries of loans previously charged-off:

TABLE 12. Summary of Activity in the Allowance for Loan Losses

	At and For The Years Ended December 31,
	2009			2008			2007			2006			2005
	(In thousands)
Net loans outstanding at end of period	$	5,114,175		$	4,249,290		$	3,596,557		$	3,249,638		$	2,964,783
Average net loans outstanding	$	4,310,120		$	3,873,908		$	3,428,009		$	3,062,222		$	2,883,020
Balance of allowance for loan losses at beginning of period	$	61,725		$	47,123		$	46,772		$	74,558		$	40,682
Loans charged-off:
Real estate		3,670			1,360			530			758			226
Commercial		36,882			12,974			2,597			3,676			4,001
Consumer, credit cards and other revolving credit		14,333			13,051			11,159			14,712			11,537
Lease financing		30			22			166			369			47
Total charge-offs		54,915			27,407			14,452			19,515			15,811
Recoveries of loans previously charged-off:
Real estate		241			162			188			263			33
Commercial		766			1,036			2,774			4,729			2,757
Consumer, credit cards and other revolving credit		3,642			4,026			4,205			7,489			4,258
Lease financing		1			—			43			10			4
Total recoveries		4,650			5,224			7,210			12,491			7,052
Net charge-offs		50,265			22,183			7,242			7,024			8,759
Provision for (reversal of) loan losses		54,590			36,785			7,593			(20,762	)		42,635
Balance of allowance for loan losses at end of period	$	66,050		$	61,725		$	47,123		$	46,772		$	74,558
Ratios
Gross charge-offs to average loans		1.27	%		0.71	%		0.42	%		0.64	%		0.55	%
Recoveries to average loans		0.11	%		0.13	%		0.21	%		0.41	%		0.24	%
Net charge-offs to average loans		1.17	%		0.57	%		0.21	%		0.23	%		0.30	%
Allowance for loan losses to year end loans		1.29	%		1.45	%		1.31	%		1.44	%		2.51	%
Net charge-offs to period-end net loans		0.98	%		0.52	%		0.20	%		0.22	%		0.30	%
Allowance for loan losses to average net loans		1.53	%		1.59	%		1.37	%		1.53	%		2.59	%
Net charge-offs to loan loss allowance		76.10	%		35.94	%		15.37	%		15.02	%		11.75	%

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An allocation of the loan loss allowance by major loan category is set forth in the following table. There were no relevant variations in loan concentrations, quality or terms, except for an increase in the outstanding loan portfolio balance. The unallocated portion of the allowance represents supportable estimates of probable losses inherent in the loan portfolio but not specifically related to one category of the portfolio. The allocation is not necessarily indicative of the category of incurred losses, and the full allowance at December 31, 2009 is available to absorb losses occurring in category of loans.

TABLE 13. Allocation of Loan Loss by Category

	For Years Ended December 31,
	2009				2008			2007			2006			2005
	Allowance for Loan Losses (1)			% of Loans to Total Loans (2)	Allowance for Loan Losses (1)		% of Loans to Total Loans (2)	Allowance for Loan Losses (1)		% of Loans to Total Loans (2)	Allowance for Loan Losses (1)		% of Loans to Total Loans (2)	Allowance for Loan Losses (1)		% of Loans to Total Loans (2)
	(In thousands)
Real estate	$	4,782		71.76	$	5,315	63.08	$	1,998	64.85	$	1,697	64.84	$	23,042	62.86
Commercial, industrial and other		42,517		17.27		36,448	22.35		27,546	19.15		27,838	18.77		34,128	19.74
Consumer and other revolving credit		18,784		10.97		19,063	14.57		16,111	16.00		15,363	16.39		15,812	17.40
Unallocated		(33	)	—		899	—		1,468	—		1,874	—		1,576	—
	$	66,050		100.00	$	61,725	100.00	$	47,123	100.00	$	46,772	100.00	$	74,558	100.00

(1) Loans used in the calculation of “allowance for loan losses” are grouped according to loan purpose.

(2) Loans used in the calculation of “% of loans to total loans” are grouped by collateral type.

Deposits

Total average deposits increased by $515.2 million, or 9.9%, from $5.2 billion at December 31, 2008 to $5.7 billion at December 31, 2009. The increase occurred primarily in NOW account deposits which grew $420.6 million, or 35.2%, non-interest bearing demand deposits which grew $59.3 million, or 6.8%, and money market deposits which grew $40.1 million, or 6.5%. The acquisition of Peoples First on December 18, 2009, increased period-end deposits by $1.5 billion and will impact our average deposit mix for 2010. The majority of these deposits are time deposits ($1.1 billion), NOW and money market account deposits ($335.5 million), and non-interest bearing deposits ($76.5 million.)

Over the course of 2009, we continued our focus on multiple accounts, core deposit relationships and strategic placement of time deposit campaigns to stimulate overall deposit growth. In addition, we keep as our highest priority, continued customer demand for safety and liquidity of deposit products. The Banks traditionally price their deposits to position themselves competitively with the local market.

Table 14 shows average deposits for a three-year period.

TABLE 14. Average Deposits

	2009						2008						2007
	Balance		Rate		Mix		Balance		Rate		Mix		Balance		Rate		Mix
							(In thousands)
Non-interest bearing demand deposits	$	935,985	0.00	%	16	%	$	876,669	0.00	%	17	%	$	927,655	0.00	%	19	%
NOW account deposits		1,616,523	1.09	%	28	%		1,195,900	1.65	%	23	%		1,067,775	2.52	%	22	%
Money market deposits		652,572	0.95	%	11	%		612,510	1.91	%	12	%		529,976	2.50	%	11	%
Savings deposits		372,781	0.12	%	7	%		370,705	0.26	%	7	%		428,599	0.61	%	8	%
Time deposits (including Public Funds CDs)		2,119,738	2.84	%	38	%		2,126,623	3.70	%	41	%		1,975,171	4.56	%	40	%
Total average deposits	$	5,697,599			100	%	$	5,182,407			100	%	$	4,929,176			100	%

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Time certificates of deposit of $100,000 and greater at December 31, 2009 had maturities as follows:

TABLE 15. Maturity of Time Deposits greater than or equal to $100,000

	December 31, 2009
	(In thousands)
Three months	$	374,502
Over three through six months		243,136
Over six months through one year		479,358
Over one year		232,554
Total	$	1,329,550

Short-Term Borrowings

The following table sets forth certain information concerning our short-term borrowings, which consist of federal funds purchased and securities sold under agreements to repurchase and other short-term borrowings.

TABLE 16. Short-Term Borrowings

	Years Ended December 31,
	2009			2008			2007
	(In thousands)
Federal funds purchased:
Amount outstanding at period-end	$	250		$	—		$	4,100
Weighted average interest at period-end		0.11	%		—			4.02	%
Maximum amount at any month-end during period	$	4,700		$	33,775		$	4,100
Average amount outstanding during period	$	3,484		$	16,003		$	4,174
Weighted average interest rate during period		0.21	%		2.20	%		4.99	%
Securities sold under agreements to repurchase:
Amount outstanding at period-end	$	484,457		$	505,932		$	371,604
Weighted average interest at period-end		1.99	%		2.10	%		3.63	%
Maximum amount at any month end during-period	$	567,888		$	621,424		$	371,604
Average amount outstanding during period	$	523,351		$	524,712		$	216,730
Weighted average interest rate during period		2.06	%		2.76	%		3.70	%
Other short-term borrowings:
Amount outstanding at period-end	$	30,805		$	—		$	—
Weighted average interest at period-end		0.38	%		—			—
Maximum amount at any month end during-period	$	156,000		$	—		$	—
Average amount outstanding during period	$	75,160		$	2,650		$	—
Weighted average interest rate during period		0.17	%		2.04	%		—

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Return on Equity and Assets

Information regarding performance and equity ratios is as follows:

TABLE 17. Return on Equity and Assets

	Years Ended December 31,
	2009		2008		2007
Return on average assets	1.05	%	1.02	%	1.26	%
Return on average common equity	11.09	%	11.18	%	13.14	%
Dividend payout ratio	42.11	%	46.38	%	41.74	%
Average common equity to average assets ratio	9.50	%	9.10	%	9.61	%

COMMITMENTS AND CONTINGENCIES

Loan Commitments and Letters of Credit

In the normal course of business, we enter into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of our customers. Such instruments are not reflected in the accompanying consolidated financial statements until they are funded and involve, to varying degrees, elements of credit risk not reflected in the consolidated balance sheets. The contract amounts of these instruments reflect our exposure to credit loss in the event of non-performance by the other party on whose behalf the instrument has been issued. We undertake the same credit evaluation in making commitments and conditional obligations as we do for on-balance-sheet instruments and may require collateral or other credit support for off-balance-sheet financial instruments.

At December 31, 2009, we had $983.2 million in unused loan commitments outstanding, of which approximately $679.0 million were at variable rates and the remainder were at fixed rates. A commitment to extend credit is an agreement to lend to a customer as long as the conditions established in the agreement have been satisfied. A commitment to extend credit generally has a fixed expiration date or other termination clauses and may require payment of a fee by the borrower. Since commitments often expire without being fully drawn, the total commitment amounts do not necessarily represent our future cash requirements. We continually evaluate each customer’s credit worthiness on a case-by-case basis. Occasionally, a credit evaluation of a customer requesting a commitment to extend credit results in our obtaining collateral to support the obligation.

Letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party. The credit risk involved in issuing a letter of credit is essentially the same as that involved in extending a loan. At December 31, 2009, we had $108.7 million in letters of credit issued and outstanding.

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The following table shows the commitments to extend credit and letters of credit at December 31, 2009 and 2008 according to expiration date.

TABLE 18. Commitments and Letters of Credit

			Expiration Date
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
					(In thousands)
December 31, 2009
Commitments to extend credit	$	983,242	$	637,170	$	54,678	$	64,773	$	226,621
Letters of credit		108,736		53,797		19,990		34,934		15
Total	$	1,091,978	$	690,967	$	74,668	$	99,707	$	226,636
			Expiration Date
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
					(In thousands)
December 31, 2008
Commitments to extend credit	$	885,156	$	527,118	$	43,454	$	66,348	$	248,236
Letters of credit		113,274		51,366		11,003		50,905		—
Total	$	998,430	$	578,484	$	54,457	$	117,253	$	248,236

RISK MANAGEMENT

Credit Risk

The Banks’ primary lending focus is to provide commercial, consumer and real estate loans to consumers and to small and middle market businesses in their respective market areas. Diversification in the loan portfolio is a means of reducing the risks associated with economic fluctuations. The Banks have no significant concentrations of loans to particular borrowers or loans to any foreign entities. Loan portfolio average loan size has leveled off from a peak level in the fourth quarter of 2008 and has trended slightly down to year-end 2009. As of the fourth quarter 2009 our average commercial loan size is $0.1 million and our average commercial real estate loan size is $0.3 million. As of year-end 2009, we do not have any commercial real estate concentrations, as defined by interagency guidelines. We have experienced a decrease in residential construction/development lending from 2008 to 2009. The decrease was across all period-end balances. This segment of the loan portfolio still represents somewhat of a risk considering national housing trends, labor availability, building material availability, price fluctuations along with local market conditions of oversupply as well as general economic conditions. We monitor local trends and have observed a continued lull in home sales and in sales prices in almost all of our markets. We are continuing to limit this segment of the loan portfolio and will continue to see a reduction in 2010.

We are concerned about the decrease in real estate values locally and nationally. There is concern over the commercial investment sector such as hotels; office buildings; mini storage buildings; strip centers etc. since occupancies for those facilities are at an all time low nationally. Our markets have held up but we expect to see weakness as we head into the 2010 year. Based on the uncertainty of the supply and demand feature of the economy coupled with elevated unemployment figures and consumer confidence at a low point, we believe real estate values have not stabilized. Additionally, we have seen evidence that the appraisal community has been challenged to arrive at reliable values in this period when multiple issues are affecting the market.

Our Direct Loan portfolio represents approximately 42% of the bank’s total retail portfolio, including mortgage loans. As of December 31, 2009, approximately 96% of the Direct Loan portfolio was secured while approximately 4% of the portfolio was considered unsecured. The size of our Indirect Portfolio continued to trend down from year end 2008 to year end 2009. At December 31, 2008 we pulled back from our out of market dealers; focused on in market, higher grade credits and implemented approximately 14 initiatives to help reduce loan losses that we were experiencing.

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Loans are underwritten on the basis of repayment ability and collateral value. Generally, real estate mortgage loans are made when the borrower produces evidence of repayment ability along with equity in the property to offset historical market devaluations.

Allowance for Loan and Lease Losses

The allowance for loan and lease losses “ALLL” is a valuation account available to absorb losses on loans. The ALLL is established and maintained at an amount sufficient to cover the estimated credit loss associated with the loan and lease portfolios as of the date of the determination. Credit losses arise not only from credit risk, but also from other risks inherent in the lending process including, but not limited to, collateral risk, operational risk, concentration risk, and economic risk. As such, all related risks of lending are considered when assessing the adequacy of the allowance for loan and lease losses. Quarterly, we estimate the probable level of losses to determine whether the allowance is adequate to absorb reasonably foreseeable, anticipated losses in the existing portfolio based on our past loan loss and delinquency experience, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay, and the estimated value of any underlying collateral and current economic conditions. The analysis and methodology include three primary segments. These segments include a pool analysis of various retail loans based upon loss history, a pool analysis of commercial and commercial real estate loans based upon loss history by loan type, and a specific reserve analysis for those loans considered impaired under generally accepted accounting principles. All commercial and commercial real estate loans with an outstanding balance of $100,000 or greater are individually reviewed for impairment; substandard mortgage loans with balances of $100,000 or greater are also included in the analysis. All losses are charged to the allowance for loan and lease losses when the loss actually occurs or when a determination is made that a loss is likely to occur; recoveries are credited to the allowance for loan losses at the time of receipt.

Commercial loans are considered impaired when it is probable (the future event or events are likely to occur) that the bank will be unable to collect all amounts due (including principal and interest) according to the contractual terms of the loan agreement. In order to ensure consideration of all possible impairments, for purposes of the model the Banks consider all loans that are risk rated substandard as impaired. When a loan is determined to be impaired, the amount of that impairment must be measured by either the loan’s observable market price, the fair value of the collateral of the loan (less liquidation costs) if it is collateral dependent, or by calculating the present value of expected future cash flows discounted at the loan’s effective interest rate. If the value of the impaired loan is less than the current balance of the loan, the impairment is recognized by creating a specific reserve allowance for the shortfall. If the value is greater or equal to the loan balance, then no reserve allocation may be made for the loan. In addition, any loans included in the impairment review are not incorporated into the pool analysis to avoid double counting.

Pool analysis is applied for all retail loans. The retail loans are subdivided into three groups, which currently include: mortgage real estate, indirect loans and direct consumer loans. A historical loss rate is calculated for each group over the twelve prior quarters to determine the three year average loss rate. As circumstances dictate, management will make adjustments to the loss history to reflect significant changes in our loss history. Adjustments will also be made to historical loss rates to cover risks associated with trends in delinquencies, non-accruals, current economic conditions and credit administration/ underwriting practices and policies.

We apply pool analysis for commercial and commercial real estate loans where a historical loss ratio is applied to all commercial loans, commercial real estate loans and leases grouped by product type for which exposure is measured as required by generally accepted accounting principles and can best be evaluated collectively due to similar attributes. A historical loss rate is calculated for each group over the twelve prior quarters to determine the three year average loss rate. As circumstances dictate, we will make adjustments to the loss history to reflect significant changes in our loss history. Adjustments will also be made to historical loss rates to cover risks associated with trends in delinquencies, non-accruals, current economic conditions and credit administration/ underwriting practices and policies and borrower concentrations.

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Asset/Liability Management

Our asset liability management (ALM) process consists of quantifying, analyzing and controlling interest rate risk (IRR) to maintain stability in net interest income (NII) under varying interest rate environments. The principal objective of ALM is to maximize net interest income while operating within acceptable limits established for interest rate risk and maintaining adequate levels of liquidity. Our net earnings are dependent on our net interest income. Net interest income is susceptible to IRR to the degree that interest-bearing liabilities mature or re-price on a different basis and timing than interest-earning assets. This timing difference represents a potential risk to our future earnings. When interest-bearing liabilities mature or re-price more quickly than interest-earning assets in a given period, a significant increase in market rates of interest and the subsequent impact on customer behavior could adversely affect NII. Similarly, when interest-earning assets mature or re-price more quickly than interest-bearing liabilities, falling interest rates and changes in customer behavior could result in a decrease in NII.

Management and the Asset/Liability Committee (ALCO) direct our IRR management through a Risk Management policy that is designed to produce a stable net interest margin (NIM) in periods of interest rate fluctuation. In adjusting our asset/liability position, the board of directors and management attempt to direct our IRR while enhancing the NIM. At times, depending on the general level of interest rates, the relationship between long-term and short-term interest rates, market conditions and competitive factors, we may determine strategies that could add to the level of IRR in order to increase its NIM. Not withstanding our IRR management activities, the potential for changing interest rates is an uncertainty that can have an adverse effect on net earnings.

To control interest rate risk, we regularly monitor the volume of interest sensitive assets compared with interest sensitive liabilities over specific time intervals. Interest-sensitive assets and liabilities are those that are subject to maturity or repricing within a given time period. We also administer this sensitivity through the development and implementation of investment, lending, funding and pricing strategies designed to achieve NII performance goals while minimizing the potential negative variations in NII under different interest rate scenarios. Investment strategies, including portfolio durations and cash flows, are formulated and continually adjusted during the implementation to assure attainment of objectives in the most effective manner. Loan and deposit pricing are adjusted weekly to reflect current interest rate and competitive market environments, with duration targets on both reviewed monthly.

The Static Gap Report shown in Table 19 measures the net amounts of assets and liabilities that re-price within a given time period over the remaining lives of those instruments. At December 31, 2009, our cumulative re-pricing gap in the one year interval was -7.2%. The liability sensitive position represents a deposit funding mix of significant balances in short term contractual CDs and interest bearing public fund transaction deposits. The earning asset position is strategically managed with a balance in our loan growth (fixed versus floating and duration targets) and securities portfolio cash flows. We believe we are adequately positioned for the current rate environment.

To further control IRR, we structure our loan portfolio to provide appropriate investment opportunities while minimizing potential volatility in earnings from extension risk. Deposit strategies continue to emphasize a mix of non-certificate of deposit core accounts and consumer time deposits. However, the 2009 yield curve environment has created more demand on consumer time deposits with maturities one year or less. By mid-year 2010, $1.3 billion in CD balances will re-price and strategy is to re-price to terms of 12 months and greater. We anticipate mid-year 2010 twelve month Cumulative Re-pricing Gap to be much closer to an even gap position.

The following table sets forth the scheduled re-pricing or maturity of our assets and liabilities at December 31, 2009 and December 31, 2008. The assumed prepayment of investments and loans was based on our assessment of current market conditions on such dates. Estimates have been made for the re-pricing of savings, NOW and money market accounts. Actual prepayments and deposit withdrawals will differ from the following analysis due to variable economic circumstances and consumer behavior. Although assets and liabilities may have similar maturities or re-pricing periods, reactions will vary as to timing and degree of interest rate change.

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TABLE 19. Analysis of Interest Sensitivity
	December 31, 2009
	Overnight			Within 6 months			6 months to 1 year			1 to 3 years			> 3 years			Non-Sensitive Balance		Total
										(In thousands)
Assets
Securities	$	1,399		$	214,695		$	153,678		$	483,171		$	757,545		$	2,474	$	1,612,962
Federal funds sold & short-term investments		582,491			214,771			—			—			—			—		797,262
Loans		—			2,419,296			344,186			1,315,098			1,005,657			—		5,084,237
Other assets		—			—			—			—			—			1,202,622		1,202,622
Total Assets	$	583,890		$	2,848,762		$	497,864		$	1,798,269		$	1,763,202		$	1,205,096	$	8,697,083
Liabilities
Interest bearing transaction deposits	$	—		$	1,431,228		$	322,818		$	1,070,566		$	225,116		$	—	$	3,049,728
Time deposits		—			1,180,993			1,199,998			524,828			166,923			—		3,072,742
Non-interest bearing deposits		—			—			—			53,667			1,019,674			—		1,073,341
Borrowings		290,551			23,573			25,039			106,805			81,264			—		527,232
Other liabilities		—			—			—			—			—			136,377		136,377
Stockholders’ equity		—			—			—			—			—			837,663		837,663
Total Liabilities & Equity	$	290,551		$	2,635,794		$	1,547,855		$	1,755,866		$	1,492,977		$	974,040	$	8,697,083
Interest sensitivity gap	$	293,339		$	212,968		$	(1,049,991	)	$	42,403		$	270,225		$	231,056
Cumulative interest rate sensitivity gap	$	293,339		$	506,307		$	(543,684	)	$	(501,281	)	$	(231,056	)		—
Cumulative interest rate sensitivity gap as a percentage of total earning assets		3.9	%		6.7	%		(7.2	)%		(6.6	)%		(3.1	)%
TABLE 19. Analysis of Interest Sensitivity (continued)
	December 31, 2008
	Overnight			Within 6 months			6 months to 1 year			1 to 3 years			> 3 years			Non-Sensitive Balance		Total
										(In thousands)
Assets
Securities	$	1,666		$	743,616		$	283,566		$	300,332		$	349,755		$	3,022	$	1,681,957
Federal funds sold & short-term investments		—			376,499			172,917			—			—			—		549,416
Loans		—			1,912,989			324,287			947,141			1,025,438			—		4,209,855
Other assets		—			—			—			—			—			726,026		726,026
Total Assets	$	1,666		$	3,033,104		$	780,770		$	1,247,473		$	1,375,193		$	729,048	$	7,167,254
Liabilities
Interest bearing transaction deposits	$	—		$	1,289,545		$	353,995		$	856,040		$	196,735		$	—	$	2,696,315
Time deposits		—			1,064,269			256,781			737,807			212,879			—		2,271,736
Non-interest bearing deposits		—			—			—			48,144			914,742			—		962,886
Borrowings		255,932			9,427			—			131,978			119,920			—		517,257
Other liabilities		—			—			—			—			—			109,561		109,561
Stockholders’ equity		—			—			—			—			—			609,499		609,499
Total Liabilities & Equity	$	255,932		$	2,363,241		$	610,776		$	1,773,969		$	1,444,276		$	719,060	$	7,167,254
Interest sensitivity gap	$	(254,266	)	$	669,863		$	169,994		$	(526,496	)	$	(69,083	)	$	9,988
Cumulative interest rate sensitivity gap	$	(254,266	)	$	415,597		$	585,591		$	59,095		$	(9,988	)		—
Cumulative interest rate sensitivity gap as a percentage of total earning assets		(3.9	)%		6.4	%		9.0	%		0.9	%		(0.2	)%

Net Interest Income at Risk

NII at risk measures the risk of a decline in earnings due to changes in interest rates. Table 20 presents an analysis of our IRR as measured by the estimated changes in NII resulting from an instantaneous and sustained parallel shift in the yield curve at December 31, 2009. Shifts are measured in 100 basis point increments (+ 300 through—100 basis points) from base case. Base case encompasses key assumptions for asset/liability mix, loan and deposit growth, pricing, prepayment speeds, deposit decay rates, securities portfolio cash flows and reinvestment strategy, and the market value of certain assets under the various interest rate scenarios. The base case scenario assumes that the current interest rate environment is held constant throughout the forecast period; the instantaneous shocks are performed against that yield curve.

45

TABLE 20. Net Interest Income (te) at Risk

Change in Interest Rates	Estimated Increase (Decrease) in NII December 31, 2009
(basis points)
-100	-7.1%
Stable	0.0%
+ 100	1.8%
+ 200	2.9%
+ 300	3.8%
Most Likely	-1.9%

Additionally, we have forecasted a Most Likely NII scenario based on its conservative projection of yield curve changes for the coming 12 month period. This scenario utilizes all base case assumptions, applying those assumptions against a yield curve forecast that incorporates the current interest rate environment and projects certain strategic pricing changes over the forecast period. Table 20 indicates that our level of NII modestly increases under rising rates and declines under falling rates. It should be noted that -100 is only presented as interest rates are at historic lows with Fed Funds target at 0.25% at December 31, 2009. The most likely scenario for interest rates projects a modest -1.9% decrease in net interest income to base case. Our 12 month forward most likely interest rate forecast is very much in line with Bloomberg consensus economic forecast which is a sloping yield curve and the spread between the 10yr yield to 2 year yield narrows to 2.30% by Q4 2010. Actual results will be significantly impacted by management’s ability to execute the CD re-pricing strategy of 18 month and greater term placement within the next 6 months of CD balance re-pricing.

The increasing rate scenarios show modest increase to levels of net interest income while the down 100 scenario shows lower levels of NII. These scenarios are instantaneous shocks that assume balance sheet management will mirror base case. Should the yield curve begin to rise or fall, management has several strategies available to maximize earnings opportunities or offset the negative impact to earnings. For example, in a rising rate environment, deposit pricing strategies could be adjusted to offer more competitive rates on long and medium-term CDs and less competitive rates on short-term CDs. Another opportunity at the start of such a cycle would be reinvesting the securities portfolio cash flows into short-term or floating-rate securities. On the loan side the company can make more floating-rate loans that tie to index that re-price more frequently, such as LIBOR (London interbank offered rate) and make fewer fixed-rate loans. Finally, there are a number of hedge strategies by which management could use derivatives, including swaps and purchased ceilings, to lock in net interest margin protection; to date, we have not entered into any hedge transactions for the purpose of earnings protection.

Even if interest rates change in the designated amounts, there can be no assurance that our assets and liabilities would perform as anticipated. Additionally, a change in the U.S. Treasury rates in the designated amounts accompanied by a change in the shape of the U.S. Treasury yield curve would cause significantly different changes to NII than indicated above. Strategic management of our balance sheet and earnings is fluid and would be adjusted to accommodate these movements. As with any method of measuring IRR, certain shortcomings are inherent in the methods of analysis presented above. For example, although certain assets and liabilities may have similar maturities or periods to re-pricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Certain assets such as adjustable-rate loans have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Also, the ability of many borrowers to service their debt may decrease in the event of an interest rate increase. We consider all of these factors in monitoring its exposure to interest rate risk.

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LIQUIDITY

Liquidity Management

Liquidity management encompasses our ability to ensure that funds are available to meet the cash flow requirements of depositors and borrowers, while also ensuring that we have adequate cash flow to meet our various needs, including operating, strategic and capital. Without proper liquidity management, we would not be able to perform the primary function of a financial intermediary and would not be able to meet the needs of the communities in which we have a presence and serve. In addition, the parent holding company’s principal source of liquidity is dividends from its subsidiary banks. Liquidity is required at the parent holding company level for the purpose of paying dividends to stockholders, servicing of any debt we may have, business combinations as well as general corporate expenses.

The asset portion of the balance sheet provides liquidity primarily through loan principal repayments, maturities of investment securities and occasional sales of various assets. 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 funding. As shown in Table 21 below, our liquidity ratios as of December 31, 2009 and 2008 for free securities stood at 20.5% or $365.5 million and 22.5% or $378.4 million, respectively.

TABLE 21. Liquidity Ratios

	2009			2008
	(In thousands)
Free securities		20.50	%		22.50	%
Free securities-net wholesale funds/core deposits		5.00	%		-5.25	%
Wholesale funding diversification
Certificate of deposits > $100,000 (excluding public funds)		9.15	%		11.57	%
Brokered certificate of deposits		0.00	%		0.00	%
Public fund certificate of deposits	$	100,251		$	168,388
Net wholesale funding maturity concentrations
Overnight		0.00	%		0.00	%
Up to 3 months		-1.12	%		6.92	%
Up to 6 months		1.94	%		1.64	%
Over 6 months		7.21	%		9.94	%
Net wholesale funds	$	698,456		$	1,325,274
Core deposits	$	5,886,782		$	4,474,625

The liability portion of the balance sheet provides liquidity through various customers’ interest-bearing and non-interest-bearing deposit accounts. Purchases of federal funds, securities sold under agreements to repurchase and other short-term borrowings are additional sources of liquidity and represent our incremental borrowing capacity. These sources of liquidity are short-term in nature and are used as necessary to fund asset growth and meet short-term liquidity needs. Our short-term borrowing capacity includes an approved line of credit with the Federal Home Loan Bank of $367 million and borrowing capacity at the Federal Reserve’s Discount Window in excess of $139 million. As of December 31, 2009 and 2008, our core deposits were $5.9 billion and $4.5 billion, respectively, and Net Wholesale Funding stood at $698.5 million and $1.3 billion, respectively.

The Consolidated Statements of Cash Flows provide an analysis of cash from operating, investing, and financing activities for each of the three years in the period ended December 31, 2009. Cash flows from operations are a significant part of liquidity management, contributing significant levels of funds in 2009, 2008 and 2007.

Cash flows from operations decreased to $17.9 in 2009 from $94.4 million in 2008 and from $56.1 million in 2007. Cash flows provided by investing activities were $253.9 million in 2009, primarily from the acquisition of Peoples First, compared to cash flows used in investing activities of $1.11 billion in 2008. Federal funds sold decreased $176.0 million during 2009 and increased $57.4 million during 2008. Cash flows used by financing activities were $266.9 million in 2009, primarily from the decrease in deposits, compared to cash flows provided by financing activities of $1.03 billion in 2008.

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Contractual Obligations

We have contractual obligations to make future payments on certain debt and lease agreements. Table 22 summarizes all significant contractual obligations at December 31, 2009, according to payments due by period.

TABLE 22. Contractual Obligations

	Payment due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
					(In thousands)
Certificates of deposit	$	3,072,742	$	2,380,991	$	524,828	$	166,923	$	—
Short-term debt obligations		484,707		484,707		—		—		—
Long-term debt obligations		223		13		33		46		131
Capital lease obligations		448		280		54		65		49
Operating lease obligations		34,553		5,810		6,895		4,533		17,315
Total	$	3,592,673	$	2,871,801	$	531,810	$	171,567	$	17,495

CAPITAL RESOURCES

A strong capital position, which is vital to continued profitability, also promotes depositor and investor confidence and provides a solid foundation for future growth. Composite ratings by the respective regulatory authorities of the Company and the Banks establish minimum capital levels. Currently, we are required to maintain minimum Tier 1 leverage ratios of at least 3%, subject to an increase up to 5%, depending on the composite rating. At December 31, 2009, our capital balances were in excess of current regulatory minimum requirements. As indicated in Table 23 below, our regulatory capital ratios far exceed the minimum required ratios, and we have been categorized as “well capitalized” in the most recent notice received from their regulators.

We remain very well capitalized. As of December 31, 2009, our Leverage (tier one) Ratio stands at 10.60%, while the Tangible Equity Ratio is 8.81% (see below in Table 23). While we remain very well capitalized, so that we maintain flexibility for future capital needs, including acquisitions, we may consider raising additional capital at some point in the future.

TABLE 23. Risk-Based Capital and Capital Ratios

	2009			2008			2007			2006			2005
							(In thousands)
Tier 1 regulatory capital	$	756,108		$	550,216		$	498,731		$	510,639		$	420,283
Tier 2 regulatory capital		66,397			61,874			47,447			46,583			46,218
Total regulatory capital	$	822,505		$	612,090		$	546,178		$	557,222		$	466,501
Risk-weighted assets	$	6,305,707		$	5,162,676		$	4,523,479		$	4,097,400		$	3,665,722
Ratios
Leverage (Tier 1 capital to average assets)		10.60	%		8.06	%		8.51	%		8.63	%		7.85	%
Tier 1 capital to risk-weighted assets		11.99	%		10.66	%		11.03	%		12.46	%		11.47	%
Total capital to risk-weighted assets		13.04	%		11.86	%		12.07	%		13.60	%		12.73	%
Common stockholders’ equity to total assets		9.63	%		8.50	%		9.15	%		9.36	%		8.02	%
Tangible common equity to total assets		8.81	%		7.62	%		8.08	%		8.24	%		6.89	%

48

We made no stock purchases in 2009. During 2008, we purchased a total of 6,458 shares of common stock at an aggregate price of $260,000, or $40.26 per share. These shares were purchased under the 2007 Stock Repurchase Plan, authorizing the repurchase of 3,000,000 shares, or approximately 10% of our outstanding common stock. Subject to market conditions, repurchases will be conducted solely through a Rule 10b-1 repurchase plan. Shares repurchased under this plan will be held in treasury and used for general corporate purposes as determined by our board of directors.

FOURTH QUARTER RESULTS

Net income for the fourth quarter of 2009 was $31.8 million, an increase of $23.5 million, or 282.0 percent, from the fourth quarter of 2008. Diluted earnings per share for 2009’s fourth quarter were $0.89, compared to $0.26 per diluted share for the same quarter a year ago. Our financial results for the fourth quarter of 2009 and the year as a whole as discussed in the Executive Overview were impacted by two very significant events. The impact of these events is summarized below:

• On October 26, 2009, the company closed a very successful common stock offering. In connection with the offering, the company issued 4,945,000 shares of common stock at a price of $35.50. Gross proceeds were $175.5 million with net proceeds of $167.3 million after expenses. The proceeds of the offering are intended to be used for general corporate purposes, which may include financing acquisition opportunities and other expansion efforts.

• On December 18, 2009, we acquired the assets and assumed the liabilities of Panama City, FL, based Peoples First Community Bank (Peoples First) through a purchase and assumption agreement containing a loss-sharing clause with the Federal Deposit Insurance Corporation (FDIC). The loss-sharing clause lessens the significant credit risk that usually accompanies a more traditional merger or acquisition. As a result of the loss-sharing clause, FDIC will cover all acquired loans with reimbursement of 80 percent of losses up to $385 million and 95 percent of losses beyond $385 million. The Company recorded an FDIC loss share receivable of $325.6 million which represents the fair value of the FDIC’s portion of the losses that are expected to be incurred and reimbursed to the Company. Hancock Bank acquired approximately $1.71 billion in assets and assumed $1.69 billion in liabilities. These values are subject to refinement for up to one year after the closing date of the acquisition as additional information relative to the closing may become available. All of the other real estate owned (including foreclosed real estate) was retained by the FDIC. The acquisition resulted in a pretax acquisition gain of $33.6 million and pretax merger related expenses of $3.7 million. Peoples First has 29 branches in the Florida Panhandle and Central Florida.

For the quarter ended December 31, 2009, Hancock’s average total loans were $4.4 billion, which represented an increase of $187.7 million, or 4.5 percent, from the same quarter a year ago. The increases were in commercial/real estate (up $155.5 million), direct consumer loans (up $54.7 million), and mortgage loans (up $38.4 million) slightly offset by decreases in indirect consumer loans (down $53.6 million) and finance company loans (down $7.2 million.) Period end loans were $5.1 billion at December 31, 2009, an increase of $864.7 million, or 20.3 percent, from December 31, 2008. The increase was mainly due to the acquisition of Peoples First.

Average deposits were up $2.9 million, or 0.1 percent, from the fourth quarter of 2008. Period-end deposits for the fourth quarter were $7.20 billion, up $1.26 billion, or 21.3 percent, from December 31, 2008, primarily due to the acquisition of Peoples First. The increase was primarily in time deposits (up $869.1 million), interest bearing transaction deposits (up $443.6 million) and noninterest bearing deposits (up $110.5 million) slightly offset by a decrease in interest bearing public fund deposits (down $158.3 million.)

Net charge-offs for 2009’s fourth quarter were $13.6 million, or 1.24 percent of average loans compared to $12.6 million in the fourth quarter of 2008, or 1.20 percent of average loans. Non-performing assets as a percent of total loans and foreclosed assets was 1.97 percent at December 31, 2009 compared to 0.83 percent at December 31, 2008. The increase in non-performing assets was due primarily to the acquisition of Peoples First. Hancock recorded a provision for loan losses for the fourth quarter of $15.8 million, a decrease of $1.3 million, from $17.1 million at December 31, 2008. The ratio of the allowance for loan losses as a percent of period-end loans was 1.29 percent at December 31, 2009 compared to 1.45 percent at December 31, 2008.

49

Net interest income (te) for the fourth quarter increased $8.7 million, or 15.8 percent, while the net interest margin (te) of 3.97 percent was 46 basis points wider than the same quarter a year ago. Growth in average earning assets was strong compared to the same quarter a year ago with an increase of $158.5 million, or 2.5 percent, mostly reflected in higher average loans (up $187.7 million, or 4.5 percent). With short-term interest rates down significantly from the same quarter a year ago, the Company’s loan yield fell 12 basis points, pushing the yield on average earning assets down 28 basis points. However, total funding costs over the same quarter a year ago were down 73 basis points.

Non-interest income, excluding securities transactions, for the fourth quarter was up $32.8 million, or 107.2 percent, compared to the same quarter a year ago. The primary factor impacting the increase in non-interest income compared to the same quarter a year ago was the acquisition gain of $33.6 million. Other factors impacting noninterest income were higher levels of secondary mortgage market operations (up $810 thousand or 128.8 percent), service charges on deposit accounts (up $347 thousand or 3.0 percent), trust fees (up $160 thousand or 4.2 percent), ATM fees (up $148 thousand or 8.8 percent), and debit card and merchant fees (up $91 thousand or 3.2 percent). These increases were partially offset by decreases in investment and annuity fees (down $1.2 million or 41.7 percent) and insurance fees ($807 thousand or 19.5 percent).

Operating expenses for the fourth quarter were up $8.0 million, or 14.4 percent, compared to the same quarter a year ago. One factor contributing to the increase from the prior year quarter was $3.7 million in merger-related expenses related to the acquisition of Peoples First. The increase from the same quarter a year ago was reflected in higher personnel expense (up $4.4 million or 15.5 percent) and other operating expenses (up $3.8 million or 19.6 percent). These increases were slightly offset by a decrease in equipment expense (down $252 thousand or 9.7 percent).

50

Table 24 summarizes our unaudited quarterly financial results for 2009 and 2008.

TABLE 24. Summary of Quarterly Results

	2009
	First			Second			Third			Fourth
	(In thousands, except per share data)
Interest income (te)	$	84,392		$	83,054		$	82,757		$	85,585
Interest expense		(28,002	)		(23,413	)		(22,004	)		(21,881	)
Net interest income (te)		56,390			59,641			60,753			63,704
Provision for loan losses		(8,342	)		(16,919	)		(13,495	)		(15,834	)
Noninterest income		29,055			34,504			30,408			63,360
Noninterest expense		(55,838	)		(58,226	)		(55,749	)		(63,657	)
Taxable equivalent adjustment		(2,944	)		(2,949	)		(2,999	)		(3,169	)
Income before income taxes		18,321			16,051			18,918			44,404
Income tax expense		(4,290	)		(2,305	)		(3,700	)		(12,624	)
Net income	$	14,031		$	13,746		$	15,218		$	31,780
Average balance sheet data
Total assets	$	7,183,886		$	7,025,612		$	6,977,267		$	7,213,323
Earning assets		6,474,047			6,325,667			6,266,441			6,408,910
Loans		4,285,376			4,277,351			4,301,651			4,375,208
Deposits		5,909,887			5,707,121			5,560,812			5,617,295
Stockholders’ equity		624,239			636,086			643,573			792,093
Ratios
Return on average assets		0.79	%		0.78	%		0.87	%		1.75	%
Return on average common equity		9.12	%		8.67	%		9.38	%		15.92	%
Net interest margin (te)		3.50	%		3.78	%		3.86	%		3.97	%
Earnings per share
Basic	$	0.44		$	0.43		$	0.48		$	0.89
Diluted	$	0.44		$	0.43		$	0.47		$	0.89
Cash dividends per common share	$	0.24		$	0.24		$	0.24		$	0.24
Market data:
High sales price	$	45.56		$	41.19		$	42.38		$	44.89
Low sales price		22.51			30.12			29.90			35.26
Period-end closing price		31.28			32.49			37.57			43.81
Trading volume		18,026			17,040			11,676			19,538

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TABLE 24. Summary of Quarterly Results (continued)

	2008
	First			Second			Third			Fourth
	(In thousands, except per share data)
Interest income (te)	$	87,227		$	84,164		$	86,774		$	87,726
Interest expense		(34,345	)		(29,573	)		(29,357	)		(32,727	)
Net interest income (te)		52,882			54,591			57,417			54,999
Provision for loan losses		(8,818	)		(2,787	)		(8,064	)		(17,116	)
Noninterest income		36,421			31,838			30,115			29,404
Noninterest expense		(50,134	)		(52,189	)		(55,483	)		(55,637	)
Taxable equivalent adjustment		(2,455	)		(2,432	)		(2,642	)		(2,925	)
Income before income taxes		27,896			29,021			21,343			8,725
Income tax expense		(7,839	)		(8,037	)		(5,338	)		(405	)
Net income	$	20,057		$	20,984		$	16,005		$	8,320
Average balance sheet data
Total assets	$	6,212,129		$	6,223,233		$	6,374,628		$	6,891,029
Earning assets		5,581,299			5,608,748			5,747,098			6,250,441
Loans		3,638,608			3,712,005			3,953,235			4,187,468
Deposits		5,046,413			4,961,305			5,103,630			5,614,400
Stockholders’ equity		570,706			581,681			584,146			602,497
Ratios
Return on average assets		1.30	%		1.36	%		1.00	%		0.48	%
Return on average common equity		14.13	%		14.51	%		10.90	%		5.49	%
Net interest margin (te)		3.80	%		3.91	%		3.99	%		3.51	%
Earnings per share
Basic	$	0.64		$	0.67		$	0.51		$	0.26
Diluted	$	0.63		$	0.66		$	0.50		$	0.26
Cash dividends per common share	$	0.24		$	0.24		$	0.24		$	0.24
Market data:
High closing price	$	44.29		$	45.68		$	68.42		$	56.45
Low closing price	$	33.45		$	38.38		$	33.34		$	34.20
Period-end closing price	$	42.02		$	39.29		$	51.00		$	45.46
Trading volume		17,204			14,527			23,562			18,544

Net interest income (te) is the primary component of earnings and represents the difference, or spread, between revenue generated from interest-earning assets and the interest expense related to funding those assets.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The accounting principles we follow and the methods for applying these principles conform with accounting principles generally accepted in the United States of America and with general practices followed by the banking industry which requires management to make estimates and assumptions about future events. These estimates and assumptions are based on our best estimates and judgments. We evaluate estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. We adjust such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity markets, rising unemployment levels and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions. Certain critical accounting policies affect the more significant judgments and estimates used in the preparation of the consolidated financial statements.

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Allowance for Loan Losses

Our most critical accounting policy relates to our allowance for loan losses, which reflects the estimated losses resulting from the inability of our borrowers to make loan payments. If the financial condition of its borrowers were to deteriorate, resulting in an impairment of their ability to make payments, the estimates of the allowance would be updated, and additional provisions for loan losses may be required.

The allowance for loan and lease losses (ALLL) is a valuation account available to absorb losses on loans. The ALLL is established and maintained at an amount sufficient to cover the estimated credit loss associated with the loan and lease portfolios of the Banks as of the date of the determination. Credit losses arise not only from credit risk, but also from other risks inherent in the lending process including, but not limited to, collateral risk, operational risk, concentration risk, and economic risk. As such, all related risks of lending are considered when assessing the adequacy of the allowance for loan and lease losses. Quarterly, management estimates the probable level of losses to determine whether the allowance is adequate to absorb reasonably foreseeable, anticipated losses in the existing portfolio based on our past loan loss and delinquency experience, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay, and the estimated value of any underlying collateral and current economic conditions. The analysis and methodology include three primary segments. These segments include a pool analysis of various retail loans based upon loss history, a pool analysis of commercial and commercial real estate loans based upon loss history by loan type, and a specific reserve analysis for those loans considered impaired under generally accepted accounting principles. All commercial and commercial real estate loans with an outstanding balance of $100,000 or greater are individually reviewed for impairment; substandard mortgage loans with balances of $100,000 or greater are also included in the analysis. All losses are charged to the allowance for loan and lease losses when the loss actually occurs or when a determination is made that a loss is likely to occur; recoveries are credited to the allowance for loan losses at the time of receipt.

Purchased impaired loans are recorded at fair value at the acquisition date and the accretable yield is recognized in interest income over the remaining life of the loan. In addition, net charge-offs exclude write-downs on purchased impaired loans as the fair value already considers the estimated credit losses.

Retirement Employee Benefit Plans

Retirement and employee benefit plan assets, liabilities and pension costs are determined utilizing actuarially determined present value calculations. The valuation of the benefit obligation and net periodic expense is considered critical, as it requires management and its actuaries to make estimates regarding the amount and timing of expected cash outflows including assumptions about mortality, expected service periods, rate of compensation increases and the long-term return on plan assets. Note 10 – Retirement and Employee Benefit Plans, included in the accompanying Notes to the Consolidated Financial Statements, provides further discussion on the accounting for Hancock’s retirement and employee benefit plans and the estimates used in determining the actuarial present value of the benefit obligations and the net periodic benefit expense.

Fair Value Accounting Estimates

Generally accepted accounting principles require the use of fair values in determining the carrying values of certain assets and liabilities, as well as for specific disclosures. The most significant include securities, loans held for sale, mortgage servicing rights and net assets acquired in business combinations. Certain of these assets do not have a readily available market to determine fair value and require an estimate based on specific parameters. When market prices are unavailable, we determine fair values utilizing parameters, which are constantly changing, including interest rates, duration, prepayment speeds and other specific conditions. In most cases, these specific parameters require a significant amount of judgment by management.

53

The Company adopted the Financial Accounting Standards Board’s (FASB) authoritative guidance regarding fair value measurements on January 1, 2008. The guidance establishes a framework for measuring fair value under generally accepted accounting principles (GAAP), clarifies the definition of fair value within that framework, and expands disclosures about the use of fair value measurements. The guidance defines a fair value hierarchy that prioritizes the inputs to these valuation techniques used to measure fair value giving preference to quoted prices in active markets (level 1) and the lowest priority to unobservable inputs such as a reporting entity’s own data (level 3). Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in markets that are not active, observable inputs other than quoted prices, such as interest rates and yield curves, and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Available for sale securities classified as Level 1 within the valuation hierarchy include U.S. Treasury securities, obligations of U.S. Government-sponsored agencies, and other debt and equity securities. Level 2 classified available for sale securities include mortgage-backed debt securities, collateralized mortgage obligations, and state and municipal bonds.

In October 2008, the FASB issued guidance for determining the fair value of a financial asset in a market that is not active, which clarified previous guidance. Application issues clarified include: how management’s internal assumptions should be considered when measuring fair value when relevant observable data do not exist; how observable market information in a market that is not active should be considered when measuring fair value; and how the use of market quotes should be considered when assessing the relevance of observable and unobservable data available to measure fair value. The guidance was effective immediately and did not have a material impact on the Company’s financial condition or results of operations. The Company adopted authoritative guidance regarding the fair value option for financial assets and financial liabilities, on January 1, 2008. The Company did not elect to fair value any additional items under the guidance.

Income Taxes

We use the asset and liability method of accounting for income taxes. Determination of the deferred and current provision requires analysis by management of certain transactions and the related tax laws and regulations. Management exercises significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets. Those judgments and estimates are re-evaluated on a continual basis as regulatory and business factors change.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 1 to our Consolidated Financial Statements included elsewhere in this report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required for this item is included in the section entitled “Asset/Liability Management” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that appears in Item 7 of this Form 10-K and is incorporated here by reference.

54

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements and Financial Statement Schedule

	Page
Management’s Report on Internal Control Over Financial Reporting	56
Report of Independent Registered Public Accounting Firm	57
Report of Independent Registered Public Accounting Firm	58
Consolidated Balance Sheets as of December 31, 2009 and 2008	59
Consolidated Statements of Income for each of the years in the three-year period ended December  31, 2009	60
Consolidated Statements of Stockholders’ Equity for each of the years in the three-year period ended December 31, 2009	61
Consolidated Statements of Cash Flows for each of the years in the three-year period ended December  31, 2009	62
Notes to Consolidated Financial Statements	64

55

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Hancock Holding Company has prepared the consolidated financial statements and other information in our Annual Report in accordance with accounting principles generally accepted in the United States of America and is responsible for its accuracy. The financial statements necessarily include amounts that are based on management’s best estimates and judgments.

In meeting its responsibility, management relies on internal accounting and related control systems. The internal control systems are designed to ensure that transactions are properly authorized and recorded in the Company’s financial records and to safeguard the Company’s assets from material loss or misuse. Such assurance cannot be absolute because of inherent limitations in any internal control system.

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Exchange Act Rules 13(a) – 15(f). Under the supervision and with the participation of management, including the Company’s principal executive officers and principal financial officer, the Company conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management also conducted an assessment of requirements pertaining to Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA). This section relates to management’s evaluation of internal control over financial reporting, including controls over the preparation of the schedules equivalent to the basic financial statements and compliance with laws and regulations. Our evaluation included a review of the documentation of controls, evaluations of the design of the internal control system and tests of the effectiveness of internal controls.

Based on the Company’s evaluation under the framework in Internal Control – Integrated Framework, management concluded that internal control over financial reporting was effective as of December 31, 2009.

Carl J. Chaney	John M. Hairston	Michael M. Achary
President &	Chief Executive Officer &	Chief Financial Officer
Chief Executive Officer	Chief Operating Officer	February 17, 2010
February 17, 2010	February 17, 2010

56

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Hancock Holding Company:

In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, stockholders’ equity and cash flows present fairly, in all material respects, the financial position of Hancock Holding Company (the “Company”) and its subsidiaries at December 31, 2009, and the results of its operations and its cash flows for the year ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and on the Company’s internal control over financial reporting based on our integrated audit. We conducted our audit 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 and whether effective internal control over financial reporting was maintained in all material respects. Our audit of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. The accompanying consolidated financial statements of the Company as of December 31, 2008 and for the two years then ended were audited by other auditors whose report, dated February 27, 2009, expressed an unqualified opinion on those statements.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Management’s assessment and our audit of the Company’s internal control over financial reporting also included controls over the preparation of financial statements in accordance with the instructions to the Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9C) to comply with the reporting requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA). A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

New Orleans, Louisiana

February 17, 2010

57

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Hancock Holding Company:

We have audited the accompanying consolidated balance sheet of Hancock Holding Company and subsidiaries as of December 31, 2008, and the related consolidated statements of income, stockholders’ equity and cash flows for each of the years in the two-year period ended December 31, 2008. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated 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, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hancock Holding Company and subsidiaries as of December 31, 2008, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2008 in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

Birmingham, Alabama

February 27, 2009

58

Hancock Holding Company and Subsidiaries

Consolidated Balance Sheets

	December 31,
	2009			2008
	(In thousands, except share data)
Assets:
Cash and due from banks (non-interest bearing)	$	204,714		$	199,775
Interest-bearing time deposits with other banks		582,081			11,355
Federal funds sold		410			175,166
Other short-term investments		214,771			362,895
Trading securities		1,635			2,201
Securities available for sale, at fair value (amortized cost of $1,566,403 and $1,651,499)		1,611,327			1,679,756
Loans held for sale		36,112			22,290
Loans		5,127,339			4,264,149
Less: Allowance for loan losses		(66,050	)		(61,725	)
Unearned income		(13,164	)		(14,859	)
Loans, net		5,048,125			4,187,565
Property and equipment, net of accumulated depreciation of $113,967 and $101,050		203,133			205,912
Other real estate, net		13,786			5,195
Accrued interest receivable		35,468			33,067
Goodwill		62,277			62,277
Other intangible assets, net		16,546			6,363
Life insurance contracts		151,355			144,959
Deferred tax asset, net		—			5,819
FDIC loss share receivable		325,606			—
Other assets		189,737			62,659
Total assets	$	8,697,083		$	7,167,254
Liabilities and Stockholders’ Equity:
Deposits:
Non-interest bearing demand	$	1,073,341		$	962,886
Interest-bearing savings, NOW, money market and time		6,122,471			4,968,051
Total deposits		7,195,812			5,930,937
Federal funds purchased		250			—
Securities sold under agreements to repurchase		484,457			505,932
Other short-term borrowings		30,805			—
Long-term notes		671			638
Deferred tax liability, net		7,116			—
Other liabilities		140,309			120,248
Total liabilities		7,859,420			6,557,755
Stockholders’ Equity
Common stock-$3.33 par value per share; 350,000,000 shares authorized, 36,840,453 and 31,769,679 issued and outstanding, respectively		122,679			105,793
Capital surplus		257,643			101,210
Retained earnings		454,343			411,579
Accumulated other comprehensive gain/(loss), net		2,998			(9,083	)
Total stockholders’ equity		837,663			609,499
Total liabilities and stockholders’ equity	$	8,697,083		$	7,167,254

See accompanying notes to consolidated financial statements.

59

Hancock Holding Company and Subsidiaries

Consolidated Statements of Income

	Years Ended December 31,
	2009			2008			2007
	(In thousands, except per share data)
Interest income:
Loans, including fees	$	244,124		$	246,573		$	255,761
Securities-taxable		70,573			80,048			78,089
Securities-tax exempt		4,555			4,978			6,234
Federal funds sold		14			1,858			5,458
Other investments		4,461			1,980			155
Total interest income		323,727			335,437			345,697
Interest expense:
Deposits		84,313			111,052			132,920
Federal funds purchased and securities sold under agreements to repurchase		10,809			14,843			8,231
Long-term notes and other interest expense		198			184			80
Capitalized interest		(20	)		(77	)		(995	)
Total interest expense		95,300			126,002			140,236
Net interest income		228,427			209,435			205,461
Provision for loan losses		54,590			36,785			7,593
Net interest income after provision for loan losses		173,837			172,650			197,868
Noninterest income:
Service charges on deposit accounts		45,354			44,243			41,929
Trust fees		15,127			16,858			15,902
Insurance commissions and fees		14,355			16,554			19,229
Investment and annuity fees		8,220			10,807			8,746
Debit card and merchant fees		11,252			11,082			10,126
ATM fees		7,374			6,856			5,983
Secondary mortgage market operations		5,906			2,977			3,723
Securities gains (losses), net		69			4,825			308
Bargain purchase gain on acquisition		33,623			—			—
Other income		16,047			13,576			14,740
Total noninterest income		157,327			127,778			120,686
Noninterest expense:
Salaries and employee benefits		121,449			109,773			106,959
Net occupancy expense		20,340			19,538			19,435
Equipment rentals, depreciation and maintenance		9,849			10,992			10,465
Amortization of intangibles		1,417			1,432			1,651
Other expense		80,415			71,708			78,233
Total noninterest expense		233,470			213,443			216,743
Income before income taxes		97,694			86,985			101,811
Income taxes		22,919			21,619			27,919
Net income	$	74,775		$	65,366		$	73,892
Basic earnings per common share	$	2.28		$	2.07		$	2.30
Diluted earnings per common share	$	2.26		$	2.04		$	2.26

See accompanying notes to consolidated financial statements.

60

Hancock Holding Company and Subsidiaries

Consolidated Statements of Stockholders’ Equity

	Common Stock					Capital			Retained			Accumulated Other Comprehensive			Unearned
	Shares		Amount			Surplus			Earnings			Loss, net			Compensation		Total
	(In thousands, except share and per share data)
Balance, January 1, 2007	32,666,052		$	108,778		$	139,099		$	334,546		$	(24,013	)	$	—	$	558,410
Comprehensive income:
Net income per consolidated statements of income	—			—			—			73,892			—			—		73,892
Net change in fair value of securities available for sale, net of tax	—			—			—			—			8,846			—		8,846
Net change in unfunded accumulated benefit obligation, net of tax	—			—			—			—			540			—		540
Comprehensive income																		83,278
Cash dividends paid ($0.96 per share)	—			—			—			(30,957	)		—			—		(30,957	)
Common stock issued, long - term incentive plan, including excess income tax benefit of $345	184,775			615			2,134			—			—					2,749
Compensation expense, long - term incentive plan	—			—			1,155			—			—			—		1,155
Purchase of common stock	(1,556,220	)		(5,182	)		(55,266	)		—			—			—		(60,448	)
Balance, December 31, 2007	31,294,607			104,211			87,122			377,481			(14,627	)		—		554,187
Comprehensive income
Net income per consolidated statements of income	—			—			—			65,366			—			—		65,366
Net change in unfunded accumulated benefit obligation, net of tax	—			—			—			—			(12,095	)		—		(12,095	)
Net change in fair value of securities available for sale, net of tax	—			—			—			—			17,639			—		17,639
Comprehensive income																		70,910
SFAS No. 158, change in measurement date	—			—			—			(815	)		—			—		(815	)
Cash dividends declared ($0.96 per common share)	—			—			—			(30,453	)		—			—		(30,453	)
Common stock issued, long-term incentive plan, including excess income tax benefit of $4,512	481,530			1,604			11,520			—			—			—		13,124
Compensation expense, long-term incentive plan	—			—			2,806			—			—			—		2,806
Purchase of common stock	(6,458	)		(22	)		(238	)		—			—			—		(260	)
Balance, December 31, 2008	31,769,679			105,793			101,210			411,579			(9,083	)		—		609,499
Comprehensive income
Net income per consolidated statements of income	—			—			—			74,775			—			—		74,775
Net change in unfunded accumulated benefit obligation, net of tax	—			—			—			—			1,473			—		1,473
Net change in fair value of securities available for sale, net of tax	—			—			—			—			10,608			—		10,608
Comprehensive income																		86,856
Cash dividends declared ($0.96 per common share)	—			—			—			(32,011	)		—			—		(32,011	)
Common stock issued	4,945,000			16,467			150,905											167,372
Common stock issued, long-term incentive plan, including excess income tax benefit of $480	125,774			419			2,274			—			—			—		2,693
Compensation expense, long-term incentive plan	—			—			3,254			—			—			—		3,254
Balance, December 31, 2009	36,840,453		$	122,679		$	257,643		$	454,343		$	2,998		$	—	$	837,663

See accompanying notes to consolidated financial statements.

61

Hancock Holding Company and Subsidiaries

Consolidated Statements of Cash Flows

	Years Ended December 31,
	2009			2008			2007
				(In thousands)
Operating Activities:
Net income	$	74,775		$	65,366		$	73,892
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		15,549			15,761			14,041
Provision for (reversal of) loan losses, net		54,590			36,785			7,593
(Gains) losses on other real estate owned		768			230			(732	)
Deferred tax expense (benefit)		(6,953	)		(5,012	)		7,560
Increase in cash surrender value of life insurance contracts		(6,396	)		(5,538	)		(5,397	)
Gain on acquisition		(20,732	)		—			—
(Gain) loss on sales/paydowns of securities available for sale, net		(69	)		(1,950	)		(273	)
(Gain) loss on disposal of other assets		(1,478	)		(602	)		193
Gain on sale of loans held for sale		(579	)		(427	)		(583	)
(Gain) loss on trading securities		—			(2,875	)		114
Purchase of trading securities, net		—			—			(10	)
Proceeds from paydowns of securities held for trading		—			7,635			—
Amortization (accretion) of securities premium/discount, net		917			2,012			(1,773	)
Amortization of mortgage servicing rights		175			210			345
Amortization of intangible assets		1,417			1,432			1,651
Stock-based compensation expense		3,254			2,806			1,155
(Increase) decrease in accrued interest receivable		2,779			2,050			(1,417	)
Increase (decrease) in accrued expenses		8,270			2,624			(12,197	)
Increase in other liabilities		20,645			2,309			4,430
Increase (decrease) in interest payable		(3,276	)		(2,785	)		883
Decrease in policy reserves and liabilities		(8,937	)		(12,051	)		(35,180	)
Decrease in reinsurance receivables		3,212			8,060			3,215
(Increase) decrease in other assets		(106,465	)		(14,062	)		274
Proceeds from sale of loans held for sale		366,885			192,838			251,684
Originations of loans held for sale		(380,128	)		(195,569	)		(253,112	)
Excess tax benefit from share based payments		(480	)		(4,512	)		(345	)
Other, net		399			(367	)		60
Net cash provided by operating activities		18,142			94,368			56,071

See accompanying notes to consolidated financial statements.

62

Hancock Holding Company and Subsidiaries

Consolidated Statements of Cash Flows (continued)

	Years Ended December 31,
	2009			2008			2007
				(In thousands)
Investing Activities:
Net (increase) decrease in interest-bearing time deposits	$	(558,271	)	$	(2,795	)	$	1,637
Proceeds from sales of securities available for sale		10,202			213,814			9,222
Proceeds from maturities of securities available for sale		599,066			938,939			1,270,294
Purchases of securities available for sale		(509,304	)		(1,140,901	)		(1,038,175	)
Proceeds from maturities of short-term investments		1,639,998			—			—
Purchase of short-term investments		(1,498,681	)		(362,895	)		—
Net (increase) decrease in federal funds sold		176,002			(57,445	)		94,521
Net (increase) decrease in loans		17,906			(684,528	)		(356,787	)
Purchases of property and equipment		(12,305	)		(23,618	)		(70,267	)
Proceeds from sales of property and equipment		2,700			2,150			497
Premiums paid on life insurance contracts		—			—			(20,000	)
Net cash received from acquisition		378,367			—			—
Proceeds from sales of other real estate		8,015			6,184			1,753
Net cash provided by (used in) investing activities		253,695			(1,111,095	)		(107,305	)
Financing Activities:
Net increase (decrease) in deposits		(298,062	)		921,403			(21,457	)
Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase		(21,225	)		130,228			153,313
(Proceeds) repayments of long-term notes		(166	)		(155	)		535
Proceeds from issuance of short-term notes		1,609,399			—			—
Repayments of short-term notes		(1,694,898	)		—			—
Dividends paid		(32,011	)		(30,453	)		(30,957	)
Proceeds from exercise of stock options		2,213			8,612			2,404
Repurchase/retirement of common stock		—			(260	)		(60,448	)
Proceeds from stock offering		167,372			—			—
Excess tax benefit from stock option exercises		480			4,512			345
Net cash provided by (used in) financing activities		(266,898	)		1,033,887			43,735
Increase (decrease) in cash and due from banks		4,939			17,160			(7,499	)
Cash and due from banks at beginning of year		199,775			182,615			190,114
Cash and due from banks at end of year	$	204,714		$	199,775		$	182,615
Supplemental Information
Income taxes paid	$	5,810		$	19,413		$	29,209
Interest paid, including capitalized interest of $20, $77, and $995, respectively		96,797			128,787			139,353
Restricted stock issued to employees of Hancock		2,688			3,045			2,495
Supplemental Information for Non-Cash
Investing and Financing Activities
Transfers from loans to other real estate	$	20,023		$	10,671		$	2,694
Financed sales of foreclosed property		2,649			1,234			339
Transfers from trading securities to available for sale securities		—			190,802			—

See accompanying notes to consolidated financial statements.

63

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements

Description of Business

Hancock Holding Company “the Company” or “Hancock” is a financial holding company headquartered in Gulfport, Mississippi operating in the states of Mississippi, Louisiana, Alabama and Florida. Hancock Holding Company, the Parent Company operates through four wholly-owned bank subsidiaries, Hancock Bank, Gulfport, Mississippi, Hancock Bank of Louisiana, Baton Rouge, Louisiana, Hancock Bank of Florida, Tallahassee, Florida and Hancock Bank of Alabama, Mobile, Alabama (“the Banks.”) Effective January 1, 2010, Hancock Bank of Florida will be merged into Hancock Bank. The Banks are community oriented and focus primarily on offering commercial, consumer and mortgage loans and deposit services to individuals and small to middle market businesses in their respective market areas. The Company’s operating strategy is to provide its customers with the financial sophistication and breadth of products of a regional bank, while successfully retaining the local appeal and level of service of a community bank. Hancock Bank subsidiaries include Hancock Investment Services, Hancock Insurance Agency, and Harrison Finance Company.

Consolidation

The consolidated financial statements include the accounts of the Company and all other entities in which the Company has a controlling interest. Significant inter-company transactions and balances have been eliminated in consolidation.

Use of Estimates

The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles. The accounting principles we follow and the methods for applying these principles conform with accounting principles generally accepted in the United States of America and with general practices followed by the banking industry which requires management to make estimates and assumptions about future events. On an ongoing basis, the Company evaluates its estimates, including those related to the allowance for loan losses, intangible assets and goodwill, income taxes, pension and postretirement benefit plans and contingent liabilities. These estimates and assumptions are based on our best estimates and judgments. We evaluate estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. We adjust such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity markets, rising unemployment levels and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities not readily apparent from other sources. Allowance for loan losses, deferred income taxes, and goodwill are potentially subject to material changes in the near term. Actual results could differ significantly from those estimates.

Reclassifications

Certain reclassifications have been made to prior periods to conform to the current year presentation. These reclassifications had no material impact on the consolidated financial statements.

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Fair Value Accounting

Generally accepted accounting principles require the use of fair values in determining the carrying values of certain assets and liabilities, as well as for specific disclosures. The most significant include securities, loans held for sale, mortgage servicing rights and net assets acquired in business combinations. Certain of these assets do not have a readily available market to determine fair value and require an estimate based on specific parameters. When market prices are unavailable, we determine fair values utilizing parameters, which are constantly changing, including interest rates, duration, prepayment speeds and other specific conditions. In most cases, these specific parameters require a significant amount of judgment by management.

The Company adopted the Financial Accounting Standards Board’s (FASB) authoritative guidance regarding fair value measurements on January 1, 2008. The guidance establishes a framework for measuring fair value under generally accepted accounting principles (GAAP), clarifies the definition of fair value within that framework, and expands disclosures about the use of fair value measurements. The guidance defines a fair value hierarchy that prioritizes the inputs to these valuation techniques used to measure fair value giving preference to quoted prices in active markets (level 1) and the lowest priority to unobservable inputs such as a reporting entity’s own data (level 3). Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in markets that are not active, observable inputs other than quoted prices, such as interest rates and yield curves, and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Available for sale securities classified as Level 1 within the valuation hierarchy include U.S. Treasury securities, obligations of U.S. Government-sponsored agencies, and other debt and equity securities. Level 2 classified available for sale securities include mortgage-backed debt securities, collateralized mortgage obligations, and state and municipal bonds. Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and are significant to the overall fair value measurement are classified as level 3 under the fair value hierarchy. The Company currently has no level 3 assets or liabilities.

In October 2008, the FASB issued guidance for determining the fair value of a financial asset in a market that is not active, which clarified previous guidance. Application issues clarified include: how management’s internal assumptions should be considered when measuring fair value when relevant observable data do not exist; how observable market information in a market that is not active should be considered when measuring fair value; and how the use of market quotes should be considered when assessing the relevance of observable and unobservable data available to measure fair value. The guidance was effective immediately and did not have a material impact on the Company’s financial condition or results of operations. The Company adopted authoritative guidance regarding the fair value option for financial assets and financial liabilities, on January 1, 2008. The Company did not elect to fair value any additional items under the guidance.

Acquisition Accounting

Acquisitions are accounted for under the purchase method of accounting. Purchased assets and assumed liabilities are recorded at their respective acquisition date fair values, and identifiable intangible assets are recorded at fair value. If the fair value of assets purchased exceeded the fair value of liabilities assumed, it results in a “bargain purchase gain.” If the consideration given exceeds the fair value of the net assets received, goodwill is recognized. Fair values are subject to refinement for up to one year after the closing date of an acquisition as information relative to closing date fair values becomes available.

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Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date and prohibit the carryover of the related allowance for loan losses. When the loans have evidence of credit deterioration since origination and it is probable at the date of acquisition that the Company will not collect all contractually required principal and interest payments, the difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the non-accretable difference. The Company must estimate expected cash flows at each reporting date. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges and adjusted accretable yield which will have a positive impact on interest income. In addition, purchased loans without evidence of credit deterioration are also handled under this method.

All identifiable intangible assets that are acquired in a business combination are recognized at fair value on the acquisition date. Identifiable intangible assets are recognized separately if they arise from contractual or other legal rights or if they are separable (i.e., capable of being sold, transferred, licensed, rented, or exchanged separately from the entity). Deposit liabilities and the related depositor relationship intangible assets may be exchanged in observable exchange transactions. As a result, the depositor relationship intangible asset is considered identifiable, because the separability criterion has been met since the depositor relationship intangible asset can be sold in conjunction with the deposit liability. Accordingly, the Company recorded a core deposit intangible asset associated with the Peoples First acquisition of $11.6 million.

Indemnification assets are recognized when the seller contractually indemnifies, in whole or in part, the buyer for a particular uncertainty. The recognition and measurement of an indemnification asset is based on the related indemnified item. That is, the acquirer should recognize an indemnification asset at the same time that it recognizes the indemnified item, measured on the same basis as the indemnified item, subject to collectibility or contractual limitations on the indemnified amount. Therefore, if the indemnification relates to an asset or a liability that is recognized at the acquisition date and measured at its acquisition-date fair value, the acquirer should recognize the indemnification asset at its acquisition-date fair value on the acquisition date. If an indemnification asset is measured at fair value, a separate valuation allowance is not necessary, because its fair value measurement will reflect any uncertainties in future cash flows. The loans purchased in the Peoples First Community Bank FDIC-assisted acquisition are covered by a loss share agreement between the FDIC and the Company, which affords the Company significant loss protection. The Company recorded an estimated receivable from the FDIC of $325.6 million which represents the fair value of the FDIC’s portion of the losses that are expected to be incurred and reimbursed to the Company.

Securities

Securities have been classified into one of two categories: available for sale or trading. Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates this classification periodically.

Available for sale securities are stated at fair value with unrealized gains and losses, net of income taxes, reported as a separate component of stockholders’ equity until realized. Trading securities are stated at fair value with unrealized gains and losses reported in results of operations.

The amortized cost of debt securities classified as available for sale is adjusted for amortization of premiums and accretion of discounts to maturity or, in the case of mortgage-backed securities, over the estimated life of the security using the constant-yield method. The prepayment speed chosen to determine the estimated life of a mortgage-backed security is the security’s historical 3-month prepayment speed. When prepayment speeds are faster than expected, the average life of the mortgage-backed security is shorter than the original estimate. Amortization, accretion and accrued interest are included in interest income on securities.

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Realized gains and losses, and declines in value judged to be other than temporary, are included in net securities gains and losses. Gains and losses on the sales of securities available for sale are determined using the specific-identification method. Using this basis results in the most accurate reporting of gains and losses realized on these sales, as well as the appropriate adjustment to accumulated other comprehensive income. A decline in the fair value of securities below cost that is deemed to be other than temporary results in a charge to earnings and the establishment of a new cost basis for the security. Gains and losses on the sales of trading securities are also determined using the specific-identification method with the gain or loss reported in the results of operations.

Short-term Investments

Short-term investments represent U.S. government agency discount notes that all mature in less than 1 year. The investments are classified as available for sale and are carried at fair value. Unrealized holding gains are excluded from net income and are recognized, net of tax, in other comprehensive income and in accumulated other comprehensive income, a separate component of stockholders’ equity, until realized.

Loans

Loans are reported at the principal balance outstanding. Non-refundable loan origination fees and certain direct origination costs are recognized as an adjustment to the yield on the related loan. Interest on loans is recorded to income as earned.

The accrual of interest on loans is discontinued when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. When accrual of interest is discontinued, all unpaid accrued interest is reversed and payments subsequently received are applied first to principal. Interest income is recorded after principal has been satisfied and as payments are received. Loans are returned to accrual status when all the principal and interest contractually due are brought current and future amounts are reasonably assured.

Generally, loans of all types which become 90 days delinquent are reviewed relative to collectability. Unless such loans are in the process of terms revision to bring to a current status, collection through repossession or foreclosure, those loans deemed uncollectible are charged off against the allowance account.

Loans held for sale are stated at lower of cost or market on the consolidated balance sheets. These loans are originated on a best-efforts basis, whereby a commitment by a third party to purchase the loan has been received concurrent with the Banks’ commitment to the borrower to originate the loan.

Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date. See Acquisition Accounting section above for accounting policy regarding loans acquired in a business combination.

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Allowance for Loan Losses

The allowance for loan and lease losses “ALLL” is a valuation account available to absorb losses on loans. The ALLL is established and maintained at an amount sufficient to cover the estimated credit loss associated with the loan and lease portfolios of the Company as of the date of the determination. Credit losses arise not only from credit risk, but also from other risks inherent in the lending process including, but not limited to, collateral risk, operational risk, concentration risk, and economic risk. As such, all related risks of lending are considered when assessing the adequacy of the allowance for loan and lease losses. Quarterly, management estimates the probable level of losses to determine whether the allowance is adequate to absorb reasonably anticipated losses in the existing portfolio based on the Company’s past loan loss and delinquency experience, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay, and the estimated value of any underlying collateral and current economic conditions. The analysis and methodology include three primary segments. These segments include a pool analysis of various retail loans based upon loss history, a pool analysis of commercial and commercial real estate loans based upon loss history by loan type, and a specific reserve analysis for those loans considered impaired under FASB’s authoritative guidance for accounting by creditors for impairment of a loan. All commercial and commercial real estate loans with an outstanding balance of $100,000 or greater are individually reviewed for impairment; substandard mortgage loans with balances of $100,000 or greater are also included in the analysis. All losses are charged to the allowance for loan and lease losses when the loss actually occurs or when a determination is made that a loss is likely to occur; recoveries are credited to the allowance for loan losses at the time of receipt.

The Company considers a loan to be impaired when, based upon current information and events, it believes it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The Company’s impaired loans include troubled debt restructurings, and performing and non-performing major loans for which full payment of principal or interest is not expected. Categories of non-major homogeneous loans, which are evaluated on an overall basis, generally include all loans under $500,000. The Company determines an allowance required for impaired loans based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of its collateral. If the recorded investment in the impaired loan exceeds the measure of fair value, a valuation allowance is required as a component of the allowance for loan losses.

Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date and prohibit the carryover of the related allowance for loan losses. See Acquisition Accounting section above for accounting policy regarding loans acquired in a business combination.

Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation is charged to expense over the estimated useful lives of the assets, which are up to 39 years for buildings and three to seven years for furniture and equipment. Amortization expense for software is charged over 3 years. Leasehold improvements are amortized over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. In cases where the Company has the right to renew the lease for additional periods, the lease term for the purpose of calculating amortization of the capitalized cost of the leasehold improvements is extended when the Company is “reasonably assured” that it will renew the lease. Depreciation and amortization expenses are computed using a straight-line basis for assets acquired after January 1, 2006 and the double declining balance basis for assets acquired prior to January 1, 2006. Gains and losses related to retirement or disposition of fixed assets are recorded in other income under non-interest income on the consolidated statements of income. The Company continually evaluates whether events and circumstances have occurred that indicate that such long-lived assets have been impaired. Measurement of any impairment of such long-lived assets is based on those assets’ fair values. There were no impairment losses on property and equipment recorded during 2009, 2008, or 2007.

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Other Real Estate

Other real estate owned includes assets that have been acquired in satisfaction of debt through foreclosure. Other real estate owned is reported in other assets and is recorded at the lower of cost or estimated fair value less the estimated cost of disposition. Valuation adjustments required at foreclosure are charged to the allowance for loan losses. Subsequent to foreclosure, losses on the periodic revaluation of the property are charged to net income as other expense. Costs of operating and maintaining the properties are included in other noninterest expenses, while gains (losses) on their disposition are charged to other income as incurred. Improvements made to properties are capitalized if the expenditures are expected to be recovered upon the sale of the properties.

Goodwill and Other Intangible Assets

Goodwill, which represents the excess of cost over the fair value of the net assets of an acquired business, is not amortized but tested for impairment on an annual basis, or more often if events or circumstances indicate there may be impairment. Management reviews goodwill for impairment based on the Company’s four primary reporting segments. The last test was conducted as of September 30, 2009. There was no impairment and there have been no trigger events that would cause an impairment since September 30, 2009.

The Company analyzes goodwill using market capitalization to book value comparison. The Company considered using a present value technique to estimate fair value. The cash flow estimates would incorporate assumptions that market participants would use in their estimates of fair value. The assumptions would need to be reasonable and based on supportable data considering all available evidence with weight commensurate with the extent to which the evidence can be verified objectively. The Company considers this alternative method to have subjective assumptions and considers market capitalization to be more objective as the Company’s reporting segments are in the same business, operate with the same policies and procedures, and are under the same executive management team.

Identifiable intangible assets are acquired assets that lack physical substance but can be distinguished from goodwill because of contractual or legal rights or because the assets are capable of being sold or exchanged either on their own on in combination with a related contract, asset, or liability. The Company’s identifiable intangible assets primarily relate to core deposits, insurance customer relationships, non-compete agreements and trade name. These intangibles, which have definite useful lives, are amortized based on the sum-of-the-years-digits method over their estimated useful lives for assets acquired prior to January 1, 2006 and on a straight-line basis for assets acquired subsequent to January 1, 2006. In addition, these intangibles are evaluated annually for impairment or whenever events and changes in circumstances indicate that the carrying amount should be reevaluated. The intangible assets are monitored annually and have had a consistent revenue stream. Also, if the annual goodwill test revealed an impairment, the Company would also evaluate the intangible assets for impairment.

Mortgage Servicing Rights

The authoritative guidance for accounting for servicing of financial assets requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable, and permits an entity to subsequently measure those servicing assets and servicing liabilities at fair value. Under the guidance, the Company decided to continue to use the amortization method instead of adopting the fair value method. Management has determined that it has one class of servicing rights which is based on the type of loan. The risk characteristics of the underlying financial assets used to stratify servicing assets for purposes of measuring impairment are interest rate, type of product (fixed versus variable), duration, and asset quality. The book value of mortgage servicing rights at December 31, 2009 and December 31, 2008 was $0.3 million. The market value of mortgage servicing rights at December 31, 2009 and December 31, 2008 was $1.4 million and $1.0 million, respectively.

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Reinsurance Receivables

Certain premiums and losses are assumed from and ceded to other insurance companies under various reinsurance agreements. Reinsurance premiums, loss reimbursement, and reserves related to reinsurance business are accounted for on a basis consistent with that used in accounting for the original policies issued and the terms of the reinsurance contract. The Company may receive a ceding commission in connection with ceded reinsurance. If so, the ceding commission is earned on a monthly pro rata basis in the same manner as the premium and is recorded as a reduction of other operating expenses.

Derivative Instruments

The Company has certain Interest Rate Lock Commitments “IRLC’s” that are reported on the consolidated balance sheets at fair value with changes in fair value reported in statements of income. The Company also has interest rate swaps which are recognized on the consolidated balance sheets as other assets at fair value as required by authoritative guidance. These interest rate swaps do not qualify for hedge accounting under the guidelines of FASB’s guidance for accounting for derivative instruments and hedging. Gains and losses related to the change in fair value are recognized in earnings during the period of change in fair value as other non-interest income.

Income Taxes

The Company accounts for deferred income taxes using the liability method. Deferred tax assets and liabilities are based on temporary differences between the financial statement carrying amounts and the tax basis of the Company’s assets and liabilities. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled.

Pension Accounting

The Company has accounted for its defined benefit pension plan using the actuarial model required by authoritative guidance for employers’ accounting for pensions. The compensation cost of an employee’s pension benefit is recognized on the projected unit credit method over the employee’s approximate service period. The aggregate cost method is utilized for funding purposes. The Company also sponsors two defined benefit postretirement plans, which provide medical benefits and life insurance benefits. The Company has accounted for these plans using the actuarial computations required by guidance regarding employers accounting for postretirement benefits other than pensions. The cost of the defined benefit postretirement plan has been recognized on the projected unit credit method over the employee’s approximate service period. Effective December 31, 2006, the Company adopted authoritative guidance for employers’ accounting for defined benefit pension and other postretirement plans which required the recognition of the over funded or under funded status of a defined benefit postretirement plan as an asset or liability on the balance sheet. In 2008, the Company changed the measurement date of the funded status of the plan from September 30 to December 31.

Policy Reserves and Liabilities

Unearned premium reserves are based on the assumption that the portion of the original premium applicable to the remaining term and amount of insurance will be adequate to pay future benefits. The reserve is calculated by multiplying the original gross premium times an unearned premium factor. Factors are developed which represent the proportion of the remaining coverage compared to the total coverage provided over the entire term of insurance.

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Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (continued)

Policy reserves for future life and health claims not yet incurred are based on assumed mortality and interest rates. For disability, the reserves are based upon unearned premium, which is the portion of the original premium applicable to the remaining term and amount of insurance that will be adequate to pay future benefits. Present value of amounts not yet due is an amount for disability claims already reported and incurred and represents the present value of all the future benefits using actuarial disability tables. IBNR “Incurred But Not Reported” is an estimate of claims incurred but not yet reported, and is based upon historical analysis of claims payments.

Stock-Based Compensation

In recognizing stock-based compensation, the Company follows the provisions of authoritative guidance regarding share-based payments. This guidance establishes fair value as the measurement objective in accounting for stock awards and requires the application of a fair value based measurement method in accounting for compensation cost, which is recognized over the requisite service period.

Revenue Recognition

The largest source of revenue for the Company is interest revenue. Interest revenue is recognized on an accrual basis driven by written contracts, such as loan agreements or securities contracts. Credit-related fees, including letter of credit fees, are recognized in non-interest income when earned. The Company recognizes commission revenue and brokerage, exchange and clearance fees on a trade-date basis. Other types of non-interest revenue such as service charges on deposits and trust revenues, are accrued and recognized into income as services are provided and the amount of fees earned are reasonably determinable.

Earnings Per Share

Basic earnings per common share is computed by dividing income applicable to common shareholders by the weighted-average number of common shares outstanding for the applicable period. Shares outstanding are adjusted for restricted shares issued to employees under the long-term incentive compensation plan and for certain shares that will be issued under the directors’ compensation plan. Diluted earnings per common share is computed using the weighted-average number of common shares outstanding increased by the number of shares in which employees would vest under performance-based restricted stock and stock unit awards based on expected performance factors and by the number of additional shares that would have been issued if potentially dilutive stock options were exercised, each as determined using the treasury stock method.

The Company adopted the FASB’s authoritative guidance regarding the determination of whether instruments granted in share-based payment transactions are participating securities. This guidance provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and should be included in the computation of earnings per share pursuant to the two-class method. This guidance was effective January 1, 2009, and upon adoption the company was required to retrospectively adjust its earnings per share data including any amounts related to interim periods, summaries of earnings and selected financial data.

Statements of Cash Flows

The Company considers only cash on hand, cash items in process of collection and balances due from financial institutions as cash and cash equivalents for purposes of the consolidated statements of cash flows.

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Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (continued)

Operating Segment Disclosures

As defined by authoritative guidance, segment disclosures require reporting information about a company’s operating segments using a “management approach.” Reportable segments are identified as those revenue-producing components for which separate financial information is produced internally and which are subject to evaluation by the chief operating decision maker in deciding how to allocate resources to segments. The Company defines reportable segments as the banks.

Other

Assets held by the banks in a fiduciary capacity are not assets of the banks and are not included in the consolidated balance sheets.

Recent Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (FASB) issued guidance on fair value measurements and disclosures that requires some new disclosures and clarifies some existing disclosure requirements about fair value measurement. The FASB’s objective is to improve these disclosures and, thus, increase the transparency in financial reporting. Specifically, the guidance now requires a reporting entity to disclose separately the amounts of significant transfers in and out of level 1 and level 2 fair value measurements and describe the reasons for the transfers and in the reconciliation for fair value measurements using significant unobservable inputs, a reporting entity should present separately information about purchases, sales, issuances, and settlements. In addition, the guidance clarifies the requirements of reporting fair value measurement for each class of assets and liabilities and clarifies that a reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities based on the nature and risks of the investments. A reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. The guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in level 3 fair value measurements which is required for annual reporting periods beginning after December 15, 2010, and for interim reporting periods within those years. The adoption of the guidance is not expected to have a material impact on the Company’s financial condition or results of operations.

In September 2009, the Financial Accounting Standards Board (FASB) issued guidance that permits companies to determine the fair value of a liability using the perspective of an investor that holds the related obligation as an asset. In the absence of a quoted market price in an active market for an identical liability, which generally would not be available because liabilities are not exchange-traded as liabilities, companies may apply approaches that use the quoted price of an investment in the identical liability or similar liabilities traded as assets or other valuation techniques consistent with the fair value measurement principles. The new guidance is effective for interim and annual periods beginning after August 26, 2009, and applies to all fair value measurements of liabilities required by generally accepted accounting principles. The adoption of the guidance is not expected to have a material impact on the Company’s financial condition or results of operations.

In June 2009, the FASB issued authoritative guidance for the FASB accounting standards codification (Codification) and the hierarchy of generally accepted accounting principles (U.S. GAAP). The guidance establishes the Codification to become the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The guidance and the Codification are effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company adopted the provisions of the guidance, as required, and determined that the impact to the Company’s financial condition or results of operations was immaterial.

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In May 2009, the FASB issued authoritative guidance establishing general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The guidance provides the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. The guidance is effective for interim or annual financial periods ending after June 15, 2009, and shall be applied prospectively. The impact on the Company’s financial condition or results of operations is dependent on the extent of any future subsequent events. The Company performed a review through February 17, 2010, and determined that there were no transactions qualifying as a subsequent event.

In April 2009, the FASB issued guidance determining fair value when the volume and level of activity for the asset or liability have significantly decreased and identifying transactions that are not orderly. This guidance affirms that the objective of fair value when the market for an asset is not active is the price that would be received to sell the asset in an orderly transaction; includes additional factors for determining whether there has been a significant decrease in market activity for an asset when the market is inactive; eliminates the presumption that all transactions are distressed unless proven otherwise requiring an entity to base its conclusion on the weight of evidence; and requires an entity to disclose a change in valuation technique resulting from application of the guidance and to quantify its effects, if practicable. The guidance is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The adoption of the guidance in the second quarter did not have a material impact on the Company’s financial condition or results of operations.

In April 2009, the FASB issued authoritative guidance regarding recognition and presentation of other-than-temporary impairments that changes existing guidance for determining whether an impairment is other than temporary to debt securities; replaces the existing requirement that the entity’s management assert it has both the intent and ability to hold an impaired security until recovery with a requirement that management assert: (a) it does not have the intent to sell the security and (b) it is more likely than not it will not have to sell the security before recovery of its cost basis; requires that an entity recognize noncredit losses on available for sale debt securities in other comprehensive income and amortize the amount over the remaining life of the security in a prospective manner by offsetting the recorded value of the asset unless the security is subsequently sold or there are credit losses; requires an entity to present the total other-than-temporary impairment in the statement of earnings with an offset for the amount recognized in other comprehensive income; and at adoption, requires an entity to record a cumulative-effect adjustment as of the beginning of the period of adoption to reclassify the noncredit component of a previously recognized other-than-temporary impairment from retained earnings to accumulated other comprehensive income if the entity does not intend to sell the security and it is more likely than not that the entity will be required to sell the security before recovery. The authoritative guidance is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The adoption of the guidance in the second quarter did not have a material impact on the Company’s financial condition or results of operations.

In April 2009, the FASB issued guidance for interim disclosures about fair value of financial instruments. Under this guidance, a publicly traded company shall include disclosures about the fair value of its financial instruments whenever it issues summarized financial information for interim reporting periods. In addition, an entity shall disclose in the body or in the accompanying notes of its summarized financial information for interim reporting periods and in its financial statements for annual reporting periods the fair value of all financial instruments for which it is practicable to estimate that value, whether recognized or not recognized in the statement of financial position. The guidance is effective for interim periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The adoption of the guidance in the second quarter did not have a material impact on the Company’s financial condition or results of operations.

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Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (continued)

In February 2009, the FASB issued authoritative guidance regarding accounting for assets acquired and liabilities assumed in a business combination that arise from contingencies, that amends provisions related to the initial recognition and measurement, subsequent measurement and disclosure of assets and liabilities arising from contingencies in a business combination. The guidance is effective for all business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The impact on the Company’s financial condition or results of operations is dependent on the extent of future business combinations.

In December 2008, the FASB issued authoritative guidance for employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. The objectives of the disclosures are to provide users of financial statements with an understanding of how investment allocation decisions are made; the major categories of plan assets; the inputs and valuation techniques used to measure fair value of plan assets; the effect of fair value measurements using significant unobservable inputs (Level 3) on changes in plan assets for the period; and significant concentrations on risk within plan assets. The guidance is effective for fiscal years ending after December 15, 2009. The adoption of the guidance did not have a material impact on the Company’s financial condition or results of operations.

In June 2008, the FASB issued authoritative guidance, which provides that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and should be included in the computation of earnings per share pursuant to the two-class method. The guidance was effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those years. Upon adoption, a company was required to retrospectively adjust its earnings per share data including any amounts related to interim periods, summaries of earnings and selected financial data. The adoption of the guidance did not have a material impact on the Company’s financial condition or results of operations.

In April 2008, the FASB issued authoritative guidance for determination of the useful life of intangible asset, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under previous guidance regarding goodwill and other intangible assets. The intent of the FSP is to improve the consistency between the useful life of a recognized intangible asset under the guidance and the period of expected cash flows used to measure the fair value of the asset under the guidance and other U.S. generally accepted accounting principles. This FSP was effective for financial statements issued for fiscal years beginning after December 15, 2008. The adoption of the guidance did not have a material impact on the Company’s financial condition or results of operations.

Note 2. Acquisition of Peoples First Community Bank

On December 18, 2009, the Company entered into a purchase and assumption agreement with the Federal Deposit Insurance Corporation (FDIC), as receiver for Peoples First Community Bank (Peoples First) based in Panama City, Florida. Earlier that day, the Office of Thrift Supervision issued an order requiring the closure of Peoples First Community Bank and appointing the FDIC as receiver. According to terms of the agreement, the Company acquired substantially all of the assets of Peoples First and all deposits and borrowings. All deposits were assumed with no losses to any depositor. There was no consideration paid for the acquisition. Peoples First operated 29 branches in Florida with assets totaling approximately $1.7 billion and approximately 437 employees.

The loans purchased are covered by a loss share agreement between the FDIC and the Company, which affords the Company significant loss protection. Under the loss share agreement, the FDIC will cover 80% of covered loan losses up to $385 million and 95% of losses in excess of that amount. The term for loss sharing on residential real estate loans is ten years. The term for loss sharing on non-residential real estate loans is five years for other loans. The reimbursable losses from the FDIC are based on the book value of the relevant loan as determined by the FDIC at the date of the transaction.

74

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 2. Acquisition of Peoples First Community Bank (continued)

New loans made after that date are not covered by the shared-loss agreements. The loss sharing agreements are subject to our compliance with servicing procedures specified in the agreements with the FDIC. The Company recorded an estimated receivable from the FDIC of $325.6 million which represents the fair value of the FDIC’s portion of the losses that are expected to be incurred and reimbursed to the Company.

The acquisition was accounted for under the purchase method of accounting in accordance with generally accepted accounting principles regarding acquisitions. The statement of net assets acquired as of December 18, 2009 and the resulting gain are presented in the following table. The purchased assets and assumed liabilities were recorded at their respective acquisition date fair values. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition as information relative to closing date fair values becomes available. A net acquisition bargain purchase gain of $20.7 million resulted from the acquisition and is included as a component of noninterest income on the statement of income. The amount of the gain is equal to the amount by which the fair value of assets purchased exceeded the fair value of liabilities assumed.

The following table provides the assets purchased and the liabilities assumed and the adjustments to fair value:

ACQUISITION GAIN CALCULATION
	As Recorded by Peoples First Community Bank		Fair Value Adjustments			As Recorded by Hancock
			(In thousands)
Assets
Cash	$	98,068	$	302,208	(a)	$	400,276
Securities		16,149		—			16,149
Loans		1,461,541		(511,111	) (b)		950,430
Land, building, and FF&E		8		—			8
Core deposit intangible		—		11,610	(c)		11,610
FIDC loss share receivable		—		325,606	(d)		325,606
Other assets		13,000		(1,813	) (e)		11,187
Total assets acquired	$	1,588,766	$	126,500		$	1,715,266
Liabilities
Deposits	$	1,552,454	$	10,483	(f)	$	1,562,937
FHLB advances		115,500	$	804	(g)	$	116,304
Other liabilities		2,402	$	12,891	(g)	$	15,293
Total liabilities acquired	$	1,670,356	$	24,178		$	1,694,534
Net assets acquired “bargain purchase” gain						$	20,732

Explanation of Fair Value Adjustments

(a) Adjustment is for cash received from the FDIC for first losses.

(b) This estimated adjustment is necessary as of the acquisition date to write down People’s First book value of loans to the estimated fair value as a result of future loan losses.

(c) This fair value adjustment represents the value of the core deposit base assumed in the acquisition based on a study performed by an independent valuation firm. This amount was recorded by the Company as an identifiable asset and will be amortized as an expense using a mix of straight-line and accelerated methods over the average life of the core deposit base, which is estimated to be 10 years.

(d) This adjustment is the estimated fair value of the amount that the Company will receive from the FDIC under its loss sharing agreement as a result of future loan losses.

(e) These are adjustments made to acquired assets to reflect fair value primarily for a write-down of an investment in a subsidiary and accrued interest receivable for loans that should have been placed on non-accrual prior to the acquisition.

(f) This fair value adjustment was recorded because the weighted average interest rate of People’s First time deposits exceeded the cost of similar wholesale funding at the time of the acquisition. This amount will be amortized to reduce interest expense on a declining basis over the average life of the portfolio of approximately 7 months.

(g) The fair value adjustment was recorded because the interest rates of People’s fixed rate borrowings exceeded the current interest rates on similar borrowings. This amount will be amortized to interest expense over terms of the borrowings.

75

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 2. Acquisition of Peoples First Community Bank (continued)

The operating results of the Company for the period ended December 31, 2009 include the operating results of the acquired assets and assumed liabilities for the 13 days subsequent to the acquisition date of December 18, 2009. The operations of Peoples First provided $0.2 million in net income for the period from the acquisition and is included in the consolidated financial statements. Peoples First results of operations prior to the acquisition are not included in Hancock’s statement of income. Merger related charges of $3.7 million are recorded in the consolidated statement of income and include incremental costs to integrate the operations of the Company and Peoples First. These charges represent costs associated with severance and employee related charges, systems integrations, and other merger-related charges. Due primarily to the significant amount of fair value adjustments and the FDIC loss sharing agreements now in place, historical results of Peoples First are not believed to be relevant to the Company’s results, and thus no pro forma information is presented.

The carrying amount of the covered loans at December 18, 2009, consisted of loans accounted for in accordance with generally accepted accounting principles governing the accounting for certain loans acquired in a transfer. The covered loans were divided into loans with evidence of credit quality deterioration for which the Company believes, at the date of acquisition, it is probable that the Company will be unable to collect all contractually required payments receivable and loans that do not meet this criteria. In addition, the loans are further categorized into different loan pools per loan types. The Company determined expected cash flows on the covered loans based on the best available information at the date of acquisition. If new information is obtained about facts and circumstances about expected cash flows that existed as of the acquisition date, management will adjust accordingly in accordance with accounting for business combinations.

The covered loans at the acquisition date of December 18, 2009 are presented in the following table.

	Loans with Deterioration of Credit Quality		Loans without a Deterioration of Credit Quality		Total Covered Loans
			(In thousands)
Construction	$	138,908	$	134,531	$	273,439
Real estate secured		504,974		132,086		637,060
Commercial and Industrial		3,145		10,277		13,422
Consumer		795		25,714		26,509
	$	647,822	$	302,608	$	950,430

76

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 2. Acquisition of Peoples First Community Bank (continued)

The following table presents the loans receivable at the acquisition date for loans without a deterioration of credit quality. The Company has elected to recognize income on these loans in the same manner as loans with credit quality deterioration.

Contractually required principal payments receivable	$	413,876
Nonaccretable difference		20,252
Present value of cash flows expected to be collected		393,624
Accretable difference		91,016
Fair value of loans acquired without a deterioration of credit quality	$	302,608

The following table presents the loans receivable (in thousands) at the acquisition date for loans with a deterioration in credit quality.

Contractually required principal payments receivable	$	1,506,165
Nonaccretable difference		633,577
Present value of cash flows expected to be collected		872,588
Accretable difference		224,766
Fair value of loans acquired with a deterioration of credit quality	$	647,822

At December 18, 2009, the carrying value of loans receivable with a deterioration in credit quality accounted for using the cost recovery method was $55.6 million due to our initial assessment of the uncertainty of the expected cash flows. Each of the loans is on nonaccrual status. Loans with a deterioration in credit quality that have an accretable difference are not included in nonperforming balances even though the customer may be contractually past due. These loans will accrete interest income over the remaining life of the loan.

Note 3. Securities

The amortized cost and fair value of securities classified as available for sale follow (in thousands):

	December 31, 2009								December 31, 2008
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury	$	11,869	$	63	$	2	$	11,930	$	11,250	$	192	$	—	$	11,442
U.S. government agencies		131,858		1,328		1,361		131,825		224,803		1,836		29		226,610
Municipal obligations		188,656		5,634		2,622		191,668		151,706		3,182		2,418		152,470
Mortgage-backed securities		1,076,708		36,075		2,236		1,110,547		1,041,805		25,703		387		1,067,121
CMOs		140,663		6,506		—		147,169		195,771		2,692		1		198,462
Other debt securities		15,578		842		94		16,326		25,117		5		2,850		22,272
Other equity securities		1,071		860		69		1,862		1,047		462		130		1,379
	$	1,566,403	$	51,308	$	6,384	$	1,611,327	$	1,651,499	$	34,072	$	5,815	$	1,679,756

77

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 3. Securities (continued)

The amortized cost and fair value of securities classified as available for sale at December 31, 2009, by contractual maturity, (expected maturities will differ from contractual maturities because of rights to call or repay obligations with or without penalties), and the amortized cost and fair value of trading securities were as follows (in thousands):

	Amortized Cost		Fair Value
Due in one year or less	$	55,131	$	55,626
Due after one year through five years		86,386		90,704
Due after five years through ten years		114,271		114,365
Due after ten years		92,173		91,054
		347,961		351,749
Mortgage-backed securities & CMOs		1,217,371		1,257,716
Equity securities		1,071		1,862
Total available for sale securities	$	1,566,403	$	1,611,327

The Company held no securities classified as held to maturity at December 31, 2009 or 2008.

The details concerning securities classified as available for sale with unrealized losses as of December 31, 2009 follow (in thousands):

	Losses < 12 months				Losses 12 months or >				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. Treasury	$	9,967	$	2	$	—	$	—	$	9,967	$	2
U.S. government agencies		—		—		73,639		1,361		73,639		1,361
Municipal obligations		—		—		62,400		2,622		62,400		2,622
Mortgage-backed securities		—		—		270,099		2,236		270,099		2,236
Other debt securities		—		—		1,211		94		1,211		94
Equity securities		—		—		177		69		177		69
	$	9,967	$	2	$	407,526	$	6,382	$	417,493	$	6,384

The details concerning securities classified as available for sale with unrealized losses as of December 31, 2008 were as follows (in thousands):

	Losses < 12 months				Losses 12 months or >				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. government agencies	$	—	$	—	$	20,077	$	29	$	20,077	$	29
Municipal obligations		—		—		38,610		2,418		38,610		2,418
Mortgage-backed securities		—		—		20,385		387		20,385		387
CMOs		—		—		4,442		1		4,442		1
Other debt securities		1,029		25		22,077		2,825		23,106		2,850
Equity securities		—		—		135		130		135		130
	$	1,029	$	25	$	105,726	$	5,790	$	106,755	$	5,815

78

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 3. Securities (continued)

The unrealized losses relate to fixed-rate debt securities that have incurred fair value reductions due to higher market interest rates since the respective purchase date. The unrealized losses are not likely to reverse unless and until market interest rates decline to the levels that existed when the securities were purchased. Since none of the unrealized losses relate to the marketability of the securities or the issuer’s ability to honor redemption obligations, none of the securities are deemed to be other than temporarily impaired.

As of December 31, 2009, the securities portfolio totaled $1.61 billion. Of the total portfolio, $417.5 million of securities were in an unrealized loss position of $6.4 million. Management and the Asset/Liability Committee continually monitor the securities portfolio and management is able to effectively measure and monitor the unrealized loss position on these securities. The Company has adequate liquidity and therefore does not plan to sell and is more likely than not, not to be required to sell these securities before recovery. Accordingly, the unrealized loss of these securities has been determined to be temporary.

The Company’s securities portfolio is an important source of liquidity and earnings for the Company. A stated objective in managing the securities portfolio is to provide consistent liquidity to support balance sheet growth but also to provide a safe and consistent stream of earnings. To that end, management is open to opportunities that present themselves which enables the Company to improve the structure and earnings potential of the securities portfolio.

Available for Sale Securities

Proceeds from sales and pay downs of available for sale securities were approximately $11.7 million in 2009, $213.8 million in 2008 and $9.2 million in 2007. Gross gains of $0.4 million in 2009, $6.0 million in 2008 and $0.4 million in 2007 and gross losses of $0.3 million in 2009, $4.1 million in 2008 and $0.1 million in 2007 were realized on such sales and pay downs.

Securities with a carrying value of approximately $1.20 billion at December 31, 2009 and $1.49 billion at December 31, 2008, were pledged primarily to secure public deposits and securities sold under agreements to repurchase. The Company has approximately $4.6 million and $4.8 million of securities pledged with various state regulatory authorities to secure reinsurance receivables as of December 31, 2009 and 2008, respectively.

Trading Securities

There was no activity in the trading portfolio during 2009. In 2008, the Company recognized $2.9 million in net gains, including a net gain of $3.2 million on a portfolio of trading securities which were subsequently transferred to available for sale. There were no trading gains or losses in 2007.

Short-term Investments

The Company held $214.8 million at December 31, 2009 and $362.9 million at December 31, 2008 in U.S. government agency discount notes as securities available for sale at amortized cost. The short-term investments all mature in less than 1 year. As the amortized cost is a reasonable estimate for fair value of these short-term investments, there were no gross unrealized losses to evaluate for impairment in the years ended December 31, 2009 and December 31, 2008.

79

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 4. Loans

Loans, net of unearned income, consisted of the following (in thousands):

	December 31,
	2009		2008
Real estate loans	$	3,670,164	$	2,680,507
Commercial and industrial loans		372,355		420,981
Loans to individuals for household, family and other consumer expenditures		560,967		619,115
Leases and other loans		510,689		528,687
	$	5,114,175	$	4,249,290

The Company generally makes loans in its market areas of South Mississippi, South Alabama, South and Central Louisiana and Central and North Florida. Loans are made in the normal course of business to its directors, executive officers and their associates on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons. Such loans did not involve more than normal risk of collectibility. Balances of loans to the Company’s directors, executive officers and their affiliates at December 31, 2009 and 2008 were approximately $26.3 million and $31.6 million, respectively. New loans, repayments and changes of directors and executive officers and their affiliates on these loans for 2009 were $5.0 million, $8.9 million and ($1.4) million, respectively. New loans, repayments and changes of directors and executive officers and their affiliates on these loans for 2008 were $20.7 million, $4.3 million and $2.1 million, respectively.

Changes in the allowance for loan losses follow (in thousands):

	2009			2008			2007
Balance at January 1	$	61,725		$	47,123		$	46,772
Recoveries		4,650			5,224			7,210
Loans charged off		(54,915	)		(27,407	)		(14,452	)
Provision for loan losses		54,590			36,785			7,593
Balance at December 31	$	66,050		$	61,725		$	47,123

In some instances, loans are placed on non-accrual status. All accrued but uncollected interest related to the loan is deducted from income in the period the loan is assigned a non-accrual status. For such period as a loan is in non-accrual status, any cash receipts are applied first to principal, second to expenses incurred to cause payment to be made and lastly to the recovery of any reversed interest income and interest that would be due and owing subsequent to the loan being placed on non-accrual status.

The Company’s investments in impaired loans at December 31, 2009 and December 31, 2008 were $242.9 million and $22.1 million, respectively. Non-accrual and renegotiated loans amounted to approximately 1.69% and 0.71% of total loans at December 31, 2009 and 2008, respectively. Accruing loans 90 days past due as a percent of loans was 0.23% and 0.26% at December 31, 2009 and 2008, respectively. The average amounts of impaired loans carried on the Company’s books for 2009, 2008 and 2007 were $40.1 million, $19.3 million and $7.7 million, respectively. The amount of interest that would have been recorded on non-accrual loans had the loans not been classified as non-accrual in 2009, 2008 or 2007, was $2.0 million, $1.1 million and $0.5 million, respectively. Interest actually received on non-accrual loans at December 31, 2009 was $0.3 million and for the years ended December 31, 2008 and 2007 was not material.

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HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 4. Loans (continued)

The following table presents the makeup of allowance for loan losses by:

	December 31,
	2009		2008
	(In thousands)
Impaired loans
Requiring a loss allowance	$	38,839	$	15,089
Not requiring a loss allowance		94,743		7,015
Total recorded investment in impaired loans		133,582		22,104
Impairment loss allowance required	$	10,972	$	7,317

As of December 31, 2009 and 2008, the Company had $38.0 million and $28.2 million, respectively, in loans carried at fair value. The Company held $36.1 million and $22.3 million in loans held for sale at December 31, 2009 and 2008 carried at lower of cost or market. Gain on the sale of loans totaled $0.6 million, $0.4 million, and $0.6 million for 2009, 2008, and 2007, respectively. These loans are originated on a best-efforts basis, whereby a commitment by a third party to purchase the loan has been received concurrent with the Banks’ commitment to the borrower to originate the loan.

Note 5. Property and Equipment

Property and equipment stated at cost, less accumulated depreciation and amortization, consisted of the following (in thousands):

	December 31,
	2009			2008
Land and land improvements	$	37,178		$	38,090
Buildings and leasehold improvements		185,814			178,374
Furniture, fixtures and equipment		66,819			61,525
Construction in progress		1,434			4,111
Software		25,855			24,862
		317,100			306,962
Accumulated depreciation and amortization		(113,967	)		(101,050	)
Property and equipment, net	$	203,133		$	205,912

Depreciation and amortization expense was $15.5 million, $15.8 million and $14.0 million for the years ended December 31, 2009, 2008 and 2007, respectively. Capitalized interest was $0.02 million, $0.1 million, and $1.0 million for the years ended December 31, 2009, 2008, and 2007, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 6. Goodwill and Other Intangible Assets

Goodwill represents costs in excess of the fair value of net assets acquired in connection with purchase business combinations. In accordance with the provisions of FASB’s guidance for goodwill and other intangibles, the Company tests its goodwill for impairment annually. No impairment charges were recognized during 2009, 2008, or 2007. The carrying amount of goodwill was $62.3 million at both December 31, 2009 and 2008.

The following tables present information regarding the components of the Company’s other intangible assets, and related amortization for the dates indicated (in thousands):

	December 31, 2009
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Core deposit intangibles	$	25,747	$	10,727	$	15,020
Value of insurance business acquired		2,752		1,544		1,208
Non-compete agreements		322		308		14
Trade name		100		90		10
	$	28,921	$	12,669	$	16,252
	December 31, 2008
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Core deposit intangibles	$	14,137	$	9,613	$	4,524
Value of insurance business acquired		2,752		1,289		1,463
Non-compete agreements		322		280		42
Trade name		100		70		30
	$	17,311	$	11,252	$	6,059
	Years Ended December 31,
	2009		2008		2007
Aggregate amortization expense for:
Core deposit intangibles	$	1,114	$	1,113	$	1,210
Value of insurance business acquired		255		271		348
Non-compete agreements		28		28		73
Trade name		20		20		20
	$	1,417	$	1,432	$	1,651

The Company recorded a core deposit intangible asset of $11.6 million associated with the acquisition of Peoples First Community Bank on December 18, 2009. The amortization period used for core deposit intangibles and value of insurance business acquired is 10 years. The amortization period used for non-compete agreements and trade name intangibles is 5 years. The following table shows estimated amortization expense of other intangible assets for the five succeeding years and thereafter, calculated based on current amortization schedules (in thousands):

2010	$	2,760
2011		2,450
2012		2,207
2013		2,002
2014		1,542
Thereafter		5,291
	$	16,252

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HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 7. Deposits

The maturities of time deposits at December 31, 2009 follow (in thousands):

2010	$	2,380,991
2011		265,963
2012		258,865
2013		37,771
2014		23,028
thereafter		106,125
	$	3,072,743

Time deposits of $100,000 or more totaled approximately $955.5 million and $1.1 billion at December 31, 2009 and 2008, respectively.

Note 8. Borrowings

Short-Term Borrowings

The following table presents information concerning federal funds purchased and sold, securities sold under agreements to repurchase and other short-term borrowings (in thousands):

	December 31,
	2009			2008
Federal funds sold
Amount outstanding at period-end	$	410		$	175,166
Weighted average interest rate at period-end		16.64	%		0.11	%
Federal funds purchased
Amount outstanding at period-end	$	250		$	—
Weighted average interest rate at period-end		0.11	%		—
Weighted average interest rate during the year		0.21	%		2.20	%
Average daily balance during the year	$	3,484		$	16,003
Maximum month end balance during the year	$	4,700		$	33,775
Securities sold under agreements to repurchase
Amount outstanding at period-end	$	484,457		$	505,932
Weighted average interest rate at period-end		1.99	%		2.10	%
Weighted average interest rate during the year		2.06	%		2.76	%
Average daily balance during the year	$	523,351		$	524,712
Maximum month end balance during the year	$	567,888		$	621,424
Other short-term investments
Amount outstanding at period-end	$	30,805		$	—
Weighted average interest rate at period-end		0.38	%		—
Weighted average interest rate during the year		0.17	%		2.04	%
Average daily balance during the year	$	75,160		$	2,650
Maximum month end balance during the year	$	156,000		$	—

83

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 8. Borrowings (continued)

The contractual maturity of federal funds purchased and securities sold under agreements to repurchase is demand or due overnight.

Specific U. S. Treasury and U. S. Government agencies with carrying values of $450.1 million at December 31, 2009 and $504.8 million at December 31, 2008 collateralized the retail and wholesale repurchase agreements. The fair value of this collateral approximated $458.3 million at December 31, 2009 and $513.3 million at December 31, 2008. In addition, there was cash collateral in the amount of $54.5 million for the wholesale repurchase agreements at December 31, 2009.

Long-Term Borrowings

As of December 31, 2009, the Company had $225.0 million in long-term borrowings classified as securities sold under agreements to repurchase. Combined with short-term borrowings of $259.5 million, the Company’s total position in securities sold under agreements to repurchase was $484.5 million. The Company has an approved line of credit with the FHLB of approximately $367.2 million, which is secured by a blanket pledge of certain residential mortgage loans. This line of credit had an outstanding balance of $10.7 million at December 31, 2009 and no outstanding balance at December 31, 2008.

Note 9. Stockholders’ Equity

Regulatory Capital

Common stockholders’ equity of the Company includes the undistributed earnings of the bank subsidiaries. Dividends are payable only out of undivided profits or current earnings. Moreover, dividends to the Company's stockholders can generally be paid only from dividends paid to the Company by the Banks. Consequently, dividends are dependent upon earnings, capital needs, regulatory policies and statutory limitations affecting the Banks. Federal and state banking laws and regulations restrict the amount of dividends and loans a bank may make to its parent company. Dividends paid by Hancock Bank are subject to approval by the Commissioner of Banking and Consumer Finance of the State of Mississippi and those paid by Hancock Bank of Louisiana are subject to approval by the Commissioner of Financial Institutions of the State of Louisiana. Dividends paid by Hancock Bank of Florida are subject to approval by the Florida Department of Financial Services and those paid by Hancock Bank of Alabama are subject to approval by Alabama State Banking Department. The amount of capital of the subsidiary banks available for dividends at December 31, 2009 was approximately $69.9 million.

Risk-based capital requirements are intended to make regulatory capital more sensitive to risk elements of the Company. Currently, the Company and its bank subsidiaries are required to maintain minimum risk-based capital ratios of 8.0%, with not less than 4.0% in Tier 1 capital. In addition, the Company and its bank subsidiaries must maintain minimum Tier 1 leverage ratios (Tier 1 capital to total average assets) of at least 3.0% based upon the regulators latest composite rating of the institution.

The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) required each federal banking agency to implement prompt corrective actions for institutions that it regulates. The rules provide that an institution is “well capitalized” if its total risk-based capital ratio is 10.0% or greater, its Tier 1 risked-based capital ratio is 6.0% or greater, its leverage ratio is 5.0% or greater and the institution is not subject to a capital directive. Under this regulation, all of the subsidiary banks were deemed to be “well capitalized” as of December 31, 2009 and 2008 based upon the most recent notifications from their regulators. There are no conditions or events since those notifications that management believes would change these classifications.

The Company and its bank subsidiaries are required to maintain certain minimum capital levels. At December 31, 2009 and 2008, the Company and the Banks were in compliance with their respective statutory minimum capital requirements.

84

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 9. Stockholders’ Equity (continued)

Following is a summary of the actual capital levels at December 31, 2009 and 2008 (amounts in thousands):

	Actual			Required for Minimum Capital Adequacy			To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio %	Amount		Ratio %	Amount		Ratio %
At December 31, 2009
Total capital (to risk weighted assets)
Company	$	822,505	13.04	$	504,457	8.00	$	N/A	N/A
Hancock Bank		403,807	11.24		287,342	8.00		359,178	10.00
Hancock Bank of Louisiana		326,127	14.53		179,591	8.00		224,489	10.00
Hancock Bank of Florida		43,962	16.11		21,825	8.00		27,282	10.00
Hancock Bank of Alabama		23,597	13.33		14,164	8.00		17,705	10.00
Tier 1 capital (to risk weighted assets)
Company	$	756,108	11.99	$	252,228	4.00	$	N/A	N/A
Hancock Bank		371,013	10.33		143,671	4.00		215,507	6.00
Hancock Bank of Louisiana		302,316	13.47		89,796	4.00		134,694	6.00
Hancock Bank of Florida		40,521	14.85		10,913	4.00		16,369	6.00
Hancock Bank of Alabama		21,364	12.07		7,082	4.00		10,623	6.00
Tier 1 leverage capital
Company	$	756,108	10.60	$	214,043	3.00	$	N/A	N/A
Hancock Bank		371,013	9.45		117,788	3.00		196,313	5.00
Hancock Bank of Louisiana		302,316	10.67		85,005	3.00		141,674	5.00
Hancock Bank of Florida		40,521	10.38		11,707	3.00		19,512	5.00
Hancock Bank of Alabama		21,364	12.29		5,216	3.00		8,694	5.00
At December 31, 2008
Total capital (to risk weighted assets)
Company	$	612,090	11.86	$	413,014	8.00	$	N/A	N/A
Hancock Bank		293,110	10.91		214,914	8.00		268,558	10.00
Hancock Bank of Louisiana		243,117	10.48		185,635	8.00		232,043	10.00
Hancock Bank of Florida		40,173	12.23		26,278	8.00		32,848	10.00
Hancock Bank of Alabama		15,673	10.45		12,000	8.00		15,000	10.00
Tier 1 capital (to risk weighted assets)
Company	$	550,216	10.66	$	206,507	4.00	$	N/A	N/A
Hancock Bank		261,726	9.74		107,457	4.00		161,135	6.00
Hancock Bank of Louisiana		217,186	9.36		92,817	4.00		139,226	6.00
Hancock Bank of Florida		37,144	11.31		13,139	4.00		19,709	6.00
Hancock Bank of Alabama		14,250	9.50		6,000	4.00		9,000	6.00
Tier 1 leverage capital
Company	$	550,216	8.06	$	204,680	3.00	$	N/A	N/A
Hancock Bank		261,726	7.08		110,878	3.00		184,797	5.00
Hancock Bank of Louisiana		217,186	7.48		87,099	3.00		145,165	5.00
Hancock Bank of Florida		37,144	12.78		8,717	3.00		14,528	5.00
Hancock Bank of Alabama		14,250	10.11		4,230	3.00		7,050	5.00

85

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 10. Retirement and Employee Benefit Plans

At December 31, 2009, the Company had a pension plan and two postretirement plans for employees, which are described more fully below. The Company has accounted for its defined benefit pension plan using the actuarial model required by generally accepted accounting principles regarding employers’ accounting for pensions. The compensation cost of an employee’s pension benefit has been recognized on the projected unit credit method over the employee’s approximate service period. The aggregate cost method has been utilized for funding purposes. The Company also sponsors two defined benefit postretirement plans, which provide medical benefits and life insurance benefits. The Company has accounted for these plans using the actuarial computations required by generally accepted accounting principles regarding employers accounting for postretirement benefits other than pensions. The cost of the defined benefit postretirement plan has been recognized on the projected unit credit method over the employee’s approximate service period.

Under generally accepted accounting principles, the Company is required to recognize the over funded or under funded status of a defined benefit postretirement plan as an asset or liability on its balance sheet. The Company recognizes changes in that funded status in the year in which the changes occur through comprehensive income effective for years ending after December 15, 2006. In addition, generally accepted accounting principles requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position effective for fiscal years ending after December 15, 2008. With the adoption of the change in measurement date, the Company recorded an $815,107 adjustment to beginning 2008 retained earnings. Results for prior periods have not been restated.

Defined Benefit Plan—Pension

The Company has a noncontributory defined benefit pension plan covering employees who have been employed by the Company one year and who have worked a minimum of 1,000 hours during the calendar year. The Company’s current policy is to contribute annually the minimum amount that can be deducted for federal income tax purposes. The benefits are based upon years of service and the employee’s compensation during the last five years of employment.

86

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 10. Retirement and Employee Benefit Plans (continued)

The measurement date for the pension plan is December 31, 2009. Data relative to the pension plan is as follows (in thousands):

	December 31,
	2009			2008*
Change in benefit obligation
Benefit obligation, beginning of year	$	82,862		$	73,203
Service cost		3,107			3,283
Interest cost		4,833			5,646
Actuarial loss		2,502			4,999
Benefits paid		(3,584	)		(4,269	)
Benefit obligation, end of year		89,720			82,862
Change in plan assets
Fair value of plan assets, beginning of year		51,001			59,741
Actual return on plan assets		7,758			(11,757	)
Employer contributions		6,431			7,467
Benefit payments		(3,584	)		(4,269	)
Expenses		(294	)		(181	)
Fair value of plan assets, end of year		61,312			51,001
Funded status at end of year—net liability	$	(28,408	)	$	(31,861	)
Amounts recognized in accumulated other comprehensive loss
Unrecognized loss at beginning of year	$	40,490		$	18,699
Amount of (loss)/gain recognized during the year		(2,648	)		(1,184	)
Net actuarial loss/(gain)		(1,089	)		22,975
Unrecognized loss at end of year	$	36,753		$	40,490

* 2008 amounts are for the 15 month period October 1, 2007—December 31, 2008.

Net periodic expense is as follows (in thousands):

	Years Ended December 31,
	2009			2008			2007
Net periodic benefit cost
Service cost	$	3,107		$	2,626		$	2,656
Interest cost		4,833			4,517			3,834
Expected return on plan assets		(3,873	)		(4,830	)		(4,206	)
Recognized net amortization and deferral		2,648			947			1,122
Net pension benefit cost		6,715			3,260			3,406
Other changes in plan assets and benefit obligations recognized in other comprehensive income, before taxes
Net (loss)/gain recognized during the year		(2,648	)		(1,184	)		(1,122	)
Net actuarial loss/(gain)		(1,089	)		22,975			(486	)
Total recognized in other comprehensive income		(3,737	)		21,791			(1,608	)
Total recognized in net periodic benefit cost and other comprehensive income	$	2,978		$	25,051		$	1,798
Weighted average assumptions as of measurement date
Discount rate for benefit obligations		5.95	%		5.96	%		6.31	%
Discount rate for net periodic benefit cost		5.96	%		6.31	%		5.75	%
Expected long-term return on plan assets		7.50	%		7.50	%		8.00	%
Rate of compensation increase		4.00	%		4.00	%		4.00	%

87

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 10. Retirement and Employee Benefit Plans (continued)

The long term rate of return is determined by using the weighted-average of historical real returns for major asset classes based on target asset allocations. The result is then adjusted for inflation. The Company changed to the Citigroup Pension Discount Curve Liability Index (CPD) in 2007 from the Aa Seasoned Moody Twenty Year Bond Rate which was used in 2006. At December 31, 2009, the discount rate was calculated by matching expected future cash flows to the CPD Curve Liability Index. The published duration of the CPD curve was 15.8 years and the duration for the Company’s valuation was 16.03 years for December 2009.

The Company has been making the contributions required by the Internal Revenue Service. The Company’s contributions to this plan were $6.4 million in 2009, $4.8 million in 2008 and $4.6 million in 2007. The Company expects to contribute approximately $6.7 million to the pension plan in 2010. The following pension plan benefit payments, which reflect expected future service, are expected to be made (in thousands):

2010	$	3,505
2011		3,556
2012		3,709
2013		4,208
2014		4,380
2015 - 2019		26,079
	$	45,437

The expected benefits to be paid are based on the same assumptions used to measure the Company’s benefit obligation at December 31, 2009.

The plan assets are held in the Company’s Hancock Horizon mutual funds, as follows: Hancock Horizon Government Money Market Fund, Hancock Horizon Strategic Income Bond Fund, Hancock Horizon Quantitative Long/Short Fund, Hancock Horizon Diversified International Fund, Hancock Horizon Burkenroad Fund, Hancock Horizon Growth Fund, and Hancock Horizon Value Fund. The fair values of the Company’s pension plan assets at December 31, 2009, by asset category, are shown in the following table (in thousands):

Fair Value Measurements at December 31, 2009

Asset Category	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalets	$	2,542	$	2,542	$	—	$	—
Equity Securities:
U.S. large/mid-cap stock		27,880		27,880		—		—
International stocks		5,444		5,444		—		—
U.S. small-cap growth		3,291		3,291		—		—
Fixed income securities:
U.S. Agencies		12,629		12,629		—		—
Corporate bonds (a)		9,527		9,527		—		—
TOTAL	$	61,313	$	61,313	$	—	$	—

(a) This category represents investment grade bonds of U.S. issuers from diverse industries

88

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 10. Retirement and Employee Benefit Plans (continued)

The Company’s pension plan weighted-average asset allocations and target allocations at December 31, 2009 and 2008, by asset category, are as follows:

	Plan Assets at December 31,				Target Allocation at December 31,
Asset category	2009		2008		2009		2008
Equity securities	60	%	49	%	40-70	%	40-70	%
Fixed income securities	36	%	47	%	30-60	%	30-60	%
Cash equivalents	4	%	4	%	0-10	%	0-10	%
	100	%	100	%

The investment strategy of the pension plan is to emphasize a balanced return of current income and growth of principal while accepting a moderate level of risk. The investment goal of the plan is to meet or exceed the return of balanced market index comprised of 55% of the S&P 500 Index and 45% Barclays Intermediate Aggregate Index. The pension plan investment committee meets periodically to review the policy, strategy and performance of the plan.

Defined Benefit Plan—Postretirement

The Company sponsors two defined benefit postretirement plans, other than the pension plan, that cover full-time employees who have reached 55 years of age with fifteen years of service, age 62 with twelve years of service or age 65 with ten years of service. One plan provides medical benefits and the other provides life insurance benefits. The postretirement health care plan is contributory, with retiree contributions adjusted annually and subject to certain employer contribution maximums. The following year-end financial information regarding the Company’s postretirement health care plan reflects the Medicare Part D subsidy. The life insurance plan is noncontributory.

The measurement date for the plans is December 31, 2009. The Company used a 6.00% discount rate for the determination of the projected postretirement benefit obligation as of December 31, 2009 and 2008. The discount rate is based on the Citigroup Discount Pension Curve.

89

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 10. Retirement and Employee Benefit Plans (continued)

Data relative to these postretirement benefits is as follows (in thousands):

	Years Ended December 31,
	2009			2008
Change in postretirement benefit obligation
Projected postretirement benefit obligation, beginning of year	$	8,727		$	8,481
Service cost		114			174
Interest cost		565			505
Plan participants’ contributions		299			304
Actuarial loss		1,574			269
Benefit payments		(989	)		(1,006	)
Projected postretirement benefit obligation, end of year		10,290			8,727
Change in plan assets
Plan assets, beginning of year		—			—
Employer contributions		690			702
Plan participants’ contributions		299			304
Benefit payments		(989	)		(1,006	)
Plan assets, end of year		—			—
Funded status at end of year—net liability	$	(10,290	)	$	(8,727	)
Amounts recognized in accumulated other comprehensive loss
Net loss	$	3,846		$	2,568
Prior service cost		(155	)		(208	)
Net obligation		10			15
	$	3,701		$	2,375

90

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 10. Retirement and Employee Benefit Plans (continued)

The following table shows the composition of net period postretirement benefit cost (in thousands):

	Years Ended December 31,
	2009			2008			2007
Net periodic postretirement benefit cost
Service cost	$	114		$	174		$	168
Interest costs		565			505			485
Amortization of net loss		296			177			249
Amortization of prior service cost		(48	)		(48	)		(48	)
Net periodic postretirement benefit cost		927			808			854
Other changes in plan assets and benefit obligations recognized in other comprehensive income, before taxes
Amount of loss recognized during the year		(296	)		(177	)		(249	)
Net actuarial (gain)/loss		1,574			269			1,012
Amortization of prior service cost		48			48			48
Total recognized in other comprehensive income		1,326			140			811
Total recognized in net periodic benefit cost and other comprehensive income	$	2,253		$	948		$	1,665

For measurement purposes in 2009, a 9.0% annual rate of increase in the over age 65 per capita costs of covered health care benefits was assumed for 2010. The rate was assumed to decrease uniformly to 5.0% over 8 years and remain at that level thereafter. In 2008, a 7.0% annual rate of increase in the over age 65 per capita costs of covered health care benefits was assumed. The rate was assumed to decrease gradually to 5.0% over 2 years and remain at that level thereafter. The health care cost trend rate assumption has an effect on the amounts reported. The following table illustrates the effect on the postretirement benefit obligation of a 1% increase or 1% decrease in the assumed health care cost trend rates:

	1% Decrease in Rates		Assumed Rates		1% Increase in Rates
Aggregated service and interest cost	$	603	$	679	$	773
Postretirement benefit obligation		9,236		10,290		11,573

The Company expects to contribute $0.7 million to the plans in 2010. Expected benefits to be paid over the next ten years and are reflected the following table (in thousands):

2010	$	702
2011		744
2012		638
2013		618
2014		640
2015 - 2019		2,936
	$	6,278

91

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 10. Retirement and Employee Benefit Plans (continued)

The following table shows the amounts in accumulated other comprehensive loss that the Company expects to be recognized as net periodic benefit cost during the year ending December 31, 2010 (in thousands):

Prior service cost	$	(53	)
Net transition obligation		5
Net loss		301
Total	$	253

Defined Contribution Plan – 401(k)

The Company has a 401(k) retirement plan covering substantially all employees who have been employed 90 days excluding on call, temporary, and seasonal employees and meet certain other requirements. Under this plan, employees can contribute a portion of their salary within limits provided by the Internal Revenue Code into the plan. The Company’s contributions to this plan were $1.8 million in 2009, $1.7 million in 2008 and $1.5 million in 2007.

Nonqualified Deferred Compensation Plans

The Company has one nonqualified deferred compensation plan covering key employees who have met certain requirements. The Company’s contributions to this plan were $0.8 million in 2009, $1.0 million in 2008 and $0.5 million in 2007.

Employee Stock Purchase Plan

The Company has an employee stock purchase plan that is designed to provide the employees of the Company a convenient means of purchasing common stock of the Company. Substantially all salaried, full time employees, who have been employed by the Company 90 days excluding on call, temporary, and seasonal employees, are eligible to participate. The Company makes no contribution to each participant’s contribution. The numbers of shares purchased under this plan were 12,516 in 2009, 9,864 in 2008 and 11,623 in 2007.

The postretirement plans relating to health care payments and life insurance are not guaranteed and are subject to immediate cancellation and/or amendment. These plans are predicated on future Company profit levels that will justify their continuance. Overall health care costs are also a factor in the level of benefits provided and continuance of these post-retirement plans. There are no vested rights under the postretirement health or life insurance plans.

Note 11. Stock-Based Payment Arrangements

At December 31, 2009, the Company had two share-based payment plans for employees, which are described below. The Company follows the fair value recognition provisions of FASB’s guidance regarding share-based payment. For the years ended December 31, 2009, 2008, and 2007 total compensation cost for share-based compensation recognized in income was $3.3 million, $2.8 million, and $1.2 million, respectively. The total recognized tax benefit related to the share-based compensation was $0.8 million, $0.7 million, and $0.3 million, respectively, for years 2009, 2008 and 2007.

Prior to the adoption of the guidance, the Company presented all tax benefits of deductions resulting from the exercise of stock options as operating cash flows in the Consolidated Statement of Cash Flows. The guidance requires the cash flows resulting from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) to be classified as financing cash flows. The excess tax benefit classified as a financing cash inflow and classified as an operating cash outflow for the years ended December 31, 2009, 2008, and 2007 was $480 thousand, $4.5 million, and $0.3 million, respectively.

92

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 11. Stock-Based Payment Arrangements (continued)

Stock Option Plans

The 1996 Hancock Holding Company Long-Term Incentive Plan (the “1996 Plan”) that was approved by the Company’s shareholders in 1996 was designed to provide annual incentive stock awards. Awards as defined in the 1996 Plan include, with limitations, stock options (including restricted stock options), restricted and performance shares, and performance stock awards, all on a stand-alone, combination or tandem basis. A total of fifteen million (15,000,000) common shares can be granted under the 1996 Plan with an annual grant maximum of two percent (2%) of the Company’s outstanding common stock as reported for the fiscal year ending immediately prior to such plan year. Grants of restricted stock awards are limited to one-third of the grant totals.

The exercise price is equal to the closing market price on the date immediately preceding the date of grant, except for certain of those granted to major stockholders where the option price is 110 percent of the market price. Option awards generally vest based on five years of continuous service and have ten-year contractual terms. The Company’s policy is to issue new shares upon share option exercise and issue treasury shares upon restricted stock award vesting. The 1996 Long-Term Incentive Plan expired in 2006.

In March of 2005, the stockholders of the Company approved Hancock Holding Company’s 2005 Long-Term Incentive Plan (the “2005 Plan”) as the successor plan to the 1996 LTIP. The 2005 Plan is designed to enable employees and directors to obtain a proprietary interest in the Company and to attract and retain outstanding personnel.

The 2005 Plan provides that awards for up to an aggregate of five million (5,000,000) shares of the Company’s common stock may be granted during the term of the 2005 Plan. The 2005 Plan limits the number of shares for which awards may be granted during any calendar year to two percent (2%) of the outstanding Company’s common stock as reported for the fiscal year ending immediately prior to such plan year.

The fair value of each option award is estimated on the date of grant using Black-Scholes-Merton option valuation model that uses the assumptions noted in the following table. Expected volatilities are based on implied volatilities from traded options on the Company’s stock, historical volatility of the Company’s stock and other factors. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

	Years Ended December 31,
	2009*		2008		2007
Expected volatility	40.45	%	29.02% - 35.33	%	29.02% - 30.89	%
Expected dividends	2.49	%	2.31% - 2.60	%	2.47% - 2.52	%
Expected term (in years)	8.7		5.6 - 8.7		5.6 - 9
Risk-free rates	3.28	%	2.07% -3.71	%	3.87% - 5.10	%

* During 2009, there was only one option award to one class of recipients

A summary of option activity and changes under the plans for 2009 is presented below:

Options	Number of Shares		Average Exercise Price ($)		Contractual Term (Years)	Aggregate Intrinsic Value ($000)
Outstanding at January 1, 2009	1,013,677		$	33.75
Granted	136,688		$	38.48
Exercised	(75,963	)	$	20.61		$	1,477
Forfeited or expired	(74,153	)	$	37.14
Outstanding at December 31, 2009	1,000,249		$	35.15	6.3	$	8,689
Exercisable at December 31, 2009	594,754		$	31.72	4.9	$	7,206
Share options expected to vest	405,495		$	40.18	8.4	$	1,483

93

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 11. Stock-Based Payment Arrangements (continued)

The weighted-average grant-date fair values of options granted during 2009, 2008, and 2007 were $14.52, $13.19, and $12.14, respectively, per optioned share. The total intrinsic value of options exercised during 2009, 2008 and 2007 was $1.5 million, $12.6 million, and $5.2 million, respectively.

A summary of the status of the Company’s nonvested shares as of December 31, 2009, and changes during 2009, is presented below:

	Number of Shares		Weighted- Average Grant-Date Fair Value
Nonvested at January 1, 2009	621,621		$	22.57
Granted	230,556		$	24.79
Vested	(146,769	)	$	18.46
Forfeited	(20,288	)	$	24.57
Nonvested at December 31, 2009	685,120		$	24.14

As of December 31, 2009, there was $12.0 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the plans. That cost is expected to be recognized over a weighted-average period of 3.7 years. The total fair value of shares which vested during 2009 and 2008 was $2.7 million and $3.0 million, respectively.

Note 12. Fair Value of Financial Instruments

The Financial Accounting Standards Board (FASB) issued authoritative guidance that establishes a framework for measuring fair value under generally accepted accounting principles (GAAP), clarifies the definition of fair value within that framework, and expands disclosures about the use of fair value measurements. The guidance defines a fair value hierarchy that prioritizes the inputs to these valuation techniques used to measure fair value giving preference to quoted prices in active markets (level 1) and the lowest priority to unobservable inputs such as a reporting entity’s own data (level 3). Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in markets that are not active, observable inputs other than quoted prices, such as interest rates and yield curves, and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Available for sale securities classified as level 1 within the valuation hierarchy include U.S. Treasury securities, obligations of U.S. Government-sponsored agencies, and other debt and equity securities. Level 2 classified available for sale securities include mortgage-backed debt securities, collateralized mortgage obligations, and state and municipal bonds. There were no transfers between levels during the year.

The Company adopted the provisions of the guidance for nonfinancial assets and nonfinancial liabilities on January 1, 2009.

94

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 12. Fair Value of Financial Instruments (continued)

Fair Value of Assets Measured on a Recurring Basis

The following table presents for each of the fair-value hierarchy levels the Company’s financial assets and liabilities that are measured at fair value (in thousands) on a recurring basis at December 31, 2009 and 2008.

	As of December 31, 2009
	Level 1		Level 2		Net Balance
Assets
Available for sale securities:
Debt securities issued by the U.S. Treasury and other government corporations and agencies	$	143,755	$	—	$	143,755
Debt securities issued by states of the United States and political subdivisions of the states		—		191,668		191,668
Corporate debt securities		16,326		—		16,326
Residential mortgage-backed securities		—		1,110,547		1,110,547
Collateralized mortgage obligations		—		147,169		147,169
Equity securities		1,862		—		1,862
Trading securities:
Equity securities		1,635		—		1,635
Short-term investments		214,771		—		214,771
Loans carried at fair value		—		38,021		38,021
Total assets	$	378,349	$	1,487,405	$	1,865,754
Liabilities
Swaps	$	—	$	2,209	$	2,209
Total Liabilities	$	—	$	2,209	$	2,209
	As of December 31, 2008
	Level 1		Level 2		Net Balance
Assets
Available for sale securities:
Debt securities issued by the U.S. Treasury and other government corporations and agencies	$	238,052	$	—	$	238,052
Debt securities issued by states of the United
States and political subdivisions of the states		—		152,470		152,470
Corporate debt securities		22,272		—		22,272
Residential mortgage-backed securities		—		1,067,121		1,067,121
Collateralized mortgage obligations		—		198,462		198,462
Equity securities		1,379		—		1,379
Trading securities:
Equity securities		2,201		—		2,201
Short-term investments		362,895		—		362,895
Loans carried at fair value		—		28,248		28,248
Total assets	$	626,799	$	1,446,301	$	2,073,100
Liabilities
Swaps	$	—	$	4,123	$	4,123
Total Liabilities	$	—	$	4,123	$	4,123

95

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 12. Fair Value of Financial Instruments (continued)

Fair Value of Assets Measured on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis and, therefore, are not included in the above table. Impaired loans are level 2 assets measured using appraisals from external parties of the collateral less any prior liens or based on recent sales activity for similar assets in the property’s market. Other real estate owned are level 2 properties recorded at the balance of the loan or at estimated fair value less estimated selling costs, whichever is less, at the date acquired. Fair values are determined by sales agreement or appraisal. Inputs include appraisal values on the properties or recent sales activity for similar assets in the property’s market. The following table presents for each of the fair value hierarchy levels the Company’s financial assets that are measured at fair value (in thousands) on a nonrecurring basis at December 31, 2009 and 2008.

	As of December 31, 2009
	Level 1		Level 2		Net Balance
Assets
Impaired loans	$	—	$	122,610	$	122,610
Other real estate owned		—		13,786		13,786
Total assets	$	—	$	136,396	$	136,396
	As of December 31, 2008
	Level 1		Level 2		Net Balance
Assets
Impaired loans	$	—	$	14,787	$	14,787
Other real estate owned		—		5,195		5,195
Total assets	$	—	$	19,982	$	19,982

The following methods and assumptions were used to estimate the fair value regarding disclosures about fair value of financial instruments of each class of financial instruments for which it is practicable to estimate:

Cash, Short-Term Investments and Federal Funds Sold—For those short-term instruments, the carrying amount is a reasonable estimate of fair value.

Securities—Estimated fair values for securities are based on quoted market prices where available. If quoted market prices are not available, estimated fair values are based on market prices of comparable instruments.

Loans, Net of Unearned Income—The fair value of loans is estimated by discounting the future cash flows using the current rates for similar loans with the same remaining maturities.

Accrued Interest Receivable and Accrued Interest Payable—The carrying amounts are a reasonable estimate of their fair values.

Deposits—The guidance requires that the fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, interest-bearing checking and savings accounts, be assigned fair values equal to amounts payable upon demand (carrying amounts). The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.

Federal Funds Purchased—For these short-term liabilities, the carrying amount is a reasonable estimate of fair value.

96

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 12. Fair Value of Financial Instruments (continued)

Securities Sold under Agreements to Repurchase, Federal Funds Purchased, and Other Short-Term Borrowing – For these short-term liabilities, the carrying amount is a reasonable estimate of fair value.

Long-Term Notes—Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate fair value of existing debt. The fair value is estimated by discounting the future contractual cash flows using current market rates at which similar Notes over the same remaining term could be obtained.

Commitments—The fair value of loan commitments and letters of credit approximate the fees currently charged for similar agreements or the estimated cost to terminate or otherwise settle similar obligations. The fees associated with these financial instruments, or the estimated cost to terminate, as applicable are immaterial.

The estimated fair values of the Company’s financial instruments were as follows (in thousands):

	December 31,
	2009				2008
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash, interest-bearing deposits, federal funds sold, and short-term investments	$	1,001,976	$	1,001,976	$	749,191	$	749,191
Securities		1,612,962		1,612,962		1,681,957		1,681,957
Loans, net of unearned income		5,150,287		5,263,246		4,271,580		4,625,130
Accrued interest receivable		35,468		35,468		33,067		33,067
Financial liabilities:
Deposits	$	7,195,812	$	7,241,363	$	5,930,937	$	5,990,883
Federal funds purchased		250		250		—		—
Securities sold under agreements to repurchase		484,457		484,457		505,932		505,932
Other short-term borrowings		30,805		30,805		—		—
Long-term notes		671		671		638		638
Accrued interest payable		4,824		4,824		6,322		6,322

Note 13. Commitments and Contingencies

Lending Related

In the normal course of business, the Company enters into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of its customers. Such instruments are not reflected in the accompanying consolidated financial statements until they are funded and involve, to varying degrees, elements of credit risk not reflected in the consolidated balance sheets. The contract amounts of these instruments reflect the Company’s exposure to credit loss in the event of non-performance by the other party on whose behalf the instrument has been issued. The Company undertakes the same credit evaluation in making commitments and conditional obligations as it does for on-balance sheet instruments and may require collateral or other credit support for off-balance sheet financial instruments. These obligations are summarized below (in thousands):

	December 31,
	2009		2008
Commitments to extend credit	$	983,242	$	885,156
Letters of credit		108,736		113,274

97

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 13. Commitments and Contingencies (continued)

Approximately $679.0 million and $610.4 million of commitments to extend credit at December 31, 2009 and 2008, respectively, were at variable rates and the remainder was at fixed rates. A commitment to extend credit is an agreement to lend to a customer as long as the conditions established in the agreement have been satisfied. A commitment to extend credit generally has a fixed expiration date or other termination clauses and may require payment of a fee by the borrower. Since commitments often expire without being fully drawn, the total commitment amounts do not necessarily represent future cash requirements of the Company. The Company continually evaluates each customer’s credit worthiness on a case-by-case basis. Occasionally, a credit evaluation of a customer requesting a commitment to extend credit results in the Company obtaining collateral to support the obligation.

Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing a letter of credit is essentially the same as that involved in extending a loan. The Company accounts for these commitments under the provisions of the FASB’s authoritative guidance. The liability associated with letters of credit is not material to the Company’s consolidated financial statements. Letters of credit are supported by collateral or borrower guarantee sufficient to cover any draw on the letter that would result in an outstanding loan.

Legal Proceedings

The Company is party to various legal proceedings arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, each matter is adequately covered by insurance and indemnification, or, if not so covered, is not expected to have a material adverse effect on the financial statements of the Company.

Lease Commitments

Hancock currently has capital and operating leases for buildings and equipment that expire from 2010 to 2048. It is expected that certain leases will be renewed or equipment replaced as leases expire. Certain of these leases have escalation clauses that are being amortized on a straight-line basis over the term of the lease as required by authoritative guidance regarding accounting for leases.

Future minimum lease payments for all non-cancelable capital and operating leases with initial or remaining terms of one year or more consisted of the following at December 31, 2009 (in thousands):

	Capital Leases		Operating Leases
2010	$	280	$	5,810
2011		26		3,824
2012		28		3,071
2013		31		2,333
2014		34		2,200
Thereafter		49		17,315
Total minimum lease payments	$	448	$	34,553
Amounts representing interest		83
Present value of net minimum lease payments	$	365

Rental expense approximated $4.5 million, $5.7 million, and $6.4 million for the years ended December 31, 2009, 2008, and 2007, respectively. Rental expense is included in net occupancy expense on the consolidated statement of income.

98

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 14. Other Noninterest Income and Other Noninterest Expense

The components of other noninterest income and other noninterest expense are as follows (in thousands):

	Years Ended December 31,
	2009			2008		2007
Other noninterest income:
Income from bank owned life insurance	$	5,527		$	5,906	$	4,912
Outsourced check income		(94	)		284		2,288
Safety deposit box income		794			821		794
Appraisal fee income		854			1,001		926
Other		8,966			5,564		5,820
Total other noninterest income	$	16,047		$	13,576	$	14,740
Other noninterest expense:
Postage	$	3,505		$	3,902	$	3,851
Communication		4,969			5,552		6,602
Data processing		19,043			18,432		17,585
Legal and professional services		12,321			12,718		15,234
Ad valorem and franchise taxes		3,621			3,532		3,514
Printing and supplies		1,911			1,833		2,252
Advertising		5,597			6,917		7,032
Regulatory and other fees		16,391			6,935		4,433
Miscellaneous expense		4,247			3,705		10,522
Other expense		8,810			8,182		7,208
Total other noninterest expense	$	80,415		$	71,708	$	78,233

Note 15. Income Taxes

Income taxes consisted of the following components (in thousands):

	Years Ended December 31,
	2009			2008			2007
Current federal	$	15,816		$	24,603		$	19,150
Current state		(241	)		2,028			1,209
Total current provision		15,575			26,631			20,359
Deferred federal		6,753			(4,675	)		6,264
Deferred state		591			(337	)		1,296
Total deferred provision		7,344			(5,012	)		7,560
Total tax expense	$	22,919		$	21,619		$	27,919

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes.

99

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 15. Income Taxes (continued)

Significant components of the Company's deferred tax assets and liabilities were as follows (in thousands):

	December 31,
	2009			2008
Deferred tax assets:
Minimum pension liability	$	15,066		$	16,004
Allowance for loan losses		24,549			22,792
Compensation		8,259			8,740
Capital loss		1,063			1,405
Federal net operating loss		123			182
State net operting losses		1,059			1,032
Other		1,720			1,496
Gross deferred tax assets		51,839			51,651
Federal valuation allowance		(85	)		(85	)
State valuation allowances		(1,059	)		(1,032	)
Subtotal Valuation allowances		(1,144	)		(1,117	)
Net deferred tax assets		50,695			50,534
Deferred tax liabilities:
Fixed assets & intangibles		(27,240	)		(26,432	)
Unrealized gain on securities available for sale		(16,538	)		(10,479	)
Deferred gain		(7,276	)
Other		(6,757	)		(7,804	)
Gross deferred tax liabilities		(57,811	)		(44,715	)
Net deferred tax asset (liability)	$	(7,116	)	$	5,819

At December 31, 2009, the Company had a federal valuation allowance related to a federal net operating loss carryforward and a state valuation allowance related to miscellaneous state net operating losses. The federal net operating loss carryforward will expire in 2011. Other than these items, no valuation allowance related to deferred tax assets has been recorded on December 31, 2009 and 2008, as management believes it is more likely than not that the remaining deferred tax assets will be realized.

The reason for differences in income taxes reported compared to amounts computed by applying the statutory income tax rate of 35% to earnings before income taxes were as follows (in thousands):

	Years Ended December 31,
	2009					2008					2007
	Amount			%		Amount			%		Amount			%
Taxes computed at statutory rate	$	34,195		35	%	$	30,445		35	%	$	35,634		35	%
Increases (decreases) in taxes resulting from:
State income taxes, net of federal income tax benefit		228		0	%		1,099		1	%		1,628		2	%
Tax-exempt interest		(6,703	)	-7	%		(5,827	)	-7	%		(5,072	)	-5	%
Bank owned life insurance		(2,097	)	-2	%		(2,159	)	-2	%		(1,807	)	-2	%
Tax credits		(5,251	)	-5	%		(3,514	)	-4	%		(3,510	)	-3	%
Other, net		2,547		2	%		1,575		2	%		1,046		1	%
Income tax expense	$	22,919		23	%	$	21,619		25	%	$	27,919		28	%

100

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 15. Income Taxes (continued)

The tax credits available to the Company for the 2009 tax year included the Worker’s Opportunity Tax Credit, the Gulf Tax Credit and the New Markets Tax Credit and the 2008 tax year included the Worker’s Opportunity Tax Credit and the Gulf Tax Credit.

The Company adopted authoritative guidance regarding accounting for uncertainty in income taxes on January 1, 2007 and determined that no adjustment was required to retained earnings due to the adoption of this Interpretation. There were no material uncertain tax positions at December 31, 2009. The Company does not expect that unrecognized tax benefits will significantly increase or decrease within the next 12 months.

It is the Company’s policy to recognize interest and penalties accrued relative to unrecognized tax benefits in income tax expense. As of December 31, 2009, the interest accrued is considered immaterial to the Company’s consolidated balance sheet.

The Company and its subsidiaries file a consolidated U.S. federal income tax return, as well as filing various returns in the states where its banking offices are located. Its filed income tax returns are no longer subject to examination by taxing authorities for years before 2006.

Note 16. Earnings Per Share

Following is a summary of the information used in the computation of earnings per common share (in thousands):

	Years Ended December 31,
	2009		2008		2007
Numerator:
Net income to common shareholders	$	74,775	$	65,366	$	73,892
Net income allocated to participating securities—basic and diluted		247		221		235
Net income allocated to common shareholders—basic and diluted	$	74,528	$	65,145	$	73,657
Denominator:
Weighted-average common shares—basic		32,747		31,491		32,000
Dilutive potential common shares		187		392		545
Weighted average common shares—diluted		32,934		31,883		32,545
Earnings per common share:
Basic	$	2.28	$	2.07	$	2.30
Diluted	$	2.26	$	2.04	$	2.26

The Company had no shares of anti-dilutive options in 2009, 2008 or 2007.

101

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 17. Segment Reporting

The Company’s primary segments are divided into the Mississippi (MS), Louisiana (LA), Florida (FL) and Alabama (AL) markets. The activity and assets of Peoples First acquired in December 2009 are included in Mississippi. Each segment offers the same products and services but is managed separately due to different pricing, product demand and consumer markets. The four segments offer commercial, consumer and mortgage loans and deposit services. In all tables, the column “Other” includes additional consolidated subsidiaries of the Company: Hancock Investment Services, Inc., Hancock Insurance Agency, Inc., Harrison Finance Company, Magna Insurance Company and three real estate corporations owning land and buildings that house bank branches and other facilities. Following is selected information for the Company’s segments (in thousands):

	Year Ended
	December 31, 2009
	MS		LA		FL			AL			Other		Eliminations			Consolidated
	(In thousands)
Interest income	$	142,485	$	138,767	$	16,338		$	8,291		$	23,931	$	(6,085	)	$	323,727
Interest expense		58,418		29,772		5,042			2,750			4,942		(5,624	)		95,300
Net interest income		84,067		108,995		11,296			5,541			18,989		(461	)		228,427
Provision for loan losses		14,573		18,398		7,780			7,160			6,679		—			54,590
Noninterest income		86,691		42,321		1,664			1,754			25,177		(280	)		157,327
Depreciation and amortization		10,662		3,467		508			315			597		—			15,549
Other noninterest expense		93,988		81,850		7,687			5,185			29,310		(99	)		217,921
Income before income taxes		51,535		47,601		(3,015	)		(5,365	)		7,580		(642	)		97,694
Income tax expense (benefit)		13,390		12,866		(2,281	)		(1,960	)		904		—			22,919
Net income (loss)	$	38,145	$	34,735	$	(734	)	$	(3,405	)	$	6,676	$	(642	)	$	74,775
Total assets	$	5,258,350	$	2,890,341	$	351,686		$	179,701		$	1,114,826	$	(1,097,821	)	$	8,697,083
Total interest income from affiliates	$	6,075	$	—	$	9		$	1		$	—	$	(6,085	)	$	—
Total interest income from external customers	$	136,410	$	138,767	$	16,329		$	8,290		$	23,931	$	—		$	323,727
	Year Ended December 31, 2008
	MS		LA		FL			AL			Other		Eliminations			Consolidated
	(In thousands)
Interest income	$	158,288	$	145,546	$	9,717		$	5,088		$	26,574	$	(9,776	)	$	335,437
Interest expense		73,477		48,813		5,355			2,508			5,164		(9,315	)		126,002
Net interest income		84,811		96,733		4,362			2,580			21,410		(461	)		209,435
Provision for loan losses		11,922		15,715		2,419			1,393			5,336		—			36,785
Noninterest income		55,640		46,231		1,633			702			23,606		(34	)		127,778
Depreciation and amortization		10,778		3,555		484			377			567		—			15,761
Other noninterest expense		87,318		68,340		6,894			4,634			30,613		(117	)		197,682
Income before income taxes		30,433		55,354		(3,802	)		(3,122	)		8,500		(378	)		86,985
Income tax expense (benefit)		6,627		14,854		(1,953	)		(1,163	)		3,254		—			21,619
Net income (loss)	$	23,806	$	40,500	$	(1,849	)	$	(1,959	)	$	5,246	$	(378	)	$	65,366
Total assets	$	3,795,890	$	3,008,320	$	367,134		$	155,862		$	871,758	$	(1,031,710	)	$	7,167,254
Total interest income from affiliates	$	9,754	$	8	$	14		$	—		$	—	$	(9,776	)	$	—
Total interest income from external customers	$	148,534	$	145,538	$	9,703		$	5,088		$	26,574	$	—		$	335,437

102

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 17. Segment Reporting (continued)

	Year Ended
	December 31, 2007
	MS			LA		FL			AL			Other		Eliminations			Consolidated
	(In thousands)
Interest income	$	179,775		$	148,708	$	9,583		$	1,238		$	25,769	$	(19,376	)	$	345,697
Interest expense		79,189			66,699		5,023			462			7,779		(18,916	)		140,236
Net interest income		100,586			82,009		4,560			776			17,990		(460	)		205,461
Provision for (reversal of) loan losses		(22	)		3,744		427			400			3,044		—			7,593
Noninterest income		53,787			37,035		883			56			28,967		(42	)		120,686
Depreciation and amortization		9,665			3,323		452			54			547		—			14,041
Other noninterest expense		89,626			70,984		5,610			1,567			36,509		(1,594	)		202,702
Income before income taxes		55,104			40,993		(1,046	)		(1,189	)		6,857		1,092			101,811
Income tax expense (benefit)		15,788			10,458		(603	)		(399	)		2,675		—			27,919
Net income (loss)	$	39,316		$	30,535	$	(443	)	$	(790	)	$	4,182	$	1,092		$	73,892
Total assets	$	3,351,986		$	2,512,200	$	168,790		$	48,619		$	815,011	$	(840,627	)	$	6,055,979
Total interest income from affiliates	$	19,327		$	—	$	—		$	49		$	—	$	(19,376	)	$	—
Total interest income from external customers	$	160,448		$	148,708	$	9,583		$	1,189		$	25,769	$	—		$	345,697

The Company allocated administrative charges among its Louisiana, Florida, Alabama and Other segments and its Mississippi segment and the Parent Company. This allocation was based on an analysis of costs for 2008. The administrative charges allocated to the Louisiana segment were $22.4 million in 2009, $18.9 million in 2008, and $18.0 million in 2007. The Florida segment received $0.7 million in allocated administrative charges in 2009, $0.3 million in 2008, and $0.2 million in 2007. The administrative charges allocated to the Alabama segment were $0.2 in 2009, $0.05 million in 2008, and $0 in 2007. The Other segment’s allocated charges were $2.6 million in 2009, $1.2 million in 2008 and $1.0 million in 2007. The aforementioned administrative charges were allocated from the Mississippi segment ($25.8 million in 2009, $20.3 million in 2008, and $19.2 million in 2007). Subsidiaries of the Mississippi segment were included in the cost allocation process beginning in 2004. Administrative charges allocated from the Parent Company were $0.1 million in 2009, $0.1 million in 2008 and $0.1 million in 2007.

Goodwill and other intangible assets assigned to the Mississippi segment totaled approximately $24.6 million, of which $12.1 million represented goodwill and $12.5 million represented core deposit intangibles at December 31, 2009. At December 31, 2008, goodwill and other intangible assets assigned to the Mississippi segment totaled approximately $13.1 million, of which $12.1 million represented goodwill and $1.0 million represented core deposit intangibles. The related core deposit amortization was approximately $0.4 million in 2009, $0.4 million in 2008, and $0.4 million in 2007.

Goodwill and other intangible assets assigned to the Louisiana segment totaled approximately $36.1 million, of which $33.8 million represented goodwill and $2.3 million represented core deposit intangibles at December 31, 2009. Goodwill and other intangible assets assigned to the Louisiana segment totaled approximately $36.7 million, of which $33.8 million represented goodwill and $2.9 million represented core deposit intangibles at December 31, 2008. The related core deposit amortization was approximately $0.6 million in 2009, $0.6 million in 2008, and $0.7 million in 2007.

Goodwill and other intangible assets assigned to the Florida segment totaled approximately $11.8 million, of which $11.3 million represented goodwill and $0.5 million represented core deposit intangibles, at December 31, 2009. At December 31, 2008, goodwill and other intangible assets assigned to the Florida segment totaled approximately $11.9 million, of which $11.3 million represented goodwill and $0.6 million represented core deposit intangibles. The related core deposit amortization was approximately $0.1 million in 2009, $0.1 million in 2008 and $0.1 million in 2007.

103

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 17. Segment Reporting (continued)

Other intangible assets are also assigned to subsidiaries that are included in the “Other” category in the table above and totaled $6.3 million at December 31, 2009 and $6.7 million at December 31, 2008. At December 31, 2009, those intangibles consist of goodwill, $5.1 million; value of insurance expirations, approximately $1.2 million; non-compete agreements, approximately $.01 million and trade name of $.01 million.

The Company performed a fair value based impairment test of goodwill and determined that the fair values of these reporting units exceeded their carrying values at December 2009, 2008 and 2007. No impairment loss, therefore, was recorded.

Note 18. Condensed Parent Company Information

The following condensed financial information reflects the accounts and transactions of Hancock Holding Company (parent company only) for the dates indicated (in thousands):

Condensed Balance Sheets

	December 31,
	2009		2008
Assets:
Cash	$	306	$	4,053
Investment in bank subsidiaries		816,033		592,275
Investment in non-bank subsidiaries		20,591		12,807
Due from subsidiaries and other assets		1,526		1,115
	$	838,456	$	610,250
Liabilities and Stockholders’ Equity:
Due to subsidiaries	$	139	$	198
Other liabilities		654		553
Stockholders’ equity		837,663		609,499
	$	838,456	$	610,250

104

HANCOCK HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 18. Condensed Parent Company Information (continued)

Condensed Statements of Income

	Years Ended December 31,
	2009			2008			2007
Operating Income
From subsidiaries
Dividends received from bank subsidiaries	$	36,700		$	43,700		$	90,400
Dividends received from non-bank subsidiaries		—			—			—
Equity in earnings of subsidiaries greater than (less than) dividends received		38,161			21,646			(18,214	)
Total operating income		74,861			65,346			72,186
Other (expense) income		(178	)		(19	)		1,473
Income tax provision (benefit)		(92	)		(39	)		(233	)
Net income	$	74,775		$	65,366		$	73,892

Condensed Statements of Cash Flows

	Years Ended December 31,
	2009			2008			2007
Cash flows from operating activities—principally dividends received from subsidiaries	$	36,743		$	35,493		$	93,886
Cash flows from investing activities—principally contribution of capital to subsidiary		(181,798	)		(20,500	)		(10,000	)
Net cash used by investing activities		(181,798	)		(20,500	)		(10,000	)
Cash flows from financing activities:
Dividends paid to stockholders		(32,011	)		(30,453	)		(30,957	)
Stock transactions, net		173,319			15,670			(55,755	)
Net cash used by financing activities		141,308			(14,783	)		(86,712	)
Net increase (decrease) in cash		(3,747	)		210			(2,826	)
Cash, beginning of year		4,053			3,843			6,669
Cash, end of year	$	306		$	4,053		$	3,843

105

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Effective as of January 1, 2009, the Board of Directors of Hancock Holding Company (“the Company”) appointed PricewaterhouseCoopers, a firm of independent certified public accountants, as auditors for the fiscal year ending December 31, 2009, and until their successors are selected. The decision to change auditors was approved by the Audit Committee of the Company’s Board of Directors during its December, 2008 meeting.

The Company has been advised that neither the firm nor any of its partners has any direct or any material indirect financial interest in the securities of the Company or any of its subsidiaries, except as auditors and consultants on accounting procedures and tax matters.

Additionally, during the two fiscal years ended December 31, 2008 and 2007 and through the subsequent period through the current period, there were no consultations between the Company and PricewaterhouseCoopers regarding: (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company’s financial statements and either a written report was provided to the Company or oral advice was provided that the new accountant concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing, or financial reporting issue (ii) any matter that was the subject of a disagreement under Item 304(a)(1)(iv) of Regulation S-K, or a reportable event under Item 304(a)(1)(v) of Regulation S-K; or (iii) any other matter.

Although not required to do so, the Company’s Board of Directors chose to submit its appointment of PricewaterhouseCoopers for ratification by the Company’s shareholders. This matter was submitted to the Company’s shareholders for ratification and approved during the Company’s annual meeting held on March 26, 2009.

No Adverse Opinion or Disagreement

The audit reports of KPMG LLP on the consolidated financial statements of the Company as of and for the years ended December 31, 2008 and 2007 did not contain an adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles, except as follows: KPMG LLP’s report on the consolidated financial statements of Hancock Holding Company as of and for the years ended December 31, 2008 and 2007, contained a separate paragraph stating that “As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for defined benefit pension postretirement benefit plans effective December 31, 2006”, and additionally as of and for the year ended December 31, 2007, contained a separate paragraph stating that “As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for share based payments and evaluating prior year misstatements effective January 1, 2006”. The audit reports of KPMG LLP on the effectiveness of internal control over financial reporting as of December 31, 2008 and 2007 did not contain an adverse opinion or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles.

In connection with the audits of the two fiscal years ended December 31, 2008 and 2007 and the subsequent period through the current period, there were no: (1) disagreements with KPMG LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to their satisfaction, would have caused them to make reference in connection with their opinion to the subject matter of the disagreement, or (2) reportable events.

The Company has agreed to indemnify and hold KPMG harmless against and from any and all legal costs and expenses incurred by KPMG in successful defense of any legal action or proceeding that arises as a result of KPMG’s consent to the inclusion or incorporation by reference of its audit report on the Company’s past consolidated financial statements included or incorporated by reference in the Registration Statements on Form S-8 and Form S-3.

106

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As defined by the Securities and Exchange Commission in Exchange Act Rules 13a-14(c) and 15d-14(c), a company’s “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within time periods specified in the Commission’s rules and forms.

As of December 31, 2009, (the “Evaluation Date”), our Chief Executive Officers and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as defined in the Exchange Act Rules. Based on their evaluation, our Chief Executive Officers and Chief Financial Officer have concluded Hancock’s disclosure controls and procedures are sufficiently effective to ensure that material information relating to us and required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

Internal Control over Financial Reporting

The management of Hancock Holding Company has prepared the consolidated financial statements and other information in our Annual Report in accordance with accounting principles generally accepted in the United States of America and is responsible for its accuracy. The financial statements necessarily include amounts that are based on management’s best estimates and judgments. In meeting its responsibility, management relies on internal accounting and related control systems. The internal control systems are designed to ensure that transactions are properly authorized and recorded in our financial records and to safeguard our assets from material loss or misuse. Such assurance cannot be absolute because of inherent limitations in any internal control system.

Management is responsible for establishing and maintaining the adequate internal control over financial reporting, as such term is defined in the Exchange Act Rules 13 – 15(f). Under the supervision and with the participation of management, including our principal executive officers and principal financial officer, we conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management also conducted an assessment of requirements pertaining to Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA). This section relates to management’s evaluation of internal control over financial reporting including controls over the preparation of the schedules equivalent to the basic financial statements and compliance with laws and regulations. Our evaluation included a review of the documentation of controls, evaluations of the design of the internal control system and tests of the effectiveness of internal controls.

Based on our evaluation under the framework in Internal Control – Integrated Framework, management concluded that internal control over financial reporting was effective as of December 31, 2009. PricewatershouseCoopers LLP, under Auditing Standard No. 5, does not express an opinion on management’s assessment as occurred under Auditing Standard No. 2. Under Auditing Standard No. 5 management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. PricewatershouseCoopers’ responsibility is to express an opinion on the effectiveness of the Company’s internal control over financial reporting based on their audit.

ITEM 9B. OTHER INFORMATION

None

107

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Pursuant to General Instruction G (3), information on directors and executive officers of the Registrant will be incorporated by reference from the Company’s Definitive Proxy Statement for the annual meeting to be held on March 17, 2010.

ITEM 11. EXECUTIVE COMPENSATION

Pursuant to General Instructions G (3), information on executive compensation will be incorporated by reference from the Company’s Definitive Proxy Statement for the annual meeting to be held on March 17, 2010.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Pursuant to General Instructions G (3), information on security ownership of certain beneficial owners and management will be incorporated by reference from the Company’s Definitive Proxy Statement for the annual meeting to be held on March 17, 2010.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS , AND DIRECTOR INDEPENDENCE

Pursuant to General Instructions G (3), information on certain relationships and related transactions will be incorporated by reference from the Company’s Definitive Proxy Statement for the annual meeting to be held on March 17, 2010.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Pursuant to General Instructions G (3), information on principal accountant fees and services will be incorporated by reference from the Company’s Definitive Proxy Statement for the annual meeting to be held on March 17, 2010.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this report:

1. The following consolidated financial statements of Hancock Holding Company and subsidiaries are filed as part of this report under Item 8 – Financial Statements and Supplementary Data:

Consolidated balance sheets – December 31, 2009 and 2008

Consolidated statements of income – Years ended December 31, 2009, 2008, and 2007

Consolidated statements of stockholders’ equity – Years ended December 31, 2009, 2008, and 2007

Consolidated statements of cash flows –Years ended December 31, 2009, 2008, and 2007

Notes to consolidated financial statements – December 31, 2009 (pages 65 to 105)

2. Financial schedules required to be filed by Item 8 of this form, and by Item 15(d) below:

The schedules to the consolidated financial statements set forth by Article 9 of Regulation S-X are not required under the related instructions or are inapplicable and therefore have been omitted.

3. Exhibits required to be filed by Item 601 of Regulation S-K, and by Item 15(b) below.

(b) Exhibits:

All other financial statements and schedules are omitted as the required information is inapplicable or the required information is presented in the consolidated financial statements or related notes.

108

(a) 3. Exhibits:

Exhibit Number	Description
2.1	Agreement and Plan of Merger between Hancock Holding Company and Lamar Capital Corporation dated February 21, 2001 (Appendix C to the Prospectus contained in the S-4 Registration Statement 333-60280 filed on May 4, 2001 and incorporated by reference herein).
3.1	Amended and Restated Articles of Incorporation dated November 8, 1990 (filed as Exhibit 3.1 to the Registrant’s Form 10-K for the year ended December 31, 1990 and incorporated herein by reference).
3.2	Amended and Restated Bylaws dated November 8, 1990 (filed as Exhibit 3.2 to the Registrant’s Form 10-K for the year ended December 31, 1990 and incorporated herein by reference).
3.3	Articles of Amendment to the Articles of Incorporation of Hancock Holding Company, dated October 16, 1991 (filed as Exhibit 4.1 to the Registrant’s Form 10-Q for the quarter ended September 30, 1991).
3.4	Articles of Correction, filed with Mississippi Secretary of State on November 15, 1991 (filed as Exhibit 4.2 to the Registrant’s Form 10-Q for the quarter ended September 30, 1991).
3.5	Articles of Amendment to the Articles of Incorporation of Hancock Holding Company, adopted February 13, 1992 (filed as Exhibit 3.5 to the Registrant’s Form 10-K for the year ended December 31, 1992 and incorporated herein by reference).
3.6	Articles of Correction, filed with Mississippi Secretary of State on March 2, 1992 (filed as Exhibit 3.6 to the Registrant’s Form 10-K for the year ended December 31, 1992 and incorporated herein by reference).
3.7	Articles of Amendment to the Articles of Incorporation adopted February 20, 1997 (filed as Exhibit 3.7 to the Registrant’s Form 10-K for the year ended December 31, 1996 and incorporated herein by reference).
3.8	Articles of Amendment to the Articles of Incorporation adopted March 29, 2007 (filed as Exhibit 3.8 to the Registrant’s Form 10-K for the year ended December 31, 2008 and incorporated herein by reference).
4.1	Specimen stock certificate (reflecting change in par value from $10.00 to $3.33, effective March 6, 1989) (filed as Exhibit 4.1 to the Registrant’s Form 10-Q for the quarter ended March 31, 1989 and incorporated herein by reference).
4.2	By executing this Form 10-K, the Registrant hereby agrees to deliver to the Commission upon request copies of instruments defining the rights of holders of long-term debt of the Registrant or its consolidated subsidiaries or its unconsolidated subsidiaries for which financial statements are required to be filed, where the total amount of such securities authorized there under does not exceed 10 percent of the total assets of the Registrant and its subsidiaries on a consolidated basis.
*10.1	1996 Long Term Incentive Plan (filed as Exhibit 10.1 to the Registrant’s Form 10-K for the year ended December 31, 1995, and incorporated herein by reference).
*10.2	Description of Hancock Bank Executive Supplemental Reimbursement Plan, as amended (filed as Exhibit 10.2 to the Registrant’s Form 10-K for the year ended December 31, 1996, and incorporated herein by reference).
*10.3	Description of Hancock Bank Automobile Plan (filed as Exhibit 10.3 to the Registrant’s Form 10-K for the year ended December 31, 1996, and incorporated herein by reference).
*10.4	Description of Deferred Compensation Arrangement for Directors (filed as Exhibit 10.4 to the Registrant’s Form 10-K for the year ended December 31, 1996, and incorporated herein by reference).

109

*10.5	Hancock Holding Company 2005 Long-Term Incentive Plan, filed as Appendix “A” to the Company’s Definitive Proxy Statement filed with the Commission on February 28, 2005 and incorporated herein by reference.
*10.6	Hancock Holding Company Nonqualified Deferred Compensation Plan, filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the Commission on December 21, 2005 and incorporated herein by reference.
10.7	Shareholder Rights Agreement dated as of February 21, 1997, between Hancock Holding Company and Hancock Bank, as Rights Agent as extended by the Company, attached as Exhibit 1 to Form 8-A12G filed with the Commission on February 27, 1997, as extended by Amendment No. 1 filed with the Commission as Exhibit 4.1 to Form 8-K filed with the Commission on February 20, 2007, both of which are incorporated herein by reference.
10.8	Purchase and Assumption Agreement (“Agreement”) with the Federal Deposit Insurance Corporation, Receiver of Peoples First Community Bank, Panama City Florida (“PCFB”) and the Federal Deposit Insurance Corporation acting in its corporate capacity (“FDIC”)
21	Subsidiaries of Hancock Holding Company.
22	Proxy Statement for the Registrant’s Annual Meeting of Shareholders on March 17, 2010 (deemed “filed” for the purposes of this Form 10-K only for those portions which are specifically incorporated herein by reference).
23.1	Consent of PricewaterhouseCoopers LLP.
23.2	Consent of KPMG LLP.
31.1	Certification of Chief Executive Officers pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
32.1	Certification of Chief Executive Officers Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Compensatory plan or arrangement.

110

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	HANCOCK HOLDING COMPANY
	Registrant
February 17, 2010	By:	/S/    CARL J. CHANEY
Date		Carl J. Chaney
		President & Chief Executive Officer
		Director
February 17, 2010
Date	By:	/S/    JOHN M. HAIRSTON
		John M. Hairston
		Chief Executive Officer & Chief Operating Officer
		Director
February 17, 2010
Date	By:	/S/    MICHAEL M. ACHARY
		Michael M. Achary
		Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/S/    JAMES B. ESTABROOK, JR	Chairman of the Board,	February 17, 2010
James B. Estabrook, Jr.	Director
/S/    ALTON G. BANKSTON	Director	February 17, 2010
Alton G. Bankston
/S/    FRANK E. BERTUCCI	Director	February 17, 2010
Frank E. Bertucci
/S/    DON P. DESCANT	Director	February 17, 2010
Don P. Descant
/S/    JERRY LEVENS	Director	February 17, 2010
Jerry Levens
/S/    JAMES H. HORNE	Director	February 17, 2010
James H. Horne

(signatures continued)

/S/    JOHN H. PACE	Director	February 17, 2010
John H. Pace
/S/    CHRISTINE L. PICKERING	Director	February 17, 2010
Christine L. Pickering
/S/    ROBERT W. ROSEBERRY	Director	February 17, 2010
Robert W. Roseberry
/S/    ANTHONY J. TOPAZI	Director	February 17, 2010
Anthony J. Topazi
/S/    RANDY HANNA	Director	February 17, 2010
Randy Hanna
/S/    THOMAS OLINDE	Director	February 17, 2010
Thomas Olinde

EXHIBIT INDEX

Exhibit Number	Description
2.1	Agreement and Plan of Merger between Hancock Holding Company and Lamar Capital Corporation dated February 21, 2001 (Appendix C to the Prospectus contained in the S-4 Registration Statement 333-60280 filed on May 4, 2001 and incorporated by reference herein).
3.1	Amended and Restated Articles of Incorporation dated November 8, 1990 (filed as Exhibit 3.1 to the Registrant’s Form 10-K for the year ended December 31, 1990 and incorporated herein by reference).
3.2	Amended and Restated Bylaws dated November 8, 1990 (filed as Exhibit 3.2 to the Registrant’s Form 10-K for the year ended December 31, 1990 and incorporated herein by reference).
3.3	Articles of Amendment to the Articles of Incorporation of Hancock Holding Company, dated October 16, 1991 (filed as Exhibit 4.1 to the Registrant’s Form 10-Q for the quarter ended September 30, 1991).
3.4	Articles of Correction, filed with Mississippi Secretary of State on November 15, 1991 (filed as Exhibit 4.2 to the Registrant’s Form 10-Q for the quarter ended September 30, 1991).
3.5	Articles of Amendment to the Articles of Incorporation of Hancock Holding Company, adopted February 13, 1992 (filed as Exhibit 3.5 to the Registrant’s Form 10-K for the year ended December 31, 1992 and incorporated herein by reference).
3.6	Articles of Correction, filed with Mississippi Secretary of State on March 2, 1992 (filed as Exhibit 3.6 to the Registrant’s Form 10-K for the year ended December 31, 1992 and incorporated herein by reference).
3.7	Articles of Amendment to the Articles of Incorporation adopted February 20, 1997 (filed as Exhibit 3.7 to the Registrant’s Form 10-K for the year ended December 31, 1996 and incorporated herein by reference).
3.8	Articles of Amendment to the Articles of Incorporation adopted March 29, 2007 (filed as Exhibit 3.8 to the Registrant’s Form 10-K for the year ended December 31, 2008 and incorporated herein by reference).
4.1	Specimen stock certificate (reflecting change in par value from $10.00 to $3.33, effective March 6, 1989) (filed as Exhibit 4.1 to the Registrant’s Form 10-Q for the quarter ended March 31, 1989 and incorporated herein by reference).
4.2	By executing this Form 10-K, the Registrant hereby agrees to deliver to the Commission upon request copies of instruments defining the rights of holders of long-term debt of the Registrant or its consolidated subsidiaries or its unconsolidated subsidiaries for which financial statements are required to be filed, where the total amount of such securities authorized there under does not exceed 10 percent of the total assets of the Registrant and its subsidiaries on a consolidated basis.

*10.1	1996 Long Term Incentive Plan (filed as Exhibit 10.1 to the Registrant’s Form 10-K for the year ended December 31, 1995, and incorporated herein by reference).
*10.2	Description of Hancock Bank Executive Supplemental Reimbursement Plan, as amended (filed as Exhibit 10.2 to the Registrant’s Form 10-K for the year ended December 31, 1996, and incorporated herein by reference).
*10.3	Description of Hancock Bank Automobile Plan (filed as Exhibit 10.3 to the Registrant’s Form 10-K for the year ended December 31, 1996, and incorporated herein by reference).
*10.4	Description of Deferred Compensation Arrangement for Directors (filed as Exhibit 10.4 to the Registrant’s Form 10-K for the year ended December 31, 1996, and incorporated herein by reference).
*10.5	Hancock Holding Company 2005 Long-Term Incentive Plan, filed as Appendix “A” to the Company’s Definitive Proxy Statement filed with the Commission on February 28, 2005 and incorporated herein by reference.
*10.6	Hancock Holding Company Nonqualified Deferred Compensation Plan, filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the Commission on December 21, 2005 and incorporated herein by reference.
10.7	Shareholder Rights Agreement dated as of February 21, 1997, between Hancock Holding Company and Hancock Bank, as Rights Agent as extended by the Company, attached as Exhibit 1 to Form 8-A12G filed with the Commission on February 27, 1997, as extended by Amendment No. 1 filed with the Commission as Exhibit 4.1 to Form 8-K filed with the Commission on February 20, 2007, both of which are incorporated herein by reference.
10.8	Purchase and Assumption Agreement (“Agreement”) with the Federal Deposit Insurance Corporation, Receiver of Peoples First Community Bank, Panama City Florida (“PCFB”) and the Federal Deposit Insurance Corporation acting in its corporate capacity (“FDIC”)
21	Subsidiaries of Hancock Holding Company.
22	Proxy Statement for the Registrant’s Annual Meeting of Shareholders on March 17, 2010 (deemed “filed” for the purposes of this Form 10-K only for those portions which are specifically incorporated herein by reference).
23.1	Consent of PricewaterhouseCoopers LLP.
23.2	Consent of KPMG LLP
31.1	Certification of Chief Executive Officers pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
32.1	Certification of Chief Executive Officers Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Compensatory plan or arrangement.

EX-10.8

EXHIBIT 10.8

PURCHASE AND ASSUMPTION AGREEMENT

MODIFIED WHOLE BANK ALL DEPOSITS

AMONG FEDERAL DEPOSIT INSURANCE CORPORATION,

RECEIVER OF PEOPLES FIRST COMMUNITY BANK, PANAMA CITY,

FLORIDA FEDERAL DEPOSIT INSURANCE CORPORATION

and

HANCOCK BANK

DATED AS OF DECEMBER 18, 2009

PURCHASE AND ASSUMPTION AGREEMENT

MODIFIED WHOLE BANK

ALL DEPOSITS

THIS AGREEMENT, made and entered into as of the 18th day of December, 2009, by and among the FEDERAL DEPOSIT INSURANCE CORPORATION, RECEIVER OF PEOPLES FIRST COMMUNITY BANK, PANAMA CITY, FLORIDA (the “Receiver”), HANCOCK BANK, organized under the laws of the state of Mississippi, and having its principal place of business in Gulfport, MS (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 Peoples First Community 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:

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 Subsidiaries of the Failed Bank acquired pursuant to Section 3.1.

“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 adjacent parking, storage and service facilities and structures connecting remote facilities to banking houses, and land on which the foregoing are located, and unimproved land 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.

“Bid Valuation Date” means September 30, 2009.

“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 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.

2

“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 the credit card business and 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 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, that the 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.

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“Deposit Secured Loan” means a loan in which the only collateral securing the loan is Assumed Deposits or deposits at other insured depository institutions

“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, as determined in accordance with 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

C.F.R. § 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

(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 acceptable appraisers provided by 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 sixty (60) days after Bank Closing by an appraiser selected by the Receiver and the Assuming Bank within seven (7) 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.

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“First Loss Tranche” means the dollar amount of liability that the Assuming Bank will incur prior to the commencement of loss sharing, which is the sum of (i) the Assuming Bank’s asset premium (discount) bid, as reflected on the Assuming Bank’s bid form, plus (ii) the Assuming Bank’s Deposit premium bid, as reflected on the Assuming Bank’s bid form, plus (iii) the Equity Adjustment. The First Loss Tranche may be a positive or negative number.

“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 and located on or at Bank Premises, including without limitation automated teller machines, carpeting, furniture, office machinery (including personal computers), shelving, office supplies, telephone, surveillance, security systems and artwork. Motor vehicles shall be considered other assets and pass at Book Value. Furniture and equipment located at a storage facility not adjacent to a Bank Premises are excluded from this definition.

“Indemnitees” means, except as provided in paragraph (11) of Section 12.1, (i) the Assuming Bank, (ii) the Subsidiaries and Affiliates of the Assuming Bank other than any 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 not also present or former directors, officers, employees or agents of the Failed Bank or of any Subsidiary or Affiliate of the Failed Bank.

“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.

“Lien” means any mortgage, lien, pledge, charge, assignment for security purposes, security interest, or encumbrance of any kind with respect to an Asset, 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 as of Bank Closing:

(a) loans (including loans which have been charged off the Accounting Records of the Failed Bank in whole or in part prior to and including the Bid Valuation Date), 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;

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(b) 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, casualty insurance policies and binders, standby letters of credit, mortgagee title insurance policies and binders, payment bonds and performance bonds 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

(c) 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), 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.

“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 claims 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.

“Proforma” means producing a balance sheet that reflects a reasonably accurate financial statement of the Failed bank through the date of closing. The Proforma 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).

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“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 (i) any advances and interest on such Loan after Bank Closing, minus (ii) the total of amounts received by the Assuming Bank for such Loan, regardless of how applied, after Bank Closing, plus (iii) advances made by Assuming Bank, plus (iv) total disbursements of principal made by Receiver that are not included in the Book Value.

“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, that if 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 Journal prior 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 Street Journal.

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“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

Section 2.1 Liabilities 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, that as to any Deposits of public money which are Assumed Deposits, the Assuming Bank agrees to properly secure such Deposits with such Assets as appropriate which, prior to Bank Closing, were pledged as security 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 on or affecting any Assets, if any; provided, that the 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;

(c) borrowings from Federal Reserve Banks and Federal Home Loan Banks, if any, provided, that the 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, that the 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, that the 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, that the 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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(h) duties and obligations assumed pursuant to this Agreement including without limitation those relating to the Failed Bank’s Records, credit card business, overdraft protection plans, safe deposit business, safekeeping business or trust business, if any;

(i) liabilities, if any, for Commitments;

(j) liabilities, if any, for amounts owed to any Subsidiary of the Failed Bank acquired under Section 3.1;

(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, or mortgage servicing is provided to the Failed Bank by 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 loss share agreement, and provided that all other defensive litigation and any class actions with respect to credit card business are retained by the Receiver.

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.

Section 2.2 Interest 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, that for 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, that if 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 and of such withdrawal rights.

Section 2.3 Unclaimed 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” in a form substantially similar to Exhibit 2.3A 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 the 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” in a form substantially similar to Exhibit 2.3B to the owner(s) of unclaimed deposit accounts.

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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, 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.

Section 2.4 Employee Plans. Except as provided in Section 4.12, the Assuming Bank shall have no liabilities, obligations or responsibilities under the Failed Bank’s health care, bonus, vacation, pension, profit sharing, deferred compensation, 401K or stock purchase plans or similar plans, if any, unless the Receiver and the Assuming Bank agree otherwise subsequent to the date of this Agreement.

ARTICLE III

PURCHASE OF ASSETS

Section 3.1 Assets 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. Schedule 3.1 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. Notwithstanding Section 4.8, the Assuming Bank specifically purchases all mortgage servicing rights and obligations of the Failed Bank.

Section 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 before the Bid Valuation Date shall be purchased at a price of zero.

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(b) The purchase price for securities (other than the capital stock of any Acquired Subsidiary and FRB and FHLB stock) 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 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, that if 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 provided in 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.

Section 3.3 Manner 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.

Section 3.4 Puts of Assets to the Receiver.

(a) Puts Within 30 Days After Bank Closing. During the thirty (30)-day period following Bank Closing and only during such period (which thirty (30)-day period may be extended in writing in the sole absolute discretion of the Receiver for any Loan), in accordance with this Section 3.4, the Assuming Bank shall be entitled to require the Receiver to purchase any Deposit Secured Loan transferred to the Assuming Bank pursuant to Section 3.1 which is not fully secured by Assumed Deposits or deposits at other insured depository institutions due to either insufficient Assumed Deposit or deposit collateral or deficient documentation regarding such collateral; provided with regard to any Deposit Secured Loan secured by an Assumed Deposit, no such purchase may be required until any Deposit setoff determination, whether voluntary or involuntary, has been made; and, 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 the Bid Valuation Date and was not made pursuant to an overdraft protection plan or similar extension of credit.

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Notwithstanding the foregoing, the Assuming Bank shall not have the right to require the Receiver to purchase any Loan if (i) the Obligor with respect to such Loan is an Acquired Subsidiary, or (ii) the Assuming Bank has:

(i) made any advance in accordance with the terms of a Commitment or otherwise with respect to such Loan;

(ii) taken any action that increased the amount of a Related Liability with respect to such Loan over the amount of such liability immediately prior to the time of such action;

(iii) created or permitted to be created any Lien on such Loan which secures indebtedness for money borrowed or which constitutes a conditional sales agreement, capital lease or other title retention agreement;

(iv) entered into, agreed to make, grant or permit, or made, granted or permitted any modification or amendment to, any waiver or extension with respect to, or any renewal, refinancing or refunding of, such Loan or related Credit Documents or collateral, including, without limitation, any act or omission which diminished such collateral; or

(v) sold, assigned or transferred all or a portion of such Loan to a third party (whether with or without recourse).

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.

(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 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.

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(c) Purchase by Receiver. The Receiver shall purchase Assets that are specified in the 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 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 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.

Section 3.5 Assets 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, extended coverage insurance policy, bank owned life insurance 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, that for 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;

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(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 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, that the 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 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;

(i) any criminal restitution or forfeiture orders issued in favor of the Failed Bank;

(j) reserved;

(k) assets essential to the Receiver in accordance with Section 3.6;

(l) the securities listed on the attached Schedule 3.5(l);

(m) prepaid accounts associated with any contract or agreement that the Assuming Bank either does not directly assume pursuant to the terms of this Agreement nor has an option to assume under Section 4.8; and

(n) Other Real Estate, including but not limited to, those parcels listed on Schedule 3.5(n).

Section 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 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 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;

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(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 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:

Section 4.1 Continuation 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 will 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. For the avoidance of doubt, the foregoing shall not restrict the Assuming Bank from opening, closing or selling branches upon receipt of the necessary regulatory approvals, if the Assuming Bank or its successors continue to provide banking services in the trade area. Assuming Bank will pay to the Receiver, upon the sale of a branch or branches within the year following the date of this agreement, fifty percent (50%) of any franchise premium in excess of the franchise premium paid by the Assuming Bank with respect to such branch or branches.

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Section 4.2 Agreement with Respect to Credit Card Business. The Assuming Bank agrees to honor and perform, from and after Bank Closing, all duties and obligations with respect to the Failed Bank’s credit card business, and/or processing related to credit cards, if any, and assumes all outstanding extensions of credit with respect thereto.

Section 4.3 Agreement 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, subject to the provisions of the rental agreements between the Failed Bank and the respective renters of such boxes; provided, that the Assuming Bank may 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. The trade area shall be determined by the Receiver. 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.

Section 4.4 Agreement 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. At the option of the Assuming Bank, the safekeeping business 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. 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.

Section 4.5 Agreement with Respect to Trust Business.

(a) The Assuming Bank shall, without further transfer, substitution, act or deed, to the full extent permitted by law, succeed to the rights, obligations, properties, assets, investments, deposits, agreements, and trusts of the Failed Bank under trusts, executorships, administrations, guardianships, and agencies, and other fiduciary or representative capacities, all to the same extent as though the Assuming Bank had assumed the same from the Failed Bank prior to Bank Closing; provided, that any liability based on the misfeasance, malfeasance or nonfeasance of the Failed Bank, its directors, officers, employees or agents with respect to the trust business is not assumed hereunder.

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(b) The Assuming Bank shall, to the full extent permitted by law, succeed to, and be entitled to take and execute, the appointment to all executorships, trusteeships, guardianships and other fiduciary or representative capacities to which the Failed Bank is or may be named in wills, whenever probated, or to which the Failed Bank is or may be named or appointed by any other instrument.

(c) In the event additional proceedings of any kind are necessary to accomplish the transfer of such trust business, the Assuming Bank agrees that, at its own expense, it will take whatever action is necessary to accomplish such transfer. The Receiver agrees to use reasonable efforts to assist the Assuming Bank in accomplishing such transfer.

(d) The Assuming Bank shall provide to the Receiver written verification of the assets held in connection with the Failed Bank’s trust business within sixty (60) days after Bank Closing.

Section 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 ninety (90) 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. If the Assuming Bank gives notice of its election not to purchase one or more of the owned Bank Premises within seven (7) days of Bank Closing, then, not withstanding any other provision of this Agreement to the contrary, the Assuming Bank shall not be liable for any of the costs or fees associated with appraisals for such Bank Premises.

(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, that the 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.

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(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, that neither 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 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, that the Receiver shall not have disposed of such Furniture and Equipment and Fixtures or repudiated the leases specified in clause (ii) or (iii).

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(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 ninety (90) days after the date of the Assuming Bank’s notice not to exercise such option. 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 ninety (90)-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 all Furniture 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 intention to vacate such Bank Premises or within ten (10) days after Bank Closing for Bank Premises it could have, but did not, occupy.

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Section 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 ninety (90) 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, that neither 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 fifty (50) days after giving the notice provided in Section 4.7(b), (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.

Section 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, within thirty (30) 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 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, 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, that the 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 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.

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(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 or mortgage servicing is provided to the Failed Bank by others, (ii) agreements that are subject to Sections 4.1 through 4.7 and any insurance policy or bond referred to in Section 3.5(a) or other agreement specified in Section 3.5, and (iii) 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).

Section 4.9 Informational 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.

Section 4.10 Insurance. 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.

Section 4.11 Office Space for Receiver and Corporation. For the period commencing on the 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 it requests for reimbursement of such expenditures pursuant to Article VIII of this Agreement.

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Section 4.12 Agreement 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.

(c) No later than five (5) Business Days after Bank Closing, the Assuming Bank shall provide the Receiver with a list of all Failed Bank employees the Assuming Bank will not hire. Unless agreed to otherwise by the Assuming Bank and the Receiver, the Assuming Bank shall be responsible for all costs and expenses (i.e. salary, benefits, etc.) associated with all other employees not on that list from and after the date of delivery of the list to the Receiver. The Assuming Bank shall offer to the Failed Bank employees it retains employment benefits comparable to those the Assuming Bank offers its current employees.

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(d) 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.

Section 4.13 Agreement 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”.

Section 4.14 Reserved.

Section 4.15 Agreement with Respect to Loss Sharing. The Assuming Bank shall be entitled to require reimbursement from the Receiver for loss sharing on certain loans in accordance with the Single Family Shared-Loss Agreement attached hereto as Exhibit 4.15A and the Non-SF Shared-Loss Agreement attached hereto as Exhibit 4.15B, collectively, the “Shared-Loss Agreements.” The Loans that shall be subject to the Shared-Loss Agreements are identified on the Schedule of Loans 4.15A and 4.15B attached hereto.

ARTICLE V

DUTIES WITH RESPECT TO DEPOSITORS OF THE FAILED BANK

Section 5.1 Payment 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 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.

Section 5.2 Certain 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.

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Section 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 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.

ARTICLE VI

RECORDS

Section 6.1 Transfer of Records.

(a) In accordance with Sections 2.1 and 3.1, the Receiver assigns, transfers, conveys and delivers to the Assuming Bank the following:

(i) all Records pertaining to the Deposit liabilities of the Failed Bank assumed by the Assuming Bank under this Agreement, including, but not limited to, the following:

(1) signature cards, orders, contracts between the Failed Bank and its depositors and Records of similar character;

(2) passbooks of depositors held by the Failed Bank, deposit slips, cancelled checks and withdrawal orders representing charges to accounts of depositors; and

(ii) all Records pertaining to the Assets, including, but not limited to, the following:

(1) records of deposit balances carried with other banks, bankers or trust companies;

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(2) Loan and collateral records and Credit Files and other documents;

(3) deeds, mortgages, abstracts, surveys, and other instruments or records of title pertaining to real estate or real estate mortgages;

(4) signature cards, agreements and records pertaining to Safe Deposit Boxes, if any; and

(5) records pertaining to the credit card business, trust business or 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.

Section 6.2 Delivery 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.

Section 6.3 Preservation 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 and customer requests for lien releases with respect to the Records of which it has custody.

Section 6.4 Access 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, that in 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 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.

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ARTICLE VII

FIRST LOSS TRANCHE

The Assuming Bank has submitted to the Receiver an asset premium (discount) bid of ($236,000,000.00) and a positive Deposit premium bid of 1%. The Deposit premium bid will be 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 shall be determined by adding (i) the asset premium (discount) bid, (ii) the Deposit premium bid, and (iii) the Equity Adjustment. If the First Loss Tranche is a positive number, then this is the Losses on Single Family Shared-Loss Loans and Net Charge-offs on Shared Loss Assets that the Assuming Bank will incur before loss-sharing commences under Exhibits 4.15A and 4.15B. If the First Loss Tranche is a negative number, the Corporation shall pay such amount by wire transfer to the Assuming Bank by the end of the first business day following Bank Closing, together with interest determined in accordance with Section 8.4, and loss sharing shall commence immediately.

ARTICLE VIII

ADJUSTMENTS

Section 8.1 Pro 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 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 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 beginning the day after the Bid Valuation Date to the date of 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.

Section 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.

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(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.

Section 8.3 Payments. 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, a payment in an amount which reflects 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 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.

Section 8.4 Interest. 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.

Section 8.5 Subsequent 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 payment made under Section 8.3 after the Settlement Date, the Assuming Bank and the Receiver agree to 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.

ARTICLE IX

CONTINUING COOPERATION

Section 9.1 General 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.

Section 9.2 Additional 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 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 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.

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Section 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. 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 co-plaintiff, 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.

Section 9.4 Payment 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.

Section 9.5 Withheld 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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Section 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 Subsidiaries acquired by the Assuming Bank, and (ii) its books and records, the books and records of such 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.

Section 9.7 Information. 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.

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(e) Representations Remain True. The Assuming Bank represents and warrants that 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

Section 12.1 Indemnification 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 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 than any action or inaction taken in a manner constituting bad faith, gross negligence or willful misconduct; and

(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;

(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, that the 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;

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(12) claims or actions which constitute a breach by the Assuming Bank of the representations and warranties contained in Article XI;

(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.

Section 12.2 Conditions 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 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, that notice 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, that the 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;

(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; provided, that the 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, that the Receiver shall not be obligated to reimburse the amount of any such settlement or payment unless such settlement or payment was effected upon the written direction of the Receiver; and

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(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.

Section 12.3 No 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, collectability, 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.

Section 12.4 Indemnification 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 costs, losses, liabilities, expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with any of the following:

(a) claims 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 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).

Section 12.5 Obligations 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 by 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.

Section 12.6 Criminal 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.

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Section 12.7 Limited 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.

Section 12.8 Subrogation. 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

Section 13.1 Entire Agreement. This Agreement 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.

Section 13.2 Headings. 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.

Section 13.3 Counterparts. 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.

Section 13.4 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS HEREUNDER 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.

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Section 13.5 Successors. 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.

Section 13.6 Modification; Assignment. No amendment or other modification, rescission, release, or assignment of any part of this Agreement shall be effective except pursuant to a written agreement subscribed by the duly authorized representatives of the parties hereto.

Section 13.7 Notice. 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

Hancock Bank

Attn: Mr. Carl J. Chaney, President and CEO

One Hancock Plaza, 7th Floor

Gulfport, Mississippi 39502

(228) 868 – 4627 (fax)

Receiver and Corporation

Federal Deposit Insurance Corporation

Receiver of Peoples First Community 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 Peoples First Community Bank

1601 Bryan Street, Suite 1700

Dallas, Texas 75201

Attention: Regional Counsel (Litigation Branch)

Section 13.8 Manner 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, that in 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.

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Section 13.9 Costs, 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, that the 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.

Section 13.10 Waiver. Each of the Receiver, the Corporation and the Assuming Bank may waive its respective rights, powers or privileges under this Agreement; provided, that such waiver shall be in writing; and further provided, that no 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.

Section 13.11 Severability. 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 and effect and shall be binding upon the parties hereto.

Section 13.12 Term of Agreement. This Agreement shall continue in full force and effect until the tenth (10th) anniversary of Bank Closing; provided, that the provisions of Section 6.3 and 6.4 shall survive the expiration of the term of this Agreement. Provided, however, 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. 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, and (ii) breach of this Agreement occurring prior to such expiration, regardless of when such breach is discovered.

Section 13.13 Survival 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]

38

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 PEOPLES FIRST COMMUNITY BANK PANAMA CITY, FLORIDA
	By:
	NAME:	Michael Spaid
	TITLE:	Receiver-in-Charge
Attest:
	FEDERAL DEPOSIT INSURANCE CORPORATION
	By:
	NAME:	Michael Spaid
	TITLE:	Attorney-in-Fact
Attest:
	HANCOCK BANK
	By:
	NAME:	Carl J. Chaney
	TITLE:	President and Chief Executive Officer
Attest:

39

SCHEDULE 2.1

Certain Liabilities Assumed by the Assuming Bank

SCHEDULE 2.1(a)

Excluded Deposit Accounts

Accounts Excluded from P&A Transaction

PEOPLES FIRST COMMUNITY BANK

Panama City, Florida

People First Community Bank has no deposits associated with the Depository Organization (DO) Cede & Co as Nominee for DTC. The DO accounts do not pass to the Assuming Bank and are excluded from the transaction as described in section 2.1 of the P&A Agreement. The attached Schedule 2.1.a DO Detail Report identifies the DO accounts as of September 30, 2009. This schedule will be updated post closing with data as of Bank Closing date.

SCHEDULE 3.1

Certain Assets Purchased

SEE ATTACHED LIST

THE LIST(S) ATTACHED TO THIS SCHEDULE (OR SUBSCHEDULE(S)) AND THE INFORMATION THEREIN, IS AS OF THE DATE OF THE MOST RECENT PERTINENT DATA MADE AVAILABLE TO THE ASSUMING BANK AS PART OF THE INFORMATION PACKAGE. IT WILL BE ADJUSTED TO REFLECT THE COMPOSITION AND BOOK VALUE OF THE LOANS AND ASSETS AS OF THE DATE OF BANK CLOSING. THE LIST(S) MAY NOT INCLUDE ALL LOANS AND ASSETS (E.G., CHARGED OFF LOANS). THE LIST(S) MAY BE REPLACED WITH A MORE ACCURATE LIST POST CLOSING.

SCHEDULE 3.2

Purchase Price of Asset 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 FRB and FHLB stock), 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)	credit card business, if any, including all outstanding extensions of credit and offensive litigation, but excluding any class action lawsuits related to the credit card business;	Book Value
(f)	Safe Deposit Boxes and related business, safekeeping business and trust business, if any;	Book Value
(g)	Records and other documents;	Book Value
(h)	Other Real Estate;	Book Value
(i)	boats, motor vehicles, aircraft, trailers, fire arms, repossessed collateral;	Book Value
(j)	capital stock of any Acquired Subsidiaries and FRB and FHLB stock;	Book Value
(k)	amounts owed to the Failed Bank by any Acquired Subsidiary;	Book Value
(l)	assets securing Deposits of public money, to the extent not otherwise purchased hereunder;	Book Value
(m)	Overdrafts of customers;	Book Value
(n)	rights, if any, with respect to Qualified As provided in Section 3.2(c) Financial Contracts;
(o)	rights of the Failed Bank to provide Book Value mortgage servicing for others and to have mortgage servicing provided to the Failed Bank by others and related contracts.

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

SCHEDULE 3.5(l)

Excluded Securities

CUSIP	DESCRIPTION	ORIGINAL FACE VALUE		MARKET VALUE
313400301	FEDERAL HOME LN MTG CORP			$	6,287.04
313586109	FEDERAL NATL MTG ASSN			$	110.40
92826C201	VISA Common Stock
	City of Callaway - Municipal	$	2,415,246.00

Peoples First Community Bank, Panama City FL

SCHEDULE 3.5(n)

Excluded Owned Real Estate

	Peoples First Community Bank
	REO Status as of: 11/30/2009
Property Number	Account Number	Date of Foreclosure	Balance as of 11/30/09	Type
1		10/20/92	0.00	Res/Lot
2	421277	12/30/99	0.00	Res/Lot
4		06/08/04		Comm
5		06/08/04		Comm
6	520525581	11/30/04	21,160.00	Comm
7	4744835	11/29/05	40,500.00	SFD
8	4587127	08/30/06	87,295.00	Res/Lot
9	4737185	11/28/06	151,800.00	Res/Lot
10	4734927	12/13/06	464,600.00	Comm
11	4751822	12/28/06	45,000.00	Res/Lot
12	4613766	12/28/06	105,780.00	Res/Lot
13	4677241	12/28/06	43,240.00	Res/Lot
18	4912259	02/26/07	62,560.00	Res/Lot
21	4740528	06/30/07	36,800.00	Res/Lot
22	4190443 1st	07/31/07	469,182.30	SFD
22a	4800074 2nd	07/31/07	25,777.70	SFD
24	4624011	07/31/07	168,360.00	Res/Lot
25	4785267	07/31/07	32,394.45	Res/Lot
26	4950044	07/31/07	42,482.00	Res/Lot
27	4618229	07/31/07	930,579.99	Res/Lot
27a	4618252	07/31/07	365,420.01	Res/Lot
28	520574901	08/30/07	129,888.37	Comm
28a	520580734	08/30/07	11,339.32	Comm
32	4871422	10/26/07	121,500.00	Res/Lot
33	4871422	10/26/07	0.00	Res/Lot
35	4441358	10/26/07	219,532.00	Comm
37	4520326	10/30/07	117,000.00	Res/Lot
39	4671327	10/30/07	5,850.00	Res/Lot
44	4411005	11/27/07	22,500.00	Res/Lot
45	4662573	11/27/07	9,900.00	Res/Lot
46	4662888	11/27/07	14,400.00	Res/Lot
47	4590071	11/27/07	41,400.00	Res/Lot
48	4368627	11/29/07	207,000.00	Res/Lot
49	4736823	11/29/07	40,500.00	Res/Lot
54	4251492	12/31/07	900,000.00	Res/Lot
62	4664454	01/28/08	40,500.00	Res/Lot
66	5063698	02/27/08	193,500.00	SFD/Condo
68	4374914	02/28/08	180,000.00	Res/Lot
69	4375721	02/28/08	180,000.00	Res/Lot
70	4526885	02/27/08	117,000.00	Res/Lot
75	4985974	02/29/08	139,500.00	Comm

76	5079421	02/29/08	189,000.00	Comm
77	4810974	03/26/08	25,200.00	Res/Lot
80	520425567	03/26/08	178,323.36	SFD
81	4371738	03/26/08	180,000.00	SFD
83	5149232	03/28/08	355,132.51	SFD
84	4810669	03/31/08	41,400.00	SFD
88	4580809	04/29/08	1,723,000.00	Comm
91	5240502	04/29/08	149,960.00	SFD
92	5263678	04/29/08	121,233.66	SFD
93	4965778	04/29/08	19,990.00	Res/Lot
94	4773966	05/22/08	58,300.00	Res/Lot
95	4774212	05/22/08	58,300.00	Res/Lot
98	4589362	05/29/08	455,400.00	SFD
100	5073515	05/22/08	851,525.22	U/C
101	5247168	05/22/08	143,520.00	SFD
103	4601449	06/26/08	4,819,000.00	Comm
104	4611943	06/26/08	157,320.00	SFD
105	4945515	06/25/08	173,124.46	SFD
106	4940052	06/24/08	119,425.00	Res/Lot
107	5007414	06/24/08	519,800.00	SFD
108	4782066	06/25/08	39,560.00	Res/Lot
111	4894580	07/10/08	381,800.00	SFD
112	4801445	07/17/08	20,760.00	Res/Lot
113	4754966	07/22/08	157,864.27	SFD
116	5148242	07/29/08	113,160.00	SFD
117	4498101	07/29/08	161,000.00	SFD
119	3691466	07/30/08	82,626.78	Res/Lot
120	4817607	07/30/08	13,790.00	Res/Lot
121	4835450	07/30/08	11,500.00	Res/Lot
123	4635710	07/31/08	745,000.00	Comm.
124	4962171	07/31/08	141,198.85	SFD
125	4962247	07/31/08	149,040.00	SFD
126	5103908	07/31/08	61,640.00	Res/Lot
130	4672036	07/31/08	736,000.00	Comm
134	4701173	08/25/08	27,600.00	Res/Lot
136	5085287	08/29/08	5,498,913.09	Comm
137	5124748	08/29/08	2,626,600.00	SFD/Condo
137-A	same as above	same as above	0.00	SFD/Condo
137-B	same as above	same as above	0.00	SFD/Condo
137-C	same as above	same as above	0.00	SFD/Condo
137-D	same as above	same as above	0.00	SFD/Condo
138	4874543	08/29/08	3,164,577.96	Comm
139	4673356	08/25/08	115,000.00	Res/Lot
141	4728671	09/26/08	36,800.00	Res/Lot
146	5208020 1st	09/30/08	441,000.00	SFD/Condo
146a	5215850 2nd	09/30/08	0.00	SFD/Condo
147	5263280	09/30/08	168,360.00	Res/Lot
151	4577474	10/30/08	1,491,961.38	SFD
152	4851200	10/30/08	1,063,878.11	SFD
152a	5378732	10/30/08	249,274.51	SFD
153	4661492	10/30/08	175,808.27	Comm
154	4591566	10/30/08	118,680.00	Res/Lot
156	4472098	10/30/08	169,200.00	SFD

160	5189485	10/28/08	92,550.92	SFD
161	5189626	10/28/08	103,008.84	SFD
162	5199013	10/28/08	102,872.67	SFD
163	5199021	10/28/08	64,972.64	SFD
164	5205976	10/28/08	13,500.00	Comm
166	4751285	10/28/08	23,505.20	Res/Lot
168	4416459	10/31/08	6,039,132.26	Comm
168a	same as above	same as above	0.00	Comm
169	4582193	11/28/08	118,386.22	Res/Lot
171	4623831	11/25/08	15,300.00	Res/Lot
172	4619763	11/25/08	13,500.00	Res/Lot
173	4639209	11/24/08	117,000.00	Res/Lot
174	4930798	11/24/08	18,000.00	Res/Lot
175	5259429	11/24/08	540,000.00	SFD
178	5168935	11/21/08	54,944.89	SFD
179	5103700	11/20/08	515,200.00	SFD
180	4972022	11/20/08	162,000.00	SFD
181	4855193	11/26/08	90,354.65	SFD
182	4855268	11/26/08	94,458.14	SFD
183	4821039	11/26/08	9,000.00	Res/Lot
184	4821245	11/26/08	11,700.00	Res/Lot
185	4821286	11/26/08	11,700.00	Res/Lot
186	4407987	11/26/08	153,000.00	Res/Lot
187	4726923	11/26/08	180,000.00	Res/Lot
188	4407912	11/26/08	153,014.39	Res/Lot
189	4407938	11/26/08	153,000.00	Res/Lot
190	4518163	12/18/08	1,564,000.00	Comm
191	4497806	12/26/08	7,648,158.36	Comm
192	4626974	12/30/08	2,500,000.00	Comm
193	4637088	12/30/08	1,399,500.00	Comm
195	4940102	12/29/08	117,000.00	Res/Lot
196	4940110	12/29/08	117,000.00	Res/Lot
197	4949292	12/29/08	117,000.00	Res/Lot
198	4429809	12/11/08	113,400.00	SFD/Condo
199	4445532	12/11/08	117,000.00	SFD/Condo
200	5035084	12/29/08	67,500.00	SFD
201	4886693	12/23/08	739,638.18	SFD
203	4985875	12/23/08	180,000.00	Res/Lot

204	4920666	12/23/08	7,650.00	Res/Lot
206	5167127	12/18/08	428,538.07	SFD
208	4354510-1st	12/22/08	65,063.05	SFD
208a	4359501-2nd	same as above	10,536.95	SFD
209	4917845	12/11/08	185,574.46	SFD
210	4327029	12/30/08	414,000.00	Comm
211	4672036	12/17/08	0.00	SFD
217	4820825	12/31/08	36,000.00	Res/Lot
218	4820916	12/31/08	36,000.00	Res/Lot
219	4820957	12/31/08	36,000.00	Res/Lot
220	4820981	12/31/08	36,000.00	Res/Lot
221	4820924	12/31/08	36,000.01	Res/Lot
222	4820908	12/31/08	36,000.00	Res/Lot
223	4820866	12/31/08	36,000.00	Res/Lot
224	4820874	12/31/08	36,000.00	Res/Lot
225	5009709	12/31/07	90,000.00	Res/Lot
226	4965810	01/09/09	100,800.00	SFD/Condo
227	4592671	01/12/09	180,000.00	Res/Lot
228	4377131	01/15/09	269,100.00	SFD
229	4901054	01/20/09	2,691,200.00	Comm
230	4436093	01/20/09	312,800.00	Comm
233	4449674	01/23/09	22,500.00	Res/Lot
234	4584504	01/23/09	17,100.00	Res/Lot
235	4589586	01/23/09	17,100.00	Res/Lot
236	4591319	01/23/09	15,300.00	Res/Lot
237	4604906	01/23/09	17,100.00	Res/Lot
238	4665360	01/23/09	17,100.00	Res/Lot
239	4885471	01/27/09	12,600.00	Res/Lot
240	5223755	01/27/09	19,800.00	Res/Lot
241	5245188	01/27/09	36,000.00	Res/Lot
242	5245311	01/27/09	36,000.00	Res/Lot
243	5245329	01/27/09	36,000.00	Res/Lot
244	5245568	01/27/09	36,000.00	Res/Lot
245	5245642	01/27/09	36,000.00	Res/Lot
246	5246319	01/27/09	36,000.00	Res/Lot
247	4842316	01/28/09	14,400.00	Res/Lot
248	4842498	01/28/09	14,400.00	Res/Lot
249	4887022	01/28/09	14,400.00	Res/Lot
250	4888574	01/28/09	14,400.00	Res/Lot
253	5347091	01/29/09	501,400.00	SFD
255	5104369	01/30/09	3,600,000.00	Comm

256	4884193	01/30/09	1,057,500.00	Res/Lot
260	3029774	01/30/09	11,400,000.00	Comm
261	4226130	02/27/09	154,539.56	Res/Lot
262	4235321	02/27/09	161,100.00	Res/Lot
265	5406285	02/26/09	28,350.00	Res/Lot
266	3761343	02/27/09	94,500.00	Res/Lot
267	5196274	02/27/09	36,000.00	Res/Lot
270	4623054	02/24/09	103,500.00	Res/Lot
271	4623674	02/24/09	106,638.01	Res/Lot
272	4623112	02/24/09	102,161.99	Res/Lot
273	5297015	02/24/09	20,250.00	Res/Lot
274	4625505	02/27/09	117,000.00	Res/Lot
277	4627915	02/25/09	39,600.00	Res/Lot
281	4497228	02/27/09	21,600.00	Res/Lot
285	4863775	03/17/09	33,469.31	SFD
286	4039640	03/30/09	193,500.00	Res/Lot
289	5408091	03/26/09	297,000.00	SFD
290	4160313	03/31/09	1,559,983.22	Comm
293	5434964	03/27/09	2,883,200.00	Comm
294	4916433	03/31/09	57,895.95	Comm/Lot
295	5084652	03/31/09	279,923.86	SFD
296	4395034	03/18/09	135,000.00	Res/Lot
297	4603635	03/30/09	5,400.00	Res/Lot
298	4641767	03/31/09	136,098.43	SFD
299	4891248	03/31/09	4,158,630.98	Comm
300	4690657	03/31/09	1,567,800.00	Comm
301	5081898	03/17/09	616,500.00	SFD
303	4800256	04/15/09	67,500.00	Res/Lot
305	4616348	04/30/09	770,000.00	Comm/PUD
306	4583696	04/27/09	1,702,000.00	Comm
308	5114129	04/29/09	76,500.00	SFD
309	5318027	04/29/09	202,500.00	SFD
310	5149927	04/28/09	1,061,584.22	SFD
314	5002563	04/29/09	172,701.75	SFD
315	5293287	04/28/09	245,972.93	SFD
317	4991097	04/28/09	99,000.00	Res/Lot
318	4406393	04/27/09	214,989.59	Comm
319	4842142	04/29/09	11,700.00	Res/Lot
320	4495818	04/28/09	124,934.79	SFD
321	4813507	04/28/09	19,065.21	SFD
322	4492070	04/29/09	208,544.51	SFD
324	4663480	05/29/09	22,500.00	LOT
325	4663332	05/29/09	22,500.00	LOT
326	5070222	05/27/09	331,024.55	SFD
327	4966719	05/27/09	119,272.64	SFD/CONDO
328	5063995	05/07/09	277,904.26	SFD/CONDO
329	4338810	05/27/09	360,000.00	SFD/CONDO
330	4437182	05/27/09	166,500.00	SFD/CONDO
331	5298476	05/26/09	49,500.00	Res/Lot
333	4571279	05/28/09	763,600.00	SFD
335	4822011	05/27/09	13,050.00	Res/Lot
336	5037213	05/27/09	144,000.00	Comm

337	4616322	05/29/09	28,800.00	Res/Lot
338	4616421	05/29/09	28,800.00	Res/Lot
340	4650420	06/29/09	116,550.00	Res/Lot
341	3886520	06/24/09	251,384.96	comm. Office bldg
342	5102926	06/26/09	58,500.00	Res/Lot
343	4690244	06/22/09	44,912.31	SFD
344	5106208	06/30/09	527,160.00	Comm
345	4555769	06/25/09	351,000.00	Res/Lot
346	4663498	06/24/09	12,600.00	Res/Lot
347	4608576	06/25/09	40,500.00	Res/Lot
348	5236377	06/22/09	193,500.00	Res/Lot
349	5236955	06/22/09	171,000.00	Res/Lot
350	4810792	06/25/09	22,500.00	Res/Lot
352	4072161	06/16/09	334,814.98	SFD/CONDO
353	4521811	06/26/09	58,500.00	Res/Lot
354	4896767	06/29/09	43,200.00	Res/Lot
355	4485280	06/26/09	43,200.00	Res/Lot
356	5104278	06/26/09	517,500.00	SFD
357	4886636	06/09/09	230,000.00	Res/Lots
357A	same as above	same as above	0.00	Res/Lots
358	4817888	06/26/09	30,600.00	res/lot
359	5156856	06/22/09	237,019.19	SFD
360	4680021	06/22/09	90,000.00	res/lot
361	5100599	06/29/09	58,275.00	res/lot
362	5104591	06/26/09	148,500.00	SFD/CONDO
363	5304589	06/22/09	432,256.62	SFD
364	5247010	06/23/09	270,000.00	SFD
366	4067237	07/27/09	22,999.50	SFD
367	5010020	07/30/09	66,240.00	res/lot
368	5228325	07/30/09	7,360.00	res/lot
369	5228382	07/30/09	7,360.00	res/lot
370	4909925	07/30/09	23,000.00	res/lot
372	4945085	07/28/09	103,705.33	SFD
373	4987558	07/28/09	13,800.00	res/lot
374	4987582	07/28/09	110,616.18	SFD
375	5103809	07/28/09	108,237.68	res/lot
376	5321575	07/28/09	127,954.53	SFD
377	5388277	07/28/09	107,255.80	SFD
378	4565891	07/30/09	667,000.00	res/lot
379	4718680	07/27/09	110,400.00	res/lot
380	4608105	07/27/09	96,600.00	res/lot
381	4886388	07/31/09	133,725.37	res/lot
381a	same as above	same as above	0.00	res/lot
382	5114871	07/31/09	66,961.40	res/lot
383	4465993	07/28/09	211,600.00	SF/Condo
384	4605143	07/28/09	223,502.30	Comm
385	5244587	07/28/09	483,000.00	SFD
386	4891842	07/29/09	202,400.00	Comm
387	5119417	07/29/09	32,200.00	SFD
388	4177630	07/28/09	1,032,062.20	Comm
389	5111414	07/28/09	952,200.00	SFD

390	5111463	07/28/09	795,800.00	SFD
391	5110242	08/31/09	848,016.77	Res/Lots
392	4822854	08/31/09	69,000.00	Res Lot
393	4514279	08/27/09	148,791.86	SFD
394	4527446	08/31/09	16,871.56	Res Lot
395	4821567	08/31/09	73,600.00	Res Lot
396	4823563	08/31/09	107,885.48	Res lots
397	5195268	08/28/09	167,071.77	Comm/Lot
397A	same as above	same as above	0.00	Res/lot
398	4569323	08/26/09	239,200.00	SFD
399	4956041	08/28/09	191,620.06	SFD
400	4935953	08/28/09	198,089.86	SFD
401	4360350	08/28/09	1,380,000.00	SFD
402	5149448	08/31/09	236,397.93	SFD
403	5162417	08/28/09	120,520.00	SF/Condo
404	5210216	08/28/09	120,521.00	SF/Condo
405	5210182	08/28/09	120,520.00	SF/Condo
406	5210133	08/28/09	120,520.00	SF/Condo
407	5210018	08/28/09	120,520.00	SF/Condo
408	5210117	08/28/09	120,520.00	SF/Condo
409	4952875	08/28/09	188,293.64	SFD
410	5178678	08/28/09	191,542.69	SFD
411	5178777	08/28/09	179,728.13	SFD
412	5226907	08/28/09	163,561.28	SFD
413	5226949	08/28/09	163,561.27	SFD
414	5227350	08/28/09	163,561.26	SFD
415	5423504	08/28/09	125,911.07	SFD
416	5423512	08/28/09	158,301.74	SFD
417	5423603	08/28/09	158,301.74	SFD
418	4843280	08/28/09	256,122.53	SFD
419	5348552	08/28/09	173,992.34	SFD
420	4967352	08/28/09	210,048.14	SFD
421	5103098	08/28/09	164,146.42	SFD
422	5162391	08/29/09	120,520.00	SF/Condo
423	4770327	08/28/09	112,231.38	SFD
424	4585501	09/25/09	7,360.00	Res/Lot
425	4585600	09/25/09	7,360.00	Res/Lot
426	4582367	09/25/09	7,360.00	Res/Lot
427	4582524	09/25/09	11,960.00	Res/Lot
428	4582607	09/25/09	11,960.00	Res/Lot
429	5116264	09/25/09	15,640.00	Res/Lot
430	4585667	09/25/09	7,360.00	Res/Lot
431	5248067	09/29/09	86,505.88	SFD
432	4005393	09/30/09	117,204.20	Res/Lot
433	4627212	09/28/09	132,041.88	SF/Condo
434	5057468	09/25/09	124,200.00	SFD
435	4945606	09/28/09	191,026.23	SFD
436	5193784	09/29/09	101,200.00	SFD
437	5122940	09/29/09	347,629.73	SFD
438	4791562	09/28/09	266,490.16	SFD
439	5150057	09/29/09	296,852.32	SF/Duplex
440	5411665	09/25/09	334,738.90	Comm

441	4633533	09/24/09	303,611.00	SFD
442	3736683	09/28/09	394,052.63	Comm
443	4227377	09/28/09	399,216.89	SFD
443 B	4822094	09/28/09	189,583.11	SFD
444	4580122	09/29/09	330,556.00	Res/Lot
445	5233945	09/29/09	516,733.31	Res/Lots
446	5103064	09/29/09	653,567.99	Res/Lots
447	4972204	09/29/09	1,127,816.57	SFD
448	5265822	10/29/09	33,854.31	Res/Lot
449	4869343	10/30/09	199,832.28	SFD
450	4750527	10/30/09	241,843.96	Res/Lot
451	5304787	10/30/09	270,161.25	SFD
452	5081906	10/29/09	192,802.05	SFD
453	5221205	10/29/09	416,598.08	SFD
454	5284617	10/30/09	765,066.46	Comm
455	4417929	10/30/09	855,333.51	Comm
456	4712121	10/30/09	665,161.50	Comm
457	4720587	10/30/09	43,728.03	Comm
458	4626164	10/22/09	123,249.58	SFD
459	4349668	10/30/09	74,529.52	SF/Condo
460	4084281	11/30/09	727,536.45	Comm
461	4678769	11/25/09	156,483.23	SFD
462	5260195	11/30/09	958,113.89	SFD
463	5358890	11/25/09	398,288.00	SFD
464	5350590	11/25/09	508,829.38	SFD
465	4920187	11/27/09	475,654.57	Res Lots
466	4970034	11/27/09	171,477.62	SFD
467	5246426	11/27/09	190,661.17	SFD
468	5408174	11/27/09	173,479.15	SFD
469	5408182	11/27/09	176,786.72	SFD
470	5408265	11/27/09	168,064.44	SFD
471	5408281	11/27/09	157,884.73	SFD
472	4473666	11/25/09	490,407.74	SFD

SCHEDULE 4.15A

LOANS SUBJECT TO LOSS SHARING UNDER

THE SINGLE FAMILY SHARED-LOSS AGREEMENT

SCHEDULE 7

Accounts Excluded from Calculation of Deposit Franchise Bid Premium

PEOPLES FIRST COMMUNITY BANK

Panama City, Florida

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

Category	Description	Amount
I II III	Non- DO Brokered Deposits CDARS Market Place	$	None
	Deposits Total deposits excluded from Calculation of premium	$	None
		$	None
		$	None

exclude the following categories of deposit accounts:

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.

DO Brokered Deposits (Cede & Co as Nominee for DTC), are typically 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”. If, however, the terms of a particular transaction are altered and the DO Brokered Deposits pass to the Assuming Bank, they will not be included in Assumed Deposits for purposes of calculating the deposit premium.

II CDARS

CDARS deposits pass to the Assuming Bank, but are excluded from Assumed Deposits when the deposit premium is calculated.

People First Community Bank did not participate in the CDARS program as of the date of the deposit download. If CDARS deposits are taken between the date of the deposit download and the Bank Closing Date, they will be identified post closing and made part of Schedule 7 to the P&A Agreement.

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.

People First Community Bank does have Qwickrate deposits however none existed as of the download date of September 30, 2009. The Qwickrate deposits are reported as time deposits in the Call Report. Peoples First Community Bank uses “Branch 4” on their system to identify both brokered and Qwickrate deposits. Please see the attached Schedule 7 – Qwickrate Deposit Detail Report for a listing of these accounts as of September 30, 2009. This list will be updated post closing with balances as of Bank Closing date as the bank just recently within last 10 days) started taking in Qwickrate deposits. This schedule provides a snapshot of account categories and balances as of September 30, 2009, which is the date of the deposit download. 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.

As of September 30, 2009 there were none.

EXHIBIT 2.3A

FINAL NOTICE LETTER

FINAL LEGAL NOTICE

Claiming Requirements for Deposits Under 12 U.S.C. 1822(e)

[Date]

[Name of Unclaimed Depositor]

[Address of Unclaimed Depositor]

[Anytown, USA]

Subject: [XXXXX – Name of Bank City, State] – In Receivership

Dear [Sir/Madam]:

As you may know, on [Date: Closing Date], the [Name of Bank (“The Bank”)] was closed and the Federal Deposit Insurance Corporation (“FDIC”) transferred [The Bank’s] accounts to [Name of Acquiring Institution].

According to federal law under 12 U.S.C., 1822(e), on [Date: eighteen months from the Closing Date], [Name of Acquiring Institution] must transfer the funds in your account(s) back to the FDIC if you have not claimed your account(s) with [Name of Acquiring Institution]. Based on the records recently supplied to us by [Name of Acquiring Institution], your account(s) currently fall into this category.

This letter is your formal Legal Notice that you have until [Date: eighteen months from the Closing Date], to claim or arrange to continue your account(s) with [Name of Acquiring Institution]. There are several ways that you can claim your account(s) at [Name of Acquiring Institution]. It is only necessary for you to take any one of the following actions in order for your account(s) at [Name of Acquiring Institution] to be deemed claimed. In addition, if you have more than one account, your claim to one account will automatically claim all accounts:

1. Write to [Name of Acquiring Institution] and notify them that you wish to keep your account(s) active with them. Please be sure to include the name of the account(s), the account number(s), the signature of an authorized signer on the account(s), name, and address. [Name of Acquiring Institution] address is:

[123 Main Street

Anytown, USA]

2. Execute a new signature card on your account(s), enter into a new deposit agreement with [Name of Acquiring Institution], change the ownership on your account(s), or renegotiate the terms of your certificate of deposit account(s) (if any).

3. Provide [Name of Acquiring Institution] with a change of address form.

4. Make a deposit to or withdrawal from your account(s). This includes writing a check on any account or having an automatic direct deposit credited to or an automatic withdrawal debited from an account.

If you do not want to continue your account(s) with [Name of Acquiring Institution] for any reason, you can withdraw your funds and close your account(s). Withdrawing funds from one or more of your account(s) satisfies the federal law claiming requirement. If you have time deposits, such as certificates of deposit, [Name of Acquiring Institution] can advise you how to withdraw them without being charged an interest penalty for early withdrawal.

If you do not claim ownership of your account(s) at [Name of Acquiring Institution by Date: eighteen months from the Closing Date] federal law requires [Name of Acquiring Institution] to return your deposits to the FDIC, which will deliver them as unclaimed property to the State indicated in your address in the Failed Institution’s records. If your address is outside of the United States, the FDIC will deliver the deposits to the State in which the Failed Institution had its main office. 12 U.S.C. § 1822(e). If the State accepts custody of your deposits, you will have 10 years from the date of delivery to claim your deposits from the State. After 10 years you will be permanently barred from claiming your deposits. However, if the State refuses to take custody of your deposits, you will be able to claim them from the FDIC until the receivership is terminated. If you have not claimed your insured deposits before the receivership is terminated, and a receivership may be terminated at any time, all of your rights in those deposits will be barred.

If you have any questions or concerns about these items, please contact [Bank Employee] at [Name of Acquiring Institution] by phone at [(XXX) XXX-XXXX].

Sincerely,

[Name of Claims Specialist] [Title]

EXHIBIT 2.3B

AFFIDAVIT OF MAILING

STATE OF                     

COUNTY OF                     

I am employed as a [Title of Office] by the [Name of Acquiring Institution].

This will attest that on [Date of mailing], I caused a true and correct copy of the Final Legal Notice, attached hereto, to owners of unclaimed deposits of [Name of Failed Bank], City, State, to be prepared for deposit in the mail of the United States of America on behalf of the Federal Deposit Insurance Corporation. A list of depositors to whom the notice was mailed is attached. This notice was mailed to the depositor’s last address as reflected on the books and records of the [Name of Failed Bank] as of the date of failure.

[Name]

[Title of Office]

[Name of Acquiring Institution]

Subscribed and sworn to before me this                      day of [Month, Year].

My commission expires:

[Name], Notary Public

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 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.

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.]

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 transfer to 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

(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.

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 and Other Assets Shared-Loss 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 Servicing Amount” 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 loss-sharing provisions of the applicable Shared-Loss Agreement is in effect.

“Cumulative Shared-Loss Amount” means the excess, if any, of the Cumulative Loss Amount over the First Loss Tranche.

“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.

“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.

“Deficient Valuation” 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.

“Home Equity Loans” means loans or funded portions of lines of credit secured by mortgages on one-to four-family residences or stock of cooperative housing associations, where the Failed Bank did not have a first lien on the same property as collateral.

“Final Shared-Loss Month” means the calendar month in which the tenth anniversary of the Commencement Date occurs.

“Final Shared-Loss Recovery 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).

“Investor-Owned Residential Loans” means Loans, excluding advances made pursuant to Home Equity Loans, that are secured by mortgages on one- to four family residences or stock of cooperative housing associations that are not owner-occupied. These loans can be treated as Restructured Loans on a commercially reasonable basis and can be a restructured under terms separate from the Exhibit 5 standards. Please refer to Exhibit 2b for guidance in Calculation of Loss for Restructured Loans.

2

“Loss” means a Foreclosure Loss, Restructuring Loss, Short Sale Loss, Portfolio Loss, Modification Default Loss or Deficient Valuation.

“Loss Amount” means the dollar amount of loss incurred and reported on the Monthly Certificate for a Single Family Shared-Loss Loan.

“Modification Default Loss” means the loss calculated in Exhibits 2a(1) and 2c(1) for single family loans modified under this part of the agreement that default and result in a foreclosure or short sale.

“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 Deficient Valuations 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.

“Period Servicing Amount” means, for any twelve month period with respect to each of the Shared-Loss Agreements during which the loss-sharing provisions of the applicable Shared-Loss Agreement are in effect, the product of (i) the simple average of the principal amount of Shared-Loss Loans and Shared-Loss Assets (other than the Shared-Loss Securities) (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) one percent (1%).

“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.

3

“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

(a) 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.

“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 and Other Assets 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 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.

“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, that each 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 Loans” means the single family one-to-four residential mortgage loans (whether owned by the Assuming Bank or any Subsidiary) identified on Schedule 4.15A of the Purchase and Assumption Agreement.

“Stated Threshold” means total losses under the shared loss agreements in the amount of $385,000,000.00.

“Termination Date” means the last day of the Final Shared-Loss Recovery Month.

“Then-Current Interest Rate” means the most recently published Freddie Mac survey rate for 30-year fixed-rate loans.

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“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

Section 2.1 Shared-Loss Arrangement.

(a) Loss Mitigation and Consideration of Alternatives. 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 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 any such Single Family Shared-Loss Loan, the Assuming Bank shall document its consideration of foreclosure, loan restructuring under such 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. 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 with respect to the calculation of the Stated Threshold. Assuming Bank shall retain its calculations of the estimated loss under each alternative, such calculations to be provided to the Receiver upon request. For the avoidance of doubt and notwithstanding anything herein to the contrary, (i) the Assuming Bank is not required to modify or restructure any Single Family Shared-Loss Loan on more than one occasion and (ii) 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 (iii) 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 month in which the tenth anniversary of the Commencement Date occurs, 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 Single Family 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”):

(i) a schedule substantially in the form of Exhibit 1 listing:

(ii) each Single Family Shared-Loss Loan for which a Loss Amount (calculated in accordance with the applicable Exhibit) is being claimed, the related Loss Amount for each Single Family Shared-Loss Loan, and the total Monthly Loss Amount for all Single Family Shared-Loss Loans;

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(iii) each Single Family Shared-Loss Loan for which a Recovery Amount was received, the Recovery Amount for each Single Family Shared-Loss Loan, and the total Recovery Amount for all Single Family Shared-Loss Loans;

(iv) the total Monthly Loss Amount for all Single Family Shared-Loss Loans minus the total monthly Recovery Amount for all Single Family Shared-Loss Loans;

(v) the Cumulative Shared-Loss Amount as of the beginning and end of the month;

(vi) the Monthly Shared Loss Amount;

(vii) 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;

(viii) for each of the Single Family 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 Exhibit 2a, Exhibit 2b, or Exhibit 2c, as applicable.

(ix) 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.

(x) 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 Recovery Month, Assuming Bank shall provide Receiver:

(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:

(A) Loan number

(B) FICO score

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(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.)

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(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 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 meets 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 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, notwithstanding the foregoing, the Receiver shall make a payment as to all Losses (or portion of Losses) that were effected which would have been payable as a Loss if the Assuming Bank had properly effected such Loss. 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.

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(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) 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 fifty percent (50%) 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 asset premium (discount) plus (B) twenty-five percent (25%) of the Cumulative Shared-Loss Payments plus (C) the Cumulative Servicing Amount. 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 Amount.

Section 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 Agreement, the Assuming Bank shall deliver to the Corporation and 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 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. It is the intention of this provision to align the timing of the audit required under this Single-Family Shared-Loss Agreement with the examination audit required pursuant to 12 CFR Section 363.

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(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.

Section 2.3 Withholdings. 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.

Section 2.4 Books 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 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

Section 2.5 Information. 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.

Section 2.6 Tax 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.

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Section 2.7 Sale of Single Family Shared-Loss Loans. The Receiver shall be relieved of its obligations with respect to a Single Family 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 of a Single Family Shared-Loss Loan by Assuming Bank to a person or entity that is not an Affiliate; provided, however, that if the Receiver consents to the sale of any such Single Family Shared-Loss Loan, any loss on such sale shall be a Portfolio Loss. 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, or

(i) a sale by Assuming Bank of all or substantially all of its assets.

ARTICLE III

RULES REGARDING THE ADMINISTRATION OF SINGLE FAMILY SHARED-LOSS

LOANS

Section 3.1 Agreement with Respect to Administration. The Assuming Bank shall (and shall cause any of its Affiliates to which the Assuming Bank transfers any Single Family Shared-Loss Loans to) manage, administer, and collect the Single Family 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.

Section 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 Single Family Shared-Loss Loan in accordance with Assuming Bank’s usual and prudent business and banking practices and Customary Servicing Procedures;

(ii) exercise its best business judgment in managing, administering and collecting amounts owed on the Single Family Shared-Loss Loans;

(iii) use commercially reasonable efforts to maximize Recoveries with respect to Losses on Single Family 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 Single Family 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.

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(b) Any transaction with or between any Affiliate of the Assuming Bank with respect to any Single Family 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 Single Family 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.

Section 3.3 Shared-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.

Section 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 Single Family 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 Single Family 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.

Section 3.5 Legal Action; Utilization of Special Receivership Powers. The Assuming Bank 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.

Section 3.6 Third 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.

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ARTICLE IV

PORTFOLIO SALE

Section 4.1 Assuming Bank Portfolio Sales of Remaining Single Family Shared-Loss Loans. The Assuming Bank shall have the right with the concurrence of the Receiver to liquidate for cash consideration, from time to time in one or more transactions, all or a portion of Single Family 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 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 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 Single Family Shared-Loss Loans not restructured. The Receiver’s review of the Assuming Bank’s proposed Portfolio Sale will be considered in a timely fashion and approval will not be unreasonably withheld, delayed or conditioned.

Section 4.2 Assuming Bank’s Liquidation of Remaining Single Family 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 Single Family 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 Single Family Shared-Loss Loans. The Assuming Bank will comply with the Receiver’s notice and must liquidate the Single Family 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 Single Family 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.

Section 4.3 Calculation of Sale Gain or Loss. For Single Family 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 Single Family 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

(a) 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).

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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 Peoples First Community 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 Peoples First Community Bank Room E7056 3501 Fairfax Drive, Arlington, VA 2226 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:

Hancock Bank

Attn: Mr. Carl J. Chaney, President and CEO

One Hancock Plaza, 7th Floor

Gulfport, Mississippi 39502

868 – 4627 (fax)

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 V shall be deemed to have been given on the date actually received.

ARTICLE VI

MISCELLANEOUS

Section 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.

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Section 6.2 Successors 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 individual shareholder, or shareholders acting in concert, of more than 9% of the outstanding shares of the Assuming Bank, or of its holding company, or of any subsidiary holding Shared-Loss Assets, or the sale of shares by the Assuming Bank or its holding company or any subsidiary holding Shared-Loss Assets, in a public or private offering, that increases the number of shares outstanding by more than 9%, constitutes the transfer of this Single Family Shared-Loss Agreement which requires the consent of the Receiver. However, 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. The FDIC’s consent shall not be required if the aggregate outstanding principal balance of Shared-Loss Assets is less than twenty percent (20%) of the initial aggregate balance of Shared-Loss Assets.

Section 6.3 Governing Law. This Single Family Shared-Loss Agreement shall be construed in accordance with federal law, or, if there is no applicable federal law, the laws of the State of New York, without regard to any rule of conflict of law that would result in the application of the substantive law of any jurisdiction other than the State of New York.

Section 6.4 WAIVER 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.

Section 6.5 Captions. All captions and headings contained in this Single Family Shared-Loss Agreement are for convenience of reference only and do not form a part of, and shall not affect the meaning or interpretation of, this Single Family Shared-Loss Agreement.

Section 6.6 Entire Agreement; Amendments. This Single Family Shared-Loss Agreement, along with the Commercial Shared-Loss Agreement and the Purchase and Assumption Agreement, including the Exhibits and any other documents delivered pursuant hereto or thereto, embody the entire agreement of the parties with respect to the subject matter hereof, and supersede all prior representations, warranties, offers, acceptances, agreements and understandings, written or oral, relating to the subject matter herein. This Single Family Shared-Loss Agreement may be amended or modified or any provision thereof waived only by a written instrument signed by both parties or their respective duly authorized agents.

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Section 6.7 Severability. Whenever possible, each provision of this Single Family Shared-Loss Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Single Family Shared-Loss Agreement is held to be prohibited by or invalid, illegal or unenforceable under applicable law, such provision shall be construed and enforced as if it had been more narrowly drawn so as not to be prohibited, invalid, illegal or unenforceable, and the validity, legality and enforceability of the remainder of such provision and the remaining provisions of this Single Family Shared-Loss Agreement shall not in any way be affected or impaired thereby.

Section 6.8 No 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.

Section 6.9 Counterparts. This Single Family Shared-Loss Agreement may be executed separately by Receiver and Assuming Bank in any number of counterparts, each of which when executed and delivered shall be an original, but such counterparts shall together constitute one and the same instrument.

Section 6.10 Consent. Except as otherwise provided herein, when the consent of a party is required herein, such consent shall not be unreasonably withheld or delayed.

Section 6.11 Rights 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 7.1 Dispute 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 arising out such resolution shall be made arising from the settlement of the SF Shared-Loss Dispute.

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(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 notify the other of its intent to submit 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 be deemed an acceptance of such SF Shared-Loss Dispute not submitted to arbitration, as well as 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 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 7.1, 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

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(e) The Moving Arbiter and Respondent Arbiter shall select a third arbiter from a list furnished by the AAA. In accordance with the rules of the AAA, the three (3) arbiters shall constitute the arbitration panel for resolution of each SF 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 7.2 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 7.2 Fees and Expenses of Arbiters. The aggregate fees and expenses of the arbiters shall be borne equally by the parties. The parties shall pay 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

Exhibit 2a

This exhibit contains three versions of the loss share calculation for foreclosure, plus explanatory notes.

Exhibit 2a(1)

CALCULATION OF FORECLOSURE LOSS

Foreclosure Occurred Prior to Loss Share Agreement

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

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.

Exhibit 2b

This exhibit contains the loss share calculation for restructuring (loan mod), plus explanatory notes.

44 Loss Amount 58,438

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.

Exhibit 2c

This exhibit contains two versions of the loss share calculation for short sales, plus explanatory notes.

Exhibit 2c(1)

CALCULATION OF LOSS FOR SHORT SALE LOANS

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.

Exhibit 2d

Exhibit 3

Portfolio Performance and Summary Schedule

Exhibit 4

Wire Transfer Instructions

PURCHASER WIRING INSTRUCTIONS

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”).

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 change, the net present value calculation for determining the covered loss remains constant.

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EXHIBIT 4.15B

COMMERCIAL AND OTHER ASSETS 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, that Accrued 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.

“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

(a) 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)) (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; (ii) no Charge-Off shall be taken with respect to any anticipated expenditure by the Assuming Bank until such expenditure is actually incurred; (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 “Charge-Offs”; and (iv) except for Portfolio Sales or any other sales or dispositions consented to by the Receiver, losses incurred on the sale or other disposition of Shared-Loss Assets to any Person (other than 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 which is conducted in a commercially reasonable and prudent manner) 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).

“Cumulative Servicing Amount” 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 loss-sharing provisions of the applicable Shared-Loss Agreement is in effect.

“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.

“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.

“Fair Value” means the value of a Shared Loss MTM Asset as stated on the books and records of the Failed Bank as of Bank Closing, inclusive of all adjustments.

“FDIC Party” has the meaning provided in Section 2.1(f)(ii) of this Commercial Shared-Loss Agreement.

“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 September 30, 2009 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 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.

“Period Servicing Amount” means, for any twelve month period with respect to each of the Shared-Loss Agreements during which the loss-sharing provisions of the applicable Shared-Loss Agreement are in effect, the product of (i) the simple average of the principal amount of Shared-Loss Loans and Shared-Loss Assets (other than the Shared-Loss Securities) (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) one percent (1%).

“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, (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, (iii) is not made with respect to a Shared-Loss Loan with respect to which (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, that the 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.

“Recoveries” (I)(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):

(i) 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

(ii) the amount of collections during such period by the Assuming Bank on Failed Bank Charge-Offs/Write-Downs; plus

(iii) 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, that the 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

(iv) the amount of collections during such period by the Assuming Bank of any Reimbursable Expenses or Recovery Expenses; plus

(v) 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, that the 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). (I)(B) For the purpose of determining the amounts to be applied as Recoveries pursuant to subparagraph (I)(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) 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 which a Charge-Off has been effected by the Assuming Bank during or prior to such period, and if, 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 numerator of 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 denominator of 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, that the amount of any interest income included as Recoveries for a particular Shared-Loss Loan shall not exceed the aggregate amount of (a) Failed Bank Charge-Offs/Write-Downs, (b) Charge-Offs effected by the Assuming Bank during or prior to the period in which the amount of Recoveries is being determined, plus (c) 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, that any collections on any such Shared-Loss Loan that are not applied to reduce book value of principal or recognized as interest income shall be applied pursuant to subparagraph (I) above.

(III) 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”), except to 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 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 as set forth immediately above in subparagraph (c), the Assuming Bank will subtract (i) 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 (ii) 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 not exceed the aggregate amount of Net ORE Income reported as Recoveries on Quarterly Certificates for all Recovery 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); 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 not include 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 numerator of 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 denominator of 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 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 numerator of 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 denominator of 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; and

(ii) manage, operate or maintain Other Real Estate, Additional ORE or Subsidiary ORE less the 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 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 MTM Assets.

“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 not made a Permitted Advance.

“Shared-Loss Loans” means:

(i) 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,

(A) 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, that Shared-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 Subsidiary which are not Shared-Loss Loans under the Single Family Shared-Loss Agreement; and (F) Consumer Loans; 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 MTM Assets” means those securities and other assets listed on Exhibit 4.15(C).

“Shared-Loss Payment Trigger” means when the sum of the Cumulative Loss 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.

“Stated Threshold” means total losses under the shared loss agreements in the amount of $385,000,000.00.

“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

Section 2.1 Shared-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”):

(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-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) net realized loss on the Shared Loss MTM Assets determined pursuant to FAS 115, expressed as a positive number (MTM Net Realized Loss), or net realized gain on the Shared Loss MTM assets, expressed as a negative number (MTM Net Realized Gain); and

(D) any other than temporary impairment of the Shared Loss MTM Assets, determined pursuant to FAS 115, expressed as a positive number (“OTTI Loss”) or reversals of OTTI Loss, 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).

(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 Quarter only, 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 not been 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) net realized gain on the Shared Loss MTM Assets.

(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 MTM Assets on its Accounting Records at Fair 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 plus Reimbursable Expenses, plus MTM Net Realized Gain or MTM Net Realized Loss, plus OTTI Loss 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 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 net realized gains or reversals of OTTI Loss on Shared Loss MTM Assets (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, that this 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 net realized gains or reversals of OTTI Loss on Shared Loss MTM Assets (“Aggregate Recovery Period Recoveries”), (B) Recovery Expenses (“Aggregate Recovery Expenses”), and (C) only those 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 minus Aggregate Offset Recovery Expenses; (ii) Aggregate Recovery Expenses minus Aggregate Offset Recovery Expenses; and (iii) the lesser of the two amounts calculated in (i) and (ii) immediately above (“Additional Recovery Expenses”) multiplied by 80% (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 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 not been 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 MTM Assets 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 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), (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 $500,000 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 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 $500,000 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.

(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 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.

(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.

(g) 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 fifty percent (50%) 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 asset premium (discount) plus (B) twenty-five percent (25%) of the Cumulative Shared-Loss Payments plus (C) the Cumulative Servicing Amount. 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 Amount.

Section 2.2 Administration 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.

Section 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 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 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. It is the intention of this provision to align the timing of the audit required under this Commercial Shared-Loss Agreement with the examination audit required pursuant to 12 CFR Section 363.

(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 work papers 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.

Section 2.4 Withholdings. 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 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.

Section 2.5 Books 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.

Section 2.6 Information. 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.

Section 2.7 Tax 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

MTM ASSETS

Section 3.1 Agreement with Respect to Administration. The Assuming Bank shall (and shall cause any of its Affiliates to which the Assuming Bank transfers any Shared-Loss Assets or Shared-Loss MTM Assets) to, or a Third Party Servicer to, manage, administer, and collect the Shared-Loss Assets and Shared-Loss MTM Assets 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.

Section 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; and

(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 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, that for 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.

Section 3.3 Duties of the Assuming Bank with Respect to Shared-Loss MTM Assets.

(a) In performance of its duties under these Rules, the Assuming Bank shall:

(i) manage, administer, collect and each Shared-Loss MTM Asset 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 MTM Assets;

(ii) exercise its best business judgment in managing, administering, collecting and effecting Charge-Offs with respect to Shared-Loss MTM Assets;

(iii) use its best efforts to maximize collections with respect to Shared-Loss MTM Assets and, if applicable for a particular Shared-Loss MTM 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 MTM Assets, provided that, any sale of a Shared-Loss MTM Asset 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 MTM Assets, as provided in Section 3.4 hereof;

(v) retain sufficient staff to perform its duties hereunder; and

(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 MTM 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 MTM Asset 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.

Section 3.4 Records 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 MTM Assets, 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 MTM Assets and the Quarterly Certificates required by Section 2.1 of this Commercial Shared-Loss Agreement.

Section 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 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.

Section 3.6 Legal 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.

Section 3.7 Third 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

Section 4.1 Assuming 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 Assuming Bank’s affiliates, contractors, or any affiliates of the Assuming Bank’s contractors.

Section 4.2 Calculation 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:

Section 5.1 With 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

Section 5.2 With 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

Section 6.1 Expenses. 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 borne by such party whether or not the transactions contemplated herein shall be consummated.

Section 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 Receive; and for a period of thirty-six (36) months after Bank Closing, a merger or consolidation shall also include the sale by any individual shareholder, or shareholders acting in concert, of more than 9% of the outstanding shares of the Assuming Bank, or of its holding company, or of any subsidiary holding Shared-Loss Assets, or the sale of shares by the Assuming Bank or its holding company or any subsidiary holding Shared-Loss Assets, in a public or private offering, that increases the number of shares outstanding by more than 9%, constitutes the transfer of this Commercial Shared-Loss Agreement which requires the consent of the Receiver. However, 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. The FDIC’s consent shall not be required if the aggregate outstanding principal balance of Shared-Loss Assets is less than twenty percent (20%) of the initial aggregate balance of Shared-Loss Assets.

Section 6.3 Governing Law. This Commercial Shared-Loss Agreement shall be construed in accordance with federal law, or, if there is no applicable federal law, the laws of the State of New York, without regard to any rule of conflict of law that would result in the application of the substantive law of any jurisdiction other than the State of New York.

Section 6.4 WAIVER 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.

Section 6.5 Captions. All captions and headings contained in this Commercial Shared-Loss Agreement are for convenience of reference only and do not form a part of, and shall not affect the meaning or interpretation of, this Commercial Shared-Loss Agreement.

Section 6.6 Entire Agreement; Amendments. This Commercial Shared-Loss Agreement, along with the Single Family Shared-Loss Agreement and the Purchase and Assumption Agreement, including the Exhibits and any other documents delivered pursuant hereto, embody the entire agreement of the parties with respect to the subject matter hereof, and supersede all prior representations, warranties, offers, acceptances, agreements and understandings, written or oral, relating to the subject matter herein. This Commercial Shared-Loss Agreement may be amended or modified or any provision thereof waived only by a written instrument signed by both parties or their respective duly authorized agents.

Section 6.7 Severability. Whenever possible, each provision of this Commercial Shared-Loss Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Commercial Shared-Loss Agreement is held to be prohibited by or invalid, illegal or unenforceable under applicable law, such provision shall be construed and enforced as if it had been more narrowly drawn so as not to be prohibited, invalid, illegal or unenforceable, and the validity, legality and enforceability of the remainder of such provision and the remaining provisions of this Commercial Shared-Loss Agreement shall not in any way be affected or impaired thereby.

Section 6.8 No 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.

Section 6.9 Consent. Except as otherwise provided herein, when the consent of a party is required herein, such consent shall not be unreasonably withheld or delayed.

Section 6.10 Rights 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.

EX-21

Exhibit 21

Subsidiaries of Hancock Holding Company

Name	Jurisdiction
Hancock Bank	Mississippi
Hancock Bank of Louisiana	Louisiana
Hancock Bank of Florida *	Florida
Magna Insurance Agency	Mississippi
The Gulfport Building, Inc.	Mississippi
Harrison Finance Company	Mississippi
Town Properties, Inc.	Mississippi
Hancock Insurance Agency	Mississippi
Hancock Insurance Agency of Alabama, Inc.	Alabama
J Everett Eaves, Inc.	Louisiana
Hancock Bank Securities Corporation II	Mississippi
Gulf South Technology Center, LLC	Mississippi
Hancock Investment Services, Inc.	Mississippi
Hancock Investment Services of MS, Inc.	Mississippi
Hancock Investment Services of LA, Inc.	Louisiana
Hancock Investment Services of FL, Inc.	Florida
HBSC LLC	Mississippi
HMC LLC	Mississippi
Hancock Community Investment Corporation	Mississippi
Hancock Bank of Alabama	Alabama
Hancock Investment Services of AL, Inc.	Alabama
Hancock Enterprise Investment Fund, LLC	Mississippi
Lighthouse Services Corporation	Mississippi
Dudley Ventures Hancock Fund, LLC	Delaware
Invest-Sure Inc.	Florida
Community First Inc.	Florida
Peoples First Transportation, Inc.	Florida

* Hancock Bank of Florida was merged into Hancock Bank effective January 1, 2010.

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Hancock Holding Company:

We hereby consent to the incorporation by reference in the Registration Statements No. 333-11831 (amended by 333-113262), 333-05081, 333-53452 and 2-99863 on Form S-8 and Nos. 33-31782 and 333-162560 on Form S-3 of Hancock Holding Company of our report dated February 17, 2010 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

New Orleans, Louisiana

February 17, 2010

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Hancock Holding Company:

We consent to the incorporation by reference in Registration Statements No. 333-11831 (amended by No. 333-113262), 333-05081, 333-53452 and 2-99863 on Form S-8 and Nos. 33-31782 and 333-162560 on Form S-3 of Hancock Holding Company of our report dated February 27, 2009, with respect to the consolidated balance sheet of Hancock Holding Company as of December 31, 2008, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2008, which report appears in the December 31, 2009 annual report on Form 10-K of Hancock Holding Company.

/s/ KPMG LLP

Birmingham, Alabama

February 17, 2010

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Carl J. Chaney, certify that:

1. I have reviewed this Annual Report on Form 10-K of Hancock Holding Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

February 17, 2010	By:	/s/ Carl J. Chaney
Date		Carl J. Chaney
		President & Chief Executive Officer

EXHIBIT 31.1

CERTIFICATION

I, John M. Hairston, certify that:

1. I have reviewed this Annual Report on Form 10-K of Hancock Holding Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

February 17, 2010	By:	/s/ John M. Hairston
Date		John M. Hairston
		Chief Executive Officer &
		Chief Operating Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Michael M. Achary, certify that:

1. I have reviewed this Annual Report on Form 10-K of Hancock Holding Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

February 17, 2010	By:	/s/ Michael M. Achary
Date		Michael M. Achary
		Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION

I, Carl J. Chaney, Chief Executive Officer, and I, John M. Hairston, Chief Executive Officer of Hancock Holding Company (the “Company”) certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The Annual Report on Form 10-K of the Company for the annual period ended December 31, 2009 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

February 17, 2010	By:	/s/ Carl J. Chaney
Date		Carl J. Chaney
		President & Chief Executive Officer
February 17, 2010	By:	/s/ John M. Hairston
Date		John M. Hairston
		Chief Executive Officer &
		Chief Operating Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION

I, Michael M. Achary, Chief Financial Officer of Hancock Holding Company (the “Company”) certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The Annual Report on Form 10-K of the Company for the annual period ended December 31, 2009 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

February 17, 2010	By:	/s/ Michael M. Achary
Date		Michael M. Achary
		Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.